Horrigan v. Troika Commercial
REITERATIONFacts
The Antecedents: Respondent Troika Commercial, Inc. (Troika) was the lessee of a ground floor space and sub-let a portion to petitioner Martha R. Horrigan for her restaurant, "Tia Maria." The sub-lease contract, prepared by petitioner's husband, stipulated a monthly rental of ₱12,500.00 from March 15, 1983, to December 31, 1989, and an additional ₱4,500.00 monthly rental from August 1, 1983, until December 31, 1989, "plus a guaranteed yearly increase equivalent to 10% thereof." Procedural History: The parties had differing interpretations of the phrase "a guaranteed yearly increase equivalent to 10% thereof." Respondent Troika contended it applied to both the ₱12,500.00 and ₱4,500.00 rentals, while petitioner argued it only applied to the ₱4,500.00. After petitioner ignored demand letters for unpaid rental adjustments totaling ₱318,489.00, respondent filed a complaint for sum of money. The Regional Trial Court (RTC) ruled in favor of respondent, ordering petitioner to pay the unpaid rental adjustments with interest. The Court of Appeals affirmed the RTC's decision in toto. The Petition: Petitioner sought a review on certiorari of the Court of Appeals' decision, arguing that the appellate court erred in ruling that the 10% guaranteed yearly increase applied to both rental amounts.
Issue(s)
Whether the Court of Appeals erred in ruling that the 10% guaranteed yearly increase of rental rates applies to both the original monthly rental of ₱12,500.00 and the additional monthly rental of ₱4,500.00.
Ruling
The petition is DENIED. The challenged Decision of the Court of Appeals in CA-G.R. CV No. 50330 is AFFIRMED IN TOTO. Costs against the petitioner.
Ratio Decidendi
On the issue of contract interpretation: The Court affirmed the appellate court's ruling that the 10% guaranteed yearly increase applies to both the original monthly rental of ₱12,500.00 and the additional monthly rental of ₱4,500.00. The Court invoked Article 1377 of the Civil Code, which states that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. Since petitioner's spouse prepared the sub-lease contract, any ambiguity therein must be construed against the petitioner. Furthermore, the 10% guaranteed yearly increase was for the benefit of the respondent as the sub-lessor. In line with Section 17, Rule 130 of the Revised Rules of Court, when different constructions of a provision are otherwise equally proper, that which is most favorable to the party in whose favor the provision was made shall be taken. The Court found that the interpretation favoring the respondent, which included the increase on both rental amounts, was the most favorable to the party for whose benefit the provision was made. Therefore, the appellate court did not err in its interpretation.
Main Doctrine
When the terms of an agreement have been intended in a different sense by the different parties to it, that sense is to prevail against either party in which he supposed the other understood it, and when different constructions of a provision are otherwise equally proper, that is to be taken which is the most favorable to the party in whose favor the provision was made. Furthermore, the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.