Manila International Airport Authority v. Avia Filipinas

G.R. No. 180168 (February 27, 2012)

SC ruled MIAA can't hike rents without consent after lease expired; AFIC awarded attorney's fees.

Facts:

In September 1990, the Manila International Airport Authority (MIAA) entered into a lease agreement with Avia Filipinas International Corporation (AFIC) for the use of specific portions of land and facilities at the Ninoy Aquino International Airport. The lease was for one year, starting from September 1, 1990, with a monthly rental of P6,580.00.

In December 1990, MIAA issued Administrative Order No. 1, which revised the rental rates effective December 1, 1990, increasing AFIC's monthly rental to P15,996.50. However, MIAA did not enforce this increase, and AFIC continued to pay the original rental amount of P6,580.00 without protest. After the lease expired on August 31, 1991, AFIC continued to occupy the premises, leading to an implied monthly lease agreement, again paying the original rental fee.

In October 1994, MIAA sent a billing statement to AFIC, demanding payment of the increased rental amount retroactively from September 1, 1991, totaling P347,300.50 for the period until September 30, 1994. AFIC began paying the increased rental from October 1994 but refused to pay the lump sum claimed by MIAA. Consequently, MIAA denied AFIC's employees access to the leased premises from July 1, 1997, until March 11, 1998, although AFIC continued to pay the original rental.

AFIC subsequently filed a complaint against MIAA in the Regional Trial Court (RTC) of Quezon City, seeking damages, an injunction for uninterrupted access to the premises, a refund of rental payments made during the access denial, and attorney's fees. MIAA countered, asserting its right to increase rental fees and claiming that AFIC had rental arrears.

The RTC ruled in favor of AFIC, awarding damages, a refund of rental payments, and attorney's fees. MIAA appealed to the Court of Appeals (CA), which modified the RTC's decision by deleting the awards for actual and exemplary damages but upheld the refund of rental payments and attorney's fees.

Legal Issues:

  1. Did the Court of Appeals correctly interpret the lease contract provisions in accordance with the Civil Code and existing jurisprudence?
  2. Is the principle of unjust enrichment applicable in this case?
  3. Is AFIC entitled to attorney's fees?

Arguments:

Petitioner (MIAA):

  • MIAA argued that it had the authority to revise rental rates under its charter and that AFIC had implicitly consented to the increase by signing the lease contract.
  • MIAA contended that it was not unjustly enriched by denying access to AFIC, as it was merely enforcing the lease terms due to AFIC's non-payment of the increased rental.
  • MIAA claimed that AFIC was not entitled to attorney's fees since it was not compelled to litigate due to any unjustified act by MIAA.

Respondent (AFIC):

  • AFIC maintained that the lease contract's provisions required any amendments to be in writing and signed by both parties, which did not occur regarding the rental increase.
  • AFIC argued that MIAA's denial of access was unjustified and constituted a breach of the lease agreement, thus entitling it to damages and a refund of rental payments made during the access denial.
  • AFIC asserted its entitlement to attorney's fees due to MIAA's actions compelling it to litigate to protect its rights.

Court's Decision and Legal Reasoning:

The Supreme Court denied MIAA's petition, affirming the CA's decision. The Court held that:

  1. The lease contract's provisions must be interpreted together, and the requirement for written amendments was not satisfied regarding the rental increase prior to October 1994. MIAA's acceptance of the original rental payments without protest constituted a waiver of its right to claim the increased fees for the period in question.

  2. MIAA's act of denying AFIC access to the leased premises was unjustified, as it had no legal basis to enforce the increased rental fees. Consequently, AFIC was not obligated to pay rent during the period it was denied access, and MIAA's actions amounted to unjust enrichment.

  3. The Court upheld the award of attorney's fees, noting that AFIC was compelled to litigate due to MIAA's unjust actions, which warranted such an award based on principles of justice and equity.

Significant Legal Principles Established:

  • The interpretation of contracts must consider the entirety of the agreement, ensuring that provisions are not read in isolation.
  • A party may be estopped from claiming amounts due when it has accepted payments without protest, indicating acquiescence to the terms.
  • Unjust enrichment occurs when one party retains a benefit at the expense of another without legal justification, warranting restitution.