SECOND DIVISION
[G.R. No. 237840. June 10, 2019.]
PEPSI-COLA PRODUCTS PHILIPPINES, INC., petitioner, vs.ISABELA LEAF TOBACCO CO., INC., respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated10 June 2019which reads as follows:
"G.R. No. 237840 — PEPSI-COLA PRODUCTS PHILIPPINES, INC., petitioner, versus ISABELA LEAF TOBACCO CO., INC., respondent.
This is a petition for review on certiorari1 (Petition) under Rule 45 of the Rules of Court assailing the Decision 2 dated September 29, 2017 and the Resolution 3 dated February 19, 2018 of the Court of Appeals (CA) in CA-G.R. CV No. 106827. The CA Decision affirmed the Order 4 dated July 22, 2015 of the Regional Trial Court of Cauayan City, Isabela, Branch 19 (RTC), granting respondent's Motion for Judgment on the Pleadings (Motion), declaring the pre-termination of the Warehouse Lease Agreement 5 (Agreement) invalid, and ordering Pepsi-Cola Products Philippines, Inc. (petitioner) to pay monthly rentals in the total amount of P1,765,500.00 and attorney's fees and costs of suit in the amount of P30,000.00.
The Facts and Antecedent Proceedings
The facts, as discussed by the CA, are summarized as follows:
Lessor, Isabela Leaf Tobacco Co., Inc. (respondent), and lessee, petitioner, entered into an Agreement for the use of the 2,447-square meter property in Cauayan, Isabela for a period of two years, from February 2013 to January 2015. 6 The Agreement contained a pre-termination clause, which stated:
11.wxwxShould the LESSEE be prevented from profitably pursuing its warehouse operations by reason of government restrictions, sudden change in business trends, operational restraints and other similar causes, it may upon thirty (30) days prior written notice to the LESSOR, terminate the Agreement. 7
On November 14, 2013, respondent received a Notice of Pre-Termination 8 dated August 15, 2013, which stated that petitioner was pre-terminating the Agreement due to "change[s] in doing business for which your current warehouse could not accommodate." 9
On November 18, 2013, respondent informed petitioner that its ground for pre-termination was not among those stipulated under the Agreement and demanded that the latter comply with its contractual obligations. 10
In a letter dated February 5, 2014, petitioner responded that the Agreement gave it the right to pre-terminate the contract by reason of "sudden change in business trends, operational restraints, and under similar causes." 11
Hence, respondent filed a Complaint for breach of contract and damages. 12 In its Answer, petitioner alleged that "it urgently needed a larger warehouse in light of business developments and fast growth x x x since [respondent's] warehouse could not accommodate the additional space required, it was forced to pre-terminate the lease agreement pursuant to Section 11 thereof." 13
After pre-trial on May 15, 2015, respondent filed a Motion, alleging that "the only issue left for determination is whether or not [petitioner] may validly pre-terminate the lease agreement." 14 In its Opposition, petitioner argued that "a trial on the merits should be conducted to prove that there will be no growth for [petitioner] should it continue to occupy and lease [respondent's] warehouse." 15
In an Order dated July 22, 2015, the RTC granted respondent's Motion, declared the pre-termination invalid, and ordered petitioner to pay monthly rentals in the total amount of P1,765,500.00 and attorney's fees and costs of suit in the amount of P30,000.00. 16
On appeal, the CA sustained petitioner's position that a Judgment on the Pleadings under Rule 34 of the Rules of Court (Rules) was improper as petitioner's Answer raised an affirmative defense. 17 Nevertheless, the CA refused to remand the case for further proceedings and held that the primary issue, i.e., whether or not petitioner's ground for pre-terminating the Agreement fell within the allowable grounds under Section 11, was "purely legal in nature" and could be resolved "without the need for a full-blown trial." 18 The CA thus treated the RTC's Order as a Summary Judgment under Rule 35 of the Rules and held that "[t]here was no genuine issue as to any pertinent fact which would warrant the presentation of evidence." 19
In resolving the supposedly "purely legal" issue, the CA affirmed the RTC's ruling and held that petitioner could not validly pre-terminate the Agreement under Section 11 on the ground that petitioner "need[ed] a larger warehouse space in light of their recent business developments and fast growing trend in their business"20 and that respondent's "warehouse x x x could not accommodate the required additional space." 21 The CA explained that petitioner's reasons did not fall within the context of "government restrictions, operational restraints, or sudden changes in business [trends], or for that matter, other similar causes." 22 Further, the CA held that petitioner could not have been prevented from profitably pursuing its warehouse business because its need for additional space presumably shows that its business generated more revenues than projected. 23 The CA held that if petitioner truly needed additional space, it could have leased another warehouse in addition to the subject premises. 24
Petitioner thus filed the instant petition, alleging, among others, that the CA erred in: 1) applying the Rule on Summary Judgment, considering that the issues were not purely legal in nature; 25 and 2) ruling that the need for additional warehouse space did not fall within the context of "government restrictions, sudden changes in business trends, operational restraints, and other similar causes." 26
Issue
The main issue in the case at bar is whether the CA erred in refusing to remand the case for trial on the merits and treating the RTC's Judgment on the Pleadings under Rule 34 as a Summary Judgment under Rule 35 of the Rules of Court.
The Court's Ruling
The Petition has merit.
In Basbas v. Sayson, 27 the Court explained the difference between a judgment on the pleadings and a summary judgment, viz.:
Simply stated, what distinguishes a judgment on the pleadings from a summary judgment is the presence of issues in the Answer to the Complaint. When the Answer fails to tender any issue, that is, if it does not deny the material allegations in the complaint or admits said material allegations of the adverse party's pleadings by admitting the truthfulness thereof and/or omitting to deal with them at all, a judgment on the pleadings is appropriate. On the other hand, when the Answer specifically denies the material averments of the complaint or asserts affirmative defenses, or in other words raises an issue, a summary judgment is proper provided that the issue raised is not genuine. "A 'genuine issue' means an issue of fact which calls for the presentation of evidence, as distinguished from an issue which is fictitious or contrived or which does not constitute a genuine issue for trial." 28
While the CA correctly held that a Judgment on the Pleadings was not proper given that petitioner's Answer raised an affirmative defense, i.e., that its reason for pre-terminating the lease was allowed under Section 11 of the Agreement, the CA committed reversible error when it nevertheless proceeded to decide the case under Rule 35 or the Rules on Summary Judgment. D.M. Consunji, Inc. v. Duvaz Corp.29 explains the nature of Summary Judgments in this wise:
In Solidbank Corp. v. CA, the Court, explaining when summary judgment may be allowed, wrote:
Summary judgment is a procedural device resorted to in order to avoid long drawn out litigations and useless delays. When the pleadings on file show that there are no genuine issues of fact to be tried, the Rules of Court allows a party to obtain immediate relief by way of summary judgment. That is, when the facts are not in dispute, the court is allowed to decide the case summarily by applying the law to the material facts.
Conversely, where the pleadings tender a genuine issue, summary judgment is not proper. A "genuine issue" is such issue of fact which [requires] the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim.
Rule 34, Section 3 of the Rules of Court provides two (2) requisites for summary judgment to be proper: (1) there must be no genuine issue as to any material fact, except for the amount of damages; and (2) the party presenting the motion for summary judgment must be entitled to a judgment as a matter of law.
xxx xxx xxx
From the foregoing provisions and pronouncements, it is clear that summary or accelerated judgment is proper only when, based on the pleadings, depositions, and admissions on file, and after hearing, it is shown that save as to the amount of damages, there is no veritable issue regarding any material fact in the action and the movant is entitled to judgment as a matter of law. Conversely, where the pleadings tender an issue, that is, an issue of fact the resolution of which calls for a presentation of evidence, as distinguished from an issue which is sham or contrived, summary judgment is not proper. 30
Applying the foregoing principles to the instant case, there can be no doubt that summary judgment is not proper as the case involves genuine issues of fact. To reiterate, Section 11 of the Agreement pertinently provides:
11. Should the LESSEE be prevented from profitably pursuing its warehouse operations by reason of government restrictions, sudden change in business trends, operational restraints and other similar causes, it may upon thirty (30) days prior written notice to the LESSOR, terminate the Agreement. 31
A plain reading of the foregoing stipulation shows that petitioner's need for additional space for the conduct of its operations certainly falls within the ambit of "operational restraints" and/or "changes in business trends" and would be a valid ground for the pre-termination of the lease if petitioner can prove that: 1) it was prevented from profitably pursuing its warehouse operations and 2) it gave the respondent-lessor written notice thereof at least 30 days prior to termination. Said conditions are undoubtedly issues of fact that require the presentation of evidence.
Also, a determination of the extent of breach, if any, whether substantial or casual, is a factual issue that needs to be addressed before the court can award damages caused by petitioner's pre-termination, should the same be deemed unwarranted.
Contrary to respondent's argument that the issue of whether the pre-termination was justified is purely legal, 32 the Court finds that the validity of the pre-termination raises genuine issues of fact which may only be resolved after trial on the merits. Respondent admitted as much when it alleged in its Motion that "[g]ranting, without admitting, that [petitioner] needs a larger warehouse, defendant was not able to show proof that it was PREVENTED from profitably pursuing its warehouse operation." 33
There is likewise no basis for the CA to assume that the need for additional space belied petitioner's claim that it was prevented from profitably pursuing its operations (and that in fact, petitioner's business generated more revenues than projected). 34 The applicable ground for termination and its resulting effect on petitioner's profitability are factual defenses which may only be established with evidence presented at trial. In the same manner, the Agreement could not be deemed a contract of adhesion, without the presentation of evidence on the circumstances surrounding the execution of the contract or the relative position of the parties. Based on the foregoing, the CA committed reversible error in treating the RTC's Judgment on the Pleadings as a Summary Judgment and in proceeding to resolve the substantive issues without a trial.
In view of the foregoing, the instant case must be remanded to the RTC for the presentation of evidence on respondent's claims and petitioner's defenses. The RTC would, after trial on the merits, be in a better position to resolve all other issues raised in the Petition, such as whether the agreement was a contract of adhesion, whether petitioner breached the contract, and whether the petitioner is liable for damages and the amount thereof.
WHEREFORE, the Petition is GRANTED. The Decision dated September 29, 2017 and the Resolution dated February 19, 2018 in CA-G.R. CV No. 106827 of the Court of Appeals are hereby REVERSED and SET ASIDE. The case is accordingly remanded to the Regional Trial Court for trial on the merits.
SO ORDERED. (J. REYES, JR., J., on leave)"
Very truly yours,
(SGD.) MARIA LOURDES C. PERFECTODivision Clerk of Court
By:
TERESITA AQUINO TUAZONDeputy Division Clerk of Court
Footnotes
1.Rollo, pp. 12-38.
2.Id. at 42-53. Penned by Associate Justice Manuel M. Barrios with Associate Justices Sesinando E. Villon and Renato C. Francisco, concurring.
3.Id. at 39-41.
4.Id. at 59-64. Penned by Executive Judge Raul V. Babaran.
5.Id. at 54-56.
6.Id. at 43, 54.
7.Id. at 55-56.
8.Id. at 57.
9.Id. at 14, 44.
10.Id.
11.Id. at 15.
12.Id. at 45.
13.Id.
14.Id.
15.Id.
16.Id. at 45, 64.
17.Id. at 48.
18.Id.
19.Id.
20.Id. at 50.
21.Id.
22.Id. at 51.
23.Id.
24.Id.
25.Id. at 20-25.
26.Id. at 28-29.
27. 671 Phil. 662 (2011).
28.Id. at 682; underscoring supplied.
29. 612 Phil. 423 (2009).
30.Id. at 432-433; underscoring supplied and italics in the original.
31.Id. at 55-56; underscoring supplied and emphasis in the original.
32.Id. at 81.
33.Id. at 23; emphasis and underscoring supplied.
34.Id. at 51.