Dee v. Court Of Appeals

SR., J.:

Before us is a special civil action for certiorari under Rule 65 of the Revised Rules of Court assailing the Decision1 of the Court of Appeals in CA-G.R. CV No. 50306 which affirmed with modification, the Order2 of the Regional Trial Court of Davao City, Branch 9, ordering the petitioner Chua Tee Dee to pay the private respondent back rentals plus interest and attorney's fees. The antecedent facts are as follows: J.C. Agricom Development Corporation, Inc. (Agricom, for brevity), a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, is the owner of a rubber plantation located at Bayabas, Toril, Davao City, with an area of 132.4012 hectares, more or less. Agricom planned to lease the plantation.

Chua Tee Dee, married to Amado Dee, is a businesswoman doing business under the name and style of Pioneer Enterprises (Pioneer, for brevity). Manuel G. Alba, the president of Agricom, had a business meeting in Davao City with Amado Dee where they discussed the possibility of leasing the rubber plantation to Chua Tee Dee/Pioneer.3 Thereafter, a draft contract of lease was made and delivered to Alba on May 22, 1985.4 The final contract of lease5 was signed and acknowledged before a notary public on July 22, 1985. The Agricom, represented by Alba, was referred to as the FIRST PARTY under the contract, while Chua Tee Dee doing business under the style of Pioneer was the SECOND PARTY.

Lillian Carriedo, a stockholder of Agricom, also signed the contract. The pertinent portions of the lease contract were as follows: 1. TERM: The lease shall be for a period of fifteen (15) years counted from the date of execution of this contract and may be renewed for another period of five (5) years upon such terms as may be agreed upon by the parties.

2. That the plantation, together with all the inventoried machineries, equipment and improvements found therein shall upon the execution of this contract be turned over to the SECOND PARTY free from any and all liens and/or encumbrances, provided, however, that the SECOND PARTY shall upon expiration and/or termination of the contract return all the inventoried machineries, equipment and improvements to the FIRST PARTY. 3.

RENTAL: The SECOND PARTY shall pay the FIRST PARTY within the first ten (10) days of the current month the following rentals, to wit: ₱45,000.00 per month for the first three (3) years of the lease ₱60,000.00 per month for the second three (3) years of the lease ₱75,000.00 per month for the third four (4) years of the lease ₱90,000.00 per month for the last five (5) years of the lease 4. NON-PAYMENT OF RENTALS: Delay in the payment of the monthly rental by the SECOND PARTY shall entitle the FIRST PARTY to charge to the former interest of two (2) percent per month as penalty. Non-payment of rentals for three (3) months shall automatically bring about the termination of the lease.

In such an event, the FIRST PARTY shall be entitled to recover from the SECOND PARTY back rentals. 5. DEPOSIT: In addition to the monthly rental stipulated in paragraph 3 of this contract, the SECOND PARTY upon signing of this contract shall deposit to the FIRST PARTY an amount equivalent to ONE HUNDRED THIRTY-FIVE THOUSAND PESOS (₱135,000.00) Philippine Currency and on the first day of September of the same year another amount equivalent to ONE HUNDRED THIRTY-FIVE THOUSAND PESOS (₱135,000.00) Philippine Currency, both interest-free which the latter shall apply against rentals for the last year of the lease.

6. FARM PERSONNEL: Upon the effectivity of this Contract, the SECOND PARTY has the option to select and screen those farm personnel that the SECOND PARTY shall retain; those not selected shall then be terminated by the FIRST PARTY, whose separation from the FIRST PARTY's employment shall be the concern of the FIRST PARTY. … 10.

RIGHT TO ENTER PREMISES: The FIRST PARTY or its duly-authorized representative shall have the right to enter the leased premises at any reasonable time during business days, with due notice to the SECOND PARTY, to verify compliance with the terms and conditions of this contract. In addition, the FIRST PARTY may use the "REST HOUSE" located in the leased premises with at least two (2) days advanced notice to the SECOND PARTY.

11. LESSEE'S OPTION TO BUY: The FIRST PARTY shall maintain the SECOND PARTY in the quiet peaceful possession and enjoyment of the leased premises during the effectivity of the lease. If at any time during the lease or renewal thereof, the first party shall opt to sell, assign, transfer or convey the leased premises for a valuable consideration, the SECOND PARTY shall be given written notice thereof, and the latter shall have first option to buy the leased premises upon such terms and conditions as may be mutually agreed by the parties.

In the event [that] this FIRST PARTY receives an offer to buy from a THIRD PARTY, the SECOND PARTY shall be advised thereof in writing and shall have the option to match said offer within a period of thirty (30) days from receipt of said advice. If the SECOND PARTY or his nominees fail to exercise the option granted under this aforementioned paragraph, and there is a sale, assignment, transfer or conveyance of the leased premises to a third party, it shall be a condition thereof that this contract of lease shall be respected and shall continue under the terms and conditions herein stipulated. 13.

(sic) VENUE: UPON the expiration of this lease contract or its earlier termination for violation of its terms and conditions, the SECOND PARTY binds himself to peacefully turn over the possession of and surrender the leased premises to the FIRST PARTY is compelled, to resort to the courts to protect its rights under this contract, the parties agree that venue thereof shall be in the courts at Davao City. In such an event, the SECOND PARTY shall be answerable for all damages that the FIRST PARTY may suffer or be entitled to plus attorney's fees equivalent to twenty-five (25%) percent thereof and costs of suit. On May 27, 1985, Alba met with the employees of the rubber plantation6 and updated them on the impending termination of their employment due to the company's contract of lease with Chua Tee Dee.

The employees were told that they would be given separation pay. On June 3, 1985, Amado Dee delivered the amount of two hundred seventy thousand pesos (₱270,000.00) to the Spouses Manuel and Suzanne Alba in compliance with paragraph 5 of the lease contract. The corresponding receipt was issued.7 In the meantime, Azarinas P. Liguiz of Agricom sent letters to the said employees, confirming the termination of their employment and informing them that their separation pay shall be computed at one-half (1/2) month's salary for every year of service rendered, and that a fraction of at least six (6) months service shall be considered as one year.

Thereafter, the corresponding vouchers were prepared.8 Sometime thereafter, the severed employees filed a complaint for illegal dismissal and unfair labor practice against Agricom, Amado Dee and Pioneer, docketed as NLRC Case No. 1815-LR-XI-85. The labor arbiter rendered his decision on August 22, 1986, holding that the termination of the complainants' employment was illegal. The respondents were ordered to pay its employees' separation pay and backwages, but the complaint for unfair labor practice was dismissed for lack of merit.9 The dispositive portion of the decision reads: WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered: (1) Declaring the termination of complainants as illegal, thereby ordering respondents J.C.

Agricom Development Company and/or Pioneer Enterprises and Amado Dee to pay all complainants herein, jointly and severally, the following, to wit: (a) Separation pay - at one (1) month salary per year of service, from date of hiring to date this Decision becomes final and executory; (b) Backwages - from date employment stopped up to the date this Decision becomes final and executory. (2) Dismissing the charge of unfair labor practice for lack of merit. SO ORDERED.10 The respondents appealed the decision.

Amado Dee and Pioneer posted a supersedeas bond of ₱21,415.58, as well as ₱142,770.54 covered by Check No. 610489625,11 and ₱142,770.54 covered by Check No. 61048962412 to stave off execution pending appeal. Because Pioneer was dragged into labor disputes not of its own making, it wrote Agricom, through its counsel, on October 20, 1987 suggesting a conference to settle the labor case, otherwise, it would consider the contract of lease as rescinded.13 Aside from the labor case, Pioneer, through Amado Dee, complained of being pestered by some individuals who claimed portions of the plantation as their own property. Some of them went to its office and even presented tax declarations to prove their claims.14 Pioneer claimed that the foregoing circumstances prevented it from operating fully the agreed area stated in the lease contract.

It also complained that the death of Pioneer's foreman sometime in 1990 even exacerbated the unresolved labor problem. On May 24, 1990, the counsel of the Carriedo heirs, the stockholders-owners of Agricom, sent a telegraphic note to Amado Dee demanding payment of long overdue rentals.15 On June 21, 1990, Pioneer sent a letter to Agricom complaining of facts and events which disrupted its operations in the plantation. In a Letter dated August 2, 1990, Agricom informed Pioneer that, after due investigation, it concluded that the latter's complaints were unfounded.

It also demanded the payment of back rentals for June, July and August 1990.16 As Pioneer was unable to pay its monthly rentals, Agricom filed, on September 4, 1990, a civil complaint for sum of money, damages and attorney's fees against Chua Tee Dee before the Regional Trial Court of Davao City, Branch 9. The case was docketed as Civil Case No. 20,312-90. The plaintiff Agricom alleged, inter alia, in the said complaint, thus: 2.02 That defendant regularly paid the monthly rentals for the years 1985 to 1989.

The payment of the monthly rentals for the first six (6) months of 1990 in the amount of Sixty Thousand (₱60,000.00), however, was occasioned by delay and those for July and August 1990, unpaid; 2.03 That as of August 1990, defendant has an outstanding arrearage of One Hundred Twenty Thousand (₱120,000.00) Pesos in favor of plaintiff, exclusive of penalty thereon at the rate of two (2%) percent per month; 2.04 That several demands, both verbally and in writing, had been made by plaintiff upon defendants to make her payment of the monthly rentals current, but said demands, notwithstanding, defendant failed and refused and still continues to fail and refuse to do so; 2.05 That by reason of defendant's unjustified and wanton refusal to pay plaintiff its plainly, valid, and demandable claims, the latter has been compelled to engage the services of counsel to enforce and protect its interest at an agreed fee of twenty-five (25%) percent of the amount due and collectible, as provided for in said Contract of Lease (Annex "A") and has, otherwise, been placed into unnecessary expenses of litigation in an amount which could not be less than Ten Thousand (₱10,000.00) Pesos;17 It prayed that after due proceedings, judgment be rendered in its favor, as follows: WHEREFORE, it is most respectfully prayed of this Honorable Court that judgment be rendered in favor of plaintiff and against the defendant ordering the latter a.) to pay plaintiff the sum of ₱120,000.00 as of August 1990, with penalty thereon at the rate of two (2%) percent per month, plus the sum of ₱60,000.00 a month thereafter; b.) to pay plaintiff the sum equivalent to twenty-five (25%) of the amount due and collectible, as and for attorney's fees; c.) to reimburse the litigation expenses of plaintiff in the amount of not less than ₱10,000.00 or such amount which will be proven during the trial; d.) to pay the cost of suit; PLAINTIFF further prays for such other reliefs and remedies, just and equitable under the premises.18 On October 16, 1990, the defendant filed her Answer with Damages where she asserted that the plaintiff had no cause of action against her.

She claimed that it was the plaintiff which failed to comply with the terms and conditions of the contract of lease when it failed to settle the labor dispute with its former employees, thus, dragging the defendant as respondent in NLRC Case No. 1815-LR-XI-85; and that the plaintiff failed to maintain her in the quiet and peaceful possession and enjoyment of the leased premises during the effectivity of the lease contract, in violation of paragraphs 6 and 11 thereof. The defendant also claimed that she had paid premiums for the appeal bond in the labor case, and that she deposited with the NLRC the total amount of ₱306,956.66 to avert execution pending appeal, which was supposed to be the sole responsibility of the plaintiff. By way of counterclaim, the defendant asserted that she was exposed to public contempt and ridicule which besmirched her reputation; and that she suffered mental anguish and sleepless nights because of the violation of the contract of lease.

She prayed, thus: WHEREFORE, defendant respectfully prays this Honorable Court, that after considering all the foregoing facts and circumstances, judgment be rendered in favor of defendant and against plaintiff: 1. Ordering the termination or rescission of the Contract of Lease; 2. Dismiss the complaint; 3.

Ordering the plaintiff to pay defendant: a) ₱316,956.66 - as actual damages b) ₱500,000.00 - as moral damages c) ₱200,000.00 - as exemplary damages d) ₱100,000.00 - as attorney's fees DEFENDANT FURTHER prays for such other relief and remedies available and legally tenable under the premises.19 On November 8, 1990, the plaintiff filed its Motion to Strike Out Portion of the Pleading,20 particularly paragraph 8 thereof and to dismiss the counterclaim of the defendant with regard to the labor case on the ground that the NLRC had already rendered a decision ordering the dismissal of the complaint of its former employees. The plaintiff appended a copy of the decision of the NLRC to its motion.21 On November 9, 1990, defendant Chua Tee Dee filed her Motion to Declare Plaintiff in Default22 for failure to answer her counterclaim. During the pre-trial, the parties admitted the following: 1.

Legal Capacities of the respective party (sic); 2. The Contract of Lease entered into on July 22, 1985 between parties herein over the 132.4102 hectares of rubber plantation located in Bayabas, Toril, Davao City; 3. The Labor Case entitled NLRC Case No. 1815-LR-XI-85, BONIFACIO LANSANG, et al. vs. JC AGRICOM DEV.

CORP. and/or PIONEER ENT. and AMADO DEE;23 In the meantime, on June 4, 1991, the defendant extended a personal loan of ₱30,000 to Lillian Carriedo as evidenced by a voucher24 and a personal receipt25 signed by Ma.

Cecilia and Elaine, both surnamed Carriedo.26 On October 21, 1992, the court rendered judgment dismissing the complaint and declaring the lease contract terminated for failure of the plaintiff to implement the terms thereof. The court ruled as follows: The evidence on record proves that plaintiff failed to effectively complement, implement and enforce the foregoing provision.

The inevitable consequence was the impleading and involvement of defendant in a vexatious labor problem instituted by plaintiff's original farm workers. This violation of paragraph 6 caused the problems that in great measure prejudiced the efficient operations intended by defendant, because of the peace and order situation caused by the malcontents, among others, resulted in the death of defendant's foreman Elicano Apolonio. "11.

Leases option to buy, the First Party shall maintain the Second Party in the quiet possession and employment (sic) of the leased premises during the effectivity of the lease. …" The evidence establishes that defendant's possession was anything but peaceful and enjoyable.

Within a comparatively short span of time from entry and occupation, defendant suffered from vexatious labor problems caused by plaintiff's original farm workers who instituted a labor case impleading the defendant. Many of them remained in the area and made trouble to the workers hired by defendant, so terrorizing the latter that they were afraid to go to work for fear of bodily harm. Defendant's foreman Elicano Apolonio, who reported early for work was shot to death in the premises (Exhibits "11,"

"12").27 The decretal portion of the decision reads: WHEREFORE, premises considered, judgment is rendered dismissing the complaint and declares the lease contract between the parties terminated and of no force and effect. Cost against the plaintiff. SO ORDERED.28 The plaintiff received its copy of the above decision on March 11, 1993 and filed its motion for reconsideration praying that the defendant be ordered to pay for the unpaid rentals in accordance with the contract of lease until it had actually vacated and surrendered the leased premises.29 The defendant filed her manifestation and compliance, declaring that when she learned about the RTC decision that the lease contract between the parties no longer had force and effect, she pulled out her enterprise and stopped operations in the leased premises.30 She also filed her opposition to the motion for reconsideration.31 On March 8, 1995, the court issued an Order granting the plaintiff's motion and modifying its decision.

It ordered the defendant to pay rentals to the plaintiff since the defendant had occupied, used and continually operated the rubber plantation during the time the case was pending; equity demanded that compensation for the use thereof was just and proper.32 The decretal portion reads: WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED and the Decision dated October 21, 1992 is hereby recalled and modified as follows: 1. Judgment is rendered in favor of the plaintiff, J.C. Agricom Development Corporation, Inc. and against the defendant, CHUA TEE DEE. 2.

Defendant is ordered to pay the plaintiff: a. ₱45,000.00 per month for the first three (3) years, less the deposit made in the amount of ₱270,000.00 or the amount of ₱1,350,000.00; b. ₱60,000.00 per month for the second three (3) years of the lease or the equivalent amount of ₱2,160,000.00; c.

₱75,000.00 per month for the succeeding years up to the time this case was decided on October 21, 1992, or the amount of ₱1,125,000.00; d. To pay the interest of 2% of the arrears as penalty for the delay in the payment of the rentals, or in the amount of ₱92,700.00; and, e. Attorney's fees equivalent to 10% of the total amount due to plaintiff or in the amount of ₱463,500.00.

Accordingly, the contract of lease entered into by the parties on July 22, 1985 is declared terminated and of no force and effect. SO ORDERED.33 The defendant appealed the March 8, 1995 Order to the Court of Appeals.34 The appeal was docketed as CA-G.R. CV No. 50306. It ascribed the following errors to the trial court: I THE LOWER COURT ERRED WHEN IT REVERSED ITS DECISION DATED OCTOBER 21, 1992 IN AN ORDER DATED MARCH 8, 1995, THE SAID REVERSAL NOT BEING IN ACCORDANCE WITH LAW.

II THE LOWER COURT ERRED IN ITS ORDER DATED MARCH 8, 1995, THE SAME NOT BEING SUPPORTED BY THE EVIDENCE PRESENTED DURING TRIAL.35 The appellant therein alleged that the motion for reconsideration of the appellee of the decision of the trial court was actually a motion for new trial;36 that while she admitted being in possession of the leased premises, there was no evidence that she had profited from operating the rubber plantation.37 She also posited that, under Article 1658 of the New Civil Code, she had the right to suspend payment of the rentals since the lessor failed to maintain her in the peaceful and adequate enjoyment of the leased property. She noted that the lower court even found in its October 21, 1992 decision that her possession of the property was anything but peaceful and enjoyable.38 The appellant asserted that the order of the trial court ordering her to pay the plaintiff-appellee was not supported by evidence presented during trial.39 The appellate court in its Decision dated May 6, 1998 affirmed the assailed order of the lower court, but modified it by reducing the award of attorney's fees: WHEREFORE, subject to the modification concerning the award of attorney's fees, which is hereby reduced to P50,000.00, the Order appealed from is AFFIRMED in all other respects.

Without pronouncement as to costs.40 The appellant filed her motion for reconsideration on June 2, 1998 but the same was denied by the CA in its October 2, 1998 Resolution.41 Chua Tee Dee, now the petitioner, filed her supplemental petition and/or amended petition for certiorari with this Court under Rule 65 of the Rules of Court and assigned the following as errors committed by the CA: I. THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN SWIFTLY CONCLUDING THAT THE "CONTRACT OF LEASE IS VALID, BINDING AND EFFECTIVE BETWEEN THE CONTRACTING PARTIES." FOR IN DOING SO, THE COURT OF APPEALS DISREGARDED THE INVALIDITY OF THE CONTRACT OF LEASE WHICH PRIVATE RESPONDENT LEASED, (A PLANTATION THAT IT DID NOT OWN), AND AGAIN, CLEARLY DID NOT INSTALL PETITIONER "IN PEACEFUL ENJOYMENT" OF THE LEASED PREMISES, AND WHICH PETITIONER WAS NOT ABLE TO POSSESS AND ENJOY, IN CLEAR, DELIBERATE AND VERY IRRESPONSIBLE VIOLATION OF THE CONTRACT OF LEASE.

THIS JUSTIFIES LESSEE'S SUSPENSION OF RENTALS. II. IN DENYING PETITIONER'S MOTION FOR RECONSIDERATION (ANNEX "O"), PUBLIC RESPONDENT COURT OF APPEALS, WITH DUE RESPECT, COMMITTED REVERSIBLE ERROR IN ORDERING PETITIONER TO PAY RENTALS WHICH HAD ALREADY BEEN PAID.42 The petitioner asserts that the suspension of the payment of rentals is justified by the fact that the private respondent Agricom breached its lease contract with her, relying on the provision of Art. 1658 of the Civil Code which provides: Art. 1658.

The lessee may suspend the payment of the rent in case the lessor fails to make the necessary repairs or to maintain the lessee in peaceful and adequate enjoyment of the property leased. The petitioner claims that the private respondent failed to maintain her in a quiet and peaceful enjoyment of the leased premises.43 She asserts that while she occupied the property, she was pestered and harassed by squatters and several claimants of the leased premises.44 As such, the private respondent violated paragraphs 6 and 11 of the lease contract. The petitioner also alleges that her business was dragged to a labor case which caused her to shell out the amounts of ₱306,956.99 and ₱10,000 as bond premiums and attorney's fees, respectively.

While machine copies of the checks were presented during trial, the court ordered the presentation of the original checks, which, however, have been lost and cannot be found.45 According to the petitioner, the various claimants of the premises fenced their claimed areas, thus, reducing the area of the leased premises and the production of rubber latex, the produce of the rubber plantation.46 The petitioner also alleges that she made verbal demands to the private respondent to observe and enforce the contract, but such demands fell on deaf ears.47 The petitioner further asserts that the private respondent included in their contract of lease areas in the rubber plantation that belonged to other persons.48 She further alleges that the private respondent misrepresented itself as the owner of a rubber plantation covering an area of 132.4102 hectares when, in fact, only an area of 36 hectares was free from any claimants.49 Thus, the petitioner argues, the diminution of the area resulted in loss of profits in the operation of the plantation.

The petitioner also claims that since the private respondent failed to maintain her, as lessee, in the quiet and peaceful possession of the leased premises, she is entitled to moral damages.50 The petitioner further claims that she agreed to remain in the leased premises upon the request of Mrs. Carriedo, a stockholder of Agricom. The petitioner avers that she did the private respondent a favor because due to her presence in the premises, the same was protected from outside forces.51 Thus, she should not be ordered to pay any back rentals. Anent the second assigned error, the petitioner asserts that she had religiously paid rentals up to June 30, 1990, and that she suspended the payment thereof due to the private respondent's breach of the lease contract.

She avers that the lower court erred when it ordered her to pay rentals starting from 1985, when the contract commenced. She posits that her liability for back rentals, if any, should cover only the period of July 1990 to October 21, 1992, when the decision of the RTC was promulgated, computed as follows: Second 3 years at ₱60,000.00 monthly rental Payment stopped on July 1990: July 31, 1990 ₱60,000.00 August 31 60,000.00 September 30 60,000.00 October 31 60,000.00 November 30 60,000.00 December 31 60,000.00 January 31, 1991 60,000.00 February 28 60,000.00 March 31 60,000.00 April 30 60,000.00 May 31 60,000.00 June 30, 1991 60,000.00 Total ₱720,000.00 Succeeding 3 years at ₱75,000.00 per month Rental up to the time this case was decided On October 21, 1992: July 31, 1991 ₱75,000.00 August 31 75,000.00 September 30 75,000.00 October 31 75,000.00 November 30 75,000.00 December 31 75,000.00 January 31, 1992 75,000.00 February 28 75,000.00 March 31 75,000.00 April 30 75,000.00 May 31 75,000.00 June 30, 1992 75,000.00 Total