A&C MINIMART v.

VILLAREAL (2007)
Facts: The subject property is a one-storey commercial building constructed on a parcel of land at Paranaque, Metro Manila. A&C
Minimart leased the six stalls from Joaquin Bonifacio under a Lease Agreement on 1992 and which expired on 1997. Another Lease
Contract dated 22 January 1998 was executed between A&C Minimart and Teresita Bonifacio renewing the earlier contract for another
five years.

However, ownership of the subject property is under dispute. Tricia Ann Villareal and Claire Hope Villareal and the Spouses Bonifacio
claim ownership over the subject property. They have conflicting claims over the property.

Villareal’s Claim
It was based on a sale of property on execution pending appeal in a separate case, wherein the civil case is an independent action for
damages by Villareal against Spouses Sevilla (original owners of the disputed property) arising from the murder of Jose Villareal,
father of the respondents. They were awarded damages and there was a writ of execution pending appeal which levied on two parcels
of land where the commercial building is built thereon. It was sold at a public auction but was still in question to the amount of
damages.

Bonifacio’s Claim
They claim to have purchased the property from the spouses Sevilla. Twice they challenged the Villareals’ ownership of the property.
They allegedly bought the property from the spouses Sevilla on 17 June 1986 but were unable to transfer the titles to their names when
they discovered that notice of levy on execution was already annotated in the TCTs.

• The first case was dismissed by CA and the sale was made null and void, final and executory.
• Second time was dismissed and was denied.

A&C MINIMART SUSPENDED PAYMENT: Upon learning of the cases, it stopped paying its rentals on the subject property in violation of the
Renewed Lease of Contract.

• Respondent filed a case of Unlawful Detainer and Damages against it and also against the Spouses Bonifacio for the recovery of
advanced rentals.
• The Spouses Bonifacio also filed a separate Unlawful Detainer case against A&C Minimart.
• RTC found that Spouses Bonifacio did not acquire ownership over the property and ruled that the petitioner had the obligation to pay
the rentals for the use of the subject property and directed petitioner to deposit it payment to a Landbank account to be held in trust.

RTC directed the Spouses Bonifacio to deposit P315K paid by A&C to the Landbank account and also for A&C to deposit rental
payments and to furnish the Villareals copies of the Lease Contract it entered into with Bonifacio’s.

RTC MR: It ruled that the rental should accrue in favor of the respondents only after the turnover of the possession of the subject
property to them sometime on 2 March 1999. Moreover, it found that petitioner did not act in bad faith when it refused to pay rentals
and, thus, should not be liable for damages.

Additionally, it also ordered the petitioner to pay 12% interest per annum on the monthly rentals due from its receipt of the
respondents’ demand letter on 25 June 1999, until full payment; to pay respondents’ attorney’s fees in the amount of P100,000.00 and
the costs of suit; and to vacate the subject property,

CA: It ordered A&C Minimart to pay a monthly interest of 3% on the total amount of rental and other charged not paid on time
pursuant to the contract of lease.

Issue:
Whether or not the Villareals are entitled to the benefits (rentals and interest) of the Contract of Lease entered into A&C Minimart and
Teresita Bonifacio.

COURT: The petitioner is partly meritorious.

Respondents Are Not Successors to Contractual Rights

CONTENTION: Petitioner argues that respondents are not entitled to the 3% penalty stipulated under the Lease Contract dated 22 January
1998, which becomes payable to the lessor whenever the petitioner incurs delay in the payment of its rentals.
COURT REPLY: This argument is well-taken. It is a well-known rule that a contractual obligation or liability, or an action ex-contractu, must
be founded upon a contract, oral or written, either express or implied. If there is no contract, there is no corresponding liability and no
cause of action may arise therefrom. This is provided for in Article 1311 of the Civil Code:

Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received
from the decedent.

IN THIS CASE:The Lease Contract dated 22 January 1998, was executed between the spouses Bonifacio and petitioner. It is undisputed
that none of the respondents had taken part, directly or indirectly, in the contract in question.
Respondents also did not enter into contract with either the lessee or the lessor, as to an assignment of any right under the Lease
Contract in question. The Lease Contract, including the stipulation for the 3% penalty interest, was bilateral between petitioner and
Teresita Bonifacio.

Respondents claim ownership over the subject property, but not as a successor-in-interest of the spouses Bonifacios. They purchased
the property in an execution sale from the spouses Sevilla. Thus, respondents cannot succeed to any contractual rights which may
accrue to the spouses Bonifacio.

Entitlement of Villareal of Rentals Arose Out from a

Quasi-Contract Not from The Contract Itself:

Although the respondents were adjudged to be entitled to rentals accruing from 2 March 1999, until the time the petitioner vacated the
premises, the obligation to pay rent was not derived from the Lease Contract dated 22 January 1998, but from a quasi-contract by virtue
of Article 2142.

SALE TO BONFACIOS WAS A FORGERY:In the present case, the spouses Bonifacio, who were named as the lessors in the Lease Contracts,
dated 3 August 1992 and 22 January 1998, are already adjudged not to be the real owners of the subject property.

In Civil Case No. 90-2551, Branch 63 of the Makati RTC declared that the Deed of Sale, executed on 17 June 1986, between the
spouses Bonifacio and the spouses Sevilla was a forgery and, hence, did not validly transfer ownership to the spouses Bonifacio.
At present, there is a pending appeal before the Supreme Court docketed as G.R. No. 150824, which would determine who between the
respondents and the spouses Sevilla are the rightful owners of the property.

Since the spouses Bonifacio are not the owners of the subject property, they cannot unjustly benefit from it by collecting rent
which should accrue to the rightful owners of the same. Hence, the Makati RTC, Branch 132, had set up a bank account where the
rent due on the subject property should be deposited and kept in trust for real owners thereto.

HELD: The petition is granted. The petitioner A & C Minimart Corporation is not obligated to pay the penalty interest of 3% per month
on the total amount of rental and other charges not paid on time pursuant to the Contract of Lease dated 22 January 1998.