G.R. No. 228513 & 228552. February 15, 2023.
Gotesco Properties, Incorporated, Petitioner, vs. Victor C. Cua, Respondent. [G.R. No. 228552] Victor C. Cua, Petitioner, vs. Gotesco Properties, Incorporated, Respondent.

FACTS

In 1994, Victor C. Cua entered into four 20-year prepaid contracts of lease with Gotesco Properties, Inc. for commercial units in Ever-Gotesco Commonwealth Center. The contracts stipulated, under Clause 17, that Cua shall pay monthly Common Area and Aircon Dues (CAAD) and that these dues “shall bear an annual escalation, compounded, at eighteen percent (18%) effective calendar year 1995 or at a rate to be determined by [the] LESSOR if said dues shall not be sufficient to meet inflation, Peso devaluation, and other escalation in utility and maintenance costs at any point in time.” From 1997 to 2003, Gotesco imposed escalation costs on the CAAD, collecting an aggregate of P2,269,735.64 from Cua. Cua protested the increases and, finding them unfair, filed a Complaint for Injunctive Relief, Restitution, and Damages. The Regional Trial Court (RTC) Branch 41 ruled in favor of Cua, invalidating the escalation clause for violating the principle of mutuality of contracts, ordering Gotesco to cease collecting the escalated CAAD and to return the amount collected, plus attorney’s fees. The Court of Appeals (CA) partly granted Gotesco’s appeal, modifying the RTC decision. The CA held that the provision allowing Gotesco to impose an 18% annual escalation was valid, but the portion granting Gotesco the sole power to determine a different rate was invalid for lack of mutuality. The CA ordered a re-computation of the invalid amounts collected (excluding the valid 18%) and deleted the award of attorney’s fees. Both parties filed Petitions for Review before the Supreme Court.

ISSUE

The pivotal issues are: (1) the validity of the CAAD escalation clause in the contracts of lease, particularly whether it violates the principle of mutuality of contracts; and (2) whether Cua is entitled to an award of attorney’s fees.

RULING

The Supreme Court denied the petitions and affirmed the modified decision of the Court of Appeals.
1. On the Validity of the Escalation Clause: The Court ruled that the second part of the escalation clause, which states “or at a rate to be determined by the LESSOR if said dues shall not be sufficient to meet inflation, Peso devaluation, and other escalation…,” is void for being potestative and violating the principle of mutuality of contracts under Article 1308 of the Civil Code. This clause grants Gotesco the sole, exclusive, and unrestrained right to increase the CAAD rates at any time based on its own determination, leaving Cua with no right to consent to the modification. Such a unilateral determination of the increased rate, without any reference to an objective market standard or criterion, renders the stipulation invalid. However, the first part of the clause, providing for a fixed 18% annual compounded escalation, remains valid as it was mutually agreed upon and provides a determinate rate.
2. On the Return of Payments: The Court affirmed the CA’s order for a re-computation and restitution. Gotesco must return to Cua the amounts collected pursuant to the invalid portion of the escalation clause (i.e., increases beyond the agreed 18% annual compounded rate). The case was remanded to the RTC for the proper computation of the invalid amounts.
3. On Attorney’s Fees: The Court sustained the CA’s deletion of the award of attorney’s fees. The general rule is that attorney’s fees cannot be recovered as part of damages unless explicitly provided by statute or stipulation. Cua failed to substantiate that his claim fell under any of the exceptions enumerated in Article 2208 of the Civil Code. The complexity of the case and the fact that he was compelled to litigate are, by themselves, insufficient justifications for the award.