G.R. 135721, 27 May 2004


J.C. Agricom Development Corporation, Inc.,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. Chua Tee Dee, married to Amado Dee, is a businesswoman doing business under the name and style of Pioneer Enterprises.

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. Thereafter, a draft contract of lease was made and delivered to Alba on May 22, 1985.

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.

Sometime thereafter, the severed employees filed a complaint for illegal dismissal and unfair labor practice against Agricom, Amado Dee and Pioneer. 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. 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. Pioneer claimed that the foregoing circumstances prevented it from operating fully the agreed area stated in the lease contract.

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. 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.

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. 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.

Upon motion for recommendation, the lower court reversed its own ruling, ordering Chua Tee Dee to pay Agricom back rentals and rentals for the first three years of the lease already paid. The CA affirmed the order.


Whether or not CA committed grave abused of discretion in upholding Chua Tee Dee liable for back rentals, including rentals already paid.


The petition is partly meritorious.

The cause or essential purpose in a contract of lease is the use or enjoyment of a thing. It is consensual, bilateral, onerous and commutative, the owner temporarily grants the use of his or her property to another who undertakes to pay rent therefor. In the case at bar, petitioner Chua Tee Dee is the lessee of the private respondent Agricom. As lessor, the Agricom had the duty to maintain the petitioner in the peaceful and adequate enjoyment of the leased premises. Such duty was made as part of the contract of lease entered into by the parties. Even if it had not been so, the lessor is still duty-bound under Art. 1654 of the Civil Code, thus:

Art. 1654. The lessor is obliged:

(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended;
(2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary:
(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.

The duty “to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract” mentioned in no. 3 of the article is merely a warranty that the lessee shall not be disturbed in his legal, and not physical, possession.In the present case, however, petitioner had not been disturbed in her legal possession of the property.

We agree with the trial court and the CA that the petitioner failed to prove that she suffered any loss from the labor case that was filed against her enterprise and her husband. The trial court declared that the petitioner “did not actually established the alleged losses especially in the labor case with the NLRC where the complaints of the laborers appear to have been dismissed. . .”

In sum, then, the petitioner failed to prove that the private respondent breached any of the provisions of the contract of lease. Thus, the petitioner had no valid reason to suspend the payment of rentals under Art. 1658.

We agree with the contention of the petitioner that her obligation to pay back rentals should cover only the period of July 1990 until the time that she vacated the leased premises. The CA, thus, erred when it affirmed the order of the trial court ordering the petitioner to pay back rentals, including the first three (3) years of the lease, as that period had already been paid by the petitioner.

*Case digest by Catherine C. Velasco, LLB-IV, Andres Bonifacio Law School, SY 2019-2020