GR 154852; (October, 2004) (Digest)
G.R. No. 154852 ; October 21, 2004
MULTINATIONAL VILLAGE HOMEOWNERS ASSOCIATION, INC. and DANILO F. CUNETA, petitioners, vs. ARA SECURITY & SURVEILLANCE AGENCY, INC., Represented by THERESA C. MAMAED, President and General Manager, respondent.
FACTS
Petitioner Multinational Village Homeowners Association, Inc. entered into a one-year Contract of Guards Services with respondent Ara Security & Surveillance Agency, Inc., effective May 25, 1994, for a monthly fee of ₱107,500.00. On August 29, 1994, petitioner Danilo F. Cuneta, Multinational’s President, terminated the contract effective August 31, 1994, citing unsatisfactory service, repeated violations of the Security Guards Code of Ethics, and loss of confidence. Ara Security demanded reconsideration and, upon refusal, filed a suit for injunction and damages.
Petitioners defended the termination by invoking paragraph 5 of the contract, which granted Ara Security the right to terminate immediately for the client’s non-payment of fees. They argued this stipulation implied a reciprocal right for the client to terminate for unsatisfactory guard performance. The trial court ruled in favor of Ara Security, awarding damages. The Court of Appeals affirmed with modification, reducing the actual damages but upholding the finding of breach of contract.
ISSUE
Whether petitioners lawfully pre-terminated the contract with respondent based on alleged unsatisfactory performance of the security guards.
RULING
No, the pre-termination was unlawful. The Supreme Court affirmed the Court of Appeals’ decision, holding that petitioners committed a breach of contract. The legal logic rests on the principle that a contract is the law between the parties, and its terms must be respected as agreed upon. Paragraph 5 of the contract explicitly and unilaterally granted only the security agency the right to terminate for a specific cause: the client’s failure to pay. There was no reciprocal stipulation granting the client a similar right to terminate for allegedly unsatisfactory service.
The Court emphasized that the mere grant of a unilateral rescission right to one party does not automatically confer the same right upon the other. Petitioners’ interpretation was erroneous. Furthermore, petitioners failed to substantiate their claim of fundamental breach. The letter-complaints they presented against the guards were correctly deemed hearsay, lacking probative value as they were not authenticated by the complainants themselves. Rescission is permitted only for substantial breaches that defeat the very object of the agreement. Petitioners did not prove such a breach existed. Consequently, their unilateral termination was unjustified, making them liable for damages equivalent to the value of services for the unexpired term of the contract.