Manila International Airport Authority vs. Avia Filipinas International, Inc.

A contractual clause allowing automatic incorporation of administrative order amendments into a lease must be read in conjunction with a mutual written consent clause for modifications, precluding unilateral imposition of increased rental rates.

MIAA and AFIC executed a one-year lease contract effective September 1, 1990, for airport property at a monthly rental of ₱6,580.00. In December 1990, MIAA issued Administrative Order No. 1 increasing rental rates but did not enforce it against AFIC, who continued paying the original amount. Upon the contract's expiration, AFIC remained on the property under an implied monthly lease, still paying the original rate without protest from MIAA. Three years later, MIAA billed AFIC for the rental differential retroactive to September 1991.

• The Lease Contract: MIAA leased property to AFIC for one year (September 1, 1990 to August 31, 1991) at ₱6,580.00 monthly. The contract contained two key provisions: Article II, Paragraph 2.04 stipulated that any subsequent amendment to Administrative Order No. 4 affecting rentals "shall be deemed incorporated herein and shall automatically amend this Contract," while Article VIII, Paragraph 8.13 required that any amendment "shall not be valid and binding, unless and until made in writing and signed by the parties thereto."
• Administrative Order No. 1: In December 1990, MIAA issued Admin Order No. 1, increasing rates effective December 1, 1990, which raised AFIC's rent to ₱15,996.50. MIAA did not require AFIC to pay the increased rate, and AFIC continued paying ₱6,580.00.
• Implied Lease and Retroactive Billing: After August 31, 1991, AFIC continued occupying the premises under an implied monthly lease, still paying the original rate. On October 6, 1994, MIAA billed AFIC for the rental differential of ₱347,300.50 covering September 1, 1991 to September 30, 1994.
• Denial of Access: Beginning October 1994, AFIC paid the increased rate but refused to pay the lump sum differential. Consequently, from July 1, 1997 to March 11, 1998, MIAA denied AFIC and its employees access to the leased premises. AFIC nonetheless continued paying its rentals during this period.

• Contract Interpretation: MIAA argued that its quasi-legislative power authorized it to levy fees via Admin Order No. 1, and AFIC's signing of the lease contract constituted consent to future increases; thus, Paragraph 2.04's automatic incorporation clause satisfied Paragraph 8.13's written consent requirement.
• Unjust Enrichment: MIAA maintained that denying AFIC access was a lawful sanction for non-payment of the increased rental, negating any claim of unjust enrichment.
• Attorney's Fees: Petitioner averred that AFIC was not compelled to litigate by any unjustified act, as MIAA was merely exercising its right as owner and administrator.

• Contract Interpretation: Respondent countered that the contract required mutual written consent for any modification, precluding unilateral imposition of rate increases.
• Estoppel: Respondent argued that MIAA's acceptance of rental payments at the original rate without protest or reservation extinguished the obligation in full.
• Unjust Enrichment and Damages: Respondent maintained that MIAA's denial of access was unjustified, depriving respondent of the leased premises' enjoyment while retaining rental payments, thus warranting a refund and attorney's fees.

• Contract Interpretation: Whether the Court of Appeals correctly interpreted the lease contract provisions in line with the Civil Code and jurisprudence on contracts.
• Unjust Enrichment: Whether the principle of unjust enrichment applies to the case.
• Attorney's Fees: Whether respondent is entitled to attorney's fees.

• Contract Interpretation: The appellate court's interpretation was affirmed. The automatic incorporation clause in Paragraph 2.04 must be read in conjunction with the mutual written consent clause in Paragraph 8.13, pursuant to Article 1374 of the Civil Code, requiring both parties' conformity for rate increases. No written bill or conformity was made for the 1991-1994 period. Furthermore, MIAA is estopped from claiming the differential under Article 1235 of the Civil Code, having accepted incomplete payments without protest or reservation.
• Unjust Enrichment: Unjust enrichment was established. MIAA had no legal basis to demand the additional fees, rendering its denial of access unjustified and in violation of its obligation under Article 1654 to maintain the lessee in peaceful enjoyment. Because respondent was deprived of use, it had no duty to pay rent under Article 1658; retaining payments made during the period of deprivation constitutes unjust enrichment under Article 22, requiring restitution.
• Attorney's Fees: The award of attorney's fees was sustained. MIAA's unjustified denial of access compelled AFIC to litigate to protect its interest, justifying the award under Article 2208 of the Civil Code and grounds of justice and equity.

• Holistic Interpretation of Contracts — The various stipulations of a contract must be interpreted together, attributing to doubtful ones the sense resulting from all taken jointly, to give effect to the parties' intention. Applied to read the automatic incorporation clause alongside the written consent clause, requiring mutual agreement for rate increases.
• Estoppel by Acceptance of Incomplete Performance — When the obligee accepts performance knowing its incompleteness or irregularity without expressing protest or objection, the obligation is deemed fully complied with. Applied to bar MIAA from collecting rental differentials after accepting original rate payments without protest.
• Unjust Enrichment — A person who acquires or comes into possession of something at the expense of another without just or legal ground must return it. Applied to require MIAA to refund rental payments collected during the period it unjustifiably denied AFIC access to the leased premises.

• "When the obligee accepts the performance knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with."
• "Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him."

• Hanjin Heavy Industries and Construction Co., Ltd. v. Dynamic Planners and Construction Corp., G.R. Nos. 169408 & 170144, April 30, 2008 — Followed. Cited for the rule that contract stipulations should be interpreted together, not in isolation, to render them effective and ascertain the parties' intention.

• Article 1235, Civil Code — Applied to establish that MIAA's acceptance of partial rental payments without protest or objection deemed the rental obligation fully complied with, estopping MIAA from claiming arrearages.
• Article 1374, Civil Code — Applied to mandate that the automatic incorporation clause and the written consent clause be read together to determine the necessity of mutual conformity for contract amendments.
• Article 1654(3), Civil Code — Applied to define the lessor's obligation to maintain the lessee in peaceful and adequate enjoyment of the lease.
• Article 1658, Civil Code — Applied to recognize the lessee's right to suspend rent payment when the lessor fails to maintain peaceful enjoyment, establishing that respondent had no duty to pay during the period of denied access.
• Article 22, Civil Code — Applied as the statutory basis for the principle of unjust enrichment, requiring MIAA to refund rental payments received while depriving AFIC of the premises' use.
• Article 2208, Civil Code — Applied to justify the award of attorney's fees, as respondent was compelled to litigate due to petitioner's unjustified act of denying access.

Presbitero J. Velasco, Jr., Roberto A. Abad, Jose Catral Mendoza, Estela M. Perlas-Bernabe.