ARTICLE 1306 AUTONOMY OF CONTRACTSG.R. No. 142830 March 24, 2006WILLIAM GOLANGCO CONSTRUCTION CORPORATION,Petitioner,vs.PHILIPPINE COMMERCIAL INTERNATIONAL BANK*, RespondentD E C I S I O NCORONA,J.:The facts of this case are straightforward.1William Golangco Construction Corporation (WGCC) and the Philippine Commercial International Bank (PCIB) entered into a contract for the construction of the extension of PCIB Tower II (denominated as PCIB Tower II, Extension Project [project])2on October 20, 1989. The project included, among others, the application of a granitite wash-out finish3on the exterior walls of the building.PCIB, with the concurrence of its consultant TCGI Engineers (TCGI), accepted the turnover of the completed work by WGCC in a letter dated June 1, 1992. To answer for any defect arising within a period of one year, WGCC submitted a guarantee bond dated July 1, 1992 issued by Malayan Insurance Company, Inc. in compliance with the construction contract.4The controversy arose when portions of the granitite wash-out finish of the exterior of the building began peeling off and falling from the walls in 1993.WGCC made minor repairs after PCIB requested it to rectify the construction defects. In 1994, PCIB entered into another contract with Brains and Brawn Construction and Development Corporation to re-do the entire granitite wash-out finish after WGCC manifested that it was "not in a position to do the new finishing work," though it was willing to share part of the cost. PCIB incurred expenses amounting toP11,665,000 for the repair work.PCIB filed a request for arbitration with the Construction Industry Arbitration Commission (CIAC) for the reimbursement of its expenses for the repairs made by another contractor. It complained of WGCCs alleged non-compliance with their contractual terms on materials and workmanship. WGCC interposed a counterclaim forP5,777,157.84 for material cost adjustment.The CIAC declared WGCC liable for the construction defects in the project.5WGCC filed a petition for review with the Court of Appeals (CA) which dismissed it for lack of merit.6Its motion for reconsideration was similarly denied.7In this petition for review on certiorari, WGCC raises this main question of law: whether or not petitioner WGCC is liable for defects in the granitite wash-out finish that occurred after the lapse of the one-year defects liability period provided in Art. XI of the construction contract.8We rule in favor of WGCC.The controversy pivots on a provision in the construction contract referred to as thedefects liability period:ARTICLE XI GUARANTEEUnless otherwise specified for specific works, and without prejudice to the rights and causes of action of the OWNER under Article 1723 of the Civil Code,the CONTRACTOR hereby guarantees the work stipulated in this Contract, and shall make good any defect in materials and workmanship which [becomes] evident within one (1) year after the final acceptance of the work.The CONTRACTOR shall leave the work in perfect order upon completion and present the final certificate to the ENGINEER promptly.If in the opinion of the OWNER and ENGINEER, the CONTRACTOR has failed to act promptly in rectifying any defect in the work which appears within the period mentioned above, the OWNER and the ENGINEER may, at their own discretion, using the Guarantee Bond amount for corrections, have the work done by another contractor at the expense of the CONTRACTOR or his bondsmen.However, nothing in this section shall in any way affect or relieve the CONTRACTORS responsibility to the OWNER.On the completion of the [w]orks, the CONTRACTOR shall clear away and remove from the site all constructional plant, surplus materials, rubbish and temporary works of every kind, and leave the whole of the [s]ite and [w]orks clean and in a workmanlike condition to the satisfaction of the ENGINEER and OWNER.9(emphasis ours)Although both parties based their arguments on the same stipulations, they reached conflicting conclusions. A careful reading of the stipulations, however, leads us to the conclusion that WGCCs arguments are more tenable.Autonomy of contractsThe autonomous nature of contracts is enunciated in Article 1306 of the Civil Code.Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.Obligations arising from contracts have the force of law between the parties and should be complied with in good faith.10In characterizing the contract as having the force of law between the parties, the law stresses the obligatory nature of a binding and valid agreement.The provision in the construction contract providing for a defects liability period was not shown as contrary to law, morals, good customs, pubic order or public policy. By the nature of the obligation in such contract, the provision limiting liability for defects and fixing specific guaranty periods was not only fair and equitable; it was also necessary. Without such limitation, the contractor would be expected to make a perpetual guarantee on all materials and workmanship.The adoption of a one-year guarantee, as done by WGCC and PCIB, is established usage in the Philippines for private and government construction contracts.11The contract did not specify a different period for defects in the granitite wash-out finish; hence, any defect therein should have been brought to WGCCs attention within the one-year defects liability period in the contract.We cannot tolerate an interpretation that undermines a contractual stipulation freely and validly agreed upon. The courts will not relieve a party from the effects of an unwise or unfavorable contract freely entered into.12[T]he inclusion in a written contract for a piece of work [,] such as the one in question, of a provision defining a warranty period against defects, is not uncommon. This kind of a stipulation is of particular importance to the contractor, for as a general rule, after the lapse of the period agreed upon therein, he may no longer be held accountable for whatever defects, deficiencies or imperfections that may be discovered in the work executed by him.13Interpretation of contractsTo challenge the guarantee period provided in Article XI of the contract, PCIB calls our attention to Article 62.2 which provides:62.2 Unfulfilled ObligationsNotwithstanding the issue of the Defects Liability Certificate[,]the Contractor and the Owner shall remain liable for the fulfillment of any obligation[,] incurred under the provisions of the Contract prior to the issue of the Defects Liability Certificate[,] which remains unperformed at the time such Defects Liability Certificate is issued[. And] for the purpose of determining the nature and extent of any such obligation, the Contract shall be deemed to remain in force between the parties of the Contract. (emphasis ours)The defects in the granitite wash-out finish were not the "obligation" contemplated in Article 62.2. It was not an obligation that remained unperformed or unfulfilled at the time the defects liability certificate was issued. The alleged defects occurred more than a year from the final acceptance by PCIB.An examination of Article 1719 of the Civil Code is enlightening:Art. 1719. Acceptance of the work by the employer relieves the contractor of liability for any defect in the work, unless:(1) The defect is hidden and the employer is not, by his special knowledge, expected to recognize the same; or(2) The employer expressly reserves his rights against the contractor by reason of the defect.The lower courts conjectured that the peeling off of the granitite wash-out finish was probably due to "defective materials and workmanship." This they characterized as hidden or latent defects. We, however, do not agree with the conclusion that the alleged defects were hidden.First, PCIBs team of experts14(who were specifically employed to detect such defects early on) supervised WGCCs workmanship. Second, WGCC regularly submitted progress reports and photographs. Third, WGCC worked under fair and transparent circumstances. PCIB had access to the site and it exercised reasonable supervision over WGCCs work. Fourth, PCIB issued several "punch lists" for WGCCs compliance before the issuance of PCIBs final certificate of acceptance. Fifth, PCIB supplied the materials for the granitite wash-out finish. And finally, PCIBs team of experts gave their concurrence to the turnover of the project.The purpose of the defects liability period was precisely to give PCIB additional, albeit limited, opportunity to oblige WGCC to make good any defect, hidden or otherwise, discovered within one year.Contrary to the CAs conclusion, the first sentence of the third paragraph of Article XI on guarantee previously quoted did not operate as a blanket exception to the one-year guarantee period under the first paragraph. Neither did it modify, extend, nullify or supersede the categorical terms of the defects liability period.Under the circumstances, there were no hidden defects for which WGCC could be held liable. Neither was there any other defect for which PCIB made any express reservation of its rights against WGCC. Indeed, the contract should not be interpreted to favor the one who caused the confusion, if any. The contract was prepared by TCGI for PCIB.15WHEREFORE, the petition is herebyGRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 41152 isANNULEDandSET ASIDE.SO ORDERED.

G.R. No. 197861 June 5, 2013SPOUSES FLORENTINO T. MALLARI and AUREA V. MALLARI,Petitioners,vs.PRUDENTIAL BANK (now BANK OF THE PHILIPPINE ISLANDS),Respondent.D E C I S I O NPERALTA,J.:Before us is a Petition for Review on Certiorari under Rule 45, assailing the Decision1dated June 17, 2010 and the Resolution2dated July 20, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 65993.The antecedent facts are as follows:On December 11, 1984, petitioner Florentino T. Mallari (Florentino) obtained from respondent Prudential Bank-Tarlac Branch (respondent bank), a loan in the amount ofP300,000.00 as evidenced by Promissory Note (PN) No. BD 84-055.3Under the promissory note, the loan was subject to an interest rate of 21% per annum (p.a.), attorney's fees equivalent to 15% of the total amount due but not less thanP200.00 and, in case of default, a penalty and collection charges of 12% p.a. of the total amount due. The loan had a maturity date of January 10, 1985, but was renewed up to February 17, 1985. Petitioner Florentino executed a Deed of Assignment4wherein he authorized the respondent bank to pay his loan with his time deposit with the latter in the amount ofP300,000.00.On December 22, 1989, petitioners spouses Florentino and Aurea Mallari (petitioners) obtained again from respondent bank another loan ofP1.7 million as evidenced by PN No. BDS 606-895with a maturity date of March 22, 1990. They stipulated that the loan will bear 23% interest p.a., attorney's fees equivalent to 15% p.a. of the total amount due, but not less thanP200.00, and penalty and collection charges of 12% p.a. Petitioners executed a Deed of Real Estate Mortgage6in favor of respondent bank covering petitioners' property under Transfer Certificate of Title (TCT) No. T-215175 of the Register of Deeds of Tarlac to answer for the said loan.Petitioners failed to settle their loan obligations with respondent bank, thus, the latter, through its lawyer, sent a demand letter to the former for them to pay their obligations, which when computed up to January 31, 1992, amounted toP571,218.54 for PN No. BD 84-055 andP2,991,294.82 for PN No. BDS 606-89.On February 25, 1992, respondent bank filed with the Regional Trial Court (RTC) of Tarlac, a petition for the extrajudicial foreclosure of petitioners' mortgaged property for the satisfaction of the latter's obligation ofP1,700,000.00 secured by such mortgage, thus, the auction sale was set by the Provincial Sheriff on April 23, 1992.7On April 10, 1992, respondent bank's Assistant Manager sent petitioners two (2) separate Statements of Account as of April 23, 1992, i.e., the loan ofP300,000.00 was increased toP594,043.54, while theP1,700,000.00 loan was alreadyP3,171,836.18.On April 20, 1992, petitioners filed a complaint for annulment of mortgage, deeds, injunction, preliminary injunction, temporary restraining order and damages claiming, among others, that: (1) theP300,000.00 loan obligation should have been considered paid, because the time deposit with the same amount under Certificate of Time Deposit No. 284051 had already been assigned to respondent bank; (2) respondent bank still added theP300,000.00 loan to theP1.7 million loan obligation for purposes of applying the proceeds of the auction sale; and (3) they realized that there were onerous terms and conditions imposed by respondent bank when it tried to unilaterally increase the charges and interest over and above those stipulated. Petitioners asked the court to restrain respondent bank from proceeding with the scheduled foreclosure sale.Respondent bank filed its Answer with counterclaim arguing that: (1) the interest rates were clearly provided in the promissory notes, which were used in computing for interest charges; (2) as early as January 1986, petitioners' time deposit was made to apply for the payment of interest of theirP300,000.00 loan; and (3) the statement of account as of April 10, 1992 provided for a computation of interest and penalty charges only from May 26, 1989, since the proceeds of petitioners' time deposit was applied to the payment of interest and penalty charges for the preceding period. Respondent bank also claimed that petitioners were fully apprised of the bank's terms and conditions; and that the extrajudicial foreclosure was sought for the satisfaction of the second loan in the amount ofP1.7 million covered by PN No. BDS 606-89 and the real estate mortgage, and not theP300,000.00 loan covered by another PN No. 84-055.In an Order8dated November 10, 1992, the RTC denied the Application for a Writ of Preliminary Injunction. However, in petitioners' Supplemental Motion for Issuance of a Restraining Order and/or Preliminary Injunction to enjoin respondent bank and the Provincial Sheriff from effecting or conducting the auction sale, the RTC reversed itself and issued the restraining order in its Order9dated January 14, 1993.Respondent bank filed its Motion to Lift Restraining Order, which the RTC granted in its Order10dated March 9, 1993. Respondent bank then proceeded with the extrajudicial foreclosure of the mortgaged property. On July 7, 1993, a Certificate of Sale was issued to respondent bank being the highest bidder in the amount ofP3,500,000.00.Subsequently, respondent bank filed a Motion to Dismiss Complaint11for failure to prosecute action for unreasonable length of time to which petitioners filed their Opposition.12On November 19, 1998, the RTC issued its Order13denying respondent bank's Motion to Dismiss Complaint.Trial thereafter ensued. Petitioner Florentino was presented as the lone witness for the plaintiffs. Subsequently, respondent bank filed a Demurrer to Evidence.On November 15, 1999, the RTC issued its Order14granting respondent's demurrer to evidence, the dispositive portion of which reads:WHEREFORE, this case is hereby ordered DISMISSED. Considering there is no evidence of bad faith, the Court need not order the plaintiffs to pay damages under the general concept that there should be no premium on the right to litigate.NO COSTS.SO ORDERED.15The RTC found that as to theP300,000.00 loan, petitioners had assigned petitioner Florentino's time deposit in the amount ofP300,000.00 in favor of respondent bank, which maturity coincided with petitioners' loan maturity. Thus, if the loan was unpaid, which was later extended to February 17, 1985, respondent bank should had just applied the time deposit to the loan. However, respondent bank did not, and allowed the loan interest to accumulate reaching the amount ofP594,043.54 as of April 10, 1992, hence, the amount ofP292,600.00 as penalty charges was unjust and without basis.As to theP1.7 million loan which petitioners obtained from respondent bank after theP300,000.00 loan, it had reached the amount ofP3,171,836.18 per Statement of Account dated April 27, 1993, which was computed based on the 23% interest rate and 12% penalty charge agreed upon by the parties; and that contrary to petitioners' claim, respondent bank did not add theP300,000.00 loan to theP1.7 million loan obligation for purposes of applying the proceeds of the auction sale.The RTC found no legal basis for petitioners' claim that since the total obligation wasP1.7 million and respondent bank's bid price wasP3.5 million, the latter should return to petitioners the difference ofP1.8 million. It found that since petitioners' obligation had reachedP2,991,294.82 as of January 31, 1992, but the certificate of sale was executed by the sheriff only on July 7, 1993, after the restraining order was lifted, the stipulated interest and penalty charges from January 31, 1992 to July 7, 1993 added to the loan already amounted toP3.5 million as of the auction sale.The RTC found that the 23% interest rate p.a., which was then the prevailing loan rate of interest could not be considered unconscionable, since banks are not hospitable or equitable institutions but are entities formed primarily for profit. It also found that Article 1229 of the Civil Code invoked by petitioners for the reduction of the interest was not applicable, since petitioners had not paid any single centavo of theP1.7 million loan which showed they had not complied with any part of the obligation.Petitioners appealed the RTC decision to the CA. A Comment was filed by respondent bank and petitioners filed their Reply thereto.On June 17, 2010, the CA issued its assailed Decision, the dispositive portion of which reads:WHEREFORE, the instant appeal is hereby DENIED. The Order dated November 15, 1999 issued by the Regional Trial Court (RTC), Branch 64, Tarlac City, in Civil Case No. 7550 is hereby AFFIRMED.16The CA found that the time deposit ofP300,000.00 was equivalent only to the principal amount of the loan ofP300,000.00 and would not be sufficient to cover the interest, penalty, collection charges and attorney's fees agreed upon, thus, in the Statement of Account dated April 10, 1992, the outstanding balance of petitioners' loan wasP594,043.54. It also found not persuasive petitioners' claim that theP300,000.00 loan was added to theP1.7 million loan. The CA, likewise, found that the interest rates and penalty charges imposed were not unconscionable and adopted in toto the findings of the RTC on the matter.Petitioners filed their Motion for Reconsideration, which the CA denied in a Resolution dated July 20, 2011.Hence, petitioners filed this petition for review arguing that:THE HON. COURT OF APPEALS ERRED IN AFFIRMING THE ORDER OF THE RTC-BRANCH 64, TARLAC CITY, DATED NOVEMBER 15, 1999, DESPITE THE FACT THAT THE SAME IS CONTRARY TO SETTLED JURISPRUDENCE ON THE MATTER.17The issue for resolution is whether the 23% p.a. interest rate and the 12% p.a. penalty charge on petitioners'P1,700,000.00 loan to which they agreed upon is excessive or unconscionable under the circumstances.Parties are free to enter into agreements and stipulate as to the terms and conditions of their contract, but such freedom is not absolute. As Article 1306 of the Civil Code provides, "The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy." Hence, if the stipulations in the contract are valid, the parties thereto are bound to comply with them, since such contract is the law between the parties. In this case, petitioners and respondent bank agreed upon on a 23% p.a. interest rate on theP1.7 million loan. However, petitioners now contend that the interest rate of 23% p.a. imposed by respondent bank is excessive or unconscionable, invoking our ruling in Medel v. Court of Appeals,18Toring v. Spouses Ganzon-Olan,19and Chua v. Timan.20We are not persuaded.In Medel v. Court of Appeals,21we found the stipulated interest rate of 66% p.a. or a 5.5% per month on aP500,000.00 loan excessive, unconscionable and exorbitant, hence, contrary to morals if not against the law and declared such stipulation void. In Toring v. Spouses Ganzon-Olan,22the stipulated interest rates involved were 3% and 3.81% per month on aP10 million loan, which we find under the circumstances excessive and reduced the same to 1% per month. While in Chua v. Timan,23where the stipulated interest rates were 7% and 5% a month, which are equivalent to 84% and 60% p.a., respectively, we had reduced the same to 1% per month or 12% p.a. We said that we need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, unconscionable and exorbitant, hence, the stipulation was void for being contrary to morals.24In this case, the interest rate agreed upon by the parties was only 23% p.a., or less than 2% per month, which are much lower than those interest rates agreed upon by the parties in the above-mentioned cases. Thus, there is no similarity of factual milieu for the application of those cases.We do not consider the interest rate of 23% p.a. agreed upon by petitioners and respondent bank to be unconscionable.In Villanueva v. Court of Appeals,25where the issue raised was whether the 24% p.a. stipulated interest rate is unreasonable under the circumstances, we answered in the negative and held:In Spouses Zacarias Bacolor and Catherine Bacolor v. Banco Filipino Savings and Mortgage Bank, Dagupan City Branch, this Court held that the interest rate of 24% per annum on a loan ofP244,000.00, agreed upon by the parties, may not be considered as unconscionable and excessive. As such, the Court ruled that the borrowers cannot renege on their obligation to comply with what is incumbent upon them under the contract of loan as the said contract is the law between the parties and they are bound by its stipulations.Also, in Garcia v. Court of Appeals, this Court sustained the agreement of the parties to a 24% per annum interest on anP8,649,250.00 loan finding the same to be reasonable and clearly evidenced by the amended credit line agreement entered into by the parties as well as two promissory notes executed by the borrower in favor of the lender.Based on the above jurisprudence, the Court finds that the 24% per annum interest rate, provided for in the subject mortgage contracts for a loan ofP225,000.00, may not be considered unconscionable. Moreover, considering that the mortgage agreement was freely entered into by both parties, the same is the law between them and they are bound to comply with the provisions contained therein.26Clearly, jurisprudence establish that the 24% p.a. stipulated interest rate was not considered unconscionable, thus, the 23% p.a. interest rate imposed on petitioners' loan in this case can by no means be considered excessive or unconscionable.We also do not find the stipulated 12% p.a. penalty charge excessive or unconscionable.In Ruiz v. CA,27we held:The 1% surcharge on the principal loan for every month of default is valid.1wphi1This surcharge or penalty stipulated in a loan agreement in case of default partakes of the nature of liquidated damages under Art. 2227 of the New Civil Code, and is separate and distinct from interest payment. Also referred to as a penalty clause, it is expressly recognized by law. It is an accessory undertaking to assume greater liability on the part of an obligor in case of breach of an obligation. The obligor would then be bound to pay the stipulated amount of indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach. x x x28And in Development Bank of the Philippines v. Family Foods Manufacturing Co., Ltd.,29we held that:x x x The enforcement of the penalty can be demanded by the creditor only when the non-performance is due to the fault or fraud of the debtor. The non-performance gives rise to the presumption of fault; in order to avoid the payment of the penalty, the debtor has the burden of proving an excuse - the failure of the performance was due to either force majeure or the acts of the creditor himself.30Here, petitioners defaulted in the payment of their loan obligation with respondent bank and their contract provided for the payment of 12% p.a. penalty charge, and since there was no showing that petitioners' failure to perform their obligation was due to force majeure or to respondent bank's acts, petitioners cannot now back out on their obligation to pay the penalty charge. A contract is the law between the parties and they are bound by the stipulations therein.WHEREFORE, the petition for review is DENIED. The Decision dated June 17, 2010 and the Resolution dated July 20, 2011 of the Court of Appeals are hereby AFFIRMED.SO ORDERED.

G.R. No. 176425 HEIRS OF MANUEL UY EK LIONG, represented by BELEN LIM VDA. DE UY,Petitioners,vs.MAURICIA MEER CASTILLO, HEIRS OF BUENAFLOR C. UMALI, represented by NANCY UMALI, VICTORIA H. CASTILLO, BERTILLA C. RADA, MARIETTA C. CAVANEZ, LEOVINA C. JALBUENA and PHILIP M. CASTILLO,Respondents.D E C I S I O NPEREZ,J.:Assailed in this Petition for Review on Certiorari filed pursuant to Rule 45 of the Rules of Court is the Decision1dated 23 January 2007 rendered by the Fifteenth Division of the Court of Appeals in CA-G.R. CV No. 84687,2the dispositive portion of which states:WHEREFORE, premises considered, the assailed January 27, 2005 Decision of the Regional Trial Court of Lucena City, Branch 59, in Civil Case No. 93-176, is hereby REVERSED and SET ASIDE and a new one entered declaring the AGREEMENT and the KASUNDUAN void ab initio for being contrary to law and public policy, without prejudice to the attorneys filing a proper action for collection of reasonable attorneys fees based on quantum meruit and without prejudice also to administrative charges being filed against counsel for counsels openly entering into such an illegal AGREEMENT in violation of the Canons of Professional Responsibility which action may be instituted with the Supreme Court which has exclusive jurisdiction to impose such penalties on members of the bar.No pronouncement as to costs.SO ORDERED.3(Italics and Underscore Ours)The FactsAlongside her husband, Felipe Castillo, respondent Mauricia Meer Castillo was the owner of four parcels of land with an aggregate area of 53,307 square meters, situated in Silangan Mayao, Lucena City and registered in their names under Transfer Certificate of Title (TCT) Nos. T-42104, T-32227, T-31752 and T-42103. With the death of Felipe, a deed of extrajudicial partition over his estate was executed by his heirs, namely, Mauricia, Buenaflor Umali and respondents Victoria Castillo, Bertilla Rada, Marietta Cavanez, Leovina Jalbuena and Philip Castillo. Utilized as security for the payment of a tractor purchased by Mauricias nephew, Santiago Rivera, from Bormaheco, Inc., it appears, however, that the subject properties were subsequently sold at a public auction where Insurance Corporation of the Philippines (ICP) tendered the highest bid. Having consolidated its title, ICP likewise sold said parcels in favor of Philippine Machinery Parts Manufacturing Co., Inc. (PMPMCI) which, in turn, caused the same to be titled in its name.4On 29 September 1976, respondents and Buenaflor instituted Civil Case No. 8085 before the then Court of First Instance (CFI) of Quezon, for the purpose of seeking the annulment of the transactions and/or proceedings involving the subject parcels, as well as the TCTs procured by PMPMCI.5Encountering financial difficulties in the prosecution of Civil Case No. 8085, respondents and Buenaflor entered into an Agreement dated 20 September 1978 whereby they procured the legal services of Atty. Edmundo Zepeda and the assistance of Manuel Uy Ek Liong who, as financier, agreed to underwrite the litigation expenses entailed by the case. In exchange, it was stipulated in the notarized Agreement that, in the event of a favorable decision in Civil Case No. 8085, Atty. Zepeda and Manuel would be entitled to "a share of forty (40%) percent of all the realties and/or monetary benefits, gratuities or damages" which may be adjudicated in favor of respondents.6On the same date, respondents and Buenaflor entered into another notarized agreement denominated as a Kasunduan whereby they agreed to sell their remaining sixty (60%) percent share in the subject parcels in favor of Manuel for the sum ofP180,000.00. The parties stipulated that Manuel would pay a downpayment in the sum ofP1,000.00 upon the execution of the Kasunduan and that respondents and Buenaflor would retain and remain the owners of a 1,750-square meter portion of said real properties. It was likewise agreed that any party violating the Kasunduan would pay the aggrieved party a penalty fixed in the sum ofP50,000.00, together with the attorneys fees and litigation expenses incurred should a case be subsequently filed in court. The parties likewise agreed to further enter into such other stipulations as would be necessary to ensure that the sale would push through and/or in the event of illegality or impossibility of any part of the Kasunduan.7With his death on 19 August 1989,8Manuel was survived by petitioners, Heirs of Manuel Uy Ek Liong, who were later represented in the negotiations regarding the subject parcels and in this suit by petitioner BelenLim Vda. de Uy. The record also shows that the proceedings in Civil Case No. 8085 culminated in this Courts rendition of a 13 September 1990 Decision in G.R. No. 895619in favor of respondents and Buenaflor.10Subsequent to the finality of the Courts Decision,11it appears that the subject parcels were subdivided in accordance with the Agreement, with sixty (60%) percent thereof consisting of 31,983 square meters equally apportioned among and registered in the names of respondents and Buenaflor under TCT Nos. T-72027, T-72028, T-72029, T-72030, T-72031, T-72032 and T-72033.12Consisting of 21,324 square meters, the remaining forty (40%) percent was, in turn, registered in the names of petitioners and Atty. Zepeda under TCT No. T-72026.13Supposedly acting on the advice of Atty. Zepeda, respondents wrote petitioners a letter dated 22 March 1993, essentially informing petitioners that respondents were willing to sell their sixty (60%) percent share in the subject parcels for the consideration ofP500.00 per square meter.14Insisting on the price agreed upon in the Kasunduan, however, petitioners sent a letter dated 19 May 1993, requesting respondents to execute within 15 days from notice the necessary Deed of Absolute Sale over their 60% share as aforesaid, excluding the 1,750-square meter portion specified in their agreement with Manuel. Informed that petitioners were ready to pay the remainingP179,000.00 balance of the agreed price,15respondents wrote a 28 May 1993 reply, reminding the former of their purported refusal of earlier offers to sell the shares of Leovina and of Buenaflor who had, in the meantime, died.16In a letter dated 1 June 1993, respondents also called petitioners attention to the fact, among others, that their right to ask for an additional consideration for the sale was recognized under the Kasunduan.17On 6 October 1993, petitioners commenced the instant suit with the filing of their complaint for specific performance and damages against the respondents and respondent Heirs of Buenaflor, as then represented by Menardo Umali. Faulting respondents with unjustified refusal to comply with their obligation under the Kasunduan, petitioners prayed that the former be ordered to execute the necessary Deed of Absolute Sale over their shares in the subject parcels, with indemnities for moral and exemplary damages, as well as attorneys fees, litigation expenses and the costs of the suit.18Served with summons, respondents filed their Answer with Counterclaim and Motion to File Third Party Complaint on 3 December 1993. Maintaining that the Agreement and the Kasunduan were illegal for being unconscionable and contrary to public policy, respondents averred that Atty. Zepeda was an indispensable party to the case. Together with the dismissal of the complaint and the annulment of said contracts and TCT No. T-72026, respondents sought the grant of their counterclaims for moral and exemplary damages, as well as attorneys fees and litigation expenses.19The issues thereby joined, the Regional Trial Court (RTC), Branch 54, Lucena City, proveeded to conduct the mandatory preliminary conference in the case.20After initially granting respondents motion to file a third party complaint against Atty. Zepeda,21the RTC, upon petitioners motion for reconsideration,22went on to issue the 18 July 1997 Order disallowing the filing of said pleading on the ground that the validity of the Agreement and the cause of action against Atty. Zepeda, whose whereabouts were then unknown, would be better threshed out in a separate action.23The denial24of their motion for reconsideration of the foregoing order25prompted respondents to file a notice of appeal26which was, however, denied due course by the RTC on the ground that the orders sought to be appealed were non-appealable.27On 14 December 1997, Menardo died28and was substituted by his daughter Nancy as representative of respondent Heirs of Buenaflor.29In the ensuing trial of the case on the merits, petitioners called to the witness stand Samuel Lim Uy Ek Liong30whose testimony was refuted by Philip31and Leovina32during the presentation of the defense evidence. On 27 January 2005, the RTC rendered a decision finding the Kasunduan valid and binding between respondents and petitioners who had the right to demand its fulfillment as Manuels successors-in-interest. Brushing aside Philips testimony that respondents were forced to sign the Kasunduan, the RTC ruled that said contract became effective upon the finality of this Courts 13 September 1990 Decision in G.R. No. 89561 which served as a suspensive condition therefor. Having benefited from the legal services rendered by Atty. Zepeda and the financial assistance extended by Manuel, respondents were also declared estopped from questioning the validity of the Agreement, Kasunduan and TCT No. T-72026. With the Kasunduan upheld as the law between the contracting parties and their privies,33the RTC disposed of the case in the following wise:WHEREFORE, premises considered, the Court finds for the petitioners and hereby:1. Orders the respondents to execute and deliver a Deed of Conveyance in favor of the petitioners covering the 60% of the properties formerly covered by Transfer Certificates of Title Nos. T-3175, 42104, T-42103, T-32227 and T-42104 which are now covered by Transfer Certificates of Title Nos. T-72027, T-72028, T-72029, T-72030, T-72031, T-72032, T-72033 and T-72026, all of the Registry of Deeds of Lucena City, for and in consideration of the amount ofP180,000.00 in accordance with the provisions of the KASUNDUAN, and2. Orders the petitioners to pay and deliver to the respondents upon the latters execution of the Deed of Conveyance mentioned in the preceding paragraph, the amount ofP179,000.00 representing the balance of the purchase price as provided in the KASUNDUAN, and3. Orders the respondents to pay the petitioners the following amounts:a).P50,000.00 as and for moral damages;b).P50,000.00 as and for exemplary damages; andc).P50,000.00 as and for attorneys fees.and to pay the costs.SO ORDERED.34Dissatisfied with the RTCs decision, both petitioners35and respondents perfected their appeals36which were docketed before the CA as CA-G.R. CV No. 84687. While petitioners prayed for the increase of the monetary awards adjudicated a quo, as well as the further grant of liquidated damages in their favor,37respondents sought the complete reversal of the appealed decision on the ground that the Agreement and the Kasunduan were null and void.38On 23 January 2007, the CA rendered the herein assailed decision, setting aside the RTCs decision, upon the following findings and conclusions, to wit: (a) the Agreement and Kasunduan are byproducts of the partnership between Atty. Zepeda and Manuel who, as a non-lawyer, was not authorized to practice law; (b) the Agreement is void under Article 1491 (5) of the Civil Code of the Philippines which prohibits lawyers from acquiring properties which are the objects of the litigation in which they have taken part; (c) jointly designed to completely deprive respondents of the subject parcels, the Agreement and the Kasunduan are invalid and unconscionable; and (d) without prejudice to his liability for violation of the Canons of Professional Responsibility, Atty. Zepeda can file an action to collect attorneys fees based on quantum meruit.39The IssuePetitioners seek the reversal of the CAs decision on the following issue:WHETHER OR NOT THE HONORABLE COURT OF APPEALS, FIFTEENTH DIVISION, COMITTED A REVERSIBLE ERROR WHEN IT REVERSED AND SET ASIDE THE DECISION OF THE RTC BRANCH 59, LUCENA CITY, IN CIVIL CASE NO. 93-176 DECLARING THE AGREEMENT AND KASUNDUAN VOID AB INITIO FOR BEING CONTRARY TO LAW AND PUBLIC POLICY FOR BEING VIOLATIVE OF ART. 1491 OF THE NEW CIVIL CODE AND THE CANONS OF PROFESSIONAL RESPONSIBILITY.40The Courts RulingWe find the petition impressed with partial merit.At the outset, it bears pointing out that the complaint for specific performance filed before the RTC sought only the enforcement of petitioners rights and respondents obligation under the Kasunduan. Although the answer filed by respondents also assailed the validity of the Agreement and TCT No. T-72026, the record shows that the RTC, in its order dated 18 July 1997, disallowed the filing of a third-party complaint against Atty. Zepeda on the ground that the causes of action in respect to said contract and title would be better threshed out in a separate action. As Atty. Zepedas whereabouts were then unknown, the RTC also ruled that, far from contributing to the expeditious settlement of the case, the grant of respondents motion to file a third-party complaint would only delay the proceedings in the case.41With the 1 October 1998 denial of their motion for reconsideration of the foregoing order, respondents subsequently filed a notice of appeal which was, however, denied due course on the ground that the orders denying their motion to file a third-party complaint and their motion for reconsideration were interlocutory and non-appealable.42Absent a showing that the RTCs ruling on the foregoing issues was reversed and set aside, we find that the CA reversibly erred in ruling on the validity of the Agreement which respondents executed not only with petitioners predecessor-in-interest, Manuel, but also with Atty. Zepeda. Since it is generally accepted that no man shall be affected by any proceeding to which he is a stranger,43the rule is settled that a court must first acquire jurisdiction over a party either through valid service of summons or voluntary appearance for the latter to be bound by a court decision.44The fact that Atty. Zepeda was not properly impleaded in the suit and given a chance to present his side of the controversy before the RTC should have dissuaded the CA from invalidating the Agreement and holding that attorneys fees should, instead, be computed on a quantum meruit basis. Admittedly, Article 1491 (5)45of the Civil Code prohibits lawyers from acquiring by purchase or assignment the property or rights involved which are the object of the litigation in which they intervene by virtue of their profession. The CA lost sight of the fact, however, that the prohibition applies only during the pendency of the suit46and generally does not cover contracts for contingent fees where the transfer takes effect only after the finality of a favorable judgment.47Although executed on the same day, it cannot likewise be gainsaid that the Agreement and the Kasunduan are independent contracts, with parties, objects and causes different from that of the other. Defined as a meeting of the minds between two persons whereby one binds himself, with respect to the other to give something or to render some service,48a contract requires the concurrence of the following requisites: (a) consent of the contracting parties; (b) object certain which is the subject matter of the contract; and, (c) cause of the obligation which is established.49Executed in exchange for the legal services of Atty. Zepeda and the financial assistance to be extended by Manuel, the Agreement concerned respondents transfer of 40% of the avails of the suit, in the event of a favorable judgment in Civil Case No. 8085. While concededly subject to the same suspensive condition, the Kasunduan was, in contrast, concluded by respondents with Manuel alone, for the purpose of selling in favor of the latter 60% of their share in the subject parcels for the agreed price ofP180,000.00. Given these clear distinctions, petitioners correctly argue that the CA reversibly erred in not determining the validity of the Kasunduan independent from that of the Agreement.Viewed in the light of the autonomous nature of contracts enunciated under Article 130650of the Civil Code, on the other hand, we find that the Kasunduan was correctly found by the RTC to be a valid and binding contract between the parties. Already partially executed with respondents receipt ofP1,000.00 from Manuel upon the execution thereof, the Kasunduan simply concerned the sale of the formers 60% share in the subject parcel, less the 1,750-square meter portion to be retained, for the agreed consideration ofP180,000.00. As a notarized document that carries the evidentiary weight conferred upon it with respect to its due execution,51the Kasunduan was shown to have been signed by respondents with full knowledge of its contents, as may be gleaned from the testimonies elicited from Philip52and Leovina.53Although Philip had repeatedly claimed that respondents had been forced to sign the Agreement and the Kasunduan, his testimony does not show such vitiation of consent as would warrant the avoidance of the contract. He simply meant that respondents felt constrained to accede to the stipulations insisted upon by Atty. Zepeda and Manuel who were not otherwise willing to push through with said contracts.54At any rate, our perusal of the record shows that respondents main objection to the enforcement of the Kasunduan was the perceived inadequacy of theP180,000.00 which the parties had fixed as consideration for 60% of the subject parcels. Rather than claiming vitiation of their consent in the answer they filed a quo, respondents, in fact, distinctly averred that the Kasunduan was tantamount to unjust enrichment and "a clear source of speculative profit" at their expense since their remaining share in said properties had "a current market value ofP9,594,900.00, more or less."55In their 22 March 1993 letter to petitioners, respondents also cited prices then prevailing for the sale of properties in the area and offered to sell their 60% share for the price ofP500.00 per square meter56or a total ofP15,991,500.00. In response to petitioners insistence on the price originally agreed upon by the parties,57respondents even invoked the last paragraph58of the Kasunduan to the effect that the parties agreed to enter into such other stipulations as would be necessary to ensure the fruition of the sale.59In the absence of any showing, however, that the parties were able to agree on new stipulations that would modify their agreement, we find that petitioners and respondents are bound by the original terms embodied in the Kasunduan. Obligations arising from contracts, after all, have the force of law between the contracting parties60who are expected to abide in good faith with their contractual commitments, not weasel out of them.61Moreover, when the terms of the contract are clear and leave no doubt as to the intention of the contracting parties, the rule is settled that the literal meaning of its stipulations should govern. In such cases, courts have no authority to alter a contract by construction or to make a new contract for the parties. Since their duty is confined to the interpretation of the one which the parties have made for themselves without regard to its wisdom or folly, it has been ruled that courts cannot supply material stipulations or read into the contract words it does not contain.62Indeed, courts will not relieve a party from the adverse effects of an unwise or unfavorable contract freely entered into.63Our perusal of the Kasunduan also shows that it contains a penal clause64which provides that a party who violates any of its provisions shall be liable to pay the aggrieved party a penalty fixed atP50,000.00, together with the attorneys fees and litigation expenses incurred by the latter should judicial resolution of the matter becomes necessary.65An accessory undertaking to assume greater liability on the part of the obligor in case of breach of an obligation, the foregoing stipulation is a penal clause which serves to strengthen the coercive force of the obligation and provides for liquidated damages for such breach.66"The obligor would then be bound to pay the stipulated indemnity without the necessity of proof of the existence and the measure of damages caused by the breach."67Articles 1226 and 1227 of the Civil Code state:Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.Art. 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time, unless this right has been clearly granted to him. However, if after the creditor has decided to require the fulfillment of the obligation, the performance thereof should become impossible without his fault, the penalty may be enforced."In the absence of a showing that they expressly reserved the right to pay the penalty in lieu of the performance of their obligation under the Kasunduan, respondents were correctly ordered by the RTC to execute and deliver a deed of conveyance over their 60% share in the subject parcels in favor of petitiOners. Considering that the Kasunduan stipulated that respondents would retain a portion of their share consisting of 1,750 square meters, said disposition should, however, be modified to give full effect to the intention of the contracting parties. Since the parties also fixed liquidated damages in the sum ofP50,000.00 in case of breach, we find that said amount should suffice as petitioners' indemnity, without further need of compensation for moral and exemplary damages. In obligations with a penal clause, the penalty generally substitutes the indemnity for damages and the payment of interests in case of non-compliance.68Usually incorporated to create an effective deterrent against breach of the obligation by making the consequences of such breach as onerous as it may be possible, the rule is settled that a penal clause is not limited to actual and compensatory damages69The RTC's award of attorney's fees in the sum ofP50,000.00 is, however, proper.1wphi1Aside from the fact that the penal clause included a liability for said award in the event of litigation over a breach of the Kasunduan, petitioners were able to prove that they incurred said sum in engaging the services of their lawyer to pursue their rights and protect their interests.70WHEREFORE, premises considered, the Court of Appeals' assailed 23 January 2007 Decision is REVERSED and SET ASIDE. In lieu thereof, the RTC's 27 January 2005 Decision is REINSTATED subject to the following MODIFICATIONS: (a) the exclusion of a 1,750-square meter portion from the 60% share in the subject parcel respondents were ordered to convey in favor of petitioners; and (b) the deletion of the awards of moral and exemplary damages. The rights of the parties under the Agreement may be determined in a separate litigation.SO ORDERED.

1308 MUTUALITY OF CONTRACTSG.R. No. 107569 November 8, 1994PHILIPPINE NATIONAL BANK,petitioner,vs.COURT OF APPEALS, REMEDIOS JAYME-FERNANDEZ and AMADO FERNANDEZ,respondents.Vidad, Corpus & Associates for petitioner.Remedios Jayme-Fernandez for privaate respondents.PUNO,J.:Petitioner bank seeks the review of the decision, dated October 15, 1992, of the Court of Appeals1in CA G.R. CV No. 27195, the dispositive portion of which reads as follows:WHEREFORE, the judgment appealed from is hereby SET ASIDE and a new one is entered ordering defendant-appellee PNB to re-apply the interest rate of 12%per annumto plaintiffs-appellants' (referring to herein private respondents) indebtedness and to accordingly take the appropriate charges from plaintiffs-appellants' (private respondents') payment of P81,000.00 made on December 26, 1985. Any balance on the indebtedness should, likewise, be charged interest at the rate of 12%per annum.SO ORDERED.The parties do not dispute the facts as laid down by respondent court in its impugned decision,viz.:On April 7, 1982, (private respondents) as owners of a NACIDA-registered enterprise, obtained a loan under the Cottage Industry Guaranty Loan Fund (CIGLF) from the Philippine National Bank (PNB) in the amount of Fifty Thousand (P50,000.00) Pesos, as evidenced by a Credit Agreement. Under the Promissory Note covering the loan, the loan was to be amortized over a period of three (3) years to end on March 29, 1985, at twelve (12%) percent interest annually.To secure the loan, (private respondents) executed a Real Estate Mortgage over a 1.5542-hectare parcel of unregistered agricultural land located at Cambang-ug, Toledo City, which was appraised by the PNB at P1,062.52 and given a loan value of P531.26 by the Bank. In addition, (private respondents) executed a Chattel Mortgage over a thermo plastic-forming machine, which had an appraisal value of P8,800 and a loan value of P4,400.00.The Credit Agreement providedinter alia, that (a) The BANK reserves the right to increase the interest rate within the limits allowed by law at any time depending on whatever policy it may adopt in the future;Provided, that the interest rate on this accommodation shall be correspondingly decreased in the event that the applicable maximum interest is reduced by law or by the Monetary Board. In either case, the adjustment in the interest rate agreed upon shall take effect on the effectivity date of the increase or decrease in the maximum interest rate.The Promissory Note, in turn, authorized the PNB to raise the rate of interest, at any time without notice, beyond the stipulated rate of 12% but only "within the limits allowed by law."The Real Estate Mortgage contract likewise provided that (k) INCREASE OF INTEREST RATE: The rate of interest charged on the obligation secured by this mortgage as well as the interest on the amount which may have been advanced by the MORTGAGE, in accordance with the provision hereof, shall be subject during the life of this contract to such an increase within the rate allowed by law, as the Board of Directors of the MORTGAGEE may prescribe for its debtors.On February 17, 1983, (private respondents) were granted an additional NACIDA loan of Fifty Thousand (P50,000.00) Pesos by the PNB, for which (private respondents) executed another Promissory Note, which was to mature on April 1, 1985. Other than the date of maturity, the second promissory note contained the same terms and stipulations as the previous note. The parties likewise executed a new Credit Agreement, changing the amount of the loan from P50,000.00 to P100,000.00, but otherwise preserving the stipulations contained in the original agreement.As additional security for the loan, (private respondents) constituted another real estate mortgage over 2 parcels of registered land, with a combined area of 311 square meters, located at Guadalupe, Cebu City. The land, upon which several buildings are standing, was appraised by the PNB to have a value of P40,000.00 and a loan value of P28,000.00.In a letter dated August 1, 1984, the PNB informed (private respondents) "that the interest rate of your CIGLF loan account with us is now 25%per annumplus a penalty of 6%per annumon past dues." The PNB further increased this interest rate to 30% on October 15, 1984; and to 42% on October 25, 1984.The records show that as of December 1985, (private respondents) had an outstanding principal account of P81,000.00 of which P18,523.14 was credited to the principal, P57,488.89 to the interest, and the rest to penalty and other charges. Thus, as of said date, the unpaid principal obligation of (private respondent) amounted to P62,830.32.Thereafter, (private respondents) exerted efforts to get the PNB to re-adopt the 12% interest and to condone the present interest and penalties due; but to no avail.2(Citations omitted.)On December 15, 1987, private respondents filed a suit for specific performance against petitioner PNB and the NACIDA. It was docketed as Civil Case No. CEB-5610, and raffled to the Regional Trial Court, 7th Judicial Region, Cebu City, Br. 7.3Private respondents prayed the trial court to order:1. The PNB and NACIDA to issue in (private respondents') favor, a release of mortgage;2. The PNB to pay pecuniary consequential damages for the destruction of (private respondents') enterprise;3. The PNB to pay moral and exemplary damages as well as the costs of suit; and4. Granting (private respondents') such other relief as may be found just and equitable in the premises.4On February 26, 1990, the trial court dismissed private respondents' complaint in Civil Case No. CEB-5610. On October 15, 1992, the Court of Appeals reversed the dismissal with respect to petitioner bank, and disallowed the increases in interest rates.Petitioner bank now contends that "respondent Court of Appeals committed grave error when it ruled (1) that the increase in interest rates are unauthorized; (2) that the Credit Agreement and the Promissory Notes are not the law between the parties; (3) that CB Circular No. 773 and CB CircularNo. 905 are not applicable; and (4) that private respondents are not estopped from questioning the increase of rate interest made by petitioner."5The petition is bereft of merit.In making the unilateral increases in interest rates, petitioner bank relied on the escalation clause contained in their credit agreement which provides, as follows:The Bank reserves the right to increase the interest rate within the limits allowed by law at any time depending on whatever policy it may adopt in the future andprovided, that, the interest rate on this accommodation shall be correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board. In either case, the adjustment in the interest rate agreed upon shall take effect on the effectivity date of the increase or decrease in maximum interest rate.This clause is authorized by Section 2 of Presidential Decree (P.D.)No. 1684 which further amended Act No. 2655 ("The Usury Law"), as amended, thus:Section 2. The same Act is hereby amended by adding a new section after Section 7, to read as follows:Sec. 7-a. Parties to an agreement pertaining to a loan or forbearance of money, goods or credits may stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased by law or by the Monetary Board;Provided, That such stipulation shall be valid only if there is also a stipulation in the agreement that the rate of interest agreed upon shall be reduced in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board;Providedfurther, That the adjustment in the rate of interest agreed upon shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest.Section 1 of P.D. No. 1684 also empowered the Central Bank's Monetary Board to prescribe the maximum rates of interest for loans and certain forbearances. Pursuant to such authority, the Monetary Board issued Central Bank (C.B.) Circular No. 905, series of 1982, Section 5 of which provides:Sec. 5. Section 1303 of the Manual of Regulations (for Banks and Other Financial Intermediaries) is hereby amended to read as follows:Sec. 1303. Interest and Other Charges. The rate of interest, including commissions, premiums, fees and other charges, on any loan, or forbearance of any money, goods or credits, regardless of maturity and whether secured or unsecured, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended.P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely regarding any subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits. In fine, they can agree to adjust, upward or downward, the interest previously stipulated. However, contrary to the stubborn insistence of petitioner bank, the said law and circular did not authorize either party tounilaterallyraise the interest rate without the other's consent.It is basic that there can be no contract in the true sense in the absence of the element of agreement, or of mutual assent of the parties. If this assent is wanting on the part of the one who contracts, his act has no more efficacy than if it had been done under duress or by a person of unsound mind.6Similarly, contract changes must be made with the consent of the contracting parties. The minds of all the parties must meet as to the proposed modification, especially when it affects an important aspect of the agreement. In the case of loan contracts, it cannot be gainsaid that the rate of interest is always a vital component, for it can make or break a capital venture. Thus, any change must bemutuallyagreed upon, otherwise, it is bereft of any binding effect.We cannot countenance petitioner bank's posturing that the escalation clause at bench gives it unbridled right tounilaterallyupwardly adjust the interest on private respondents' loan. That wouldcompletelytake away from private respondents the right to assent to an important modification in their agreement, and would negate the element of mutuality in contracts. InPhilippine National Bank v.Court of Appeals, et al., 196 SCRA 536, 544-545 (1991) we held . . . The unilateral action of the PNB in increasing the interest rate on the private respondent's loan violated the mutuality of contracts ordained in Article 1308 of the Civil Code:Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.In order that obligations arising from contracts may have the force or law between the parties, there must bemutualitybetween the parties based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void . . . . Hence, even assuming thatthe . . . loan agreement between the PNB and the private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of the loan, that license would have been null and void for being violative of the principle of mutuality essential in contracts. It would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain on equal footing, the weaker party's (the debtor) participation being reduced to the alternative "to take it or leave it" . . . . Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition. (Citation omitted.)Private respondents are not also estopped from assailing the unilateral increases in interest rate made by petitioner bank. No one receiving a proposal to change a contract to which he is a party, is obliged to answer the proposal, and his silenceper secannot be construed as an acceptance.7In the case at bench, the circumstances do not show that private respondents implicitly agreed to the proposed increases in interest rate which by any standard were too sudden and too stiff.IN VIEW THEREOF, the instant petition is DENIED for lack of merit, and the decision of the Court of Appeals in CA-G.R. CV No. 27195, dated October 15, 1992, is AFFIRMED. Costs against petitioner.SO ORDERED.

[G.R. No. 124290.January 16, 1998]ALLIED BANKING CORPORATION,petitioner, vs. COURT OF APPEALS,HON. JOSE C. DE GUZMAN, OSCARD. TANQUECO,LUCIAD. TANQUECO-MATIAS, RUBEN D. TANQUECO andNESTOR D. TANQUECO,respondentsD E C I S I O NBELLOSILLO,J.:There are two (2) main issues in this petition for review:namely,(a) whether a stipulation in a contract of lease to the effect that the contract"may be renewed for a like term at the option of the lessee" is void for being potestative or violative of the principle of mutuality of contracts under Art. 1308 of the Civil Code and, corollarily, what is the meaning of the clause"may be renewed for a like term at the option of the lessee;"and, (b) whether a lessee has the legal personality to assail the validity of a deed of donation executed by the lessor over the leased premises.Spouses Filemon Tanqueco and Lucia Domingo-Tanqueco owned a 512-square meter lot located at No. 2 Sarmiento Street corner Quirino Highway, Novaliches, Quezon City, covered by TCT No. 136779 in their name.On 30 June 1978 they leased the property to petitioner Allied Banking Corporation (ALLIED) for a monthly rental ofP1,000.00 for the first three (3) years, adjustable by 25% every three (3) years thereafter.[1]The lease contract specifically states in its Provision No. 1 that "the termof this lease shall be fourteen (14) years commencing from April 1, 1978 and may be renewed for a like term at the option of the lessee."Pursuant to their lease agreement, ALLIED introduced an improvement on the property consisting of a concrete building with a floor area of 340-square meters which it used as a branch office.As stipulated, the ownership of the building would be transferred to the lessors upon the expiration of the original term of the lease.Sometime in February 1988 the Tanqueco spouses executed a deed of donation over the subject property in favor of their four (4) children, namely, private respondents herein Oscar D. Tanqueco, Lucia Tanqueco-Matias, Ruben D. Tanqueco and Nestor D. Tanqueco, who accepted the donation in the same public instrument.On 13 February 1991, a year before the expiration of the contract of lease, the Tanquecos notified petitioner ALLIED that they were no longer interested in renewing the lease.[2]ALLIEDrepliedthatitwas exercising its optiontorenew their lease under the same terms with additional proposals.[3]Respondent Ruben D. Tanqueco, acting in behalf of all the donee-lessors, made a counter-proposal.[4]ALLIED however rejected the counter-proposal and insisted on Provision No. 1 of their lease contract.When the lease contract expired in 1992 private respondents demanded that ALLIED vacate the premises.But the latter asserted its sole option to renew the lease and enclosed in its reply letter a cashiers check in the amount ofP68,400.00 representing the advance rental payments for six (6) months taking into account the escalation clause.Private respondents however returned the check to ALLIED, prompting the latter to consign the amount in court.An action for ejectment was commenced before the Metropolitan Trial Court of Quezon City.After trial, the MeTC-Br. 33declared Provision No. 1 of the lease contract void for being violative of Art. 1308 of the Civil Code thus -x x xbut such provision [in the lease contract], to the mind of the Court, does not add luster to defendants cause nor constitutes as an unbridled or unlimited license or sanctuary of the defendant to perpetuate its occupancy on the subject property.The basic intention of the law in any contract is mutuality and equality.In other words, the validity of a contract cannot be left at (sic) the will of one of the contracting parties. Otherwise, it infringes (upon)Article 1308 ofthe New Civil Code, which provides:The contract must bind both contracting parties;its validity or compliance cannot be left to the will of one of themx x x xUsing the principle laid down in the case ofGarcia v. Legardaas cornerstone, it is evident that the renewal of the lease in this case cannot be left at the sole option or will of the defendant notwithstanding provision no. 1 of their expired contract.For thatwould amount to a situation where the continuance andeffectivityofa contractwilldependonlyuponthesolewillorpowerofthelessee,which is repugnant to the very spirit envisioned under Article 1308 of the New Civil Codex x x xthe theory adopted by this Court in the case at bar finds ample affirmation from the principle echoed by the Supreme Court in the case ofLao Lim v. CA,191 SCRA 150, 154, 155.On appeal to the Regional Trial Court, and later to the Court of Appeals, the assailed decision was affirmed.[5]On 20 February 1993, while the case was pending in the Court of Appeals, ALLIED vacated the leased premises by reason of the controversy.[6]ALLIED insists before us that Provision No. 1 of the lease contract was mutually agreed upon hence valid and binding on both parties, and the exercise by petitioner of its option to renew the contract was part of their agreement and in pursuance thereof.We agree with petitioner.Article 1308 of the Civil Code expresses what is known in law as theprinciple of mutuality of contracts.It provides that"the contract must bind both the contractingparties; its validity or compliance cannot beleftto the will of one of them." This binding effect of a contract on both parties is based on theprinciplethattheobligations arising from contractshavethe force of law between the contracting parties, and there must be mutuality between them based essentially on their equality under which it is repugnant to have one party bound bythecontractwhileleavingthe other free therefrom.The ultimate purpose is to render void a contract containing a condition which makes its fulfillment dependent solely upon the uncontrolled will of one of the contracting parties.An express agreement which gives the lessee the sole option to renew the lease is frequent and subject to statutory restrictions, valid and binding on the parties.This option, which is provided in the same lease agreement, is fundamentally part of the consideration in the contract and is no different from any other provision of the lease carrying an undertaking on the part of the lessor to act conditioned on the performance by the lessee.It is a purely executory contract and at most confers a right to obtain a renewal if there is compliance with the conditions on which the right is made to depend.The right of renewal constitutes a part of the lessees interest in the land and forms a substantial and integral part of the agreement.The fact thatsuch option is binding only on the lessor and can be exercised only by the lessee does not render it void for lack of mutuality.After all, the lessor isfree to give or not to give the option to the lessee.And while the lessee has a right to elect whether to continue with the lease or not, once he exercises his option to continue and the lessor accepts, both parties are thereafter bound by the new lease agreement.Their rights and obligations become mutually fixed, andthe lessee is entitled to retain possession ofthe property for the duration of the new lease, and the lessor mayholdhim liable for the rent therefor. The lessee cannot thereafter escape liability even ifhe shouldsubsequentlydecide to abandonthe premises. Mutuality obtains in such a contract and equality exists between the lessor and the lessee since they remain with the same faculties in respect to fulfillment.[7]The case ofLao Lim v. Court of Appeals[8]relied upon by the trial court is not applicable here.In that case, the stipulation in the disputed compromise agreement was to the effect that the lessee would be allowed to stay in the premises"as long as he needs it and can pay the rents."In the present case, the questioned provision states that the lease"may be renewed for a like term at the option of the lessee."The lessor is bound by the option he has conceded to the lessee.The lessee likewise becomes bound only when he exercises his option and the lessor cannot thereafter be excusedfrom performing his part of the agreement.Likewise, reliance by the trial court on the 1967 case ofGarcia v. Rita Legarda, Inc.,[9]is misplaced.In that case, what was involved was a contract to sell involving residential lots, which gave the vendor the righttodeclarethe contract cancelledand of no effect upon the failure of the vendee to fulfill any of theconditions therein set forth. In the instant case, we are dealing witha contract of lease which gives thelesseethe right to renew the same.With respect to the meaning of the clause "may be renewedfora like term at the option of the lessee," we sustain petitioner's contention that its exercise of the option resulted in the automatic extension of the contract of lease under the same terms and conditions. Thesubject contractsimply provides that "the term of this lease shallbe fourteen (14) years and may be renewed fora liketerm at the option of the lessee."As we seeit, the only term on which there has been a clear agreement is the period of the new contract, i.e., fourteen (14) years, which is evident from the clause "may be renewed for a like term at the option of the lessee,"the phrase"for a like term"referring to the period.Itis silent as to what the specific terms and conditionsof the renewed lease shall be.Shall it be the same terms and conditions as in the original contract, or shall it be under the terms and conditions as maybe mutually agreed upon by the parties after the expiration ofthe existing lease?InLedesma v. Javellana[10]this Court was confronted with a similar problem.In that case the lesseewas giventhe sole option to renew the lease, but the contract failed to specify the terms and conditions that would govern the new contract. When the lease expired, the lessee demanded an extension under the same terms and conditions.The lessor expressed conformity to the renewal of the contract but refused to accede to the claim of the lessee that the renewal should be under the same terms and conditions as the original contract.In sustaining the lessee, this Court made the following pronouncement:xxx in the case ofHicksv.Manila HotelCompany,a similar issue wasresolved bythisCourt.It was heldthat'sucha clause relates to the very contract inwhich it is placed, and does not permit the defendant upon the renewal of the contract in which the clause is found, to insist upon different terms than those embraced in the contractto be renewed;' and that 'a stipulation to renew always relates to the contract in which it is found and the rights granted thereunder, unlessit expressly provides forvariations in the terms of the contract to be renewed.'The same principle is upheld in American Law regarding the renewal of lease contracts.In50 Am. Jur. 2d, Sec. 1159, at p. 45,we find the following citations:'Therule is well-established that a general covenant to renew or extend alease which makes no provision as to the terms of a renewalorextension implies arenewalor extension upon the same terms as providedin the original lease.'In the leasecontractunderconsideration,there is no provisiontoindicate that the renewal will be subject to new terms and conditions that the parties may yet agree upon.It is to renewal provisions oflease contracts of the kind presently considered that the principles statedabovesquarely apply.We do not agree with the contention of the appellants that if it was intended by the parties to renew the contract under thesame termsand conditions stipulated in thecontract of lease, such should have expressly so statedinthecontractitself.Thesame argument could easily be interposedbythe appelleewho could likewise contend thatif theintention was to renew the contractof lease under such new terms and conditions that the parties may agree upon, the contract should have so specified.Between the two assertions,there is more logic in thelatter.The settled rule is that in case of uncertainty as to the meaning of aprovision grantingextension to a contractoflease, thetenantis the one favored andnotthe landlord.'As a general rule, in construingprovisionsrelatingto renewals or extensions, where there is any uncertainty, the tenant is favored, and not the landlord, because the latter, having the power of stipulatingin hisown favor, has neglected to doso;and alsouponthe principlethateveryman's grantis to be taken moststronglyagainst himself(50 Am Jur. 2d, Sec. 1162, p. 48; see also 51 C.J.S. 599).'Besides,if we were to adopt the contrarytheory thattheterms and conditions to be embodied in the renewed contract were still subject to mutual agreement by and between the parties, then the option - which is an integral part of the consideration for the contract - would be rendered worthless.For then, the lessor could easily defeat the lessee's right of renewal by simply imposing unreasonable and onerous conditions to prevent the parties from reaching an agreement, as in the case at bar.As in a statute no word, clause, sentence, provision or part of a contract shall be considered surplusage or superfluous, meaningless, void, insignificant or nugatory, if that can be reasonably avoided. To this end, a construction whichwillrender every word operative is to be preferred over that which would make some words idle and nugatory.[11]Fortunately for respondent lessors, ALLIED vacated the premises on 20 February 1993 indicating its abandonment of whatever rights it had under the renewal clause.Consequently, what remains to be done is for ALLIED to pay rentals for the continued use of the premises until it vacated the same, computed from theexpiration of the original term of the contract on 31 March 1992 to the time it actually left the premises on 20 February 1993, deducting therefrom the amount ofP68,400.00consigned in court by ALLIED and any other amount which it may have deposited oradvanced in conection with the lease.Since the old lease contract was deemed renewed under the same terms and conditions upon the exercise by ALLIED of its option, the basis of the computation of rentals should be the rental rate provided for in the existing contract.Finally, ALLIED cannot assail the validity of the deed of donation, not being a party thereto.A personwho is not principally or subsidiarilybound has no legal capacity to challenge the validity ofthe contract.[12]He must first have an interest in it."Interest" within the meaning of the term means material interest, an interest to be affected by the deed, as distinguished from a mere incidentalinterest.Hence,a personwho is not a party to a contract and forwhose benefitit was not expressly made cannot maintain an action on it, even if the contract, if performed by the parties thereto would incidentally affect him,[13]except when he is prejudiced in his rights with respect to one of the contracting parties and can show the detriment which couldpositively result to him from the contract in which he had no intervention.[14]We find none in the instant case.WHEREFORE, the Decision of the Court of Appeals isREVERSED and SET ASIDE. Considering that petitioner ALLIED BANKING CORPORATION already vacated the leased premises as of 20 February 1993, the renewed lease contract is deemed terminated as of that date.However, petitioner is required to pay rentals to respondent lessors at the rate provided in their existing contract, subject to computation in view of the consignment in court ofP68,400.00 by petitioner, and of such other amounts it may have deposited or advanced in connection with the lease.SO ORDERED.

MANILA INTERNATIONAL AIRPORT AUTHORITY,Petitioner, versus DING VELAYO SPORTS CENTER, INC.,Respondent.G.R. No. 161718 December 14, 2011

D E C I S I O NLEONARDO-DE CASTRO,J.:Before Us is a Petition for Review under Rule 45 of the Rules of Court of the Decision[1]dated January 8, 2004 of the Court Appeals in CA-G.R. CV No. 68787, affirming the Decision[2]dated October 29, 1999 of Branch 111 of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 8847, which granted the Complaint for Injunction, Consignation, and Damages with prayer for a Temporary Restraining Order filed by respondent Ding Velayo Sports Center, Inc. against petitioner Manila International Airport Authority (MIAA), and essentially compelled petitioner to renew the lease of respondent over a parcel of land within the airport premises.Below are the facts as culled from the records of the case:On February 15, 1967, petitioner (then still called the Civil Aeronautics Administration or CAA) and Salem Investment Corporation (Salem) entered into a Contract of Lease whereby petitioner leased in favor of Salem a parcel of land known as Lot 2-A, with an area of 76,328 square meters, located in front of the Manila International Airport (MIA) in Pasay City, and registered under Transfer Certificate of Title (TCT) No. 6735 in the name of the Republic (Lot 2-A).Petitioner andSalementered into said Contract of Lease for the following reasons:WHEREAS, this particular portion of land is presently an eyesore to the airport premises due to the fact that a major portion of it consists of swampy and talahib infested silt and abandoned fishponds and occupied by squatters and some [petitioners] employees with ungainly makeshift dwellings;WHEREAS, the LESSOR, in accordance with its general plan to improve and beautify the airport premises, is interested in developing this particular area by providing such facilities and conveniences as may be necessary for thecomfort, convenience and relaxation of transients, tourists and the general public;WHEREAS, the LESSEE, a corporation engaged in hostelry and other allied business, is ready, willing and able to cooperate with the LESSOR in the implementation of this general development plan for the airport premises;xx x xWHEREAS, the LESSEEsmain interest is to have a sufficient land area within which to construct a modern hotel with such facilities as would ordinarily go with modern hostelry, including recreation halls, facilities for banks, tourist agencies, travel bureaus, laundry shops, postal stations, curio and native shops and other allied business calculated to make the hotel and its facilities comfortable, convenient and attractive, and for this purpose, an initial land area of some Thirty[-]Five Thousand Ten (35,010) square meters would be first utilized.[3]The term of the lease and renewal thereof as stipulated upon by petitioner and Salem are as follows:3.That the term of the lease shall be for a period of Twenty-Five (25) years, commencing from the date of receipt of approval of this Contract by the Secretary of Public Works and Communications, and at the option of the LESSEE, renewable for another Twenty-Five (25) years.It is understood, that after the first 25 years lease, the ownership of, and full title to, all the buildings and permanent improvements introduced by the LESSEE on the leased premises including those introduced on theGolfDrivingRangeshall automatically vest in the LESSOR, without cost.Upon the termination of the lease or should the LESSEE not exercise this option for renewal, the LESSEE shall deliver the peaceful possession of all the building and other permanent improvements herein above referred to, with the understanding that the LESSEE shall have the right to remove from the premises such equipment, furnitures, accessories and other articles as would ordinarily be classified as movable property under pertinent provisions of law.4.That the renewal of this lease contract shall be for another period of Twenty-Five (25) years, under the same terms and conditions herein stipulated; provided, however that, since the ownership of the hotel building and permanent improvement have passed on the LESSOR, the LESSEE shall pay as rental, in addition to the rentals herein agreed upon, an amount equivalent to One percent (1%) of the appraised value of the hotel building and permanent improvements at the time of expiration of Twenty-Five (25) years lease period, payable annually.[4]Subsequently, in a Transfer of Lease Rights and Existing Improvements dated September 30, 1974, Salem conveyed in favor of Ding Velayo Export Corporation (Velayo Export), for the consideration ofP1,050,000.00, its leasehold rights over a portion of Lot 2-A, measuring about 15,534 square meters, with the improvements thereon, consisting of an unfinished cinema-theater.Accordingly, petitioner and Velayo Export executed a Contract of Lease datedNovember 26, 1974pertaining to the aforementioned leased portion ofLot2-A.In turn, Velayo Export executed a Transfer of Lease Rights dated April 27, 1976 by which it conveyed to respondent, for the consideration ofP500,000.00, its leasehold rights over an 8,481-square meter area (subject property) out of the 15,534-square meter portion it was leasing from petitioner.As a result, petitioner and respondent executed another Contract of Lease[5]datedMay 14, 1976covering the subject property.The Contract of Lease datedMay 14, 1976between petitioner (as lessor) and respondent (as lessee) specified how respondent shall develop and use the subject property:2.That the LESSEE shall utilize the premises as the site for the construction of a Sports Complex facilities and shopping centers in line with the Presidential Decree for Sports Development and Physical Fitness, including the beautification of the premises and providing cemented parking areas.3.That the LESSEE shall construct at its expense on the leased premises a parking area parallel to and fronting the Domestic Airport Terminal to be open to the traveling public free of charge to ease the problem of parking congestion at the Domestic Airport.[6]Pursuant to the aforequoted objectives, respondent agreed to the following:9.Physical improvements on building spaces and areas subject of this agreement may be undertaken by and at the expenses of the LESSEE.However, no improvements may be commenced without prior approval of the plans by the LESSOR and, whenever deemed necessary a cash deposit shall be made in favor of the LESSOR which shall be equivalent to the cost of restoration of any portion affected by such alteration or improvements;10.The LESSEE agrees and binds himself to complete the physical improvements or contemplated structures within the leased premises for a period of one (1) year.Failure on the part of the LESSEE to do so within said period shall automatically revoke the Contract of Lease without necessity of judicial process.[7]The lease rental shall be computed as follows:5.That the LESSEE shall pay to the LESSOR as monthly rentals for the leased premises the rate of P0.45 per square meter for the first 300 square meters,P0.30 per square meter for the next 500 square meters, andP0.25 per square meter for the remaining area pursuant to Part VIII, Section 4 of Administrative Order No. 4, Series of 1970, which in the case of the 8,481 square meters herein leased shall amount toP2,205.25 per month, or aroyalty equivalent to one percent (1%) of the monthly gross income of the LESSEE, whichever is higher.6.That for the purpose of accurately determining the monthly gross income, the LESSEE hereby gives its consent for the examination of the books by authorized representatives of the LESSOR or the Commission on Audit;x x x x13.If, during the lifetime of this agreement and upon approval by the LESSOR, the leased area is increased or diminished, or the LESSEE is relocated to another area, rentals, fees, and charges imposed shall be amended accordingly.Subsequent amendments to the Administrative Order which will affect an increase of the rates of fees, charges and rentals agreed upon in this contract shall automatically amend this contract to the extent that the rates of fees, rentals, and charges are increased.In the event of relocation of the LESSEE to other areas, the cost of relocation shall be shouldered by the LESSEE.[8]Nonpayment of lease rentals shall have the following consequence:8.Failure on the part of the LESSEE TO PAY ANY fees, charges, rentals or the royalty of one percent (1%) within thirty (30) days after receipt of written demand, the LESSOR shall deny the LESSEE of the further use of the leased premises and /or any of its facilities, utilities and services.x x x.[9]The Contract of Lease prohibits respondent from transferring its leasehold rights, engaging in any other business outside those mentioned in said Contract, and subletting the premises whether in whole or in part, thus:16.The LESSEE agrees not to assign, sell, transfer or mortgage his rights under this agreement or sublet the whole or part of premises covered by it to a third party or parties nor engage in any other business outside of those mentioned in this contract.Violation of this provision shall also be a ground for revocation of the lease contract without need of judicial process.[10]Period of the lease and renewal thereof are governed by paragraphs 4 and 17 of the Contract of Lease that read:4.That the period of this lease shall take effect fromJune 1, 1976up toFebruary 15, 1992which is equivalent to the unexpired portion of the lease contract executed between [petitioner] and Ding Velayo Export Corporation.x x x x17.The LESSEE, if desirous of continuing his lease, should notify the LESSOR sixty (60) days prior to expiration of the period agreed upon for the renewal of the Contract of Lease.[11]The lease may be revoked/terminated under the following conditions:15.This contract of lease may be terminated by other party upon thirty (30) days notice in writing.Failure on the part of the LESSEE to comply with any of the provisions of this lease contract or any violation of any rule or regulations of the Airport shall give the LESSOR the right to revoke this contract effective thirty (30) days after notice of revocation without need of judicial demand.However, the LESSEE shall remain liable and obligated to pay rentals and other fees and charges due and in arrears with interest at the rate of twelve percent (12%) per annum;x x x x18.Upon termination or revocation of this contract of lease as herein provided, the LESSEE shall deliver possession of the premises to the LESSOR in the same condition that they were received giving allowance to normal wear and tear and to damage or destruction caused by act of God.All permanent improvements, however, which the LESSEE might have constructed in the premises by virtue hereof shall upon the termination of this lease automatically become the absolute property of the LESSOR without cost;19.In the event that the LESSOR shall need the leased premises in its airport development program, the LESSEE agrees to vacate the premises within thirty (30) days from receipt of notice.All improvements not removed by the LESSEE within the thirty (30) day period shall become the property of the LESSOR without cost.[12]Respondent began occupying the subject property and paying petitioner the amount ofP2,205.25 per month as rental fee.Respondent then constructed a multi-million plaza with a three-storey building on said property.Respondent leased spaces in the building to various business proprietors.In a Letter[13]datedApril 11, 1979, petitioner requested respondent for a copy of the latters Gross Income Statement from December 1977 to December 1978, duly certified by a certified public accountant, for the purpose of computing the royalty equivalent to 1% of the monthly gross income of respondent.Acceding to this request, respondent sent petitioner a Letter[14]datedMay 31, 1979and appended therewith the requested income statements which disclosed that the total gross income of respondent for the period in question amounted toP1,972,968.11.Respondent also submitted to petitioner and the Commission on Audit (COA) its duly audited financial statements[15]for the years 1984 to 1988.Meanwhile, petitioner had continued billing respondent the amount ofP2,205.25 as monthly rental fee, which the latter obediently paid.Petitioner eventually issued Administrative Order (AO) No. 4, series of 1982,[16]and AO No. 1, series of 1984, fixing various rates for the lease rentals of its properties.AO No. 4, series of 1982, and AO No. 1, series of 1984, allegedly effected an increase in the lease rental of respondent for the subject property, as provided for in paragraph 13 of the Contract of Lease datedMay 14, 1976between petitioner and respondent.However, said issuances were subjected to review for revision purposes and their implementation was suspended.Still, petitioner, through a l