Food Fest Land v. Siapno
REITERATIONFacts
The Antecedents: Respondents, as registered owners of a parcel of land, entered into a Contract of Lease with petitioner Food Fest Land, Inc. (Food Fest) for a term of fifteen (15) years. Food Fest assigned its rights and obligations to Tucky Foods, Inc., which in turn assigned them to petitioner Joyfoods Corporation (Joyfoods). The contract stipulated a monthly rent with a 10% annual escalation. Food Fest and its assignees paid rent as stipulated for the first five years. However, the rental escalation clause was not observed from the sixth to the tenth year. At the eleventh year, respondents sought to enforce the escalation clause, proposing a monthly rent of P113,867.89. Joyfoods proposed a reduced rate, which was rejected. On October 27, 2008, Joyfoods informed respondents of its intent to pre-terminate the lease due to business losses, effective November 29, 2008, with turnover on December 13, 2008. Procedural History: Respondents filed a Complaint for sum of money against Food Fest and Joyfoods, seeking payment of P988,907.74, representing the alleged unpaid balance of rent due to the non-application of the rental escalation clause from the eleventh year up to the pre-termination of the lease. The Regional Trial Court (RTC) ruled in favor of the respondents, ordering payment of the unpaid balance. The Court of Appeals (CA) affirmed the RTC's decision. The Petition: Petitioners Food Fest and Joyfoods appealed, challenging the amount of the unpaid balance and arguing that they should only be liable for P382,055.22. They claimed an unwritten agreement suspended the rental escalation clause and that a subsequent agreement fixed the rent at P90,000.00 per month for the eleventh and twelfth years. They also argued that only Joyfoods should be liable due to the assignment of rights and obligations, postulating novation.
Issue(s)
Whether the amount of the unpaid balance awarded by the RTC and CA is correct. Whether Food Fest and Joyfoods can be held jointly and severally liable for the unpaid balance, or if liability rests solely with Joyfoods.
Ruling
The appeal is denied. The Decision of the Court of Appeals is affirmed.
Ratio Decidendi
On the amount of the unpaid balance: The Court rejected the petitioners' challenge to the amount of the unpaid balance. The petitioners' assertion that the unpaid balance should be P382,055.22 was based on the alleged existence of two agreements: one suspending the rental escalation clause indefinitely, and another fixing the rent at P90,000.00 per month for the eleventh and twelfth years. However, both the RTC and the CA found no credible evidence to support the existence of these agreements. As an appellate court, the Supreme Court generally defers to the factual findings of lower courts, especially when they are consistent, and does not act as a trier of facts. The petitioners failed to demonstrate any circumstance that would warrant disturbing these factual determinations. Therefore, the Court sustained the unpaid balance awarded by the RTC and CA. On the liability for the unpaid balance: The Court also rejected the plea to limit the liability solely to Joyfoods. The petitioners invoked the concept of novation by substitution of the debtor, arguing that the assignments of rights and obligations released Food Fest from liability. However, novation by substitution of a debtor requires the consent of the creditor. Article 1293 of the Civil Code explicitly states that such novation cannot be made without the consent of the creditor. In this case, the Contract of Lease contained a non-waiver clause (Clause 16) requiring any waiver of rights to be in writing and signed by the party concerned. The Court found that the respondents' consent to the substitution of Food Fest by Joyfoods was not expressly given in writing. Furthermore, even setting aside the non-waiver clause, the Court found no implied consent from the respondents' actions. Mere acceptance of payments from a third party (Joyfoods) does not automatically result in novation; it only makes the third party a co-debtor or surety unless there is an express release of the original debtor. Since no valid novation occurred, Food Fest remained liable under the Contract of Lease, and Joyfoods, as the assignee, became a co-debtor.
Main Doctrine
The assignment of rights and obligations under a contract does not result in novation by substitution of debtor without the express consent of the creditor. Furthermore, a non-waiver clause requiring written consent for waivers of rights binds the parties, preventing implied consent to novation.