G.R. No.

L-23546 August 29, 1974 contract of lease would be suspended only if

the defendants could not operate the leased
lines due to the action of the officers,
LAGUNA TAYABAS BUS COMPANY and BATANGAS employees or laborers of the lessor but not of
TRANSPORTATION COMPANY, petitioners, the lessees, and that the deduction of P836.92
vs. amounted to a fraudulent preference in the
FRANCISCO C. MANABAT, as assignee of Biñan Transportation insolvency proceedings as whatever judgment
Company, Insolvent, respondent. might have been rendered in favor of any of
the lessees should have been filed as a claim
Domingo E. de Lara for petitioners. in said proceedings. The defendants neither
refunded the deductions nor paid the rentals
beginning January, 1958, notwithstanding
M. A. Concordia & V.A. Guevarra for respondent. demands therefor made from time to time. At
first, the defendants assured the plaintiff that
the lease rentals would be paid, although it
might be delayed, but in the end they failed to
MAKASIAR, J.:p
comply with their promise.

This is an appeal by certiorari from a judgment of the Court of

On February 18, 1958, the Batangas
Appeals dated August 31, 1964, which WE AFFIRM.
Transportation Company and Laguna-
Tayabas Bus Company separately filed with
The undisputed facts are recounted by the Court of Appeals through the Public Service Commission a petition for
then Associate Justice Salvador Esguerra thus: authority to suspend the operation on the
lines covered by the certificates of public
convenience leased to each of them by the
On January 20, 1956, a contract was executed Biñan Transportation Company. The
whereby the Biñan Transportation Company defendants alleged as reasons the reduction
leased to the Laguna-Tayabas Bus Company in the amount of dollars allowed by the
at a monthly rental of P2,500.00 its Monetary Board of the Central Bank of the
certificates of public convenience over the Philippines for the purchase of spare parts
lines known as Manila-Biñan, Manila- needed in the operation of their trucks, the
Canlubang and Sta. Rosa-Manila, and to the alleged difficulty encountered in securing
Batangas Transportation Company its said parts, and their procurement at
certificate of public convenience over the line exorbitant costs, thus rendering the
known as Manila-Batangas Wharf, together operation of the leased lines prohibitive. The
with one "International" truck, for a period of defendants further alleged that the high cost
five years, renewable for another similar of operation, coupled with the lack of
period, to commence from the approval of the passenger traffic on the leased lines resulted
lease contract by the Public Service in financial losses. For these reasons they
Commission. On the same date the Public asked permission to suspend the operation of
Service Commission provisionally approved the leased lines until such time as the
the lease contract on condition that the operating expenses were restored to normal
lessees should operate on the leased lines in levels so as to allow the lessees to realize a
accordance with the prescribed time reasonable margin of profit from their
schedule and that such approval was subject operation.
to modification or cancellation and to
whatever decision that in due time might be
rendered in the case. Plaintiff's assignee opposed the petition on
the ground that the Public Service
Commission had no jurisdiction to grant the
Sometime after the execution of the lease relief prayed for as it should involve the
contract, the plaintiff Biñan Transportation interpretation of the lease contract, which act
Company was declared insolvent in Special falls exclusively within the jurisdiction of the
Proceedings No. B-30 of the Court of First ordinary courts; that the petitioners had not
Instance of Laguna, and Francisco C. Manabat asked for the suspension of the operation of
was appointed as its assignee. From time to the lines covered by their own certificates of
time, the defendants paid the lease rentals up public convenience; that to grant the petition
to December, 1957, with the exception of the would amount to an impairment of the
rental for August 1957, from which there was obligation of contract; and that the
deducted the sum of P1,836.92 without the defendants have no legal personality to ask
consent of the plaintiff. This deduction was for suspension of the operation of the leased
based on the ground that the employees of lines since they belonged exclusively to the
the defendants on the leased lines went on plaintiffwho is the grantee of the
strike for 6 days in June and another 6 days in corresponding certificate of public
July, 1957, and caused a loss of P500 for each convenience. Aside from the assignee, the
strike, or a total of P1,000.00; and that in Civil Commissioner of the Internal Revenue and
Case No. 696 of the Court of First Instance of other creditors of the Biñan Transportation
Batangas, Branch II, judgment was rendered Company, like the Standard Vacuum Oil Co.
in favor of defendant Batangas and Parsons Hardware Company, filed
Transportation Company against the Biñan oppositions to the petitions for suspension of
Transportation Company for the sum of operation.
P836.92. The assignee of the plaintiff
objected to such deduction, claiming that the

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 On October 15, 1958, the Public Service presented evidence before the Chief Attorney
Commission overruled all oppositions filed and the hearing was concluded on June 29,
by the assignee and other creditors of the 1959. On October 20, 1959, the Public Service
insolvent, holding that upon its approval of Commission issued an order the dispositive
the lease contract, the lessees acquired the part of which reads as follows:
operating rights of the lessor and assumed
full responsibility for compliance with all the
terms and conditions of the certificate of In view of the
public convenience. The Public Service foregoing, the
Commission further stated that the petition petitioners herein are
to suspend operation did not pertain to any authorized to suspend
act of dominion or ownership but only to the their operation of the
use of the certificate of public convenience trips of the Biñan
which had been transferred by the plaintiff to Transportation
the defendants, and that the suspension Company between
prayed for was but an incident of the Batangas Piers-
operation of the lines leased to the Manila, Biñan-Manila,
defendants. The Public Service Commission Sta. Rosa-Manila and
further ruled that being a quasi-judicial body Canlubang-Manila
of limited jurisdiction, it had no authority to authorized in the
interpret contracts, which function belongs to aforementioned cases
the exclusive domain of the ordinary courts, from the date of the
but the petition did not call for interpretation filing of their petition
of any provision of the lease contract as the on February 18, 1958,
authority of the Public Service Commission to until December 31,
grant or deny the prayer therein was derived 1959. (p. 25, rec.; pp.
from its regulatory power over the leased 60-61, ROA).
certificates of public convenience.
Going back to the Court of First Instance of Laguna —
While proceedings before the Public Service Commission were thus
going on, as a consequence of the continuing failure of the lessees to ... The motion (to dismiss) having been
fulfill their earlier promise to pay the accruing rentals on the leased denied, the defendants answered the
certificates, complaint, alleging among others, that the
Public Service Commission authorized the
On May 19, 1959, plaintiff Biñan suspension of operation over the leased lines
Transportation Company represented by from February 18, 1950, up to December 31,
Francisco C. Manabat, assignee, filed this 1959, and hence the lease contract should be
action against defendants Laguna Tayabas deemed suspended during that period; that
Bus Company and Batangas Transportation plaintiff failed to place defendants in peaceful
Company for the recovery of the sum of and adequate enjoyment and possession of
P42,500 representing the accrued rentals for the things leased; that as a result of the
the lease of the certificates of public plaintiff being declared insolvent the lease
convenience of the former to the latter, contract lost further force and effect and
corresponding to the period from January payment of rentals thereafter was made
1958, to May 1959, inclusive, plus the sum of under a mistake and should be refunded to
P1,836.92 which was deducted by the the defendants. (p. 21; rec.; p. 55, ROA).
defendants from the rentals due for August,
1957, together with all subsequent rentals The Court of Appeals proceeded to state that —
from June, 1959, that became due and
payable; P5,000.00 for attorney's fees and
such corrective and exemplary damages as After hearing in the court a quo and
the court may find reasonable. presentation by the parties herein of their
respective memoranda, the trial court on
March 18, 1960, rendered judgment in favor
The defendants moved to dismiss the of plaintiff, ordering the defendants jointly
complaint for lack of jurisdiction over the and severally to pay to the former the sum of
subject matter of the action, there being P65,000.00 for the rentals of the certificates
another case pending in the Public Service of public convenience corresponding to the
Commission between the same parties for the period from January, 1958, to February,
same cause. ... (pp. 20-21, rec.; pp. 54-55, 1960, inclusive, including the withheld
ROA). amount of P836.92 from the rentals for
August, 1957, plus the rentals that might
The motion to dismiss was, however, denied. Meanwhile — become due and payable beginning March,
1960, at the rate of P2,500.00 a month, with
interest on the sums of P42,500 and P836.92
The Public Service Commission delegated its at the rate of 6% per annum from the date of
Chief Attorney to receive evidence of the the filing of the complaint, with interest on
parties on the petition of the herein the subsequent rentals at the same rate
defendants for authority to suspend beginning the first of the following month,
operation on the lines leased to them by the plus the sum of P3,000.00 as attorney's fees,
plaintiff. The defendants, the assignee of the and the cost of the suit. (pp. 25-26, rec.)
plaintiff and other creditors of the insolvent

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From the decision of the Court of First Instance, defendants appealed The new question raised is presented thus:
to the Court of Appeals, which affirmed the same in toto in its
decision dated August 31, 1964. Said decision was received by the
appellants on September 7, 1964. xxx xxx xxx

On September 21, 1964, appellants filed the present appeal, raising IV

the following questions of law:
This Honorable Court is authorized to
1. Considering that the Court of Appeals equitably reduce the rentals payableby the
found that the Public Service Commission petitioners, should this Honorable Court
provisionally approved the lease contract of adopt the position of the Courtof Appeals and
January 20, 1956 between petitioners and the lower court that petitioners have not
Biñan Transportation Company upon the been releived from thepayment of rentals on
condition, amongothers, that such approval the leased lines. (p. 7 Amended Petition for
was subject to modification and cancellation Certiorari,pp. 46, 52, rec.).
and towhatever decision that in due time
might be rendered in the case, the Court On November 5, 1964, the Supreme Court
ofAppeals erred in giving no legal effect and required respondents herein to file an
significance whatever to the suspension of answer to the amended petition. On the same
operations later granted by the Public Service date, respondents filed, quite belatedly, an
Commission after due hearing covering the opposition to the motion of the petitioners.
lines leased to petitioners thereby nullifying, Said opposition was later "noted" by the
contrary to law and decisions of this Court in its resolution dated December 1,
Honorable Court, the authority and 1964.
powersconferred on the Public Service
Commission.
I

2. The Court of Appeals misapplied the

statutory rules on interpreting contracts and First, it must be pointed out that the first three questions of law
erred in its construction of the clauses in the raised by petitioners were already disposed of in Our resolution
lease agreement authorizing petitioners to dated October 12, 1964 dismissing the original petition for lack of
suspend operation without the merit, which in effect affirmed the appealed decision of the Court of
corresponding liability for rentals during the of Appeals. Although, in their motion to admit amended petition
period of suspension. dated October 31, 1964, petitioners sought a reconsideration of the
said resolution not only in the light of the fourth legal issue raised
but also on the said first three legal questions, the petitioners
3. Contrary to various decisions of this advanced no additional arguments nor cited new authorities in
Honorable Court relieving the lessee from the support of their stand on the first three questions of law. They
obligation to pay rent where there is failure merely reproduced verbatim from their original petition their
to use or enjoy the thing leased, the Court of discussion on said questions.
Appeals erroneously required petitioners to
pay rentals, with interest, during the period
of suspension of the lease from January, 1958 To the extent therefore that the motion filed by the petitioner seeks
up to the expiration of the agreement on a reconsideration of our order of dismissal by submitting anew,
January 20, 1961. (p. 7, rec.) through the amended petition, the very same arguments already
dismissed by this Court, the motion shall be considered pro forma,
(See Estrada v. Sto. Domingo, 28 SCRA 890, 905-906, 911) and hence
On October 12, 1964, the Supreme Court issued a resolution is without merit.
dismissing said petition "for lack of merit." (p. 43, rec.). Said
resolution was received by petitioners on October 16, 1964.
Consequently, we limit the resolution of this case solely on the
discussions on the last (fourth) question of law raised, taking into
On October 31, 1964, the day the Court's resolution was to become consideration the discussion on the first three questions only insofar
final, petitioners filed a "Motion to Admit Amended Petition and to as they place the petitioners' discussion on the fourth question in its
Give Due Course Thereto." In said motion, petitioners explained — proper context and perspective.

... The amendment includes an alternative II

ground relating to petitioners' prayer for the
reduction of the rentals payable by them. This
alternative petition was not included in the The undisguised object of petitioners' discussion on the fourth
original one as petitioners where genuinely question of law raised is to justify their plea for a reduction of the
convinced that they should have been rentals on the ground that the subject matter of the lease was
absolved from all liabilities whatever. allegedly not used by them as a result of the suspension of
However, in view of the apparent position operations on the lines authorized by the Public Service
taken by this Honorable Court, as implied in Commission.
its resolution on October 12, 1964, notice of
which was received on October 16, 1964, In support of said plea, petitioners invoke article 1680 of the Civil
petitioners now squarely submit their Code which grants lessees of rural lands a right to a reduction of
alternative position for consideration. There rentals whenever the harvest on the land leased is considerably
is decisional authority for the reduction of damaged by an extraordinary fortuitous event. Reliance was also
rentals payable (see Reyes v. Caltex, 47 O.G. placed by the petitioners on Our decision in Reyes v. Caltex (Phil.)
1193, 1203-1204) (p. 44, rec).

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Inc., 84 Phil. 654, which supposedly applied said article by analogy The citizenry and the economy will suffer by reason of any
to a lease other than that covered by said legal provision. disruption in the transportation facilities.

The authorities from which the petitioners draw support, however, Furthermore, we are not at all convinced that the lease contract
are not applicable to the case at bar. brought no material advantage to the lessor for the period of
suspension. It must be recalled that the lease contract not only
stipulated for the transfer of the lessor's right to operate the lines
Article 1680 of the Civil Code reads thus: covered by the contract, but also for a forbearance on the part of the
lessor to operate transportation business along the same lines —
Art. 1680. The lessee shall have no right to a and to hold a certificate for that purpose. Thus, even if the lessee
reduction of the rent on accountof the would not actually make use of the lessor's certificates over the
sterility of the land leased, or by reason of the leased lines, the contractual commitment of the lessor not to operate
loss of fruits due toordinary fortuitous on the lines would sufficiently insure added profit to the lessees on
events; but he shall have such right in case of account of the lease contract. In other words, the commitment alone
the loss ofmore than one-half of the fruits of the lessor under the contract would enable the lessees to reap full
through extraordinary and unforeseen benefits therefrom since the commuting public would, after all, be
fortuitous events, save always when there is forced — at their inconvenience and prejudice — to patronize
a specific stipulation to the contrary. petitioner's remaining buses.

Extraordinary fortuitous events are Contrary to what petitioners want to suggest, WE refused in the
understood to be: fire, war, pestilence, Reyes case, supra, to apply by analogy Article 1680 and
unusual flood, locusts, earthquake, or others consequently, WE denied the plea oflessee therein for an equitable
which are uncommon, and which reduction of the stipulated rentals, holding that:
thecontracting parties could not have
reasonably foreseen. The general rule on performance of contracts
is graphically set forth in American treatises
Article 1680, it will be observed is a special provision for leases of which is also the rule, in our opinion,
rural lands. No other legal provision makes it applicable to ordinary obtaining under the Civil Code.
leases. Had theintention of the lawmakers been so, they would have
placed the article among the general provisions on lease. Nor can the Where a person by his contract charges
article be applied analogously to ordinary leases, for precisely himself with an obligation possible to be
because of its special character, it was meant to apply only to a performed, he must perform it, unless the
special specie of lease. It is a provision of social justice designed to performance is rendered impossible by the
relieve poor farmers from the harsh consequences of their contracts act of God, by the law, or by the other party, it
with rich landowners. And taken in that light, the article provides no being the rule that in case the party desires to
refuge to lessees whose financial standing or social position is equal be excused from the performance in the event
to, or even better than, the lessor as in the case at bar. of contingencies arising, it is his duty to
provide therefor in his contract. Hence,
Even if the cited article were a general rule on lease, its provisions performance is not excused by subsequent
nevertheless do not extend to petitioners. One of its requisites is that inability to perform, by unforeseen
the cause of loss of the fruits of the leased property must be an difficulties, by unusual or unexpected
"extraordinary and unforeseen fortuitous event." The circumstances expenses, by danger, by inevitable accident, by
of the instant case fail tosatisfy such requisite. As correctly ruled by breaking of machinery, by strikes, by
the Court of Appeals, the alleged causes for the suspension of sickness, by failure of a party to avail himself
operations on the lines leased, namely, the high prices of spare parts of the benefits tobe had under the contract, by
and gasoline and the reduction of the dollar allocations, "already weather conditions, by financial stringency or
existed when the contract of lease was executed" (p. 11, Decision; p. bystagnation of business. Neither is
30, rec.; Cuyugan v. Dizon, 89 Phil. 80). The cause of petitioners' performance excused by the fact that the
inability to operate on the lines cannot, therefore, be ascribed to contract turns out to be hard and improvident,
fortuitous events or circumstances beyond their control, but to their unprofitable, or impracticable, ill-advised, or
own voluntary desistance (p. 13, Decision; p. 32, rec.). even foolish, or less profitable, unexpectedly
burdensome. (17 CJS 946-948) (Reyes vs.
Caltex, supra, 664. Emphasis supplied).
If the petitioners would predicate their plea on the basis solely of
their inability to use the certificates of public convenience, absent
the requisite of fortuitous event, the cited article would speak Also expressed in said case is a ruling in American jurisprudence,
strongly against their plea.Article 1680 opens with the statement: which found relevance again in the case at bar, to wit: "(S)ince, by
"The lessee shall have no right to reduction of the rent on account of the lease, the lessee was to have the advantage of casual profits of
the sterility of the land leased ... ." Obviously, no reduction can be the leased premises, he should run the hazard of casual losses during
sustained on the ground that the operation of the leased lines was the term and not lay the whole burden upon the lessor." (Reyes vs.
suspended upon the mere speculation that it would yield no Caltex, supra, 664).
substantial profit for the lessee bus company. Petitioners' profits
may be reduced due to increase operating costs; but the volume of Militating further against a grant of reduction of the rentals to the
passenger traffic along the leased lines not only remains same but petitioners is the petitioners' conduct which is not in accord with the
may even increase as the tempo of the movement of population is rules of fair play and justice. Petitioners, it must be recalled,
intensified by the industrial development of the areas covered or promised to pay the accrued rentals in due time. Later, however,
connected by the leased routes. Moreover, upon proper showing, the when they believed they found a convenient excuse for escaping
Public Service Commission might have granted petitioners an their obligation, they reneged on their earlier promise. Moreover,
increase in rates, as it has done so in several instances, so that public petitioners' option to suspend operation on the leased lines appears
interest will always be promoted by a continuous flow of malicious. Thus, Justice Esguerra, speaking for the Court of Appeals,
transportation facilities to service the population and the economy. propounded the following questions: "If it were true that thecause

4
of the suspension was the high prices of spare parts, gasoline and
needed materials and the reduction of the dollar allocation, why was
it that only plaintiff-appellee's certificate of public convenience was
sought to be suspended? Why did not the defendants-appellants ask
for a corresponding reduction or suspension under their own
certificate along the same route? Suppose the prices of the spare
parts and needed materials were cheap, would the defendants-
appellants have paid more than what is stipulated in the lease
contract? We believe not. Hence, the suspension of operation on the
leased lines was conceived as a scheme to lessen operation costs
with the expectation of greater profit." (p. 14, Decision).

Indeed, petitioners came to court with unclean hands, which fact

militates against their plea for equity.

WHEREFORE, THE ORIGINAL AND AMENDED PETITIONS ARE

HEREBY DISMISSED, AND THE DECISION OF THE COURT OF
APPEALS DATED AUGUST 31, 1964 IS HEREBY AFFIRMED, WITH
COSTS AGAINST PETITIONERS.

Makalintal, C.J., Castro, Teehankee and Muñoz Palma, JJ., concur.

Esguerra, J., took no part.