G.R. No. 182148 and 183210; June 8, 2011
SIME DARBY PILIPINAS, INC., Petitioner, vs. GOODYEAR PHILIPPINES, INC. and MACGRAPHICS CARRANZ INTERNATIONAL CORPORATION, Respondents. (G.R. No. 182148)

GOODYEAR PHILIPPINES, INC., Petitioner, vs. SIME DARBY PILIPINAS, INC. and MACGRAPHICS CARRANZ INTERNATIONAL CORPORATION, Respondents. (G.R. No. 183210)

FACTS

Macgraphics Carranz International Corporation (Macgraphics) owned a billboard at the Magallanes Interchange, leased to Sime Darby Pilipinas, Inc. (Sime Darby) from April 1994 to March 1998 at a monthly rental of ₱120,000.00. Sime Darby paid a ten-month deposit. On April 22, 1996, Sime Darby executed a Memorandum of Agreement (MOA) to sell its assets to Goodyear Philippines, Inc. (Goodyear) for ₱1.5 billion. The next day, Goodyear increased the purchase price to ₱1.65 billion, partly in consideration for the assignment of Sime Darby’s receivables, including its leasehold rights and deposits for the Magallanes billboard. On May 9, 1996, Sime Darby and Goodyear executed a Deed of Assignment covering these leasehold rights. Sime Darby notified Macgraphics of the assignment.
Goodyear submitted a new design for the billboard and requested a cost quotation from Macgraphics. Macgraphics replied that the monthly rental would be ₱250,000.00, citing the new design’s technical aspects. Goodyear declined, stating it would honor the original ₱120,000.00 rate and requested a quote for simple repainting. On July 11, 1996, Macgraphics informed Sime Darby it could not consent to the assignment, as the transfer to Goodyear would necessitate drastic design and structural changes not foreseen at the lease’s inception. Macgraphics advised Goodyear that any advertising service would have to wait until the lease with Sime Darby expired or was validly pre-terminated.
On September 23, 1996, due to Macgraphics’ refusal to honor the assignment, Goodyear demanded partial rescission of the Deed of Assignment and a refund of ₱1,239,000.00 (the pro-rata value of the leasehold rights) from Sime Darby. Upon Sime Darby’s refusal, Goodyear filed a complaint for partial rescission plus damages against Sime Darby and, alternatively, against Macgraphics. Goodyear alleged Sime Darby failed to deliver the object of the assignment and breached its warranty in the MOA that no third-party consent was required for the transactions. Alternatively, if rescission was improper, Goodyear claimed it succeeded to Sime Darby’s lease rights and sought payment from Macgraphics.
The Regional Trial Court (RTC) partially rescinded the Deed of Assignment, ordered Sime Darby to pay Goodyear ₱1,239,000.00 with legal interest, and ordered Goodyear to pay Macgraphics ₱50,000.00 as attorney’s fees. The RTC ruled that, under Article 1649 of the Civil Code, the lease assignment required Macgraphics’ consent as the lessor, absent a stipulation to the contrary in the lease contract. Sime Darby’s failure to secure consent meant it failed to deliver the object, entitling Goodyear to rescission under Article 1191. It found Goodyear had no basis to sue Macgraphics. The Court of Appeals affirmed the RTC decision in toto. Both Sime Darby and Goodyear filed petitions for review.

ISSUE

Whether the Court of Appeals erred in affirming the RTC’s decision which: (1) granted Goodyear’s complaint for partial rescission of the Deed of Assignment against Sime Darby due to Sime Darby’s failure to secure Macgraphics’ consent to the assignment of the lease; and (2) ordered Goodyear to pay attorney’s fees to Macgraphics.

RULING

The Supreme Court DENIED the petitions and AFFIRMED the assailed Court of Appeals Decision and Resolutions.
The Court held that under Article 1649 of the Civil Code, “The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary.” The lease contract between Sime Darby and Macgraphics contained no stipulation allowing assignment without consent. Therefore, Macgraphics’ consent was indispensable for the assignment to be effective against it. Macgraphics’ act of negotiating with Goodyear for a new design and rental rate did not constitute implied consent to the assignment; its subsequent explicit written refusal to consent was controlling. Consequently, Sime Darby failed to deliver the leasehold rights—the object of the Deed of Assignment—to Goodyear.
In reciprocal obligations, such as the Deed of Assignment, failure by one party to comply with its obligation entitles the other to rescission under Article 1191 of the Civil Code. Since Sime Darby could not convey the leasehold rights due to lack of lessor’s consent, Goodyear was entitled to seek partial rescission of the assignment and a refund of the corresponding portion of the purchase price (₱1,239,000.00).
Regarding attorney’s fees, the Court found the award to Macgraphics proper. Goodyear impleaded Macgraphics as an alternative defendant despite knowing that the lessor’s consent was required by law and was not obtained. Macgraphics was thus compelled to litigate to protect its interests. The trial court’s factual finding that Goodyear had no valid cause of action against Macgraphics was affirmed.
The consolidated petitions were denied for lack of merit. The Court of Appeals’ decision, which upheld the RTC’s partial rescission of the Deed of Assignment, the order for Sime Darby to refund Goodyear, and the order for Goodyear to pay attorney’s fees to Macgraphics, was sustained.