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RepublicofthePhilippines
SUPREMECOURT
Manila

THIRDDIVISION

G.R.No.169656October11,2007

FELSANREALTY&DEVELOPMENTCORPORATION,petitioner,
vs.
COMMONWEALTHOFAUSTRALIA,respondent.

DECISION

NACHURA,J.:

This is a petition for review of the Decision1 of the Court of Appeals (CA) in CAG.R. CV No. 69475, dated
December 2, 2004, and Resolution dated September 13, 2005 denying the motion for reconsideration of the said
decision.

PetitionerFelsanRealty&DevelopmentCorporationistheownerofathreestoreyduplexresidentialhouselocated
atSanLorenzoVillage,Makati

City.OnFebruary25,1997,respondentCommonwealthofAustraliaenteredintoacontractofleaseoverthesaid
propertywiththepetitioner.TheleasewasfortwoyearsfromFebruary22,1997untilFebruary21,1999,andthe
agreed monthly rental was P100,000.00. The respondent paid P200,000.00 as two months security deposit, and
P2,400,000.00asadvancerentalsfortheentiredurationofthelease.

On November 4, 1997, at around 2:30 a.m., fire broke out at the ground floor of the leased premises which
destroyedamajorportionofthehouse.AccordingtotheFireInvestigationReportoftheBureauofFireProtection,
the cause of the fire was "[a]ccidental due to overheated electric fan that produce[d] intense heat/sparks and
subsequentlyignitedthecombustiblematerialsthereatandburstintoflame."2

OnNovember21,1997,therespondentinformedthepetitionerthat,asaresultofthefire,thepropertyhasbecome
uninhabitableandunsuitableforliving.ItaverredthattheappraisalmadebyitsFacilitiesManagerindicatedthatit
wouldtakethreemonthstocompletetherestorationofthepremisesandthatthealternatepropertyofferedwasnot
suitable.TherespondentthendemandedthepreterminationoftheleasecontracteffectiveNovember4,1997,and
reimbursementoftheadvancerentalsandsecuritydeposit.3

Thepetitionerrejectedtherespondentsdemandtoterminatethecontractonthegroundthatthefirewascausedby
thegrossnegligenceoftheoccupantsoftheleasedpropertybasedontheinvestigationreportoftheBureauofFire
Protection of Makati City which showed that the fire was caused by an "overheated fan." Instead, the petitioner
offeredtorefundthebalance,ifany,oftheadvancerentalsandsecuritydepositfromthetimeitisabletofindanew
lesseeuntilFebruary22,1999.4

OnMay29,1998,thepetitionerinformedtherespondentofthecompletionoftherepairsofthepremisesandasked
whether the latter will reoccupy the same.5 The respondent, however, replied that it was no longer interested in
reoccupyingthesubjectpropertyandreiterateditsrequestfortherefundoftheadvancerentalspaid.Consequently,
thepetitionerinformedtherespondentthatithasadvertisedthepropertyasavailableforleaseandthatitwaswilling
torefundthebalance,ifany,oftheadvancerentalsandsecuritydepositfromthetimeofthenewleaseuptoand
includingFebruary22,1999,lesstheamountspentfortherepairsofthedamagecausedtotheproperty.6

Therespondentdidnotagree.Thus,onNovember13,1998,therespondentfiledacomplaintagainstthepetitioner
claiming that under Section 13 of the Contract of Lease, it is entitled to the reimbursement of P1,556,666.67 as
balanceoftheprepaidrental.Italsoprayedforexemplarydamages,attorneysfeesandthecostsofsuit.

In its Answer with Counterclaim, the petitioner averred that the respondent did not comply with the mandatory
requirementunderArticle1358oftheCivilCodeofthePhilippinesthatapreterminationorrescissionofacontract
of lease over real property shall appear in a public document. It claimed that the respondent is not entitled to
reimbursementbecausethesubjectpropertywasdamagedbyfireduetoitsnegligence.

Duringtrial,EdgardoA.Nogales,whowastheChiefoftheInvestigationandIntelligenceUnitofFireStation2,Fire
District III, Makati City, at the time of the fire, testified that they determined the cause of the fire as accidental in
naturebecauseitwasnotintentionallymotivated.Accordingtohim,thefirewascausedbytheoverheatingofan
electric fan which was plugged in but actually turned off. He said that there was no shred of evidence tending to
showthatthefirewasanythingbutaccidental.7

On the other hand, Reynaldo D. Gonzales, the Fire and Arson Investigator assigned to the case, testified that,
basedonthepathofthefire,theprobableareawherethefirestartedwasthemaidsquartersonthegroundfloorof
thebuilding.Henarratedthat,accordingtotheaccountofthefiremenwhoarrivedfirstatthescene,therewasno
one inside the maids quarter when the fire broke out because they had to use force to open it. They reported to
Gonzalesthattheelectricfanwaspluggedintoawallsocketandinthe"on"positionwhentheyenteredtheroom.
Gonzales stated that although he was not personally present when the firemen entered the maids quarters after
forciblyopeningit,heconductedanocularinspectionthereon.Henotedthatthesourceofignitioncouldonlybethe
burntelectricfanwhichwasstillpluggedin.8

OnOctober23,2000,theRegionalTrialCourt(RTC)renderedaDecisionupholdingtherightoftherespondentto
preterminate the contract of lease. According to the trial court, the respondent successfully overturned the
presumption of negligence against it through the testimonies of the fire officers that the cause of the fire was
accidental.Itopinedthattheoverheatingoftheelectricfanwhich,althoughpluggedin,wasnotswitchedon,could
not have been reasonably expected or foreseen by occupants of the leased premises. The trial court further
declared that the pretermination of the Contract of Lease need not appear in a public instrument because the
requirementunderArticle13589oftheCivilCodeisnotmandatorybutamereformalityfortheconvenienceofthe
parties. Moreover, it awarded attorneys fees to the respondent since the latter was constrained to go to court to
protectitsinterests.ThedispositiveportionoftheDecisionreads:

PREMISESCONSIDERED,judgmentisherebyrenderedinfavorofplaintiffdeclaringthepreterminationof
theContractofLeaseeffective4November1997andorderingdefendanttopaythefollowing:

[1.]PhP1,556,666.67representingthebalanceoftheadvancerentals

[2.]PhP200,000.00representingthetwo(2)monthssecuritydeposit

[3.]PhP100,000.00asandforattorneysfeesand

[4.]Thecosts.

SOORDERED.10

OnDecember2,2004,theCArenderedaDecisionaffirmingtheRTCdecision.11Attheoutset,theappellatecourt
agreed with the petitioner that the terms "accident" and "accidental" do not exclude, without qualification, events
resulting in damage or loss due to the fault, recklessness or negligence of third parties. However, in view of the
conflicting testimonies of the fire investigators, it held that it cannot reasonably conclude that the accident was
attendedbynegligenceorfault.It,therefore,sustainedthetrialcourtsfindingsthattherespondentcannotbeheld
liablesincethepetitionerfailedtoestablishbypreponderanceofevidencetherespondentsnegligence.Itagreed
withthetrialcourtthatnoncompliancewiththerequirementunderArticle1358oftheCivilCodedoesnotaffectthe
validityorenforceabilityoftherescissionofthecontractasbetweentheparties.

OnSeptember13,2005,theCAlikewisedeniedthepetitionersmotionforreconsideration.

Inthispetitionforreview,thepetitionerascribesthefollowingerrorstotheCA:

A.

THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR OF LAW IN PLACING ON
PETITIONER FELSAN THE BURDEN OF PROVING NEGLIGENCE AS CAUSE OF THE FIRE, IN
CONTRAVENTION OF ARTICLES 1667 AND 1668 OF THE NEW CIVIL CODE WHICH PLACES THE
BURDENOFPROVINGNONNEGLIGENCEONTHELESSEE,RESPONDENTCOA[COMMONWEALTH
OFAUSTRALIA]INTHEINSTANTCASE.

B.

THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR OF LAW IN EQUATING
"ACCIDENTAL"WITHLACKOFNEGLIGENCEONTHEPARTOFCOA.
 C.

THECOURTOFAPPEALSCOMMITTEDGRAVEANDREVERSIBLEERROROFLAWINHOLDINGTHAT
THERE WAS A CONFLICT OF TESTIMONIES OF SFO4 NOGALES, ON THE ONE HAND, AND OF FO3
GONZALES, ON THE OTHER HAND, AS TO THE "ON" OR "OFF" POSITION OF THE OVERHEATED
ELECTRIC FAN, CONSIDERING THAT THE FORMER IS HEARSAY AND WORTHLESS WHILE THE
LATTERISCOMPETENTANDPOSITIVE.

D.

THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN UPHOLDING THE
SPECULATION OF THE TRIAL COURT THAT THE CAUSE OF THE FIRE COULD HAVE BEEN FAULTY
WIRING EITHER OF THE FAN ITSELF OR THE ELECTRICAL SOCKET, CONSIDERING THAT
CONJECTUREISNOTFACT.

E.

THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR OF LAW IN UPHOLDING
THAT IN THE FACE OF SUPPOSED EQUIPOISE OF EVIDENCE AND/OR CONJECTURE, JUDGMENT
SHOULDNEVERTHELESSBEINFAVOROFPETITIONERFELSAN.

F.

THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR OF LAW IN ILLOGICALLY
TAKINGAGAINSTPETITIONERFELSANITSRELIANCEONTHECERTIFICATIONOFSFO4NOGALES
THAT THE FIRE WAS ACCIDENTAL, FOR THE PURPOSE OF RECOVERING INDEMNITY FROM THE
INSURER,ANDTHUSERRONEOUSLYAPPLYINGTHELAWANDPRINCIPLEOFESTOPPELAGAINST
FELSAN.

G.

THECOURTOFAPPEALSCOMMITTEDGRAVEANDREVERSIBLEERROROFLAWINHOLDINGTHAT
RESPONDENT COA HAS THE RIGHT TO AUTOMATIC RESCISSION OF THE LEASE CONTRACT AND
TOPAYMENTOFTHEBALANCEOFUNPAIDRENTALS(P1,556,666.67)ANDTWOMONTHSSECURITY
DEPOSIT(P200,000.00),ASWELLASATTORNEYSFEES(P100,000.00).

H.

THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR OF LAW IN AFFIRMING
THEDECISIONOFTHETRIALCOURT.12

The petitioner maintains that the respondent does not have the right to preterminate the contract and to be
reimbursedfortheadvancerentalssincetheleasedpropertywasdamagedduetothelattersfaultornegligence.
The petitioner contends that the CA erred in placing on it, the lessor, the burden of proof to establish that the
respondentlesseewasnegligent,consideringthatunderArticle1667oftheCivilCode,thelesseeispresumedto
be negligent hence, the latter bears the burden to prove that it was not negligent. It argues that the evidence
profferedbytherespondentwasnotsufficienttooverturnthepresumptionofnegligence.

Inpetitionsforreviewoncertiorari,thejurisdictionofthisCourtisonlylimitedtothereviewandrevisionoferrorsof
law allegedly committed by the appellate court inasmuch as the latters findings of fact are deemed conclusive.
Thus, this Court is not dutybound to analyze and weigh all over again the evidence already considered in the
proceedings below.13 It is foreclosed from ascertaining if the trial court and the appellate court were correct in
accordingsuperiorcredittothisorthatpieceofevidenceofonepartyortheother.14Whilethisruleisnotwithout
exceptions, we do not find the instant case falling under any of said exceptions to warrant a different conclusion
fromtheCourt.15

TheCourtfindsnoreversibleerrorintheappellatecourtsrulingthattherespondenthastherighttopreterminate
theContractofLease.ThisisclearlyembodiedinSection13thereofwhichprovidesthat:

(13)DAMAGESTOPREMISES:Shouldtheleasedpremisessubjectmatterofthiscontractbedamagedby
fire,lightning,earthquake,typhoon,orbyanycauseinthenatureofforcemajeure,renderingthepremises
tobetotallyuninhabitableorunsuitableforliving,intheopinionoftheLESSEE,thisContractshallbe
automaticallyrescindedwithoutthepartiesbecomingliabletoeachotherforanydamages.Insuchacase,
the obligation of the LESSEE to pay the agreed rental shall cease from the date the accident or force
majeure hereinabove mentioned occurs. The LESSOR shall reimburse the LESSEE the balance of the
rentals which may have been paid in advance by the latter to the former if any exists at the time of the
accidentorforcemajeure.(Emphasissupplied.)
 However, if damage to premises is minimal (e.g., only a small isolated portion of the house such as the
portionoftheliving/diningroomwasdestroyed),thentheeffectiverentalrateforthatperiodcanbereduced
toaminimumasdeemedfitandagreedtobybothLESSORandLESSEE.

xxxx16

ThefirstparagraphofSection13plainlystatesthat,wheretheleasedpropertyisdamagedbyfire,thelesseehas
the right to automatically preterminate the contract when it finds that the damage to the property rendered it
uninhabitableorunsuitableforliving.Inthiscase,therespondentdeterminedthattheleasedpropertyhasbecome
uninhabitable after it was damaged by fire. Accordingly, it immediately exercised its right to preterminate the
contract.

Considering that the parties entered into a contract, it shall constitute the law between them.17 The agreement
betweenthepartiesistheformalexpressionofthepartiesrights,dutiesandobligations.18Beingtheprimarylaw
betweentheparties,itgovernstheadjudicationoftheirrightsandobligations.19Whenthetermsofthecontractare
clearandleavenoroomforinterpretation,theliteralmeaningofitsstipulationsshall,therefore,control.20 A court
has no alternative but to enforce the contractual stipulations in the manner they have been agreed upon and
written.21Thepetitionerwas,therefore,boundtorespectthedecisionoftherespondentnottocontinueonwiththe
lease.Absentanyallegationthatastipulationiscontrarytolaw,morals,goodcustoms,publicorderorpublicpolicy,
itmustbecompliedwithingoodfaith.22

Thepetitionersinsistencethatthefirewasallegedlyduetothefaultornegligenceoftherespondentcannotprevail.
Thisargumentwasprofferedinthelightoftheallegedconflictingtestimoniesofthefireofficersbasedonthesame
burnedelectricfanduringtheirocularinspection.23Tothis,wequotewithfavortherespondentcourtsrulingonthe
matter:

xxx[T]heCourtcannotreasonablyconcludetherefromthattheaccidentwasattendedbynegligenceorfault
onthepartofappellee.Asthetrialcourtcorrectlypointedout,thecauseofthefirecouldhavebeenfaulty
wiring either of the fan itself or the electrical socket but no evidence was presented to establish the same.
Thus, bereft of sufficient evidence to establish that the fire was caused by the negligence of appellee, the
finding of the trial court that the cause of the fire was accidental in nature must be sustained. Besides,
appellantswitnesshimselfadmittedthatFelsanrequestedforthecertificationofSPO4Nogalesandusedthe
sametoestablishthatthefirewascausedbypureaccidenttorecoverindemnityintheamountofmorethan
onemillionpesosfromtheinsureranditisnowestoppedfromdisputingthesaidfinding.24

Consideringtheforegoing,thepetitionercannotusetherespondentsallegedfaultornegligenceasanexcuseto
prevent the pretermination of the lease contract. Neither can the petitioner seek reimbursement for expenses as
maybewarrantedunderthethirdparagraphofSection13oftheContractofLease,whichstates:

That all damages which may be caused upon the premises, equipment and fixtures due to the fault or
negligenceoftheLESSEE,itsagents,employeesand/orservants,shallberepairedbytheLESSEEat
itsexclusiveexpense.TheLESSOR,however,shallnotberesponsibleforanylossordamagesustainedby
the LESSEE in the premises, or arising from the use of the equipment and fixtures, without the fault or
negligence of the LESSOR, his agents or employees. The LESSEE shall, however, be free from any claim
whatsoeverbytheinsurancecompany.

Itmustbenotedthatthevariousstipulationsinacontractmustbeinterpretedtogether,attributingtothedoubtful
onesthatsensewhichmayresultfromallofthemtakenjointly.25Section13oftheContractofLeaseenumerates
the grounds for pretermination as "fire, lightning, earthquake, typhoon, or by any cause in the nature of force
majeure."ThesecondandthirdsentencesofSection13use"accidentorforcemajeure"inreferringtothegrounds
forthepreterminationoftheContract.Exceptforfire,noneoftheothercausescanoccurthroughaccidentbecause
theyareallnaturalcalamities.Theonlylogicalconclusionisthattheword"accident"qualifies"fire"thelesseedoes
nothavetherighttopreterminateonlywhenfireisnotaccidentalorisdeliberate.Nootherqualificationcanberead
intotheContract.Accidentandnegligenceareintrinsicallycontradictoryonecannotexistwiththeother.Accident
occurswhenthepersonconcernedisexercisingordinarycare,whichisnotcausedbyfaultofanypersonandwhich
could not have been prevented by any means suggested by common prudence.26 Hence, a statement that the
causewasaccidentalnecessarilyimpliesthatitwasnotduetothefaultornegligenceofanyparty.

Clearly,therespondenthadtherighttopreterminatetheContractofLeaseconsideringthatitwaswellestablished
thatthefirewasaccidentalinnature.Thiswasafindingmadebythetrialcourtandaffirmedbytheappellatecourt.
In the absence of any showing that the findings complained of are totally devoid of support in the evidence on
record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must
stand.27
As to the award of attorneys fees in favor of the respondent, the Court finds that this is not warranted under the
circumstanceshence,itshouldbedeleted.Anadversedecisiondoesnotipsofactojustifyanawardofattorneys
fees to the winning party.28 The power of the court to award attorneys fees under Article 2208 demands factual,
legal, and equitable justification. Even when a claimant is compelled to litigate with third persons or to incur
expenses to protect his rights, still attorneys fees may not be awarded where no sufficient showing of bad faith
couldbereflectedinapartyspersistenceinacaseotherthananerroneousconvictionoftherighteousnessofhis
cause.29

WHEREFORE, the Decision of the Court of Appeals, dated December 2, 2004, and Resolution dated September
13,2005,areAFFIRMEDwiththeMODIFICATIONthattheawardofattorneysfeesinfavoroftherespondentis
deleted.

SOORDERED.

YnaresSantiago,Chairperson,AustriaMartinez,ChicoNazario,Reyes,JJ.,concur.

Footnotes
1PennedbyAssociateJusticeJosefinaGuevaraSalonga,withAssociateJusticesConradoM.Vasquez,Jr.
andFernandaLampasPeralta,concurring.
2Records,p.263.

3Id.at250.

4Id.at252253.

5Id.at254255.

6Id.at256257.

7Id.at260261.

8Id.at271273.

9Article1358oftheNewCivilCodeprovides

ART.1358.Thefollowingmustappearinapublicdocument:

(1)Actsandcontractswhichhavefortheirobjectthecreation,transmission,modificationor
extinguishmentofrealrightsoverimmovablepropertysalesofrealpropertyorofaninteresttherein
aregovernedbyarticles1403,No.2and1405

(2)Thecession,repudiationorrenunciationofhereditaryrightsorthoseoftheconjugalpartnershipof
gains

(3)Thepowertoadministerproperty,oranyotherpowerwhichhasforitsobjectanactappearingor
whichshouldappearinapublicdocument,orshouldprejudiceathirdperson

(4)Thecessionofactionsorrightsproceedingfromanactappearinginapublicdocument.

Allothercontractswheretheamountinvolvedexceedsfivehundredpesosmustappearinwriting,
evenaprivateone.Butsalesofgoods,chattelsorthingsinactionaregovernedbyarticles1403,No.2
and1405.

10Rollo,p.49.

11Id.at126.

12Id.at2223.

13RomagoElectricCo.,Inc.v.CourtofAppeals,388Phil.964,975(2000).

14Gajev.Vda.deDalisay,G.R.No.158762,April4,2007.