GR 126570; (August, 2000) (Digest)
G.R. No. 126570 ; August 18, 2000
PILIPINAS HINO, INC., petitioner, vs. COURT OF APPEALS, FERNANDO V. REYES, PONCIANO REYES, and TERESITA R. TAN, respondents.
FACTS
Petitioner Pilipinas Hino, Inc. leased property from respondents. Upon the lease’s expiration, a dispute arose over a P400,000.00 security deposit. Petitioner alleged that after a joint inspection, the parties agreed that repair costs were P60,000.00, obliging respondents to return P340,000.00. Respondents returned only P200,000.00, claiming actual damages were P298,738.90. Separately, the parties entered into a Contract to Sell the same property. Petitioner paid a downpayment and two installments totaling P7,050,000.00 but defaulted on the third. Respondents rescinded the contract per its terms, returning the installments but deducting P924,000.00 as accrued interest for the unpaid installments and P220,000.00 for rent.
ISSUE
The core issues were: (1) Whether respondents were liable to return the balance of the security deposit based on an alleged repair cost agreement; and (2) Whether respondents were entitled to deduct accrued interest from the returned installments upon rescission of the Contract to Sell.
RULING
The Supreme Court modified the Court of Appeals’ decision. On the first cause, it affirmed the lower courts. The alleged P60,000.00 repair agreement was not proven; petitioner’s witnesses lacked specific authority to bind the corporation to such a settlement, and respondents consistently rejected the amount. Thus, respondents rightfully retained funds covering the actual cost of damages to the property.
On the second cause, the Court ruled for petitioner. The Memorandum of Agreement (Contract to Sell) was the law between the parties. Paragraphs 7 and 9 expressly granted respondents the option to rescind upon default and the right to retain the downpayment, but were silent on retaining interest on unpaid installments. The Court emphasized that while a seller in a contract to sell may retain sums received if expressly stipulated, no such provision existed here. Equity cannot be invoked to justify the P924,000.00 interest deduction absent a contractual basis. The Court ordered respondents to return this amount. The rent deduction was upheld as a proper offset for petitioner’s continued use of the property post-rescission.