Tuesday, August 17, 2021

[CASE DIGEST] Yulo v. Chan Pe (G.R. No. 156448)

FACTS:

Alfredo Yulo had leased Chan Pe door No. 11 as well as another room of the Commercial Building at Bonifacio Street, Bacolod City for a period of five (5) years. Their lease agreement contained a stipulation that upon default, the contract will be deemed automatically cancelled and the advance payment of the lessee shall also be confiscated.

Pe had failed to pay the rentals from May to October for a total sum of Php 3,900. As such, Yulo filed a case against Pe. The Court of First Instance sentenced Pe to pay Yulo the sum of Php 3,900 as rent arrears, which shall be deducted from Php 5,700 (balance of advance payment of Php 6,000 deducted by the discount of 100 per month of February to April), after which Yulo will pay (or give back) Pe the sum of Php 1,800, representing the balance of the advance payment (Php 5,700 minus Php 3,900).

ISSUE:

Whether the CFI's ruling is correct. -- NO.

HELD:

The Supreme Court held that the stipulation in the contract which provides that upon default, the contract will be deemed automatically cancelled and the advance payment of the lessee shall also be confiscated, was a penal clause. Moreover, said stipulation also provided for payment of either liquidated damages or exemplary damages.

The Courth held that Yulo is entitled to retain the balance of Php 5,700. In addition, the Php 1,800 balance should not be given back to Pe, as this shall serve as compensation to Yulo for such damages he may have suffered for the breach of obligation by Pe.