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Closed Philippine Village Hotel told to pay Nayong Pilipino rent

Vol. XXII, No. 127 [ BusinessWorld Online ]

Thursday, January 29, 2009 | MANILA, PHILIPPINES


THE SUPREME Court has affirmed the eviction of Philippine Village Hotel, Inc. (PVHI) from the premises of the Nayong Pilipino Complex, saying it has no claim or title to the land.


In a 12-page decision, the high court ruled the sequestered company, which used to run the 36,289-square meter Philippine Village Hotel near the Ninoy Aquino International Airport in Pasay, owes the Nayong Pilipino Foundation P26.2 million in rent until July 30, 2001.


The court also said PVHI must pay the foundation P725, 780 in monthly rent starting July 31, 2001. Computed until Dec. 31 last year or 89 months, the additional unpaid rent will amount to almost P65 million, excluding periodic increases, but the decision was silent on the matter.


Efforts to reach PVHI, whose assets were frozen by the government in 1986 for having been illegally amassed, was unsuccessful. The dilapidated hotel still stands on the Nayong Pilipino property, although it no longer operates


The firm, formerly known as Sulo sa Nayon, Inc., entered into a lease deal with the government corporation on June 1, 1975. The lease ended in May 1996.


Invoking its right to a new contract, the firm renewed its contract by another 25 years or until 2021. Under the new agreement, PVHI was supposed to pay the monthly rental of P20 per square meter or P725,780 per month, subject to a 20% hike every three years.


Nayong Pilipino sued the now closed hotel and sought its eviction at the Metropolitan Trial Court of Pasay City when the hotel failed to pay rent after repeated demands. By July 31, 2001, the rental debt had reached P26.18 million.


But PVHI sought an allowance, having supposedly improved the property. It invoked its civil right to cling to the land until it got reimbursed for the improvements.


On Feb. 26, 2002, the metropolitan court favored Nayong Pilipino, as it ruled the improvements should not deprive if of its rights as the owner.


In the same year, a Pasay City regional trial court ruled PVHI was a builder in good faith, preventing its eviction until it was paid its share.


But the Court of Appeals, in a ruling dated Oct. 4, 2005, reversed the trial court decision, which it said allowed a lessee to illegally occupy a property by spending on improvements.


The appellate court also recognized PVHI’s rights under Article 1678 of the Civil Code, which allows the lessor to pay for half the value of the improvements.


The lessee can remove the enhancement should the property owner refuse to pay it.


In favoring Nayong Pilipino, Chief Justice Reynato S. Puno, who wrote the ruling, said: "[The] introduction of valuable improvements on the leased premises does not give [PVHI] the right of retention and reimbursement which rightfully belongs to a builder in good faith."


It debunked PVHI’s contention that the application of Article 1678 would result in sheer injustice since it would end up giving away the hotel at a bargain price. The hotel was worth about P2 billion, it earlier claimed.


PVHI also claimed the lease contract governed its relationship with Nayong Pilipino. Article 1678, therefore, should be deemed waived, it argued. "We cannot sustain this line of argument... Basic is the doctrine that laws are deemed incorporated in each and every contract. Existing laws always form part of any contract," the high court said. — Ira P. Pedrasa

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