19 SM Investments vs. Mac Graphics Digest

SECOND DIVISION
G.R. Nos. 224131-32, June 25, 2018
SM INVESTMENTS CORPORATION, Petitioner, v. MAC GRAPHICS1 CARRANZ

INTERNATIONAL CORP., Respondent.
G.R. Nos. 224337-38, June 25, 2018
PRIME METROESTATE, INC., Petitioner, v. MAC GRAPHICS CARRANZ

INTERNATIONAL CORP., Respondent.
DECISION
CAGUIOA, J.:
Nature of Action:Permanent Injunction and Declaration of Subsistence of Contract;

Damages with Application for Temporary Restraining Order and/or Writ of Preliminary
Injunction.
Facts: Respondent Mac Graphics which is engaged in advertising and operation of

billboards and other outdoor advertising media, entered into a Contract of Leasewith
Makro for exclusive use of the latter's billboard sites located at Makro EDSA Cubao,
Quezon City (Makro-Cubao) and Makro Makati City (Makro-Makati) for a period of 20
years.
The relevant provision of the contract reads:
X X Xif the other party fails to comply with any of its obligations under this Contract
(other than as specified in Section 3 [Rental fee]) and such breach is not remediable, or
if remediable, shall is (sic) unremedied for a period of ninety (90) days after written
notice thereof shall have been given by the terminating party to the other party[.]
Makro, a company that SMIC had had a substanstial interest, sent a letterto Mac
Graphics terminating the lease contract effective immediately because of the latter's
alleged failure to obtain the relevant Metro Manila Development Authority (MMDA) and
local government permits and to obtain a comprehensive all-risk property insurance for
the sites. Makro averred that the 90 days "remedy period" of the lease contract does not
apply because Mac Graphics' violation was not remediable. At any rate, there was no
compliance within such 90-day period because the insurance policies were not
comprehensive and did not cover the stipulated third party liability, and the third party
liability policies were issued in April 2009 or beyond the 90-day period.
Mac Graphics objected to the termination in its letter. SMIC's counsel sent a letter
reiterating the termination of the lease contract.Mac Graphics answered in a letter,
stating its compliance with the provisions of the lease contract. A meeting among
representatives of Mac Graphics, Makro and SMIC was subsequently held.
Makro and SMIC then removed Mac Graphics' billboards and other advertising media
installed at Makro-Cubao and Makro-Makati.28 They also prevented Mac Graphics from
entering the leased premises.
Mac Graphics sent a letter to Makro and SMIC expressing its objection to the unilateral
removal or dismantling of the billboards and other advertising media and its demand for
Makro to cease and desist from further infringing upon its rights under the lease
contract. However , it was unheeded. Thus, Mac Graphics files a complaint. Mac
Graphics reiterated its position in its Complaint and invoked Articles 1266 and 1267 of
the Civil Code to excuse itself from securing the stipulated insurance for the billboards
and other outdoor advertising materials since the circumstances brought about by
typhoon Milenyo had "not only rendered the obligation so difficult as to be manifestly
beyond the contemplation of the parties, but in fact made it legally and physically
impossible under the circumstances then prevailing." Mac Graphics likewise invoked the
90-day curing period under the lease contract.
In its Answer, Makro controverted Mac Graphics' allegations and averred that as Mac
Graphics itself admitted, none of the stipulated licenses/permits and all-risk insurance
coverage was secured prior to, or even on, January 15, 2007,which was imperative for
Mac Graphics to secure the same prior to the commencement of the lease, and Makro
merely enforced its option under the lease contract to rescind and terminate the lease
by reason thereof. Thus, Makro notified Mac Graphics of the termination of the lease
contract and returned to the latter the checks representing the lease payments for the
year 2009. RTC and CA ruled in favor of Mac Graphics.
Issue: Whether the pre-termination of the contract is proper.
Held: Yes, it is proper. Given the foregoing, the Court is of the opinion, and so holds,
that Mac Graphics has failed to establish prima facie a right in esse or a clear and
unmistakable right, rendering the issuance of the WPMI improper. Given the legal
complexity of Mac Graphic's cause of action vis-a-vis PMI's defenses, it is unclear at
this point whether Mac Graphics can enforce the preterminated lease contract as a
matter of law. There are simply too many legal and factual sub-issues that need to be
threshed out before the pretermination may be declared valid or invalid.
Also, a finding in favor of the existence of a clear and unmistakable right in favor of Mac
Graphics, which the lower courts effectively made, is tantamount to a prejudgment of
the legality of PMI's pre-termination of the lease contract. PMI's pre-termination has in
effect been declared invalid. The existence of Mac Graphics' right consequently negates
the validity of the pre-termination by PMI. How can PMI now convince the RTC that the
90-day "remedy period" is not applicable — the breach by Mac Graphics being non-
remediable — given the RTC finding that "MACGRAPHICS had shown that the contract
of lease was pre-terminated by MAKRO without giving it a chance to rectify or remedy
any violations that MAKRO alleged to have been committed by MACGRAPHICS?" This
is precisely the absurd situation that would result if there is a prejudgment of the main
case as contemplated in Searth Commodities Corp. v. Court of Appeals, where there
would be a reversal of the rule on the burden of proof since the proposition which Mac
Graphics is inceptively bound to prove is already assumed.

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SECOND DIVISION

G.R. Nos. 224131-32, June 25, 2018

SM INVESTMENTS CORPORATION, Petitioner, v. MAC GRAPHICS1 CARRANZ

G.R. Nos. 224337-38, June 25, 2018

PRIME METROESTATE, INC., Petitioner, v. MAC GRAPHICS CARRANZ

Nature of Action:Permanent Injunction and Declaration of Subsistence of Contract;

Facts: Respondent Mac Graphics which is engaged in advertising and operation of

The relevant provision of the contract reads:

Issue: Whether the pre-termination of the contract is proper.

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