Cuenco v. Talisay Tourist Sports Complex
REITERATIONFacts
The Antecedents: Petitioner leased the Talisay Tourist Sports Complex from respondents for a period of two years, which was extended for another four years, until May 8, 1998. The contract stipulated that petitioner would maintain the premises in good condition, be responsible for damages, and provide a deposit equivalent to six months' rental to answer for any damages. Upon expiration of the contract, petitioner participated in a public bidding for a new lease but lost to another bidder. Petitioner then sent four demand letters requesting the return of his ₱500,000.00 deposit, asserting he had fulfilled his obligations regarding repairs. Procedural History: As the demand letters were unheeded, petitioner filed a complaint for sum of money, damages, and attorney's fees, alleging bad faith by respondents in withholding the deposit. Respondents countered that petitioner caused damages exceeding the deposit amount and that respondent Matias B. Aznar III was not personally liable. The RTC ruled in favor of petitioner, ordering the return of the deposit with interest, based on the admission of no inventory and the testimony of respondents' witness. The CA reversed the RTC decision, finding for respondents based on testimony of continued cockfights after lease expiration, summary of repairs, and expenses incurred by the new lessor. The Supreme Court reviewed the case due to conflicting findings. The Petition: Petitioner questions the CA's rejection of the judicial admission made by respondents' counsel during pre-trial that no inventory of damages was conducted, and the CA's findings regarding damages sustained by the premises.
Issue(s)
Whether a judicial admission is conclusive and binding upon a party making the admission, and whether the Court of Appeals committed an error in rejecting the judicial admission made by respondents' counsel during pre-trial. Whether the petitioner is entitled to the return of the ₱500,000.00 deposit, considering the claims for damages and the lack of a proper inventory. Whether the petitioner's two-month overstay after the lease expiration constitutes an implied monthly lease, and the corresponding rental value chargeable against the deposit. Whether respondent Matias B. Aznar III is solidarily liable with respondent corporation, and the applicable rate of interest on any amounts due.
Ruling
The Court ruled in the affirmative, partly granting the petition. The Court reversed and set aside the CA decision and reinstated the RTC decision with modifications. Talisay Sports Complex, Inc. is solely liable to return the deposit amount after deducting two months' arrears in rentals. The legal interest rate is six percent (6%) on the amount due computed from October 21, 1998, and twelve percent (12%) upon finality of the decision until full payment.
Ratio Decidendi
On the binding effect of judicial admissions: The Court reiterated that a judicial admission, whether verbal or written, made by a party in the course of the proceedings, does not require proof and can only be contradicted by showing palpable mistake or that no such admission was made. Admissions made during pre-trial, as embodied in the pre-trial order, are binding and conclusive upon the parties. Respondents failed to deny their counsel's admission or claim palpable mistake, thus they are bound by it. The CA erred in giving evidentiary weight to evidence contradictory to this judicial admission. On the entitlement to the return of the deposit and the issue of damages and inventory: The Court found that respondents failed to present sufficient proof to warrant the retention of the full deposit. The CA's reliance on the testimony of Coronado and the summary of repairs was flawed because it contradicted the judicial admission that no inventory was conducted. Furthermore, many receipts for repairs were in the name of Southwestern University, a separate entity, and were not proven to be for the leased premises. Crucially, the testimony revealed that the new lessee, Mr. Salud, undertook significant renovation and repair work at his own expense, negating respondents' claim that these costs should be charged to petitioner's deposit. The respondents' failure to conduct a proper inventory in the presence of the petitioner, or to present an inventory countersigned by the petitioner, rendered their claims of damages unsubstantiated. The RTC correctly considered the inventory presented during trial as an afterthought. The judicial admission that no inventory was conducted up to the pre-trial stage was controlling. On the two-month overstay: The Court found that petitioner's continued occupation and operation of the sports complex for two months after the lease expiration, without renewal, constituted an implied monthly lease under Articles 1670 and 1687 of the Civil Code. This period of overstaying, with a rental value of ₱195,833.34, was deemed a valid charge against the deposit. On the rate of interest and solidary liability: The Court disallowed the petitioner's claim for 3% monthly interest due to lack of stipulation and the unliquidated nature of the claim at the time of filing. It applied the legal interest rates of 6% from filing and 12% upon finality, as per Eastern Shipping Lines v. CA. Respondent Matias B. Aznar III was found not solidarily liable, as corporate officers are generally not personally liable for corporate obligations unless they act outside their authority or in bad faith.
Main Doctrine
Respondents failed to present sufficient proof to warrant the retention of the full amount of the deposit given by petitioner, and are bound by the judicial admission made by their counsel during pre-trial that no inventory of damages was conducted.