[CA-G.R. SP No. 46502. April 12, 2002.]
BORMAHECO, INC., Represented by its Branch Manager, Hernani Lozanes, petitioner, vs. DOLORES GRANADA, respondent.
D E C I S I O N
AQUINO, J p:
What is the nature of the juridical relationship of the parties? This is the question to be resolved in this appeal. The petitioner BORMAHECO, Inc. claims that it is a lessor-lessee relationship in a civil law lease. Respondent Dolores Granada however asserts that it is an agricultural leasehold relationship. The Provincial Agrarian Reform Adjudicator agreed with the petitioner while the Department of Agrarian Reform Adjudication Board sustained the position of the respondent.
With the foregoing conflicting views, it is helpful to elucidate on the concept and nature of different leasehold relationships. There are three kinds of lease contracts pertinent to the case at bench. These are agricultural lease contract, the civil law agricultural lease contract and the contract of lease of things.
The essential elements of agricultural leasehold relationship are: (a) the parties are the landowner and the tenant; (b) the subject is an agricultural land; (c) there is consent; (d) the purpose is agricultural production; (e) there is primal cultivation; and (f) there is sharing of harvests. (Caballes v. Department of Agrarian Reform, 168 SCRA 247)
On the other hand, a civil law agricultural lease is one where one of the parties binds himself to give to another the enjoyment and use of an agricultural land for a price certain or an agreed rental for a period which shall not exceed ninety-nine years. (Based on Art. 1643 of the Civil Code).
A third kind of lease is a lease of things. In this contract one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for an agreed period.
The differences between an agricultural leasehold and a civil law agricultural lease are spelled out in Gabriel v. Pangilinan, 58 SCRA 590, thus:
"In Gabriel vs. Pangilinan, 58 SCRA 590, it is pointed out that the subject matter of leasehold tenancy is limited to agricultural land; that of civil law lease may be either rural or urban property. As to attention and cultivation, the law requires the leasehold tenant to personally attend to, and cultivate the agricultural land, whereas the civil law lessee need not personally cultivate or work the thing leased. As to purpose, the landholding in leasehold tenancy is devoted to agriculture, whereas in civil law lease, the purpose may be for any other lawful pursuits. As to the law that governs, the civil law lease is governed by special law."
The following differences may be added: a) an agricultural leaseholder is entitled to security of tenure over the landholding he works on so that even when the term of the lease has expired, he cannot as a general rule be ejected therefrom. On the other hand a civil law agricultural lessee does not enjoy security of tenure so that upon the expiration of the term thereof, he can be ejected from the leased promises. (Evangelista v. Court of Appeals, 158 SCRA 41) The juridical relationship between the parties in an agricultural leasehold is impressed with public interest so that the law mainly governs such relationship. In civil law agricultural lease, the contract is the law between the parties and for as long as the terms thereof do not violate the law, good customs, morals, public policy and public order, the same is accorded respect by the law.
When the subject of the lease is not a land, the contract is lease of things. This contract is treated in law just like any ordinary contract.
The facts: Lot 641-A with an area of 25,977 square meters situated in Punta-Taytay, Bacolod City was originally owned by Augusto Villarosa. In 1950, he orally leased the land to Alfredo Granada who planted it with coconuts and fruit trees. Subsequently, Augusto Villarosa sold the land to petitioner Border Machinery and Heavy Equipment Co., Inc. (BORMAHECO, Inc.) which secured TCT No. T-27970 in its name. Alfredo Granada however continued possessing said land as lessee until his death in 1982.
Among the heirs of Alfredo Granada was his daughter, the respondent Dolores Granada. On September 29, 1965 respondent Granada and petitioner BORMAHECO entered into a Contract of Lease (Annex A, Petition) with the latter as Lessor and the former as lessee under the following terms and conditions:
"That the LESSEE is the registered owner and in the actual possession and enjoyment of a certain parcel of land situated at Punta Taytay, Sum-ag, Bacolod City, Philippines, which is technically know as Lot No. 641-A, together with the improvements thereon consisting of growing coconut trees, and which parcel of land is more particulary described in Transfer Certificate of Title No. T-27970 of the Land Records of the Registry of Deeds of Bacolod City;
1. That this lease shall cover only the growing coconut trees in the above-mentioned parcel of land;
2. That the duration of this lease shall be one (1) year beginning October 1, 1965, up to and until September 30, 1996, inclusive, and may be renewed on a year to year basis upon mutual agreement of the parties. PROVIDED, HOWEVER, that should the LESSOR desire to utilize the land for some other purpose, even before the expiration of this lease, a written notice shall be given to the LESSEE at least thirty days and the LESSEE shall deliver possession of the lease coconut trees immediately and shall be entitled to reimbursement of the rental already paid to be computed on the number of the months left remaining of the one year term;
3. That the LESSEE hereby undertakes to take care of the leased premises or coconuts with the diligence of a good father of the family, to fertilize the same if and when necessary, to apply proper pest and disease control, and to replace old or worn out trees with new planting of coconuts.
4. That should any of the parties violate the terms and conditions of this agreement and that should court action be resorted by the innocent party against the other for the enforcement of his rights under this agreement, the erring party shall pay the sum of P2,000.00 as liquidated damages as well as attorney's fee and expenses of litigation.
5. That in consideration of the said coconuts and of the faithful performance of all the stipulations of this agreement, the LESSEE binds herself to pay unto the LESSOR, upon the signing of this agreement, the sum of SIX HUNDRED PESOS (P600.00), Philippine Currency, as rental for one (1) year.
6. That the LESSOR warrants unto the LESSEE the peaceful possession and enjoyment of the leased coconuts for the term aforesaid."
In July 1984, said parties entered into another Contract of Lease (Annex B, Petition) with the following terms and conditions.
"That the LESSOR is the registered owner and in the actual possession and enjoyment of a certain parcel of land, situated at Punta Taytay, Sum-ag, Bacolod City, Philippines, which is technically known as Lot No. 641-A, together with the improvements thereon consisting of growing coconut trees and which parcel of land is more particularly described in Transfer Certificate of Title No. T-279700 of the Land Records of the Register of Deeds, Bacolod City;
That the LESSEE desires to renew the lease from the LESSOR, the coconut growing in said parcel of land and the LESSOR has, in turn, agreed to lease the same to the LESSEE under the following terms and conditions which the latter accepts:
1. That this lease shall cover only the growing coconut trees in the aforesaid parcel of land;
2. That the duration of this lease shall be one (1) year, beginning October 1, 1983 up to and until October 1, 1984, inclusive, and may be renewed in writing on a year to year basis upon terms and conditions acceptable to the parties. PROVIDED, HOWEVER, that should the LESSOR desires to utilize the land for some other purpose, a written notice will be given to the LESSEE at least thirty (30) days and the LESSEE shall deliver possession of the lease of coconut trees immediately and shall be entitled to reimbursement of the rental already paid to be computed on the number of months remaining of the one (1) year terms;
3. That the LESSEE hereby undertakes to take care of the leased premises or coconuts with the diligence of a good father of the family, to fertilize the same if and when necessary, to apply proper insecticides or fungicides for proper pest and disease control and to replace old or worn out trees with new plantings and coconuts;
4. That in consideration of the said coconuts and of the faithful performance of all the stipulations of this agreement, the yearly rental of the lease is FOUR THOUSAND PESOS (P4,000.00), Philippine Currency, payable as follows:
a) The LESSEE will pay the amount of ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00), Philippine Currency, upon signing of this document;
b) Another amount of ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00), Philippine Currency, to be paid by the LESSEE on or before August 30, 1984;
c) Another amount of ONE THOUSAND PESOS (P1,000.00), Philippine Currency, shall be paid on or before October 30, 1984;
5. That the LESSOR warrants unto the LESSEE the peaceful possession and enjoyment of the lease coconuts for the term aforesaid;
6. Should any tax be imposed on the coconut trees herein being lease to the LESSEE, the same shall be for the account of the LESSEE;
7. That the LESSEE admits having allowed, without permission from the LESSOR, her relatives (namely, spouse Romeo and Betty Sobigon and spouses Juan and Nora Recodo, Jr.) to construct their house on Lot No. 641-A, Bacolod Cadastre, and binds and obliges herself on her coconut to cause their ejectment upon demand at any time by the LESSOR; and the LESSEE further binds and obliges herself not to allow any other person or persons to construct any structure or house in any portion of the lease premises and to report immediately to the LESSOR any attempt or attempts of construction."
When the Contract of Lease (Annex B) expired in 1984, the parties renewed it verbally under the same terms and conditions except the amount of the rental which was changed. On October 20, 1989, petitioner BORMAHECO wrote respondent Granada a letter (Annex C, Petition) informing her that the verbal lease agreement covering the period October 1, 1988 to October, 1989 had already lapsed and she should vacate the premises because it needed the property for its special project. Respondent posted security guards on the said land who confiscated the tuba gathered in the premises.
As a reaction to the demand to vacate the said land, respondent Granada filed on November 8, 1989 a Petition For Status Quo with Prayer for the Issuance of Preliminary Injunction (Annex D, Petition) with the Provincial Agrarian Reform Adjudicator in Bacolod City which was docketed as PARAB Case No. 379. In her pleading, she showed that when her father Augusto Villarosa died in 1981, she succeeded him as agricultural lessee and as such she could not be ejected from said land. She, therefore, prayed for an injunction against respondent BORMAHECO to prevent it from ejecting her from said land. BORMAHECO denied said claim and raised the defense that petitioner Granada was a civil law agricultural lessee who ought to be ejected because the verbal lease contract had already lapsed (Annex E, Petition). On May 14, 1991, the said Adjudicator rendered a Decision (Annex F, Petition) finding for petitioner BORMAHECO with the following adjudication:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of the respondent and against the petitioner, to wit:
1. Ordering the ejectment of petitioner from Lot No. 641-A, covered by TCT No. T-27970, situated at Punta-Taytay, Bacolod City and deliver possession thereof to the respondent;
2. Ordering petitioner to pay respondent the amount of P5,000.00 as attorney's fees.
No pronouncement as to cost."
Respondent Granada appealed from said Decision to the Department of Agrarian Reform Adjudication Board (DARAB) which rendered a Decision (Annex G, Petition) on July 11, 1997 reversing the appealed Decision with the following adjudication:
"WHEREFORE, in the light of the foregoing, the appealed decision is REVERSED and SET ASIDE, and a new one is entered as follows:
1. Declaring petitioner Dolores Granada the agricultural lessee of the subject landholding.
2. Directing the party litigants to reduce their tenancy relation into a written agricultural leasehold contract before the Municipal Reform Officer (MARO) of Bacolod City taking into consideration the pertinent provisions of Section 34 of R.A. 3844, as amended, in relation to Section 12 of R.A. No. 6657 and pertinent rules and regulations thereon.
Hence, this appeal by petition for review. The appeal is meritorious.
Respondent Granada and petitioner BORMAHECO started their relationship with a written Contract of Lease (Annex A, Petition). This contract was definitely not a contract of agricultural leasehold but a contract of lease of things. First, the subject of the lease contract consisted of 300 coconut trees. The subject of a agricultural leasehold or civil law lease is an agricultural land. Obviously, coconut trees do not constitute an agricultural land. Second, the term of the lease contract was fixed at one (1) year renewable on a year to year basis. In agricultural leasehold, once constituted, the same extends indefinitely for the leaseholder under the law enjoys security of tenure. Third, it was stipulated in the contract that even if the terms of the lease has not yet expired, if the lessor would need the land in which the leased coconut trees stood for other purposes, it could give the lessee a written notice to vacate at least thirty (30) days and the lessee is then obliged to vacate the same. Again, that stipulation is incompatible with an agricultural leasehold because in that contract the need of the lessor of the land is not a ground to terminate much less pre-terminate the leasehold relationship.
Neither were the notarized contracts of the parties constitutive of an agricultural civil law lease because the subject is not an agricultural land but 300 coconut trees. Therefore, it was a contract of lease of things.
Note that said contract was renewed until October 1, 1984 under another notarized contract of lease (Annex B). From October 2, 1984 up to October 31, 1989, respondent Granada continued possessing the coconut trees, enjoying their fruits and paying the stipulated rentals to petitioner BORMAHECO. The latter claims that their written contract was verbally renewed on a yearly basis under the same terms and conditions but respondent Granada asserts that her possession of the coconut land was by virtue of his being an agricultural leaseholder.
The position of respondent is untenable.
One. If it had been true that Alfredo was an agricultural leaseholder over Lot 641-A since 1950 up to his death in 1981 (pars. 2 & 5, Petition for Status Quo with Prayer In the Issuance of Ruling Injunction, Annex P, Petition), why did respondent Granada enter into a notarized Contract of Lease (Annex A, Petition) with petitioner BORMAHECO on September 29, 1965 over 300 coconuts standing on the same Lot 641-A? If that had been true, then Alfredo Granada was the agricultural leaseholder over the land while her daughter was the leaseholder of the trees standing thereon? That does not make sense!
Two. If as claimed by respondent Granada she succeeded her father as agricultural leaseholder over the land in 1981 when the latter died, what was the need for her to enter into a notarized Contract of Lease (Annex B, Petition) in July 1984 with petitioner BORMAHECO over the coconut trees in said land? Is she trying to foist to this Court the absurdity that since the death of her father in 1981 up to October 31, 1989, she was an agricultural leaseholder over the land and an ordinary lessee over the coconut standing thereon?
Three. For the DARAB to say, as it did in its Decision, that said Contract of Lease (Annex A and D, Petition) did not reflect the true intention of the parties is to improperly make a determination with nothing to back it up. Additionally, that matter has not been pleaded by respondent Granada and so there was even no basis for the DARAB to make such a conjectural determination.
Since, there was nothing in the written contract of lease and in the verbal renewal of said contract which is against the law, morals, good customs, public policy and public order, the said agreement should, therefore, be recognized as valid and binding upon the parties.
WHEREFORE, finding merit in the appeal, the Court renders judgment REVERSING the appealed Decision and UPHOLDING the Decision of the Provincial Agrarian Reform Adjudicator with the modification that the contract between petitioner and respondent was one of contract of lease of things.
Cruz and Tolentino, JJ., concur.