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PETITIONERS Chua Tee Dee doing business as Pioneer Enterprises
RESPONDENTS CA & J.C. Agricom Development Corp. Inc.
TOPIC Lease of things > Rights & obligations > Right of lessee to suspend
payment of rentals

J.C. Agricom Development Corporation, Inc. (Agricom) is the owner of a

rubber plantation located at Davao City, with an area of 132.4012
hectares, more or less. Agricom entered into a lease agreement with
Chua Tee Dee, a businesswoman doing business under the name
Pioneer Enterprises (Pioneer). Lease stipulations: The lease was for a
period of 15 years, renewable for 5 years. Nonpayment of rentals for 3
months will automatically terminate the lease. Dee was obligated,
besides paying rentals, to make a P270 000 deposit [Par 5]. The farm
personnel will be selected by Dee and those not selected will be
terminated by Agricom [Par 6]. Agricom had the duty to maintain Dee
in the quiet peaceful possession and enjoyment of the leased premises
during the leases effectivity [Par 11]. Dee was granted first option to

Pioneer delivered P270 000 in compliance with the contracts Par 5.

Agricom met with the employees of the rubber plantation and told
them they were going to be terminated but were going to receive
separation pay. Termination was confirmed and the vouchers were
prepared. Afterwards, the severed employees filed a complaint for
illegal dismissal against Agricom and Pioneer. LA ruled their dismissal
as illegal and was awarded separation pay and backwages. Agricom
and Pioneer appealed. Pioneer posted a supersedeas bond of P21
415.58, as well as P142 770.54 covered by Check No. 610489625 and
P142 770.54 covered by Check No. 610489624 to stave off execution
pending appeal.

Because Pioneer was dragged into labor disputes not of its own
making, Dee wrote Agricom, suggesting a conference to settle the
labor case, otherwise, it would consider the contract of lease as
rescinded. Aside from the labor case, 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. Dee 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 Pioneers
foreman in 1990 even exacerbated the unresolved labor problem.

May 1990: Agricoms stockholders sent a telegraphic note demanding

payment of long overdue rentals to Dee. Jun 1990: Pioneer sent a letter
to Agricom complaining of facts and events which disrupted its
operations in the plantation. Aug 1990: Agricom, in a letter, concluded
that Pioneers complaints were unfounded and demanded payment of
back rentals for Jun, Jul, Aug 1990. Pioneer was still unable to pay.

Sep 1990: Agricom filed a civil complaint for sum of money and
damages against Dee before RTC. Dee filed an answer saying that it
was Agricom which failed to comply with the terms and conditions of
the lease contract when it failed to settle the labor dispute thus
dragging Pioneer as respondent in the NLRC case and when Agricom
failed to maintain Pioneer in the quiet and peaceful possession and
enjoyment of the leased premises during the effectivity of the lease
contract. Dee also claimed that she paid premiums for the appeal bond
in the labor case and that she deposited P306 956.66 to avert
execution pending appeal.
Nov 1990: Agricom filed Motion to Strike Out Portion of the Pleading
and to dismiss Dees counterclaim in light of the fact the NLRC had
already ordered the dismissal of the complaint of its former employees.
Dee filed a Motion to Declare Plaintiff in Default for Agricoms failure to
answer her counterclaim.
Jun 1991: Dee gave a personal loan of P30 000 to Carriedo, a
stockholder of Agricom.
Oct 1992: RTC ruled in favor of Dee and declared the lease terminated
for failure to implement the terms thereof. It found that Dees
possession was not peaceful for she suffered from vexatious labor
problems shortly after the start of the lease.
Agricom filed MR which the RTC granted, ordering Dee to pay rentals to
Agricom for occupying and operating the rubber plantation while the
case was pending. Dee was ordered to pay all the rentals due from the
first year. CA affirmed the RTC with a reduction of attorneys fees.
Dee: Invokes Art. 16581 and claims that the suspension of payment of
rentals is justified by the fact that Agricom failed to maintain her in a
quiet and peaceful enjoyment of the leased premises. While occupying
the property, she was pestered and harassed by squatters and several
claimants of the leased premises and was dragged to a labor case,
thus violating Par. 6 & 11 of the contract. The various claimants fenced
their claimed areas which reduced the area of the leased premises and
the production of rubber latex. Agricom misrepresented owning
132.4102 ha when only 36 ha was free from any claimants and this
diminution of area resulted in loss of profits in operation. She also
claims that stockholder Carriedo actually requested her to remain in
the premises to protect it from outside forces so she shouldnt pay any
back rentals. She also claims she paid rentals up to Jun 1990 so RTC
and CA erred when they ordered her to pay rentals starting from 1985.


1 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.

WON Agricom failed to maintain Dee in peaceful & adequate

enjoyment of the lease NO
As lessor, Agricom had the duty to maintain the petitioner in the
peaceful and adequate enjoyment of the leased premises. Such duty
was part of the lease contract and is provided for under Art. 1654 2. This
duty is merely a warranty that the lessee shall not be disturbed in his
legal, and not physical, possession.

Goldstein v. Roces: Court denied lessees claims for damages from the
opening of holes in the roof when lessor allowed another lessee to
construct another floor to the leased building. Nobody has in any
manner disputed, objected to, or placed any difficulties in the way of
plaintiff's peaceful enjoyment, or his quiet and peaceable possession of
the floor he occupies. The lessors, therefore, have not failed to
maintain him in the peaceful enjoyment of the floor leased to him and
he continues to enjoy this status without the slightest opposition on
the part of any one. That there was a disturbance of the peace or order
in which he maintained his things in the leased story does not mean he
lost the peaceful enjoyment of the thing rented. [] Numerous
examples could be given to show how the lessee might fail peacefully
to enjoy the floor leased to him, in all of which cases he would, of
course, have a right of action for the recovery of damages from those
who disturbed his peace, but he would have no action against the
lessor to compel the latter to maintain him in his peaceful enjoyment
of the thing rented.

Dee claims several people presented tax declarations to her and

claimed some portions of the leased premises. However, no case was
filed by any of the said claimants against her or her lessor during the
time she occupied the premises. Even her branch manager testified
that no such action to quiet title had been filed by the alleged
claimants. There was no formal claim or case filed. The claimants just
went to their office and presented certain documents and fenced some
areas. Thus, Dee had not been disturbed in her legal possession of the
property in derogation of Art. 1654. When Dees representative saw
that a portion of the leased premises was being fenced by the
claimants, she had all the right to sue the intruders who had disturbed
her physical possession as provided for in Art. 1664 3 but she didnt file

2 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.

3 Art. 1664. The lessor is not obliged to answer for a mere act of trespass which a
third person may cause on the use of the thing leased; but the lessee shall have a
direct action against the intruder. There is a mere act of trespass when the third
person claims no right whatever.

any suit against any of the claimants. Thus, it cannot be said that
Agricom violated the contract of lease.
WON Dee suffered any loss from the labor case filed against
Pioneer NO

Dee failed to prove that she suffered any loss from the labor case filed
against Pioneer. RTC: Dee did not actually establish the alleged losses
especially in the labor case with the NLRC where the complaints have
been dismissed. CA: During the interregnum, Dee regularly paid the
monthly rentals for 1985 1989 and it was only when the labor case
has been resolved that Dee started to fail to pay her rentals indicating
that the labor case has not dampened her peaceful and adequate
possession of the leased premises.
WON Dee should pay back rentals from 1985 or the start of the
lease NO

Dee failed to prove Agricom breached any provision of the lease

contract so Dee had no valid reason to suspend payment of rentals
under Art. 1658. However, Dee should only be ordered to pay back
rentals from Jul 1990 and not from 1985 as the lower courts ruled
because her non-payment started from Jul 1990 and she has already
paid the first 3 years. Dee should also be credited for the P270 000 she
paid to Agricom under Par. 5 of the lease contract.
WON Dees loan in favor of stockholder Cariedo should be charged
against Agricom NO

The personal loan Dee extended to Agricoms stockholder Carriedo

should not be charged against Agricom because, even though Carriedo
agreed that it was chargeable against Agricoms account, Agricom
has a separate and distinct personality from its stockholders and it was
not privy to the agreement and did not agree to pay the loan.
Petition DENIED. RTC and CA affirmed with modification that Dee liable only
to pay rentals from Jul 1990 up to Jun 1991 with interest of 2% of the arrears
for the delay and P75 000/month from Jul 1991 until Dee actually left the