SPOUSED MANZANILLA V. WATERFIELDS INDUSTRIES CORP.July 18, 2014Fa!

"

: The spouses Manzanilla are the owners of a 25,000-square meter parcel of land in
Batangas, a portion of which was being leased to Waterelds (represented by its
President Aliza Ma). The Contract of Lease (dated May 24, 1994) provides a 25-year
period and renewable upon the option of the lessee. Theres a provision
acknowledging the lessees payment of a rental deposit amounting to P216,000
which is meant to answer for unpaid rentals, damages, penalties and unpaid utility
charges. Such deposit or any balance thereof shall be refunded to the lessee
immediatelyupon the termination or expiration of the contract. The parties executed
on June 6, 1994 an Amendment to the Contract of Lease which retained the terms
and conditions of the original contract. Beginning April 1997, however, Waterelds
failed to pay the monthly rental. Hence, Ma sent the spouses Manzanilla
aletterdated July 7, 1997. The letter contains Mas promise to pay the rentals in
arrears by way of check payment and a statement that the deposit stipulated in the
lease contract be used exclusively for the payment of the unpaid utilities and other
incidental expenses. It also stated that the original contract shall be amended
according to the provision of the letter.Spouses Manzanilla led before the MTC a
Complaintfor Ejectment against Waterelds. Paragraph 5 of the complaint alleges:
subsequently, the said Contract of Lease

was amended

on 06 June 1994 and on

09 July 1997

x x x.In its Answer, Waterelds admitted

paragraphs 4 and 5 of the Complaint. It alleged that it had built substantial

improvements over the land; that it just recently suered business losses. It claimed
that it did not fail or refuse to pay the monthly rentals but was just utilizing the
rental deposit in the amount of P216,000.00 (equivalent to one year rentals) as
rental payment in accordance with Section 4 of the original Contract of Lease.
Hence, it argued that the spouses Manzanilla have no cause of action against it.

MTC:

Ruled in favor of Manzanilla. It held that Mas letter of July 9, 1997 had amended the
Contract of Lease. In particular, Section 4 of the Contract of Lease which provides
that the rental deposit shall answer

for any unpaid rentals

, damages, penalties and unpaid utility charges was superseded by the portion in
Mas July 9, 1997 letter which states that

the deposit stipulated in our lease contract shall be used

exclusively for the payment of unpaid utilities, if any, and other incidental expenses
only

and applied at the termination of the lease

. Hence, the MTC found no merit in Waterelds claim that it did not fail or refuse to
pay the monthly rentals as it was applying the rental deposit to its payment of the
same.

RTC:

Waterelds, in its Answer admitted paragraph 5 of the Complaint which states that
the Contract of Lease was amended on June 6, 1994 and

July 9, 1997

CA:

Spouses Manzanilla have no cause of action against Waterelds.

Spouses Manzanilla terminated the Contract of Lease. Upon such termination, it

held that the rental deposit should have been applied as payment for unpaid
utilities and other incidental expenses, if any, in view of the July 9, 1997 letter. And
since the spouses Manzanilla did not allege that there were unpaid utilities or
incidental expenses for the account of Waterelds as of the termination of the
contract, the whole amount of P216,000.00 should have been returned by the
former to the latter when the

1 Paragraph 2 of the Answer provides:

Paragraphs 4,

, and 6 of the Complaint are admitted.

contract was terminated. Not having done so, the spouses Manzanilla therefore,
became debtors of Waterelds insofar as the said amount is concerned. And since
Waterelds is also a debtor of the spouses Manzanilla with respect to the unpaid
rentals, compensation should take place.

Issues

: Whether or not there was a violation of the lease which will justify a complaint for
unlawful detainer. (YES)

Held:

Spouses Manzanilla, on account of Waterelds alleged violation of the contract of

lease by non-payment of rentals, considered the contract terminated and demanded
for the latter to pay its obligation and vacate the property. As demand proved futile,
the said spouses led the Complaint for ejectment [unlawful detainer].

There is no issue with respect to demand. What is in question is the presence of a

cause of action. As mentioned above, courts, in order to ascertain whether there is
cause of action for unlawful detainer, must inquire into (a) the existence of the lease
contract and, (b) the violation of that lease by the lessee. Since in this case the
existence of a lease contract between the parties is undisputed, the focus is on the
supposed violation of the lease, that is, Waterelds alleged non-payment of rent.
However, since Waterelds denies that it failed to pay rent and puts up the claim
that it was utilizing the rental deposit as rental payment, a preliminary question
emerges,

viz: May the rental deposit be utilized as rental payment?

The violation of the lease through non-payment of rent is what constitutes the cause
of action.Hence, once the failureto pay rent is established, a cause of action for
unlawful detainer arises. The CAs acknowledgement that Waterelds failed to pay
rent, as shown by its declaration that the latter is the debtor of the spouses
Manzanilla with respect to theunpaid rentals, is clearly inconsistent with the
conclusion that no cause of action for ejectment exists against Waterelds. Failure
to pay the rent must precede termination of the contract due to non- payment of
rent. It therefore follows that the cause of action for unlawful detainer in this case
must necessarily arise before the termination of the contract and not the other way
around as what the CA supposed. Indeed, in going beyond the termination of the
contract, the CA went a bit too far in its resolution of this case.Waterelds cannot
now contradict its judicial admission

3
 that the Contract of Lease was amended on July 9, 1997; the doctrine of estoppel
likewise bars it from falsifying Mas July 9, 1997 letter in this litigation.

For the purpose of bringing an unlawful detainer suit, two requisites must concur:
(1)

there must be failure to pay rent or comply with the conditions of the lease

, and (2) there must be demand both to pay or to comply and vacate.

The rst requisite refers to the existence of the cause of action for unlawful detainer

, while the second refers to the jurisdictional requirement of demand in order that
said cause of action may be pursued.

Section 4, Rule 129 of the Rules of Court provides:SEC. 4.

Judicial admissions.

An admission, verbal or written, made by a party in the course of the proceedings

in the same case, does not require proof. The admission may be contradicted only
by showing that it was made through palpable mistake or that no such admission
was made.A party may make judicial admissions in (a) the pleadings, (b) during
trial, either by verbal or written manifestations or stipulations, or (c) in other stages
of the judicial proceeding.

Clearly, Waterelds admitted in its Answer the truth of the material allegation that
the Contract of Lease was amendedon July 9, 1997. It is well- settled that judicial
admissions cannot be contradicted by the admitter who is the party [itself] and
binds the person who makes the same, and absent any showing that this was made
thru palpable mistake (as in this case), no amount of rationalization can oset
it.Moreover, [u]nder the doctrine of estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved
as against the person relying thereon. A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon them. In the law
of evidence, whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing [to be] true,
and to act upon such belief, he cannot, in any litigation arising out of such
declaration, act,or omission, be permitted to falsify it.In view of these, any eort on
the part of Waterelds to impugn the July 9, 1997 letter is futile.Even without the
above-mentioned admission of Waterelds, the contemporaneous and subsequent
acts (which, according to Article 1371 of the Civil Code, shall be considered in
judging the intent of the contracting parties) of the parties reveal their intention to
amend the original Contract of Lease.The doctrine of unjust enrichment does not
apply in this case since any benet that the spouses Manzanilla may obtain from
the subject premises cannot be said to be without any valid basis or justication.