Dr. JOSE EDUQUE died on June 3, 1938, without a will. He was survived by three children and his second wife, SALVACION FERIA DE EDUQUE, who was childless. Subsequently, Salvacion married Dr. CONRADO POTENCIANO, and she is now known as Mrs. Salvacion F. de Potenciano. In Civil Case No. 53360 of the Court of First Instance of Manila, administration proceedings were commenced to administer and settle the estate of Dr. EDUQUE. JOSE Q. TABORA who married ELISA EDUQUE, one of the children of the deceased Jose Eduque, and Mrs. Potenciano were appointed co-administrators. Among the properties included in the estate was a lot at the corner of Legarda and Alejandro VI streets, Sampaloc, Manila, with an area of 858.10 square meters, covered by Transfer Certificate of Title No. 44036 (now T.C.T. No. 6443) of the City of Manila. This lot formerly contained a concrete show house known as the PRINCE THEATER and several apartments (accesorias). All these improvements, however, were burned during the war.

The administrator Mrs. Potenciano and Mr. Tabora desiring to rebuild and rehabilitate these old improvements, and one Mr. FRANCISCO LAZATIN, a businessman then engaged in operating movie houses, seeing business possibilities in said buildings if rebuilt, got together and finally entered into a contract of lease (Exhibit A), the main features of which were that Lazatin would lease the premises for a period of three and a half (3-1/2) years beginning July 1, 1946, at a monthly rental of P1,500.00, but he must rebuild the apartments and rehabilitate the old Prince Theater and equip it with projection and sound machines and systems as well as chairs, all within a period of six months, under penalty of paying liquidated damages. We reproduce paragraphs 2, 3, 5, 6, 7 and 10, the most pertinent and important provisions of the lease contract.

"2. The LESSEE shall pay the LESSOR a monthly rental of P1,500.00 payable in advance on or before the fifth day of every month beginning July 1, 1946.

"3. The LESSEE shall rebuild and reconstruct the theatre and the adjoining apartments in accordance with the plan and specifications approved by both parties and the City authorities of Manila, copies of which are attached hereto and made an integral part of this contract, and binds himself to comply with the requirements and regulations of the City Engineer, the Bureau of Health, the Fire Department, and other regulatory governmental agencies.

x x x

"5. All the construction, improvements, apparatus, furniture and equipment described in paragraphs 3 and 4 above shall be at the expense and for the account of the LESSEE. Upon the termination of this contract of lease, either because of the expiration of the term or the failure of the LESSEE to pay the rents in the manner herein agreed upon or to comply with any of the other terms and conditions of this contract, the LESSEE binds himself to deliver all the buildings and improvements, apparatus, furniture and equipment, above mentioned, in good condition to the LESSOR, without any reimbursement or payment for expenses incurred thereof. However, the LESSEE shall have preferential right over other parties, all terms and conditions being equal, to lease the said theatre and its apparatus and equipment, as well as the apartments, after the termination of this contract.

"6. That immediately upon the approval by the Court of this contract, the LESSOR shall give notice to the tenants occupying the premises covered by this lease to vacate the same, and the LESSEE shall have the right to begin the construction immediately even before the commencement of this contract on July 1, 1946. The LESSOR warrants that the terms of the leases of the said tenants are from month to month.

"7. In the event the LESSEE fails to complete the construction and installation of the buildings and improvements, apparatus, furniture and equipment, above mentioned, within six (6) months from the date of the approval of this contract by the Court, he shall pay to the LESSOR as liquidated damages in addition to those stipulated in paragraph 10 below, the sum of FIFTY THOUSAND (P50,000.00) PESOS.

x x x

"10. In the event either party to this contract is constrained to have recourse to the courts to enforce his rights under this contract, the offending party shall be bound to pay the sum of P2,000.00 for attorney's fees and costs."

The contract was signed by the two administrators on behalf of the estate as LESSOR and by Lazatin, and it was approved by the probate court on June 10, 1946. One of the administrators notified the tenants and occupants of the premises, of the lease, and Lazatin presumably took possession, at least of part of the property and started to have the plans and specifications approved by the corresponding authorities and to secure the necessary permit. It is a fact however that neither the Prince Theater nor the apartments were rebuilt, and as we understand it, not even up to the present time.

On October 10, 1946, Lazatin wrote a letter (Exhibit 4) to Mrs. Potenciano informing her that despite all his efforts to obtain the necessary permit to reconstruct the Prince Theater and the apartments, from the City authorities and from Malacañang, he failed, due to the fact that it was the plan of the Government to widen calle Legarda, which plan would greatly affect the location of the theater; also that the hostile attitude of the tenants or occupants of the lot, who refused either to pay the rentals for their occupancy or to vacate the place, added to his difficulties; and because of all this, he had no alternative but to ask for the cancellation of the lease contract, but that after the Government had made the necessary adjustments they could again talk and negotiate about the lease upon a firmer and lasting basis.

On November 7, 1946, both administrators, Mrs. Potenciano and Tabora wrote a letter (Exhibit 2) to Lazatin informing him that they would insist upon his compliance with the terms of the contract. Thereafter, Lazatin would seem to have abandoned the premises, and the administrators finding it in that state took possession thereof at the beginning of January, 1947.

In the meantime, this property, presumably, as a result of a project of partition was assigned to VALENTIN EDUQUE, a minor child of the deceased Jose Eduque, as part of his share in the estate.

On October 24, 1947, the present action against Lazatin was filed by Valentin through his married sister Elisa Eduque Tabora, acting as his guardian, to recover rentals from the month of August up to December , 1946, at the rate of P1,500.00 a month, P50,000.00 as liquidated damages because of defendant's failure to reconstruct the Prince Theater and the apartments, and P2,000.00 as attorney's fees. After hearing, the Court of First Instance of Manila rendered judgment ordering the defendant to pay P50,000.00 as liquidated damages, P2,000.00 as attorney's fees and the sum of P7,500.00 as unpaid rents or a total of P59,500.00, with interest at 6% per annum from the date of the filing of the complaint. Lazatin appealed from the decision and because of the amount involved, the appeal was taken directly to this Tribunal.

The most important errors assigned by appellant are that the lower court erred in not finding that appellant exerted every effort to secure the approval of the plans and also in not finding that the administrators failed to place him in possession of the premises under lease. The trial court found that although Lazatin presented the plans and specifications in the office of the City Engineer for approval and for the issuance of the corresponding permit to rebuild and although these plans and specifications were referred to the Urban Planning Commission through its chairman Mr. Louis P. Croft for recommendation, there is no proof as to the action taken by said Commission. The trial court said that the testimony of Lazatin to the effect that he made a follow-up of the case with the Planning Commission but that he was informed by a Clerk in said Commission that said plans could not be approved by the Commission because of the plan to widen Legarda and Alejandro VI streets, was unsatisfactory, and that after such alleged information, he made no further effort to secure the approval of the plans.

After a careful examination of the record, including the testimony of witnesses, and considering the conditions obtaining in the City of Manila at the time, we are inclined to agree with the appellant that despite his efforts to secure the necessary building permit for the reconstruction, he failed because of the disapproval or unfavorable attitude of the Urban Planning Commission toward constructions or reconstructions unless they conformed to the plan of widening the streets of the City, in this case, those of Legarda and Alejandro VI. According to witness Advincula, a building inspector in the Office of the City Engineer at the time, presented by appellant, the City Engineer at the time, presented by appellant, the City Engineer never issued building permits unless it was favorably indorsed by the Urban Planning Commission, or unless it had no objection to the location of the construction with respect to the planned street line. This Court is not unaware of that practice. There were many complaints and there was much dissatisfaction on the part of owners of buildings destroyed during the war. After liberation said owners wanted to rebuild but the City Engineer put obstacles in their way, and in not a few instances actually refused to issue the building permits unless the constructions or reconstructions were made in accordance with the widening of the streets as planned by the Urban Planning Commission. As a matter of fact, in one case, HIPOLITO v. CITY OF MANILA, 47 O.G. (Supp.) p. 365, decided on August 21, 1950, the City Engineer refused to issue a permit to build a private structure within the lot of the petitioner because the latter did not want to move it back to the building line designed for the widening of Inverness street in Santa Ana, as planned by the Urban Planning Commission. Because the City had neither expropriated, much less paid for the strip affected, we had to order the City Engineer through mandamus to issue said permit. This practice at that time was of such public knowledge that the courts might well take judicial notice thereof. And this is exactly what must have happened in the case of appellant. He tried hard to get the building permit from the City Engineer but this official refused to issue it because of the plan of the Urban Planning Commission to widen Legarda and Alejandro VI streets by three meters on each side, and because of the Commission's failure to approve, if it did not actually disapprove the plans unless the structures were built three meters back from the present street line. Of course, neither the City Engineer nor the Urban Planning Commission is entirely to blame for the reason that they were concerned solely with the technical side of the plan and its execution, not with its legal aspect.

And to further lend credence to the difficulty encountered by the appellant in securing the necessary building permit, we have the fact that up to the present time, we have the fact that up to the present time, the Prince Theater and the apartments in question have not been rebuilt; and this was not due to any lack of effort or diligence on the part of the owner or the administrators. As early as January, 1947, after the administrators had taken possession of the premises, one Atty. Gonzales, counsel for the administrators, inquired from the office of the City Engineer about the reconstruction of the Prince Theater. In answer he received a letter (Exhibit T). According to the lower court said letter is proof that the City Engineer was ready to issue the permit for the rehabilitation of the Prince Theater. We, however, view it differently. According to the second paragraph of the letter which reads as follows

"The rehabilitation of this building is therefore feasible provided that the application and plans to be filed in this Office, prior to the issuance of the permit would meet with our regulations and provisions of the building ordinances as well as to the requirement that the National Urban Planning Commission may demand in accordance with their plans now under preparation."

the rehabilitation of the theater was feasible provided that the plans would meet the regulations and provisions of the building ordinances of the City as well as the "requirement that the National Urban Planning Commission may demand in accordance with their plans now under preparation." That was the very obstacle that confronted Lazatin, and that may be the same reason why until now both the Prince Theater and the apartments have not been rebuilt.

We see no reason to believe that Lazatin did not exert efforts to secure said permit. He was as much interested as the administrators of the estate, in rebuilding the theater and the apartments. At that time most, if not all the movie houses in Manila had been burned or destroyed or put out of commission. The people who had not seen movie pictures, at least from the United States, for a long time, and during the Japanese occupation, were hungry for them and anxious to see them and almost at any price, and many of them had the price because at that time, with the money left and being spent by the U. S. Army including all its agencies, money was relatively plentiful. That is the reason why all the movie houses were rebuilt almost immediately and ahead of residential houses. Even new movie houses were built. So, it is not hard to see or to imagine that Lazatin, a businessman engaged in the show business, must have expected to make a handsome profit by quickly rebuilding the Prince Theater and taking advantage of the boom in movie exhibitions, during the lifetime of the lease. Not to be excluded was the expected revenue from rentals of the apartments to be rebuilt. At that time, many apartments and residential houses in the City had been destroyed and space for dwelling was at a premium. Rentals were high, so much so that the Chief Executive and later the Legislature had to curb and regulate them by Executive Order and by legislation.

Finding as we do that appellant had done all he could to secure the permit and to comply with his obligation to rebuild the Prince Theater and the apartments, but because of the refusal of the Government authorities to issue said permit, he failed to fulfill his undertaking, he should be absolved and released from said obligation.

The appellant claims that he had not been placed in possession of the premises by the lessors. It may be true that there may have been some occupants who offered objection or even resistance to leaving the premises. But this was not the real reason for the failure of the appellant to make the reconstruction. Before, October, 1946, when he decided to rescind the contract of lease, he never complained about not being able to occupy the premises. As a matter of fact, he was able to collect rents from some of the tenants.

There is evidence to show that although the appellant could not rebuild the theater or apartments, he was in possession of the premises up to December, 1946, and the administrators did not take possession thereof until January 1, 1947. It is, therefore, but just that appellant should be held responsible for the payment of the monthly rental up to the end of December, 1946. Although appellant claims that he has paid two months rental for July and August, the preponderance of evidence shows that the amount paid was only P1,500.00, for July only.

In view of the foregoing, the decision appealed from is hereby modified so that appellant will pay to the plaintiffs only the sum of P7,500.00 as rentals from August 1st to December 31, 1946, with interest at the legal rate from the date of the filing of the complaint. No pronouncement as to costs.

Paras, C. J., Pablo, Bengzon, Tuason, Reyes, Jugo, Bautista Angelo and Labrador, JJ., concur.
Feria and Padilla, JJ., no part.