Florentino v. Supervalue Inc.

G.R. No. 172384, September 12, 200

Facts:

Petitioner is engaged in the retail of empanada; Respondent is engaged in the leasing of stalls
and stores within SM. Parties entered into a lease Agreement with renewal upon agreement

Respondent submits 2 letters to Petitioner first letter stating the latter’s failure to accord to the
contract for:

1. Selling a variety of empanada as such increasing price without her consent P20 to
P22
2. Petitioner frequently close stores earlier than mall closing time for delay of delivery
of stocks to her store
nd
In 2 letter the respondent informed upon lease expiration on March 31 2000 no longer to
extend the lease agreement

Upon expiration, Respondent also took possession of equipment and personal belonging of
Petitioner from SM store as well as security deposits of P192000 as provided in Lease
Agreement upon breach

Petitioner filed case for Sum of Money and Damages; RTC ruled in favor of Petitioner that
forfeiture of security deposit w/o consent is illegal however CA modified decision that the
forfeiture of security deposit was valid on account of petitioner breach in agreement

ISSUE: Whether the penalty of forfeiture of security deposit on account of breach should be
reduced by Court?

Ruling:
Yes.
1. Question of whether a penalty is reasonable or iniquitous can be partly subjective and
partly objective.
Factors include: type, extent and purpose of the penalty, the nature of the obligation,
the mode of breach and its consequences, the supervening realities, the standing and
relationship of the parties, and the like.

2. Forfeiture of the entire amount of the security deposits in the sum of P192,000.00 was
excessive and unconscionable considering that the gravity of the breaches committed by
the petitioner is not of such degree.
3. It is in the exercise of its sound discretion that this court tempered the penalty to 50%.
The respondent is therefore under the obligation to return the 50% of P192,000.00 to
the petitioner