GR 85161; (September, 1991) (Digest)
G.R. No. 85161 September 9, 1991
Country Bankers Insurance Corporation and Enrique Sy, petitioners, vs. Court of Appeals and Oscar Ventanilla Enterprises Corporation, respondents.
FACTS
Petitioner Enrique Sy, as lessee, and respondent Oscar Ventanilla Enterprises Corporation (OVEC), as lessor, entered into a lease agreement for three theaters in Cabanatuan City. After more than two years, OVEC demanded repossession due to Sy’s arrears in rentals and failure to remit deducted amusement taxes to the city government. The parties executed a supplemental agreement allowing Sy to continue operations upon meeting new conditions, but he subsequently defaulted again. After final demands, OVEC padlocked and repossessed the theaters on February 11, 1980. Sy filed an action for reformation of the lease, damages, and injunction, regaining possession via a writ of preliminary injunction secured by a bond from co-petitioner Country Bankers Insurance Corporation. OVEC filed counterclaims for unpaid rentals, tax liabilities, and damages.
ISSUE
The primary issue is whether the Court of Appeals erred in affirming the trial court’s judgment, which dismissed Sy’s complaint and upheld OVEC’s counterclaims, including the forfeiture of Sy’s cash deposit and awards for arrears and damages.
RULING
The Supreme Court denied the petition and affirmed the appellate court’s decision. The legal logic centers on the validity of OVEC’s actions under the lease agreement and the nature of its counterclaims. The Court found that Sy’s defaults in rental payments and tax remittances constituted substantial breaches, justifying OVEC’s cancellation of the lease and repossession under their contract’s forfeiture clause. The Court rejected Sy’s claim for reformation, as he failed to prove any vitiation of consent or mutual mistake warranting such equitable relief.
Regarding procedural matters raised by petitioners, the Court held that OVEC’s counterclaims were compulsory. They arose from the same transaction—the lease agreement and Sy’s breaches—that was the subject of Sy’s complaint. As compulsory counterclaims, no separate docket fees were required for their adjudication. The Court distinguished the mandatory docket fee rule from Manchester Development Corporation, noting that compulsory counterclaims are ancillary to the main action and do not necessitate independent jurisdictional fees. Consequently, the trial court properly exercised jurisdiction over OVEC’s claims, and its monetary awards, including arrears, forfeiture of deposit, and damages due to the injunction, were upheld as legally sound.