Haystack: Chua Peng Hian v. Court of Appeals (GR 60015, 19 December 1984)

Chua Peng Hian v. CA
[G.R. No. 60015. December 19, 1984.]
Second Division, Aquino (J): 4 concur, 1 took no part.

Facts: Miguel C. Veneracion owned a 2,194 sq.m. lot located at 787 Melencio Street, Cabanatuan City. He leased it in 1948 to Patrick Chua Peng Hian for 10 years. The lease was renewed for another 10 years. Chua constructed on that lot a 2-storey building, the ground floor being the sawmill and the second floor as residence. On 25 May 1968, after the second lease agreement had expired, Veneracion leased to Chua 1,850 square meters of the lot for 3 years or from 1 May 1968 to 1 May 1971 at the monthly rental of P1,500. The new lease contract stipulates that the lease shall terminate automatically without extension and the lessee shall vacate and surrender the premises without any obstruction thereon; that in the event that the Lessee fails to surrender and vacate the leased premises at the expiration of this lease on May 1, 1971, and/or to remove his buildings and improvements, same shall automatically remain as property of the Lessor without the necessity of executing a Deed of Transfer or conveyance of the aforementioned properties; that this document will serve as Deed of Transfer and Conveyance of the above mentioned buildings and improvements in favor of the Lessor; and that the Lessee shall pay the Lessor "compensatory damages" of P20,000 plus attorney's fee of P2,000 should the Lessor seek judicial relief by reason of Lessee's non-fulfillment or violation of the terms of the lease. On 6 February 1969 Veneracion died. After the third lease contract expired or on 1 May 1971, Veneracion's heirs demanded that Chua vacate the premises and pay the accrued rentals. Chua did not comply with their demand.

On 11 April 1972, the Veneracions filed in the CFI Nueva Ecija an action for specific performance against Chua. The trial court rendered a decision from which both parties appealed. On 30 October 1980, the Appellate Court rendered judgment ordering Chua and his family to vacate the land in question; to convey the buildings and improvements existing on the land to the Veneracion heirs and to pay the monthly rental of P1,500 from June, 1971 until he delivers possession thereof and the amount of P20,000 as compensatory damages plus P2,000 as attorney's fee. Chua appealed to the Supreme Court.

The Supreme Court affirmed the judgment of the Court of Appeals; with costs against the petitioner.

1. CFI has jurisdiction over issue on rights of parties to a building constructed on land
Where the issues raised before the inferior court do not only involve possession of the lot but also the rights of the parties to the building constructed thereon, the Court of First Instance and not the municipal or city court has jurisdiction over the case (Ortigas and Co., Ltd. Partnership vs. Court of Appeals, G.R. No. 52488, July 25, 1981, 106 SCRA 121).

2. CFI has jurisdiction as action for specific performance is not capable of pecuniary
The action sought was for specific performance of the stipulations of a lease contract. It was not capable of pecuniary estimation. It was within the exclusive original jurisdiction of the Court of First Instance (De Jesus vs. Garcia, 125 Phil. 965; Lapitan vs. Scandia, Inc., L-24668, July 31, 1968, 24 SCRA 479).

3. Building and improvements on leased land treated as personal property
The building and improvements on the leased land may be treated as personal properties (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630; Luna vs. Encarnacion, 91 Phil. 531; Manarang vs. Ofilada, 99 Phil. 108; Tumalad vs. Vicencio, L-30173, September 30, 1971, 41 SCRA 143, 152-3). Alienation in the contract of lease of the Lessee’s improvements is not a disposition of conjugal realty without the wife's consent.

4. Stipulation that Lessor would become owner of improvements is valid
The validity of a stipulation that the lessor would become the owner of the improvements constructed by the lessee on the leased land has been sustained (Lao Chit vs. Security Bank & Trust Co. and Consolidated Investment, Inc., 105 Phil. 490; Co Bun Kin vs. Liongson, 100 Phil. 1091).

5. Contract is the law between the parties.
The case is governed by the lease contract which is the law between the parties. The four-year extension of the lease made by the trial court and the amount of damages do not merit any serious consideration.

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