GR 138088; (January, 2006) (Digest)
G.R. No. 138088 ; January 23, 2006
CAR COOL PHILIPPINES, INC., represented by its President and General Manager VIRGILIO DELA ROSA, Petitioner, vs. USHIO REALTY AND DEVELOPMENT CORPORATION, Respondent.
FACTS
Respondent Ushio Realty filed an ejectment case against petitioner Car Cool to recover possession of a leased property. Ushio alleged that after the expiration of a written lease agreement in 1992, Car Cool occupied the property under a verbal month-to-month lease. The former owner, Hector Lopez, terminated this verbal lease effective August 31, 1995, and subsequently sold the property to Ushio Realty, which made several demands for Car Cool to vacate. Car Cool refused, claiming a renewed two-year verbal lease agreement with Lopez starting January 1995, for which it had allegedly paid advance rentals and a security deposit. It argued Ushio Realty purchased the property with knowledge of this agreement.
ISSUE
Whether the Court of Appeals erred in awarding damages in the form of monthly rentals and attorney’s fees in favor of Ushio Realty.
RULING
The Supreme Court affirmed the appellate court’s decision with modifications. On the award of rentals as damages, the Court upheld the finding that Car Cool’s possession became unlawful only upon its refusal to vacate after Ushio’s final demand on December 19, 1995. However, the Court limited the accrual of these compensatory rentals only until November 18, 1996. This cutoff date was based on Car Cool’s own judicial admission in its pleadings before the trial court that it had voluntarily vacated the premises on November 19, 1996. Consequently, it could not be liable for rentals beyond the period it actually occupied the property. The award was thus computed at P18,000 monthly from December 19, 1995, to November 18, 1996.
Regarding attorney’s fees, the Court deleted the award. The general rule is that attorney’s fees cannot be recovered as part of damages in ejectment suits unless there is a specific finding of bad faith. The Metropolitan Trial Court’s decision, which the higher courts affirmed, contained no such factual finding of bad faith on the part of Car Cool. Mere refusal to vacate, based on a claim of a right to possess (however erroneously held), does not per se constitute bad faith warranting an award of attorney’s fees. The absence of a factual basis for bad faith rendered the award improper.