MANILA, Philippines – The Supreme Court (SC) has ordered a building owner to return some P4.07 million in security deposit and advance rentals, plus interest, to an educational institution when the leased three-storey building turned out to be structurally unsafe despite previous inspection by the lessee.

But the SC granted the building owner P150,000 in exemplary damages and attorney’s fees when he was forced to litigate to protect his interest after the lessee “acted in reckless, wanton, oppressive, and malevolent manner in imputing fraud and deceit.”

The dispute over the building owned by the Immaculate Conception Academy (ICA) in Dasmarinas, Cavite, leased in 1997 to the Ama Computer College, Inc. (AMA) was resolved by the SC in a decision written by Justice Roberto A. Abad.

AMA would have wanted to buy ICA’s building but did not succeed. Later, after inspecting the building, AMA signed a 10-year lease contract from Sept. 22, 1997 to Sept. 21, 2007. The agreed rent was P561,000 per month plus value added tax. AMA paid ICA P500,000 in earnest money, three months advance rentals, and security deposit.

When the building was being renovated, AMA’s personnel noted cracks on the floor and walls on the building’s second floor. The municipal engineer’s office, after inspection for occupancy permit sought by AMA, confirmed the cracks and ruled that “the building is structurally unsafe for human occupancy.”

Upon receipt of the inspection report, AMA demanded from ICA the return within 24 hours of all the money it had paid for violation of implied warranty against hidden defects. AMA did not pursue the lease contract and rented another property.