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    Sps. Poon v. Prime Savings Bank

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    AJ Arugay
    The Supreme Court ruled on an appeal regarding the forfeiture of advance rentals paid under a commercial lease agreement. The petitioners owned a building they leased to Prime Savings Bank for 10 years. The contract included a clause stating that if the leased premises were vacated, all advance rentals would be forfeited. After 3 years, Prime Savings Bank was placed under receivership and ordered to cease operations, vacating the building. The petitioners refused to return the advance rentals paid. The Supreme Court upheld the forfeiture of advance rentals as a valid penal clause, meant to ensure performance of the principal lease obligation.

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    Sps. Poon v. Prime Savings Bank

    Uploaded by

    AJ Arugay
    502 views1 page
    The Supreme Court ruled on an appeal regarding the forfeiture of advance rentals paid under a commercial lease agreement. The petitioners owned a building they leased to Prime Savings Bank for 10 years. The contract included a clause stating that if the leased premises were vacated, all advance rentals would be forfeited. After 3 years, Prime Savings Bank was placed under receivership and ordered to cease operations, vacating the building. The petitioners refused to return the advance rentals paid. The Supreme Court upheld the forfeiture of advance rentals as a valid penal clause, meant to ensure performance of the principal lease obligation.

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    37. Sps. Poon v. Prime Savings Bank.docx

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    The Supreme Court ruled on an appeal regarding the forfeiture of advance rentals paid under a commercial lease agreement. The petitioners owned a building they leased to Prime Savings Bank for 10 years. The contract included a clause stating that if the leased premises were vacated, all advance rentals would be forfeited. After 3 years, Prime Savings Bank was placed under receivership and ordered to cease operations, vacating the building. The petitioners refused to return the advance rentals paid. The Supreme Court upheld the forfeiture of advance rentals as a valid penal clause, meant to ensure performance of the principal lease obligation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    502 views1 page

    Sps. Poon v. Prime Savings Bank

    Uploaded by

    AJ Arugay
    The Supreme Court ruled on an appeal regarding the forfeiture of advance rentals paid under a commercial lease agreement. The petitioners owned a building they leased to Prime Savings Bank for 10 years. The contract included a clause stating that if the leased premises were vacated, all advance rentals would be forfeited. After 3 years, Prime Savings Bank was placed under receivership and ordered to cease operations, vacating the building. The petitioners refused to return the advance rentals paid. The Supreme Court upheld the forfeiture of advance rentals as a valid penal clause, meant to ensure performance of the principal lease obligation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    SUPREME COURT FIRST DIVISION

    Sps. Poon v. Prime Savings Bank, G.R. No. 183794, June 13, 2016

    Sereno, CJ.:
    Nature: Appeal form a decision of the CA

    Facts: The petitioners owned a commercial building. They executed a 10-year contract of lease
    over building with respondent Prime Savings Bank for the latter to use it as a branch office. They
    agreed to a fixed monthly rental with an advance payment. The contract also provided: Should
    the lease[d] premises be closed, deserted or vacated by the LESSEE, the LESSOR shall have the
    right to terminate the lease ... x x x The LESSOR shall thereupon have the right to enter into a
    new contract with another party. All advanced rentals shall be forfeited in favor of the LESSOR.
    Three years later, the BSP placed respondent under receivership of the PDIC and eventually
    ordered its litigation. The respondent vacated petitioner’s building and PDIC then demanded
    return of the advance rentals. Petitioners refused to return the advanced rentals. Thus
    respondent commenced this case for rescission of contract and recovery of sum of money. The
    RTC ruled in favor of Petitioners and ordered the partial rescission of the contract insofar as the
    advance payment was forfeited. It held that the PDIC’s closure of their business was a fortuitous
    event. The CA affirmed but applied Art. 1229 instead.

    Issue: W/N the forfeiture of the advance rentals was a penal clause.

    Held: It is settled that a provision is a penal clause if it calls for the forfeiture of any remaining
    deposit still in the possession of the lessor, without prejudice to any other obligation still owing,
    in the event of the termination or cancellation of the agreement by reason of the lessee's
    violation of any of the terms and conditions thereof. This kind of agreement may be validly
    entered into by the parties. The clause is an accessory obligation meant to ensure the
    performance of the principal obligation by imposing on the debtor a special prestation in case of
    nonperformance or inadequate performance of the principal obligation.

    It is evident from the above-quoted testimony of Jaime Poon that the stipulation on the
    forfeiture of advance rentals under paragraph 24 is a penal clause in the sense that it provides
    for liquidated damages.

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