Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173575 February 2, 2011
IMMACULATE CONCEPTION ACADEMY and the late DR. PAULO C. CAMPOS substituted by his heirs, DR. JOSE PAULO E. CAMPOS, ATTY. PAULO E. CAMPOS, JR. and DR. ENRIQUE E. CAMPOS,1 Petitioners,
vs.
AMA COMPUTER COLLEGE, INCORPORATED, Respondent.
D E C I S I O N
ABAD, J.:
This case is about the rescission of a lease contract on the ground that the building turned out to be structurally unsafe even as the lessee had previously inspected the same.
The Facts and the Case
Immaculate Conception Academy (ICA) owned a three-storey building in Dasmariñas, Cavite. The property caught the eye of AMA Computer College, Inc. (AMA) and it sought to buy the same but did not succeed. Subsequently, after inspecting the building, AMA settled on leasing it.2 The parties signed a contract of lease for 10 years from September 22, 1997 to September 21, 2007. The agreed rent was P561,000.00 plus VAT per month. In accordance with the contract, AMA paid ICA P500,000.00 in earnest money, three months advance rentals, and security deposit.
After the signing of the contract, officials of AMA re-inspected the building and began renovating it for the upcoming school year. But during an inspection, AMA’s Chief Operating Officer for its Cavite Campus noted several cracks on the floor and walls of the building’s second storey. This prompted more inspections. Eventually, AMA applied with the municipal engineer’s office for an occupancy permit.3 After inspection, Municipal Engineer Gregorio C. Bermejo wrote AMA a letter dated September 29, 1997, detailing his findings and conclusion, thus:
x x x x
[The] inspection reveals the following defects in the building, such as:
1. Multiple cracks in the second floor slabs showing signs of insufficient or improper reinforcements.
2. Deflections in the second floor slabs and bears ranging from 20 mm to 50 mm which are beyond normal...