Maluenda v. Enriquez
REITERATIONFacts
The Antecedents: On April 10, 1919, Rafael Enriquez, acting as administrator for the estate of deceased Antonio Enriquez and Ciriaca Villanueva and on behalf of his coheirs, leased premises on Escolta Street, Manila, to A. Maluenda & Co. (plaintiff) for three years at P1,000 per month, commencing July 1, 1919. The plaintiff sublet half of the premises to Joseph G. Brimo on April 11, 1919. On April 30, 1919, Rafael Enriquez, along with Nazario Constantino representing an heir, leased the entire property to Lorenzo Atienza for four years, commencing May 1, 1919. Lorenzo Atienza took possession. However, on July 1, 1919, A. Maluenda & Co. could not take possession of the leased premises and never did. On September 23, 1919, the property was sold to Vicente Madrigal, with the leases not being respected. The purchaser allowed P. B. Florence, who occupied the premises prior, to remain, preventing the plaintiff from occupying them. Florence subsequently paid P1,800 per month, later reduced to P1,400 per month. Procedural History: The plaintiff commenced an action to recover damages. The amended judgment absolved Lorenzo Atienza and sentenced the Enriquez defendants to pay Maluenda & Co. P4,800 in damages. G. Brimo's complaint was dismissed. All parties appealed. The Petition: The plaintiff appealed because it was not awarded P28,800; the defendants appealed the P4,800 award; and the intervenor appealed the dismissal of his complaint.
Issue(s)
Whether the plaintiff and intervenor are entitled to recover damages. Who are liable for the damages. The amount of indemnity.
Ruling
The judgment is modified. Lorenzo Atienza is absolved from the complaint. The other defendants (the Enriquez defendants) are sentenced to pay P18,000 as damages, one-half to the plaintiff company and the other half to the intervenor, without costs.
Ratio Decidendi
On whether the plaintiff and intervenor are entitled to recover damages: The plaintiff is entitled to indemnification as provided by law (Article 1556, Civil Code) for the failure to deliver possession of the leased premises. The intervenor Brimo also has the right to indemnification by virtue of the sublease. His damages are not directly recoverable from the defendants but are included within the damages the plaintiff may recover, as the plaintiff is both a creditor of the defendants and directly liable to the intervenor as sublessor. The intervenor's claim that he did not suffer damage by not establishing a business is irrelevant; damages are measured by the benefit directly derived from the lease that was not obtained, not remote or speculative losses. On who are liable for the damages: The persons liable are those who, personally or through their representative, made the lease to the plaintiff and subsequently sold the property to Vicente Madrigal, referred to as the "Enriquez defendants." The evidence sufficiently shows that Rafael Enriquez had the authority to execute the lease contract. Lorenzo Atienza is not liable because his intervention in the lease did not amount to a subrogation of the rights and obligations of the Enriquez defendants with respect to the plaintiff. Atienza's lease of the entire property had no legal effect from July 1, 1919, rendering his title ineffective and precluding any subrogation. The correspondence between the parties did not establish a sublease or reciprocal obligations between Atienza and the plaintiff. Furthermore, the liability of the Enriquez defendants, which began on July 1, 1919, by failing to deliver possession, was aggravated by the absolute sale of the property to Madrigal, making subrogation even less plausible. On the amount of indemnity: The damages are to be measured by the profit the prejudiced parties failed to realize, which is the difference between the actual rental value of the premises and the rent stipulated in the contract. The evidence shows the premises had a higher rental value than the P1,000 per month stipulated in the lease with the plaintiff. After the sale to Madrigal, the rent increased significantly. The excess of these higher rents over the stipulated rent constitutes the damages. Specifically, from April 1920 for eighteen months, the premises produced P800 per month in excess of the stipulated rent (P14,400). For the remaining nine months of the lease, the excess was P400 per month (P3,600). The total of these amounts, P18,000, represents the damages for which the Enriquez defendants are liable. The plaintiff's payment of a higher rent for a different property does not alter this measure of damages, as the rental value of the specific leased premises is the controlling factor.
Main Doctrine
In cases of breach of a lease contract where the lessor fails to deliver possession of the leased premises, damages are measured by the benefit the prejudiced party failed to realize, which is the difference between the actual rental value of the premises and the rent stipulated in the contract.