G.R. No. L-55074 December 17, 1987
PURIFICACION M. MACLAN, et al., petitioners, vs. MARIO L. SANTOS and the COURT OF APPEALS, respondents.

FACTS

Petitioners are the owners of three contiguous fishpond parcels in Paombong, Bulacan. Private respondent Mario L. Santos was their lessee under a written contract from 1963 to 1967. Upon the contract’s expiration, the parties’ accounts diverged. Santos claimed the lease was orally renewed for another five years at an increased annual rental of P28,000, which he paid for two years before petitioners refused his third-year payment, prompting him to consign the rental and file an action for injunction and damages. Petitioners countered that they only agreed to two successive one-year extensions, expiring in 1969, after which they demanded possession as they found Santos’s new rental offer inadequate.
The Trial Court dismissed Santos’s complaint, crediting petitioners’ version and ordering Santos to pay damages. The Court of Appeals reversed, finding a valid five-year renewed lease and awarding attorney’s fees to Santos.

ISSUE

Whether the Court of Appeals erred in its factual finding that the parties entered into a five-year oral lease renewal upon the expiration of the written contract in 1967.

RULING

Yes. The Supreme Court reversed the Court of Appeals and reinstated the Trial Court’s decision with modifications. The Court exercised its power to review factual issues as an exception to the general rule, given the directly conflicting factual findings between the lower courts on the crucial term of the renewal.
The Court found the Trial Court’s reasoning more convincing and aligned with ordinary business practice. Key factors supported only a series of yearly agreements, not a single five-year term: (1) the parties’ failure to reduce the alleged five-year agreement to writing was unusual, especially since prior shorter-term agreements were documented; (2) customary practice in fishery leases points to yearly periods; and (3) economic context made it more logical for the lessors to prefer short-term leases due to rising rental rates. Santos’s arguments, such as his making of improvements or a promise to correct a boundary, were insufficient to prove a five-year term, as lease duration is fixed by stipulation, not by a lessee’s voluntary acts.
Consequently, Santos was a holdover lessee from 1969 to 1972. He was liable for the difference between the reasonable rental value of P45,000 per year (as found) and the P28,000 he paid. The award of moral and exemplary damages was reduced to P50,000.