G.R. No. 155879, December 2, 2005
Manila International Airport Authority vs. The Hon. Henrick F. Gingoyon, et al.

FACTS

Petitioner Manila International Airport Authority (MIAA) and private respondent Moreland Realty, Inc. entered into a compromise agreement to settle an ejectment case, which was approved by the Regional Trial Court (RTC) on April 17, 1998. The agreement stipulated the execution of a lease contract adopting the rental rates in MIAA Administrative Order (A.O.) No. 1, Series of 1993, at ₱39.60 per square meter per month. It further provided that any subsequent amendment to said A.O. increasing rentals would be automatically incorporated into their contract. Prior to this, on April 2, 1998, MIAA had already promulgated A.O. No. 1, Series of 1998, increasing the rent to ₱72.56 per square meter, effective June 1, 1998.
Despite knowledge of the new A.O., the parties executed a formal Lease Contract on May 29, 1998. Its Paragraph 2.01 explicitly set the monthly rental at the 1993 A.O. rate of ₱39.60. Crucially, Paragraph 7.17 stipulated that the contract could only be modified thereafter by a written agreement of the parties or by an administrative order “duly issued/promulgated hereafter.” After a change in MIAA administration, it demanded payment based on the higher 1998 rates. Moreland refused, leading to an urgent motion before the RTC to enforce the contract terms.

ISSUE

Whether the Regional Trial Court committed grave abuse of discretion in ordering MIAA to collect rentals based on the old rates in A.O. No. 1, Series of 1993, and not the increased rates under the subsequently issued A.O. No. 1, Series of 1998.

RULING

The Supreme Court ruled that the RTC did not commit grave abuse of discretion. The legal logic centers on contract interpretation and the parties’ clear intent as manifested in the final, signed Lease Contract. While the earlier compromise agreement provided for automatic incorporation of subsequent amendatory orders, the parties deliberately executed a subsequent, more specific contract. Paragraph 2.01 of this final contract explicitly adopted the 1993 A.O. rates. More significantly, Paragraph 7.17 established that modification could only be effected by a written mutual agreement or by an administrative order issued after the contract date of May 29, 1998.
Since A.O. No. 1, Series of 1998 was promulgated on April 2, 1998—before the contract’s execution—it did not fall within the ambit of Paragraph 7.17 and therefore could not unilaterally amend the agreed-upon rental. The Court emphasized that the contract’s specific terms govern the parties’ relations, and MIAA offered no compelling reason to disregard the plain language of Paragraphs 2.01 and 7.17. The parties mutually covenanted to be bound by the 1993 rates, adjustable only by future administrative orders, a stipulation which the law respects. Thus, the appellate court’s decision affirming the RTC orders was upheld.