G.R. No. 116652 ; March 10, 2003
NINOY AQUINO INTERNATIONAL AIRPORT AUTHORITY (NAIAA), petitioner, vs. COURT OF APPEALS, UNITED BUS LINES and JOSE M. SILVA, respondents.

FACTS

The Civil Aeronautics Administration (CAA), NAIAA’s predecessor, leased a portion of airport land to respondent United Bus Lines (UBL) for 25 years under a 1963 contract. The contract contained a provision for an extension of the lease term equal to any period UBL was prevented from occupying the premises due to causes beyond its control. In 1979, CAA filed an unlawful detainer case, but the parties later entered into a 1982 compromise agreement, extending the lease by eight years and settling all prior claims. Before the amended term expired in 1990, UBL sued NAIAA for reformation of contract, alleging it was deprived of full possession due to squatters and adverse claimants, thus necessitating a new lease term.
The Regional Trial Court ruled in favor of UBL, granting a ten-year extension of the lease. The Court of Appeals affirmed this decision. NAIAA elevated the case to the Supreme Court, arguing that the 1982 compromise agreement constituted a waiver of all prior claims, including any disturbance of possession, and that UBL failed to use the property for its stipulated purpose.

ISSUE

Whether respondent UBL is entitled to an extension of the lease term under the contract due to alleged deprivation of possession.

RULING

Yes, UBL is entitled to a lease extension. The Supreme Court affirmed the appellate court’s decision but modified the reckoning period. The legal logic rests on the application of the lease contract’s extension clause. The provision explicitly states that the lease term shall be extended for a period equal to the time the lessee is prevented from possession due to causes beyond its control. The evidence, including demand letters and official communications, substantiated UBL’s claim that its possession was disturbed by squatters and adverse ownership claims from third parties like the Estate of Don Antonio Rodriguez. These disturbances, which persisted even after the 1982 compromise, constituted causes beyond UBL’s control, triggering the extension clause.
The Court rejected NAIAA’s argument that the compromise agreement waived these claims. The agreement settled claims existing up to 1982 but did not preclude UBL from seeking relief for disturbances occurring thereafter. Furthermore, NAIAA’s counterclaim that UBL violated the contract by subleasing and not building a bus terminal failed. Subleasing was not expressly prohibited, and evidence showed UBL built a garage, indicating partial compliance. The extension is not reckoned from the finality of the trial court’s decision, as this would unjustly extend UBL’s possession. Instead, equity demands it runs from the day after the amended lease expired, May 8, 1990, for ten years. As UBL continuously possessed the property during the litigation, the extension period was deemed served, and the lease was terminated as of May 8, 2000.