Florentino
v.
Supervalue
559
Phil
577
|
GR
No.
172384
|
12
September
2007
|
Chico-Nazario,
J.
When Courts May
Reduce Penalty
Princess
Trisha
Joy
Z.
Uy
|
Law
122-Obligations
and
Contracts
|
Grp3
Courts
may
reduce
penalty
when
the
obligation
has
been
partially
complied
with,
or
when
the
penalty
is
unconscionable.
Facts:
! Florentino
is
the
sole
proprietor
of
Empanada
Royale,
while
the
respondent
is
a
corporation
which
leases
stalls
and
commercial
store
spaces
in
SM.
! Both
parties
executed
3
contracts
to
lease
cart-type
stalls
in
SM,
each
with
a
term
of
4
months
renewable
upon
agreement.
! When
the
contracts
expired,
the
parties
renewed.
! A
month
before
the
renewal
expires,
PET
received
2
letters
from
RESP.
One
charges
them
of
violating
the
Contract
of
Lease
by
not
opening
on
December
16
and
26
of
1999;
Increasing
their
price
without
consulting
the
RESP;
and
frequently
closing
early
because
of
the
lack
of
supply,
which
violates
the
terms
of
the
contract.
The
second
letter
was
to
inform
the
PET
that
RESP
would
not
be
renewing
their
contract.
! The
RESP
confiscated
the
equipment
and
personal
belongings
of
the
PET
found
in
the
stall
after
the
contract
expired.
! PET
demanded,
through
a
letter,
that
the
RESP
release
the
equipment
and
personal
belongings
and
to
return
the
security
deposit
(192k).
A
month
later,
the
PET
sent
another
letter
demanding
the
same.
The
RESP
still
refused
to
comply.
! PET
filed
an
action
for
Specific
Performance,
Sum
of
Money
and
Damages
in
the
RTC.
! PET
claims
that
RESP
had
always
verbally
represented
that
the
contract
would
be
renewed,
and
so
the
PET
introduced
improvements
in
the
store
space
(200k).
PET
further
avers
that
RESP
refuses
to
give
back
the
security
deposit,
personal
belongings
and
equipment
without
reason
even
after
repeated
demands.
PET
prays
for
actual,
moral
and
exemplary
damages
plus
attorneys
fees.
! RESP
reiterated
that
PET
violated
their
contract
and
is
also
liable
for
electricity
and
water
bills
and
claims
that
the
confiscation
of
the
items
was
in
the
exercise
of
its
retaining
lien
because
PET
failed
to
settle
obligations.
! RTC
found
for
petitioner.
CA
modified,
and
found
that
RESP
was
justified
in
forfeiting
the
security
deposit.
Issue/Ratio:
WON
PET
is
entitiled
to
get
back
her
security
deposit.
YES,
but
only
half.
Section
18.
TERMINATION.
Any
breach,
non-performance
or
non-
observance
of
the
terms
and
conditions
herein
provided
shall
constitute
default
which
shall
be
sufficient
ground
to
terminate
this
lease,
its
extension
or
renewal.
In
which
event,
the
LESSOR
shall
demand
that
LESSEE
immediately
vacate
the
premises,
and
LESSOR
shall
forfeit
in
its
favor
the
deposit
tendered
without
prejudice
to
any
such
other
appropriate
action
as
may
be
legally
authorized.
! This
is
a
penal
clause.
! Penal
clause
accessory
undertaiking
to
assume
greater
liability
in
case
of
breach.
It
is
placed
in
the
terms
to
insure
performance,
provide
for
liquidated
damages
and
strengthen
coercive
force.
! Courts
may
reduce
penalty
in
two
instances:
(1)
if
the
principal
obligation
has
been
partly
or
irregularly
complied
with;
and
(1)
even
if
there
has
been
no
compliance
if
the
penalty
is
iniquitous
or
unconscionable.
! The
forfeiture
of
the
security
deposit,
in
this
case,
is
excessive
since
the
breaches
were
not
of
such
degree
that
the
respondent
was
unduly
prejudiced.
RESP
should
reimburse
half
of
the
deposit.
! It
has
been
a
practice
that
lessees
improve
the
leased
spaces,
no
misrepresentation
from
the
lessor
induced
the
lessee
from
doing
as
such.
To
be
entitled
to
reimbursement
for
improvements,
Art.
1678
should
be
read
together
with
448
and
546,
the
PET
must
be
considered
a
builder
in
good
faith.
A
builder
in
good
faith
is
one
who
is
unaware
of
any
flaw
in
his
title
to
the
land,
in
this
case,
this
is
not
true,
the
PET
knows
she
was
only
a
lessee.
