Case Digest: PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY v. COURT OF APPEALS, et al.

PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY v. COURT OF APPEALS, et al.

467 SCRA 449 (2005)

The New Civil Code provides that “various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.’’

Philippine Fisheries Development Authority (PFDA) as lessor, and respondent QVEGG Marine Transport and Builders Corporation (QVEGG) as lessee, entered into a 10-year lease contract covering the Iloilo Fishing Port Complex slipways and other auxiliary facilities for a monthly rental of P85,000.00.

QVEGG was delinquent in the performance of its contractual obligations so QVEGG requested the restructuring of its overdue account which was granted by the PFDA subject to several ―instructions.‖ Should QVEGG fail to comply with the ―instructions,‖ PFDA would terminate the contract and file the necessary legal action. It appears, however, that it was only on February 22, 1993 that QVEGG paid its January 1993 space rental and electric and water bills. PFDA then terminated their contract for failure of QVEGG to strictly comply with the terms and conditions imposed. QVEGG, on the other hand, sought reconsideration explaining that it interpreted paragraph c of the ―instructions‖ in relation to paragraph 3 of the contract which provides for that its failure to pay rentals for two successive months shall be a ground for the termination of the contract. This was denied.

QVEGG then filed a complaint for Enforcement of Contract and Damages before the Regional Trial Court (RTC). PFDA contended that paragraph 3 of the contract was rendered ineffective by the new terms and conditions of the ―instructions.‖ The RTC found for QVEGG and declared illegal the termination of the contract by the PFDA, it holding that paragraph c of the ―instructions‖ did not modify paragraph 3 of the lease contract but it did not grant QVEGG‘s prayer for damages.

Both QVEGG and PFDA appealed to the Court of Appeals (CA) which dismissed their petitions for want of merit. Hence, this petition.

ISSUE:

Whether or not paragraph 3 of the lease contract is rendered ineffective by the new terms and conditions set forth in the ―instructions‖

HELD:

The termination by the PFDA of the contract is illegal since paragraph 3 of the contract calls for its termination only after the QVEGG fails for two successive months to comply with its obligations there under.

The New Civil Code provides that ―various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.‘‘

Indeed, paragraph c of the ―instructions‘ cannot stand alone independently of paragraph 3 of the lease contract for paragraph c does not provide for the amount, period or manner of payment. Said paragraph c did not amend paragraph 3 of the lease contract, hence, it is only the QVEGG that fails.