OBLICON Article 1159 (Obligations Arising From Contracts)

Article 1169 (Commencement of Time of Delay)

Title GR No. 175554
LIGA vs. ALLEGRO RESOURCES Date: December 23, 2008
Ponente: TINGA, J.
Edsel Liga (sublessee) – petitioner Allegro Resources Corp. (lessee) – respondent
Nature of the case: Appeal via certiorari from the decision of the Court of Appeals which ordered Liga to pay back
rentals due Ortigas & Company, Limited Partnership and monthly rentals due Allegro Resources Corporation in the
amount of Ph40,000 per month.
FACTS
Case timeline for better appreciation:
1. October 10, 1975 – Ortigas & Company, Limited Partnership (Ortigas) entered into a lease agreement
with La Paz Investment & Realty Corporation (La Paz) wherein the former leased to the latter its parcel of
land located in San Juan, Metro Manila, for a period of 25 years from Jan. 1, 1976 to December 31, 2000.
2. La Paz constructed the Greenhills Shopping Arcade and divided it into several stalls and subleased them
to other people. One of the sublessees was Edsel Liga.
3. December 31, 2000 – Lease agreement of Ortigas and La Pax has expired. Proposals by sublessees to
renew lease agreement were all denied by Ortigas. These developments notwithstanding, Liga was
allowed by Ortigas to remain in possession of her leased property.
4. January 1, 2001 to August 31,2001 – Liga continued to be in possession of her stall despite having no
contract of lease and despite not paying the monthly rental.
5. September 2001 – Ortigas leased the property to Allegro Resources Corporation.
6. September 2001 – Allegro and Liga entered into a lease agreement in which Liga agreed to pay rental of
Ph40,000 monthly starting September 1, 2001. She also agreed to pay the back rentals covering the
months of January through August 2001 due Ortigas.
7. Liga’s compliance with the agreement ended as soon as it was executed. Allegro filed a complaint for
ejectment with the Metropolitan Trial Court of San Juan.
8. MeTC rendered a decision ordering Liga to vacate the subleased stall and to pay back rentals for her
continuous possession of the property. MeTC ordered Liga to pay Allegro Ph210,000.00 (Ph42,000 x 5
months) representing back rentals from October 2001 to February 2002 (5 months) and Ph20,000 per
month as reasonable compensation for the use of the premises from the filing of the ejectment suit until
it is vacated.
9. On appeal, RTC affirmed the decision of the MeTC but made modifications with respect to its monetary
awards. It extended the period of lease over the property for two years at a rental rate of Ph20,000 per
month, and ordered Liga to pay Ph80,000 (Ph13,333.33 x 6 months) as back rentals for the period of
September 2001 to February 2002 (6 months) and Ph20,000 per month as rental from March 2002 until
the property is vacated.
10. Upon petition for review, the Court of Appeals granted Allegro’s petition and held that it was incorrect
for the RTC to extend the lease contract for two years since it would infringe on the parties right to
contract and that Liga herself had never raised as an issue the extension of the lease contract. The CA
ordered Liga to pay Ortigas back rentals of Ph20,000 per month for the period of January to August 2001
and Ph40,000 per month as rentals to Allegro starting September 2001 until the property is vacated.
11. Hence, this petition.
ISSUE/S
1. Whether or not the order for Liga to pay Ortigas the back rentals (January to August 2001) was correct. – NO.
2. Whether or not the order for Liga to pay Allegro back rentals in the amount of Ph40,000 a month starting
from September 2001 until such time as she vacates the leased property was correct. – YES.
3. Whether or not the order for Liga to pay Allegro the amount of Ph20,000 as attorney’s fees and the costs of
suit was correct. – YES with modification.
RATIO
1. Ortigas was not a party to this case, whether as plaintiff or otherwise. It is basic that no relief can be
Page 1 of 2
 extended in a judgment to a stranger or one who is not a party to a case. Also, Allegro did not aver in its
complaint that it was acting as Ortigas’s legal representative and seeking the back rentals due Ortigas. There
was no allegation or prayer in the complaint that Allegro was seeking the collection of the back rentals due
Ortigas. The courts, in rendering decisions, ought to limit themselves to the issues presented by the parties
in their pleadings.
2. The Court cannot countenance the obstinate refusal of Liga to pay Ph40,000 a month to Allegro since she
had already acquiesced to pay such rental rate when she signed the Rental Information. It is fundamental
that a contract is the law between the parties. Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good faith.
3. The Court deems it proper to award interest in favour of Allegro. As held in the case of Eastern Shipping
Lines, Inc. vs. Court of Appeals, the following guideline should be followed in the award of interest:
 When the obligation is breached, and it consists in the payment of a sum of money, the interest
should be that which may have been stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code.
WHEREFORE, the petition for review is DENIED. The Decision of the Court of Appeals is AFFIRMED with the
MODIFICATIONS that the award of back rentals for the period 1 January 2001 to 31 August 2001 to Ortigas &
Company, Limited Partnership is DELETED and that petitioner Edsel Liga is ORDERED to pay respondent Allegro
Resources Corporation legal interest of twelve percent (12%) per annum on the back rentals from the date of
extrajudicial demand on 15 December 2001 until fully paid.
Notes
Article 1159, NCC
Obligations arising from contracts have the force of law between the contracting parties and should be complied
with in good faith.

Article 1169, Par. 1, NCC

Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfilment of their obligation.
1-C 2015-16 (ALFARO)

Page 2 of 2