Labayen v. Serafica
REITERATIONFacts
The Antecedents: Milagros S. Serafica owned a 221-square-meter lot in Quezon City, which she leased to petitioner Ana G. Labayen for fifteen years, commencing August 16, 1992. The lease agreement stipulated monthly rentals, a rental deposit, and an automatic cancellation clause for non-compliance. Subsequently, Milagros donated the property to respondent Leonardo R. Serafica, and the lease annotation was carried over to his title. Later, a document titled "Cancellation of Contract of Lease," purportedly signed by both Ana Labayen and the respondent, was annotated on the respondent's title, leading to the cancellation of the original lease annotation. Procedural History: Claiming forgery in the "Cancellation of Contract of Lease," the petitioners filed a suit with the Regional Trial Court (RTC) of Quezon City, seeking the cancellation of the new annotation and the revival of the original lease inscription. The respondent argued that the petitioners had no cause of action, citing their failure to comply with the lease terms, specifically the payment of rentals and deposit, which he contended led to the automatic termination of the lease. The RTC dismissed the petition, finding that while the petitioners' signatures were forged, they had no cause of action as they failed to establish a right violated by the respondent, particularly due to their non-compliance with the lease agreement. The Court of Appeals (CA) affirmed the RTC's decision, agreeing that the petitioners lacked a cause of action because the lease contract had been automatically cancelled due to non-payment of rentals and deposit. The CA denied the petitioners' motion for reconsideration. The Petition: The petitioners filed a petition for review with the Supreme Court, seeking to nullify the CA's decision. They argue that the CA erred in holding that their failure to pay the deposit and subsequent rentals, which they attributed to the respondent's failure to deliver possession of the property, resulted in the automatic rescission of the lease contract and consequently, their lack of cause of action to challenge the cancellation of the encumbrance. The petitioners also sought moral and exemplary damages, alleging fraudulent actions by the respondent. The Supreme Court, however, denied the petition, affirming the findings of the lower courts that the petitioners had indeed taken possession of the property and failed to pay the stipulated deposit and monthly rentals, thus triggering the automatic cancellation clause of the lease contract. The Court found no basis for the petitioners' claim of damages, as their loss stemmed from their own non-compliance with the contract, not from any wrongful act by the respondent.
Issue(s)
Whether the petitioners have a cause of action to seek the cancellation of the annotation of the "Cancellation of Contract of Lease" and the revival of the annotation of the original contract of lease. Whether the petitioners are entitled to moral and exemplary damages and attorney's fees.
Ruling
The petition is denied. The Decision and Resolution of the Court of Appeals are affirmed.
Ratio Decidendi
On the issue of cause of action: The Supreme Court sustained the RTC and CA rulings, holding that the petitioners failed to establish a cause of action. The Court found that the petitioners admitted non-payment of the stipulated deposit and monthly rentals. While petitioners claimed respondent failed to deliver possession, records showed possession was delivered on July 20, 1995, which Ana Labayen confirmed. Section 14 of the lease contract explicitly provided for automatic cancellation and termination upon failure to pay rentals or violate any term. Therefore, the automatic cancellation clause took effect, terminating the lease contract. Consequently, petitioners lost their status as lessees, and there was no basis for them to maintain the inscription of the lease contract on respondent's title. The Court reiterated that the forgery of the cancellation document was of no moment because there was never a right to talk about concerning the petitioners' claim, as they had already lost the efficacy of the lease contract due to their own non-compliance. The Court also noted that the lease period had expired, further negating any right to maintain the inscription. On the issue of damages: The Supreme Court denied the petitioners' claim for moral and exemplary damages and attorney's fees. The Court emphasized that for damages to be awarded, there must be an injury resulting from a breach of a legal duty owed by the respondent to the petitioners. In this case, the termination of the lease and cancellation of its annotation were due to the petitioners' own failure to comply with the contract, not a wrongful act by the respondent. The RTC and CA found that the respondent was not involved in the forgery. Therefore, any damages suffered by the petitioners were a consequence of their own breach of contract, falling under the principle of damnum absque injuria (damage without injury), for which the law affords no remedy.
Main Doctrine
A lessee who fails to pay the stipulated deposit and monthly rentals, despite having been given possession of the leased property, cannot claim damages arising from the cancellation of the lease contract and its annotation on the lessor's title, as such cancellation is a consequence of the lessee's own breach of contract, and the resulting damage is damnum absque injuria.