G.R. No. 224006 & 224472, July 06, 2020
CJH DEVELOPMENT CORPORATION, PETITIONER, VS. CORAZON D. ANICETO, RESPONDENT; CORAZON D. ANICETO, PETITIONER, VS. CJH DEVELOPMENT CORPORATION, ATTY. MA. GEORGINA ALVAREZ, AND ATTY. HILARIO BELMES, RESPONDENTS.

FACTS

Respondent Corazon D. Aniceto owned El Rancho Cafe and Restaurant, which stood on Camp John Hay in Baguio City. Petitioner CJH Development Corporation allowed her to use a junkyard within the vicinity, where she built her restaurant from October to December 2003. The parties formally entered into a Lease Contract on December 1, 2003, effective until November 30, 2004, which was later renewed on a monthly basis. On November 18, 2005, they entered into another Lease Contract lasting until November 17, 2006, which was later amended to extend until May 17, 2007. Pertinent provisions of the Lease Contract included Article VI, Section 1, stating that all permanent improvements made by Aniceto shall become CJH Development’s property upon termination of the lease, and Article X, Section 2, authorizing CJH Development to enter the premises, take inventories of Aniceto’s merchandise, and place them in a bodega for her retrieval upon contract termination.
Before the second lease expired, Aniceto requested another extension, which was denied by CJH Development’s officer-in-charge, Federico S. Alquiros. Nevertheless, El Rancho continued to operate on a monthly basis, with Aniceto paying advance rentals up to February 28, 2008. On January 30, 2008, Alquiros wrote to Aniceto, informing her to vacate the premises by March 1, 2008, as the area would undergo land development. Aniceto’s subsequent requests for extension were denied.
Aniceto filed a Complaint before the Regional Trial Court of Baguio City seeking to enjoin the closure and demolition of El Rancho. The trial court issued a 72-hour Temporary Restraining Order and later a status quo order but eventually denied the application for a writ of preliminary injunction. While Aniceto’s motion for reconsideration was pending, El Rancho was demolished on May 1, 2008. The case then became a complaint for damages, with Aniceto seeking actual damages for the demolished structure and seized personal properties.
The Regional Trial Court ruled in favor of Aniceto, declaring the demolition illegal and Article X, Section 2 of the Lease Contract without force and effect, and awarded damages. The Court of Appeals reversed this decision, ruling that CJH Development was within its rights as owner to demolish the restaurant under the Lease Contract, but ordered CJH Development to pay Aniceto P2,183,625.00, representing the value of personal properties taken during the demolition. Both parties filed Petitions for Review before the Supreme Court.

ISSUE

The primary issue is whether the stipulation in the Lease Contract (Article X, Section 2) authorizing the lessor to take possession of the leased premises and the lessee’s properties upon contract termination is valid and binding without judicial action.

RULING

The Supreme Court ruled that the stipulation is valid and binding. The Court emphasized that contracts are the law between the parties, and absent any showing that the stipulation is contrary to law, morals, good customs, public order, or public policy, it must be upheld. The provision did not violate due process as it was a contractual agreement voluntarily entered into by the parties. The Court distinguished this from judicial ejectment proceedings, noting that the contractual stipulation provided a specific remedy agreed upon by the parties for the lessor to recover possession upon lease termination.
The Court further held that CJH Development acted within its rights under the contract. The lease had expired, and Aniceto was merely a holdover lessee. The demolition occurred after the denial of the application for preliminary injunction and the expiration of the status quo order. However, the Court affirmed the award of P2,183,625.00 to Aniceto for the value of her personal properties seized during the demolition, as CJH Development failed to prove it exercised the diligence of a good father of a family in safeguarding these items, making it liable for their loss or damage. The Court deleted the awards for moral and exemplary damages and attorney’s fees, finding no evidence of bad faith on the part of CJH Development.