Spouses Latip vs. Chua

Courts may take judicial notice only of matters that are of common and general knowledge, well and authoritatively settled, and not doubtful or uncertain; a practice that still requires proof through documentary evidence does not meet the requisite of notoriety. The Court further held that a contract of lease need not be signed by the lessor's spouse to be valid, and that payments received by a lessor from lessees, absent clear words indicating otherwise, should be considered advance rentals on the leased premises.

Respondent Rosalie Palaña Chua is the owner of Roferxane Building, a commercial building located at No. 158 Quirino Avenue corner Redemptorist Road, Barangay Baclaran, Parañaque City. Petitioners Spouses Omar and Moshiera Latip entered into a contract of lease with Rosalie over two cubicles in the building. The contract of lease, dated December 1999, provided for a six-year term with a monthly rental of ₱60,000.00 and a yearly increase of ten percent. The dispute centers on the interpretation of the contract of lease and the nature of the ₱2,570,000.00 paid by the Spouses Latip to Rosalie.

Respondent Rosalie Palaña Chua is the owner of Roferxane Building, a commercial building located at No. 158 Quirino Avenue corner Redemptorist Road, Barangay Baclaran, Parañaque City. On July 6, 2001, Rosalie filed a complaint for unlawful detainer plus damages against petitioners, Spouses Omar and Moshiera Latip, attaching to the complaint a contract of lease over two cubicles in the building. The contract of lease, dated December 1999, was signed by Rosalie as lessor and by the Spouses Latip as lessees, and provided for a monthly rental of ₱60,000.00 with a yearly increase of ten percent, for a term of six years starting from December 1999 up to December 2005.

A year after the commencement of the lease, with the Spouses Latip already occupying the leased cubicles, Rosalie, through counsel, sent the spouses a letter demanding payment of back rentals and requiring them to vacate the leased cubicles. When the Spouses Latip did not heed the demand, Rosalie instituted the complaint for unlawful detainer.

In their Answer, the Spouses Latip refuted Rosalie's claims, averring that the lease of the two cubicles had already been paid in full as evidenced by three receipts showing payment to Rosalie of the total amount of ₱2,570,000.00. The receipts, in Rosalie's handwriting, read: (1) a receipt for ₱2,000,000.00 from Omar Latip and Moshiera Latip "for the payment of 2 cubicles" at the building "with the terms 6 yrs. Contract," paid by check; (2) a receipt for ₱500,000.00 cash from Moshiera Latip dated 12/10/99; and (3) a receipt for ₱70,000.00 cash from Moshiera Latip dated 12-11-99.

The Spouses Latip asseverated that sometime in October 1999, Rosalie offered for sale lease rights over two cubicles in the building, which was still under construction at the time. According to the Spouses Latip, the immediate payment of ₱2,570,000.00 would be used to finish construction of the building, giving them first priority in the occupation of the finished cubicles. In December 1999, as soon as two cubicles were finished, the Spouses Latip occupied them without waiting for the completion of five other stalls. The Spouses Latip averred that the contract of lease they signed had been novated by their purchase of lease rights of the subject cubicles.

The MeTC ruled in favor of Rosalie, ordering the Spouses Latip to vacate the property and pay rent arrearages. The RTC reversed, ruling that the contract of lease was not notarized and incomplete, and that the lease had been fully paid. The RTC believed the claim of the Spouses Latip that the contract of lease was modified and supplemented, and that the entire lease rentals for the two cubicles for six years had already been paid in the amount of ₱2,570,000.00. The CA reversed the RTC and reinstated the MeTC decision, taking judicial notice of the common practice in the Baclaran area of paying goodwill money to lessors, bolstered by the Joint Sworn Declaration of stallholders at the building that they all had paid goodwill money to Rosalie prior to occupying their stalls.

• Novation of Contract: Petitioners argued that the contract of lease they signed had been novated by their purchase of lease rights over the subject cubicles, and that the entire lease rentals for the two cubicles for six years had already been paid in the amount of ₱2,570,000.00.
• Improper Judicial Notice: Petitioners maintained that the CA erred in taking judicial notice of the alleged practice of paying goodwill money in the Baclaran area, as this practice did not meet the requisite of notoriety and still had to be proven by documentary evidence.

• Goodwill Money: Respondent argued that the ₱2,570,000.00 received from the Spouses Latip was simply goodwill payment by prospective lessees to their lessor, and not payment for the purchase of lease rights or advance rentals.
• Validity of Contract: Respondent maintained that the contract of lease, despite its alleged defects, remained a complete and valid contract, and that the Spouses Latip should be ejected for failure to pay rentals.

• Judicial Notice: Whether the Court of Appeals correctly took judicial notice of the alleged practice of paying goodwill money to lessors in the Baclaran area.
• Ejectment and Liability for Rentals: Whether the Spouses Latip should be ejected from the leased cubicles and held liable for unpaid rentals.

• Judicial Notice: No. The CA erred in taking judicial notice of the alleged practice of paying goodwill money in the Baclaran area, as the matter did not meet the requisite of notoriety under Sections 1 and 2 of Rule 129 of the Rules of Court. The practice was not of common and general knowledge, and the necessity of attaching documentary evidence to prove it contradicted the very purpose of judicial notice.
• Ejectment and Liability for Rentals: Yes, with modification. The Spouses Latip can be ejected from the leased premises since the lease ended in 2005, and they are liable for unpaid rentals in accordance with the stipulations in the Contract of Lease, but the amount of ₱2,570,000.00, covering advance rentals, must be deducted from their liability.

• Judicial Notice: The Court cited Sections 1 and 2 of Rule 129 of the Rules of Court, which declare when the taking of judicial notice is mandatory or discretionary. Citing State Prosecutors vs. Muro, the Court reiterated the three material requisites of judicial notice: (1) the matter must be one of common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be within the limits of the jurisdiction of the court. The Court found that the alleged practice of paying goodwill money in the Baclaran area did not meet the requisite of notoriety, as only the CA took judicial notice of it, and neither the MeTC nor the RTC found that the practice was of "common knowledge" or notoriously known. The Court emphasized that the necessity of attaching the Joint Affidavit of the stallholders to Rosalie's appeal before the CA belied the requisite of notoriety, as the alleged practice still had to be proven by Rosalie, contravening the title of Rule 129 — "What need not be proved."
• Ejectment and Liability for Rentals: The Court held that the contract of lease between the parties was a complete document and need not be signed by Ferdinand Chua, Rosalie's husband, as he likewise did not sign the other two receipts for ₱500,000.00 and ₱70,000.00, and it was undisputed that Rosalie owns and leases the stalls in the building. The Court found that the contract of lease had a period of six years commencing in December 1999, buttressed by the Spouses Latip's admission that they occupied the property in December 1999. On the conflicting interpretations of the receipts, the Court held that the practice of payment of goodwill money was an inadequate subject of judicial notice, and Rosalie was unable to provide sufficient evidence that the amount was simply for goodwill money. Guided by Articles 1371, 1372, and 1373 of the Civil Code on interpretation of contracts, the Court found that there was nothing on the receipts and on record that the payment and receipt of ₱2,570,000.00 referred to full payment of rentals for the whole period of the lease. Since the contract of lease remained operative, the Court found that Rosalie's receipt of the monies should be considered as advance rentals on the leased cubicles, bolstered by the fact that Rosalie demanded payment of the lease rentals only in 2000, a full year after the commencement of the lease. Since the lease ended in 2005, the Spouses Latip could be ejected from the leased premises and were liable for unpaid rentals, with the ₱2,570,000.00 deducted from their liability.

• Doctrine of Judicial Notice — Judicial notice rests on the wisdom and discretion of the courts, and the power to take judicial notice must be exercised with caution. Matters of judicial notice have three material requisites: (1) the matter must be one of common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be within the limits of the jurisdiction of the court. The principal guide is notoriety. In this case, the Court held that the alleged practice of paying goodwill money in the Baclaran area did not meet the requisite of notoriety, as the necessity of attaching documentary evidence to prove it contradicted the very purpose of judicial notice.
• Interpretation of Contracts — Under Articles 1371, 1372, and 1373 of the Civil Code, in order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered; however general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases that are different from those which the parties intended to agree; and if some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most adequate to render it effectual. The Court applied these provisions in interpreting the receipts for ₱2,570,000.00, holding that the payments should be considered advance rentals absent clear words indicating otherwise.

• "Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be within the limits of the jurisdiction of the court. The principal guide in determining what facts may be assumed to be judicially known is that of notoriety." — This passage, quoted from State Prosecutors vs. Muro and reiterated in Expertravel & Tours, Inc. vs. Court of Appeals, states the canonical formulation of the requisites for judicial notice and was the basis for the Court's finding that the CA erred in taking judicial notice of the goodwill money practice.
• "However, in this case, the requisite of notoriety is belied by the necessity of attaching documentary evidence, i.e., the Joint Affidavit of the stallholders, to Rosalie's appeal before the CA. In short, the alleged practice still had to be proven by Rosalie; contravening the title itself of Rule 129 of the Rules of Court – What need not be proved." — This passage explains why the CA's judicial notice was improper: the very need to attach evidence to prove the practice negated its alleged notoriety.
• "There is nothing on the receipts and on record that the payment and receipt of ₱2,570,000.00 referred to full payment of rentals for the whole period of the lease. All three receipts state Rosalie's receipt of cash in varying amounts. The first receipt for ₱2,000,000.00 did state payment for two (2) cubicles, but this cannot mean full payment of rentals for the entire lease period when there are no words to that effect." — This passage articulates the Court's interpretation of the receipts, leading to its conclusion that the payments constituted advance rentals rather than full payment of the lease.

• State Prosecutors vs. Muro, A.M. No. RTJ-92-876, September 19, 1994, 236 SCRA 505 — Controlling precedent on the doctrine of judicial notice, cited for the three material requisites of judicial notice and the principle that the power to take judicial notice must be exercised with caution.
• Expertravel & Tours, Inc. vs. Court of Appeals, G.R. No. 152392, May 26, 2005, 459 SCRA 147 — Followed, reiterating the requisites of judicial notice and the principle that a judicially noticed fact must not be subject to reasonable dispute.

• Rule 129, Sections 1 and 2, Rules of Court — These provisions declare when the taking of judicial notice is mandatory or discretionary. Section 1 lists matters of mandatory judicial notice, while Section 2 allows discretionary judicial notice of matters of public knowledge or capable of unquestionable demonstration. The Court applied these provisions in finding that the CA improperly took judicial notice of the goodwill money practice.
• Articles 1371, 1372, and 1373, Civil Code — These provisions govern the interpretation of contracts, requiring that the intention of the contracting parties be judged principally by their contemporaneous and subsequent acts, that general terms not be understood to comprehend things distinct from what the parties intended, and that stipulations admitting of several meanings be understood as bearing the import most adequate to render them effectual. The Court applied these provisions in interpreting the receipts for ₱2,570,000.00.

• Associate Justice Conchita Carpio Morales
• Associate Justice Minita V. Chico-Nazario (Acting Chairperson, Third Division)
• Associate Justice Diosdado M. Peralta
• Associate Justice Roberto A. Abad