GR L 60015; (December, 1984) (Digest)
G.R. No. L-60015 December 19, 1984
PATRICK CHUA PENG HIAN, doing business as Nueva Ecija Lumber, petitioner, vs. COURT OF APPEALS, EMILIANA R. VENERACION and the HEIRS of the late MIGUEL VENERACION, respondents.
FACTS
Miguel Veneracion leased a lot in Cabanatuan City to Patrick Chua Peng Hian. After two prior leases, a final three-year contract was executed in 1968. A critical stipulation provided that upon the lease’s expiration on May 1, 1971, Chua was to vacate and surrender the premises. Paragraph 7 further stated that if Chua failed to vacate and remove his buildings and improvements, these structures would automatically become the property of the lessor, with the contract itself serving as the deed of transfer. Chua also agreed to pay compensatory damages and attorney’s fees in case of judicial action due to his violation of the terms. Veneracion died in 1969. After the lease expired in 1971, Chua refused to vacate and pay accrued rentals, prompting the Veneracion heirs to file an action for specific performance.
ISSUE
The primary issues were whether the trial court had jurisdiction over the case and whether the stipulation automatically transferring ownership of the buildings to the lessor upon the lessee’s failure to vacate was valid.
RULING
The Supreme Court affirmed the Court of Appeals’ decision. On jurisdiction, the Court held that the action was for specific performance of a lease contract, which is not capable of pecuniary estimation and thus within the exclusive original jurisdiction of the then Court of First Instance. Furthermore, the case involved not merely possession but also rights to the buildings constructed on the land, which also fell under the court’s jurisdiction. On the validity of the contractual stipulation, the Court ruled it was binding. The building and improvements, being erected on the land of another, could be treated as personal property for purposes of the contract. The validity of such stipulations, where the lessor becomes owner of the improvements upon termination of the lease, had been consistently sustained. The defense that the transfer constituted a disposition of conjugal property without the wife’s consent was without merit, as the structures were considered personal property in this context. The lease contract governed the parties’ rights, and the lower courts correctly ordered Chua to vacate, convey the buildings, and pay accrued rentals, damages, and attorney’s fees as stipulated.