G.R. No.

135721             May 27, 2004

CHUA TEE DEE, doing business under the name and style of PIONEER
ENTERPRISES, petitioner, 
vs.
COURT OF APPEALS and J.C. AGRICOM DEVELOPMENT CORPORATION, INC., respondents.

DECISION

CALLEJO, SR., J.:

Before us is a special civil action for certiorari under Rule 65 of the Revised Rules of Court assailing
the Decision1of the Court of Appeals in CA-G.R. CV No. 50306 which affirmed with modification, the
Order2 of the Regional Trial Court of Davao City, Branch 9, ordering the petitioner Chua Tee Dee to
pay the private respondent back rentals plus interest and attorney’s fees.

The antecedent facts are as follows:

J.C. Agricom Development Corporation, Inc. (Agricom, for brevity), a corporation duly organized and
existing under and by virtue of the laws of the Republic of the Philippines, is the owner of a rubber
plantation located at Bayabas, Toril, Davao City, with an area of 132.4012 hectares, more or less.
Agricom planned to lease the plantation.

Chua Tee Dee, married to Amado Dee, is a businesswoman doing business under the name and
style of Pioneer Enterprises (Pioneer, for brevity).

Manuel G. Alba, the president of Agricom, had a business meeting in Davao City with Amado Dee
where they discussed the possibility of leasing the rubber plantation to Chua Tee
Dee/Pioneer.3 Thereafter, a draft contract of lease was made and delivered to Alba on May 22,
1985.4

The final contract of lease5 was signed and acknowledged before a notary public on July 22, 1985.
The Agricom, represented by Alba, was referred to as the FIRST PARTY under the contract, while
Chua Tee Dee doing business under the style of Pioneer was the SECOND PARTY. Lillian Carriedo,
a stockholder of Agricom, also signed the contract. The pertinent portions of the lease contract were
as follows:

1. TERM: The lease shall be for a period of fifteen (15) years counted from the date of
execution of this contract and may be renewed for another period of five (5) years upon such
terms as may be agreed upon by the parties.

2. That the plantation, together with all the inventoried machineries, equipment and
improvements found therein shall upon the execution of this contract be turned over to the
SECOND PARTY free from any and all liens and/or encumbrances, provided, however, that
the SECOND PARTY shall upon expiration and/or termination of the contract return all the
inventoried machineries, equipment and improvements to the FIRST PARTY.

3. RENTAL: The SECOND PARTY shall pay the FIRST PARTY within the first ten (10) days
of the current month the following rentals, to wit:

P45,000.00 per month for the first three (3) years of the lease
 P60,000.00 per month for the second three (3) years of the lease

P75,000.00 per month for the third four (4) years of the lease

P90,000.00 per month for the last five (5) years of the lease

4. NON-PAYMENT OF RENTALS: Delay in the payment of the monthly rental by the

SECOND PARTY shall entitle the FIRST PARTY to charge to the former interest of two (2)
percent per month as penalty. Non-payment of rentals for three (3) months shall
automatically bring about the termination of the lease. In such an event, the FIRST PARTY
shall be entitled to recover from the SECOND PARTY back rentals.

5. DEPOSIT: In addition to the monthly rental stipulated in paragraph 3 of this contract, the
SECOND PARTY upon signing of this contract shall deposit to the FIRST PARTY an amount
equivalent to ONE HUNDRED THIRTY-FIVE THOUSAND PESOS (P135,000.00) Philippine
Currency and on the first day of September of the same year another amount equivalent to
ONE HUNDRED THIRTY-FIVE THOUSAND PESOS (P135,000.00) Philippine Currency,
both interest-free which the latter shall apply against rentals for the last year of the lease.

6. FARM PERSONNEL: Upon the effectivity of this Contract, the SECOND PARTY has the
option to select and screen those farm personnel that the SECOND PARTY shall retain;
those not selected shall then be terminated by the FIRST PARTY, whose separation from
the FIRST PARTY’s employment shall be the concern of the FIRST PARTY.

10. RIGHT TO ENTER PREMISES: The FIRST PARTY or its duly-authorized representative
shall have the right to enter the leased premises at any reasonable time during business
days, with due notice to the SECOND PARTY, to verify compliance with the terms and
conditions of this contract. In addition, the FIRST PARTY may use the "REST HOUSE"
located in the leased premises with at least two (2) days advanced notice to the SECOND
PARTY.

11. LESSEE’S OPTION TO BUY: The FIRST PARTY shall maintain the SECOND PARTY in
the quiet peaceful possession and enjoyment of the leased premises during the effectivity of
the lease.

If at any time during the lease or renewal thereof, the first party shall opt to sell, assign,
transfer or convey the leased premises for a valuable consideration, the SECOND PARTY
shall be given written notice thereof, and the latter shall have first option to buy the leased
premises upon such terms and conditions as may be mutually agreed by the parties. In the
event [that] this FIRST PARTY receives an offer to buy from a THIRD PARTY, the SECOND
PARTY shall be advised thereof in writing and shall have the option to match said offer within
a period of thirty (30) days from receipt of said advice.

If the SECOND PARTY or his nominees fail to exercise the option granted under this
aforementioned paragraph, and there is a sale, assignment, transfer or conveyance of the
leased premises to a third party, it shall be a condition thereof that this contract of lease shall
be respected and shall continue under the terms and conditions herein stipulated.
 13. (sic) VENUE: UPON the expiration of this lease contract or its earlier termination for
violation of its terms and conditions, the SECOND PARTY binds himself to peacefully turn
over the possession of and surrender the leased premises to the FIRST PARTY is
compelled, to resort to the courts to protect its rights under this contract, the parties agree
that venue thereof shall be in the courts at Davao City. In such an event, the SECOND
PARTY shall be answerable for all damages that the FIRST PARTY may suffer or be entitled
to plus attorney’s fees equivalent to twenty-five (25%) percent thereof and costs of suit.

On May 27, 1985, Alba met with the employees of the rubber plantation6 and updated them on the
impending termination of their employment due to the company’s contract of lease with Chua Tee
Dee. The employees were told that they would be given separation pay.

On June 3, 1985, Amado Dee delivered the amount of two hundred seventy thousand pesos
(P270,000.00) to the Spouses Manuel and Suzanne Alba in compliance with paragraph 5 of the
lease contract. The corresponding receipt was issued.7

In the meantime, Azarinas P. Liguiz of Agricom sent letters to the said employees, confirming the
termination of their employment and informing them that their separation pay shall be computed at
one-half (1/2) month’s salary for every year of service rendered, and that a fraction of at least six (6)
months service shall be considered as one year. Thereafter, the corresponding vouchers were
prepared.8

Sometime thereafter, the severed employees filed a complaint for illegal dismissal and unfair labor
practice against Agricom, Amado Dee and Pioneer, docketed as NLRC Case No. 1815-LR-XI-85.
The labor arbiter rendered his decision on August 22, 1986, holding that the termination of the
complainants’ employment was illegal. The respondents were ordered to pay its employees’
separation pay and backwages, but the complaint for unfair labor practice was dismissed for lack of
merit.9 The dispositive portion of the decision reads:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:

(1) Declaring the termination of complainants as illegal, thereby ordering respondents J.C.
Agricom Development Company and/or Pioneer Enterprises and Amado Dee to pay all
complainants herein, jointly and severally, the following, to wit:

(a) Separation pay – at one (1) month salary per year of service, from date of hiring
to date this Decision becomes final and executory;

(b) Backwages – from date employment stopped up to the date this Decision
becomes final and executory.

(2) Dismissing the charge of unfair labor practice for lack of merit.

SO ORDERED.10

The respondents appealed the decision. Amado Dee and Pioneer posted a supersedeas bond
of P21,415.58, as well as P142,770.54 covered by Check No. 610489625,11 and P142,770.54
covered by Check No. 61048962412to stave off execution pending appeal.
Because Pioneer was dragged into labor disputes not of its own making, it wrote Agricom, through
its counsel, on October 20, 1987 suggesting a conference to settle the labor case, otherwise, it
would consider the contract of lease as rescinded.13

Aside from the labor case, Pioneer, through Amado Dee, complained of being pestered by some
individuals who claimed portions of the plantation as their own property. Some of them went to its
office and even presented tax declarations to prove their claims.14 Pioneer claimed that the foregoing
circumstances prevented it from operating fully the agreed area stated in the lease contract. It also
complained that the death of Pioneer’s foreman sometime in 1990 even exacerbated the unresolved
labor problem.

On May 24, 1990, the counsel of the Carriedo heirs, the stockholders-owners of Agricom, sent a
telegraphic note to Amado Dee demanding payment of long overdue rentals.15 On June 21, 1990,
Pioneer sent a letter to Agricom complaining of facts and events which disrupted its operations in the
plantation. In a Letter dated August 2, 1990, Agricom informed Pioneer that, after due investigation,
it concluded that the latter’s complaints were unfounded. It also demanded the payment of back
rentals for June, July and August 1990.16

As Pioneer was unable to pay its monthly rentals, Agricom filed, on September 4, 1990, a civil
complaint for sum of money, damages and attorney’s fees against Chua Tee Dee before the
Regional Trial Court of Davao City, Branch 9. The case was docketed as Civil Case No. 20,312-90.
The plaintiff Agricom alleged, inter alia, in the said complaint, thus:

2.02 That defendant regularly paid the monthly rentals for the years 1985 to 1989. The
payment of the monthly rentals for the first six (6) months of 1990 in the amount of Sixty
Thousand (P60,000.00), however, was occasioned by delay and those for July and August
1990, unpaid;

2.03 That as of August 1990, defendant has an outstanding arrearage of One Hundred
Twenty Thousand (P120,000.00) Pesos in favor of plaintiff, exclusive of penalty thereon at
the rate of two (2%) percent per month;

2.04 That several demands, both verbally and in writing, had been made by plaintiff upon
defendants to make her payment of the monthly rentals current, but said demands,
notwithstanding, defendant failed and refused and still continues to fail and refuse to do so;

2.05 That by reason of defendant’s unjustified and wanton refusal to pay plaintiff its plainly,
valid, and demandable claims, the latter has been compelled to engage the services of
counsel to enforce and protect its interest at an agreed fee of twenty-five (25%) percent of
the amount due and collectible, as provided for in said Contract of Lease (Annex "A") and
has, otherwise, been placed into unnecessary expenses of litigation in an amount which
could not be less than Ten Thousand (P10,000.00) Pesos;17

It prayed that after due proceedings, judgment be rendered in its favor, as follows:

WHEREFORE, it is most respectfully prayed of this Honorable Court that judgment be rendered in
favor of plaintiff and against the defendant ordering the latter

a.) to pay plaintiff the sum of P120,000.00 as of August 1990, with penalty thereon at the
rate of two (2%) percent per month, plus the sum of P60,000.00 a month thereafter;
 b.) to pay plaintiff the sum equivalent to twenty-five (25%) of the amount due and collectible,
as and for attorney’s fees;

c.) to reimburse the litigation expenses of plaintiff in the amount of not less than P10,000.00
or such amount which will be proven during the trial;

d.) to pay the cost of suit;

PLAINTIFF further prays for such other reliefs and remedies, just and equitable under the
premises.18

On October 16, 1990, the defendant filed her Answer with Damages where she asserted that the
plaintiff had no cause of action against her. She claimed that it was the plaintiff which failed to
comply with the terms and conditions of the contract of lease when it failed to settle the labor dispute
with its former employees, thus, dragging the defendant as respondent in NLRC Case No. 1815-LR-
XI-85; and that the plaintiff failed to maintain her in the quiet and peaceful possession and enjoyment
of the leased premises during the effectivity of the lease contract, in violation of paragraphs 6 and 11
thereof.

The defendant also claimed that she had paid premiums for the appeal bond in the labor case, and
that she deposited with the NLRC the total amount of P306,956.66 to avert execution pending
appeal, which was supposed to be the sole responsibility of the plaintiff.

By way of counterclaim, the defendant asserted that she was exposed to public contempt and
ridicule which besmirched her reputation; and that she suffered mental anguish and sleepless nights
because of the violation of the contract of lease. She prayed, thus:

WHEREFORE, defendant respectfully prays this Honorable Court, that after considering all the
foregoing facts and circumstances, judgment be rendered in favor of defendant and against plaintiff:

1. Ordering the termination or rescission of the Contract of Lease;

2. Dismiss the complaint;

3. Ordering the plaintiff to pay defendant:

a) P316,956.66 – as actual damages

b) P500,000.00 – as moral damages

c) P200,000.00 – as exemplary damages

d) P100,000.00 – as attorney’s fees

DEFENDANT FURTHER prays for such other relief and remedies available and legally tenable
under the premises.19

On November 8, 1990, the plaintiff filed its Motion to Strike Out Portion of the Pleading,20 particularly
paragraph 8 thereof and to dismiss the counterclaim of the defendant with regard to the labor case
on the ground that the NLRC had already rendered a decision ordering the dismissal of the
complaint of its former employees. The plaintiff appended a copy of the decision of the NLRC to its
motion.21

On November 9, 1990, defendant Chua Tee Dee filed her Motion to Declare Plaintiff in Default22 for
failure to answer her counterclaim.

During the pre-trial, the parties admitted the following:

1. Legal Capacities of the respective party (sic);

2. The Contract of Lease entered into on July 22, 1985 between parties herein over the
132.4102 hectares of rubber plantation located in Bayabas, Toril, Davao City;

3. The Labor Case entitled NLRC Case No. 1815-LR-XI-85, BONIFACIO LANSANG, et al.
vs. JC AGRICOM DEV. CORP. and/or PIONEER ENT. and AMADO DEE;23

In the meantime, on June 4, 1991, the defendant extended a personal loan of P30,000 to Lillian
Carriedo as evidenced by a voucher24 and a personal receipt25 signed by Ma. Cecilia and Elaine,
both surnamed Carriedo.26

On October 21, 1992, the court rendered judgment dismissing the complaint and declaring the lease
contract terminated for failure of the plaintiff to implement the terms thereof. The court ruled as
follows:

The evidence on record proves that plaintiff failed to effectively complement, implement and enforce
the foregoing provision. The inevitable consequence was the impleading and involvement of
defendant in a vexatious labor problem instituted by plaintiff’s original farm workers. This violation of
paragraph 6 caused the problems that in great measure prejudiced the efficient operations intended
by defendant, because of the peace and order situation caused by the malcontents, among others,
resulted in the death of defendant’s foreman Elicano Apolonio.

"11. Leases option to buy, the First Party shall maintain the Second Party in the quiet possession
and employment (sic) of the leased premises during the effectivity of the lease. …"

The evidence establishes that defendant’s possession was anything but peaceful and enjoyable.
Within a comparatively short span of time from entry and occupation, defendant suffered from
vexatious labor problems caused by plaintiff’s original farm workers who instituted a labor case
impleading the defendant. Many of them remained in the area and made trouble to the workers hired
by defendant, so terrorizing the latter that they were afraid to go to work for fear of bodily harm.
Defendant’s foreman Elicano Apolonio, who reported early for work was shot to death in the
premises (Exhibits "11," "12").27

The decretal portion of the decision reads:

WHEREFORE, premises considered, judgment is rendered dismissing the complaint and declares
the lease contract between the parties terminated and of no force and effect.

Cost against the plaintiff.

SO ORDERED.28
The plaintiff received its copy of the above decision on March 11, 1993 and filed its motion for
reconsideration praying that the defendant be ordered to pay for the unpaid rentals in accordance
with the contract of lease until it had actually vacated and surrendered the leased premises.29

The defendant filed her manifestation and compliance, declaring that when she learned about the
RTC decision that the lease contract between the parties no longer had force and effect, she pulled
out her enterprise and stopped operations in the leased premises.30 She also filed her opposition to
the motion for reconsideration.31

On March 8, 1995, the court issued an Order granting the plaintiff’s motion and modifying its
decision. It ordered the defendant to pay rentals to the plaintiff since the defendant had occupied,
used and continually operated the rubber plantation during the time the case was pending; equity
demanded that compensation for the use thereof was just and proper.32 The decretal portion reads:

WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED and the Decision
dated October 21, 1992 is hereby recalled and modified as follows:

1. Judgment is rendered in favor of the plaintiff, J.C. Agricom Development Corporation, Inc.
and against the defendant, CHUA TEE DEE.

2. Defendant is ordered to pay the plaintiff:

a. P45,000.00 per month for the first three (3) years, less the deposit made in the
amount ofP270,000.00 or the amount of P1,350,000.00;

b. P60,000.00 per month for the second three (3) years of the lease or the equivalent
amount ofP2,160,000.00;

c. P75,000.00 per month for the succeeding years up to the time this case was
decided on October 21, 1992, or the amount of P1,125,000.00;

d. To pay the interest of 2% of the arrears as penalty for the delay in the payment of
the rentals, or in the amount of P92,700.00; and,

e. Attorney’s fees equivalent to 10% of the total amount due to plaintiff or in the
amount ofP463,500.00.

Accordingly, the contract of lease entered into by the parties on July 22, 1985 is declared terminated
and of no force and effect.

SO ORDERED.33

The defendant appealed the March 8, 1995 Order to the Court of Appeals.34 The appeal was
docketed as CA-G.R. CV No. 50306. It ascribed the following errors to the trial court:

THE LOWER COURT ERRED WHEN IT REVERSED ITS DECISION DATED OCTOBER 21, 1992
IN AN ORDER DATED MARCH 8, 1995, THE SAID REVERSAL NOT BEING IN ACCORDANCE
WITH LAW.
 II

THE LOWER COURT ERRED IN ITS ORDER DATED MARCH 8, 1995, THE SAME NOT BEING
SUPPORTED BY THE EVIDENCE PRESENTED DURING TRIAL.35

The appellant therein alleged that the motion for reconsideration of the appellee of the decision of
the trial court was actually a motion for new trial;36 that while she admitted being in possession of the
leased premises, there was no evidence that she had profited from operating the rubber
plantation.37 She also posited that, under Article 1658 of the New Civil Code, she had the right to
suspend payment of the rentals since the lessor failed to maintain her in the peaceful and adequate
enjoyment of the leased property. She noted that the lower court even found in its October 21, 1992
decision that her possession of the property was anything but peaceful and enjoyable.38 The
appellant asserted that the order of the trial court ordering her to pay the plaintiff-appellee was not
supported by evidence presented during trial.39

The appellate court in its Decision dated May 6, 1998 affirmed the assailed order of the lower court,
but modified it by reducing the award of attorney’s fees:

WHEREFORE, subject to the modification concerning the award of attorney’s fees, which is hereby
reduced to P50,000.00, the Order appealed from is AFFIRMED in all other respects. Without
pronouncement as to costs.40

The appellant filed her motion for reconsideration on June 2, 1998 but the same was denied by the
CA in its October 2, 1998 Resolution.41

Chua Tee Dee, now the petitioner, filed her supplemental petition and/or amended petition for
certiorari with this Court under Rule 65 of the Rules of Court and assigned the following as errors
committed by the CA:

I. THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE

ERROR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN SWIFTLY CONCLUDING THAT THE "CONTRACT OF LEASE IS VALID,
BINDING AND EFFECTIVE BETWEEN THE CONTRACTING PARTIES." FOR IN DOING
SO, THE COURT OF APPEALS DISREGARDED THE INVALIDITY OF THE CONTRACT
OF LEASE WHICH PRIVATE RESPONDENT LEASED, (A PLANTATION THAT IT DID NOT
OWN), AND AGAIN, CLEARLY DID NOT INSTALL PETITIONER "IN PEACEFUL
ENJOYMENT" OF THE LEASED PREMISES, AND WHICH PETITIONER WAS NOT ABLE
TO POSSESS AND ENJOY, IN CLEAR, DELIBERATE AND VERY IRRESPONSIBLE
VIOLATION OF THE CONTRACT OF LEASE. THIS JUSTIFIES LESSEE’S SUSPENSION
OF RENTALS.

II. IN DENYING PETITIONER’S MOTION FOR RECONSIDERATION (ANNEX "O"), PUBLIC

RESPONDENT COURT OF APPEALS, WITH DUE RESPECT, COMMITTED REVERSIBLE
ERROR IN ORDERING PETITIONER TO PAY RENTALS WHICH HAD ALREADY BEEN
PAID.42

The petitioner asserts that the suspension of the payment of rentals is justified by the fact that the
private respondent Agricom breached its lease contract with her, relying on the provision of Art. 1658
of the Civil Code which provides:
Art. 1658. The lessee may suspend the payment of the rent in case the lessor fails to make the
necessary repairs or to maintain the lessee in peaceful and adequate enjoyment of the property
leased.

The petitioner claims that the private respondent failed to maintain her in a quiet and peaceful
enjoyment of the leased premises.43 She asserts that while she occupied the property, she was
pestered and harassed by squatters and several claimants of the leased premises.44 As such, the
private respondent violated paragraphs 6 and 11 of the lease contract. The petitioner also alleges
that her business was dragged to a labor case which caused her to shell out the amounts
of P306,956.99 and P10,000 as bond premiums and attorney’s fees, respectively. While machine
copies of the checks were presented during trial, the court ordered the presentation of the original
checks, which, however, have been lost and cannot be found.45 According to the petitioner, the
various claimants of the premises fenced their claimed areas, thus, reducing the area of the leased
premises and the production of rubber latex, the produce of the rubber plantation.46 The petitioner
also alleges that she made verbal demands to the private respondent to observe and enforce the
contract, but such demands fell on deaf ears.47

The petitioner further asserts that the private respondent included in their contract of lease areas in
the rubber plantation that belonged to other persons.48 She further alleges that the private
respondent misrepresented itself as the owner of a rubber plantation covering an area of 132.4102
hectares when, in fact, only an area of 36 hectares was free from any claimants.49 Thus, the
petitioner argues, the diminution of the area resulted in loss of profits in the operation of the
plantation.

The petitioner also claims that since the private respondent failed to maintain her, as lessee, in the
quiet and peaceful possession of the leased premises, she is entitled to moral damages.50 The
petitioner further claims that she agreed to remain in the leased premises upon the request of Mrs.
Carriedo, a stockholder of Agricom. The petitioner avers that she did the private respondent a favor
because due to her presence in the premises, the same was protected from outside forces.51 Thus,
she should not be ordered to pay any back rentals.

Anent the second assigned error, the petitioner asserts that she had religiously paid rentals up to
June 30, 1990, and that she suspended the payment thereof due to the private respondent’s breach
of the lease contract. She avers that the lower court erred when it ordered her to pay rentals starting
from 1985, when the contract commenced. She posits that her liability for back rentals, if any, should
cover only the period of July 1990 to October 21, 1992, when the decision of the RTC was
promulgated, computed as follows:

Second 3 years at P60,000.00 monthly rental

Payment stopped on July 1990:

July 31, 1990 P60,000.00

August 31 60,000.00
September 30 60,000.00
October 31 60,000.00
November 30 60,000.00
December 31 60,000.00
January 31, 1991 60,000.00
 February 28 60,000.00
March 31 60,000.00
April 30 60,000.00
May 31 60,000.00
June 30, 1991 60,000.00
Total P720,000.00

Succeeding 3 years at P75,000.00 per month

Rental up to the time this case was decided
On October 21, 1992:

July 31, 1991 P75,000.00

August 31 75,000.00
September 30 75,000.00
October 31 75,000.00
November 30 75,000.00
December 31 75,000.00
January 31, 1992 75,000.00
February 28 75,000.00
March 31 75,000.00
April 30 75,000.00
May 31 75,000.00
June 30, 1992 75,000.00

Total P900,000.00
July 31, 1992 75,000.00
August 31 75,000.00
September 30 75,000.00
October 21, 1992 52,500.00

Total P280,500.00

Grand Total P1,900,500.0052

=============

For its part, the private respondent contends that the petition should be dismissed for having been
filed under Rule 65, an inappropriate remedy or wrong mode of appeal in the present case. And
even if the Court considers the same as filed under Rule 45, the same is still unavailing as only
questions of law can be raised therein, while the present petition raises questions of fact.53

The private respondent maintains that the appellate court did not commit any grave abuse of its
discretion when it decided the case and affirmed with modification the assailed RTC Order. It
contends that the sweeping statements of the petitioner, that the Court of Appeals committed grave
abuse of its discretion, are baseless and unfounded. It asserts that the petition is without merit.

The petition is partly meritorious.

Preliminarily, we note that the remedy resorted to by the petitioner is a petition for certiorari under
Rule 65 of the Rules of Court, a remedy resorted to where the issues raised involve lack of
jurisdiction or grave abuse of discretion. For the writ of certiorari under Rule 65 to issue, the
petitioner must show not only that the lower court acted with grave abuse of discretion, but also that
"there is no appeal, or any other plain, speedy, and adequate remedy in the ordinary course of
law."54 The assailed CA decision was a disposition on the merits; hence, the proper remedy of the
petitioner was a petition for review on certiorari under Rule 45 of the Rules of Court. For this
procedural lapse, the instant petition should be dismissed outright.55

Nonetheless, as the petition was filed within the reglementary period under Rule 45, and in the
interest of justice, this Court shall treat the action as a petition for review on certiorari under Rule 45.

We now delve into the merits of the case.

The cause or essential purpose in a contract of lease is the use or enjoyment of a thing.56 It is
consensual, bilateral, onerous and commutative, the owner temporarily grants the use of his or her
property to another who undertakes to pay rent therefor.57 In the case at bar, petitioner Chua Tee
Dee is the lessee of the private respondent Agricom. As lessor, the Agricom had the duty to maintain
the petitioner in the peaceful and adequate enjoyment of the leased premises. Such duty was made
as part of the contract of lease entered into by the parties. Even if it had not been so, the lessor is
still duty-bound under Art. 1654 of the Civil Code, thus:

Art. 1654. The lessor is obliged:

(1) To deliver the thing which is the object of the contract in such a condition as to render it fit
for the use intended;

(2) To make on the same during the lease all the necessary repairs in order to keep it
suitable for the use to which it has been devoted, unless there is a stipulation to the contrary:

(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire
duration of the contract.

The duty "to maintain the lessee in the peaceful and adequate enjoyment of the lease for the
duration of the contract" mentioned in no. 3 of the article is merely a warranty that the lessee shall
not be disturbed in his legal, and not physical, possession. Thus, in the case of Goldstein v.
Roces,58 the Court ruled in favor of the lessor and denied the lessee's claim for damages which
resulted from the opening of holes in the roof, as the lessor had allowed another lessee to construct
another floor to the leased building. The Court had the occasion to state:
Article 1554 provides that the lessor is obliged to maintain the lessee in the peaceful enjoyment of
the lease during all the time covered by the contract.

Nobody has in any manner disputed, objected to, or placed any difficulties in the way of plaintiff's
peaceful enjoyment, or his quiet and peaceable possession of the floor he occupies. The lessors,
therefore, have not failed to maintain him in the peaceful enjoyment of the floor leased to him and he
continues to enjoy this status without the slightest opposition on the part of any one. That there was
a disturbance of the peace or order in which he maintained his things in the leased story does not
mean he lost the peaceful enjoyment of the thing rented. The peace would likewise have been
disturbed or lost had some tenant of the Hotel de Francia, living above the floor leased by plaintiff,
continually poured water on the latter's bar and sprinkled his bar-tender and his customers and
tarnished his furniture; or had some gay patrons of the hotel gone down into his saloon and broken
his crockery or glassware, or stunned him with deafening noises. Numerous examples could be
given to show how the lessee might fail peacefully to enjoy the floor leased to him, in all of which
cases he would, of course, have a right of action for the recovery of damages from those who
disturbed his peace, but he would have no action against the lessor to compel the latter to maintain
him in his peaceful enjoyment of the thing rented. The lessor can do nothing, nor is it incumbent
upon him to do anything, in the examples or cases mentioned, to restore his lessee's peace. 59

In the case at bar, the petitioner claims that several people presented tax declarations to her and
claimed some portions of the leased premises. However, no case was filed by any of the said
claimants against her or her lessor during the time she occupied the premises. Even her branch
manager testified that no such action to quiet title had been filed by the alleged claimants:

Q Now, one other question which is not related to the xerox document – now, will you kindly
inform this Honorable Court whether you received a formal letter from the person you said
was claiming ownership?

A No, they went to the office.

Q They did not make a formal claim against you?

A They made (sic) formal claim because they went to the office taking with them the
documents, the title and the tax declaration and they came to me. That is a formal address.

Q And that is what they did, they just came to your office and presented certain documents,
is that correct?

A They presented documents and they have done also something in the field, they fenced
the area.

Q Now, did they file a case against you?

A Against me?

Q Against Pioneer?

A A case, no.

Q And then as a matter of fact there is no judgment for ejectment or anything against
Pioneer between that claimant and Pioneer?
 ATTY. SABILLO:

It is already answered, Your Honor, there is no case.

ATTY. MOJICA:

So, there is no judgment.

ATTY. SABILLO:

There is no case.

ATTY. MOJICA:

If counsel and I stipulate that there is no judgment … ?

ATTY. SABILLO:

Of course, there is no case.

COURT:

All right, no case, no judgment.60

Patently, then, the petitioner had not been disturbed in her legal possession of the property in
derogation of Article 1654 of the New Civil Code. When the petitioner’s representative saw that a
portion of the leased premises was being fenced by the claimants, she had all the right to sue the
intruders who had disturbed her physical possession61 as provided for in Article 1664 of the New Civil
Code.62 However, the petitioner did not file any suit against any of the claimants. Thus, it cannot be
said that the private respondent violated paragraph 11 of the contract of lease.

We agree with the trial court and the CA that the petitioner failed to prove that she suffered any loss
from the labor case that was filed against her enterprise and her husband. The trial court declared
that the petitioner "did not actually established (sic) the alleged losses especially in the labor case
with the NLRC where the complaints of the laborers appear to have been dismissed…"63 The CA,
likewise, noted thus:

… [T]rue, the labor case was instituted during the effectivity of the lease contract until the
case was finally resolved on August 22, 1986. Surprisingly, however, during the interregnum,
appellant regularly paid the monthly rentals for the years 1985 to 1989. It was after the labor
case has been resolved that appellant started to fail to pay her rentals, strongly indicating
that the labor case has not dampened her peaceful and adequate possession of the leased
premises.64

… [T]hat the NLRC case did not deter the continuance of the possession and occupation of
the leased premises. It also proved the continuous production of latex in the plantation. Now,
if in the production of latex, the corporation rather than made profit, instead incurred losses,
such losses has to be borne by the corporation.65
In sum, then, the petitioner failed to prove that the private respondent breached any of the provisions
of the contract of lease. Thus, the petitioner had no valid reason to suspend the payment of rentals
under Art. 1658.

In the complaint filed by the private respondent against the petitioner, it alleged that the petitioner
failed and/or refused to pay the rent starting in July 1990. Also, the private respondent’s president,
Manuel G. Alba, testified that Agricom had suffered from the petitioner’s non-payment of rentals
since July 1990.66 At that time, the parties were already on their second three-year period of the
lease contract.

We agree with the contention of the petitioner that her obligation to pay back rentals should cover
only the period of July 1990 until the time that she vacated the leased premises. The CA, thus, erred
when it affirmed the order of the trial court ordering the petitioner to pay back rentals, including the
first three (3) years of the lease, as that period had already been paid by the petitioner. The
petitioner should also be credited for the amount ofP270,000.00 she paid to the private respondent
under paragraph 5 of the contract of lease.

The personal loan67 extended by the petitioner to Lillian Carriedo should not be charged against the
private respondent. While it is true that the petitioner and Carriedo had agreed that the personal loan
of the latter shall be "chargeable against Agricom’s account," the private respondent is not privy to
the agreement; nor did it agree to pay the said loan. It must be stressed that the private respondent
has a personality separate and distinct from its stockholders.

IN LIGHT OF ALL THE FOREGOING, the assailed Decision of the Court of Appeals in CA-G.R. CV
No. 50306 and the RTC Order dated March 8, 1995 are AFFIRMED WITH MODIFICATION. The
petitioner is hereby ordered to pay to the private respondent monthly rentals in the amount
of P60,000 starting July 1990 up to June 30, 1991; and in the amount of P75,000.00 per month from
July 1991 until the petitioner actually left the leased premises. The petitioner is also ordered to pay
interest of two percent (2%) of the arrears, as penalty for the delay in the payment of rentals.

No costs.

SO ORDERED.

[G.R. No. 148562. November 25, 2004]

TAGBILARAN INTEGRATED SETTLERS ASSOCIATION [TISA]

INCORPORATED THRU ITS SECRETARY-TREASURER
REPRESENTATIVE SIXTO MUMAR, SR. AS WELL AS ITS OTHER
OFFICERS AND MEMBERS, NAMELY: AURELIO CIRUNAY,
CIPRIANO GAMIL, ROBERTO MEDINA, BASILISA PUMARES,
MARIETA LUMAYNO, CRISOSA A. TAPAY, JULIETA DURAN,
RAMON RAMOS, JR., DELIO ERANA, EMETERIA ALE, PANFILO
LAWAY, CRISPIN PENASO, HADJE MALIK, ALANGADI SULTAN,
BERNARDA GULLEBAN, MANUEL CHATTO, KABSARAN
 MAMACAL, PEDRO ESTOQUE, and EULALIO
SARAMOSING, petitioners, vs. HONORABLE COURT OF
APPEALS, TAGBILARAN WOMANS CLUB REPRESENTED BY
ITS PRESIDENT and LAMBERTS REPRESENTED BY ITS
MANAGER, CRISPIN PENASO, SPS. ALEX and ARLENE
SANTOS, NECITA BOLATETE, CAROL CURIBA, MAMARI
BUSAR, ANTONIO BULASA, SUSAN PANTOJA, LEONORA
ESTALLO, DANIEL OMICTIN, BOBBY BANDIANON and CARMEN
CRISTALES, respondents.

DECISION
CARPIO MORALES, J.:

On petition for review on certiorari is the appellate courts Decision  of [1]

February 28, 2001 affirming that of Branch 2 of the Regional Trial Court of
Tagbilaran City, Bohol.[2]

Petitioner Tagbilaran Integrated Settlers Association (TISA), is an

organization founded in 1991 by individuals who have residential and
business establishments in a commercial lot located at Torralba and Parras
Streets in Tagbilaran City. The lot, which has an area of 2,726 square meters,
is covered by TCT No. (142) 21047 in the name of respondent Tagbilaran
Womens Club (TWC).
In 1986-1987, the TWC entered into separate written lease contracts for a
period of one year with individual petitioners herein, Aurelio Cirunay, Roberto
Medina, Basilisa Pumares, Marietta Lumayno, Ramon Ramos Jr., Delio
Erana, Elemeterio Ale, Alangadi Sultan, Manuel Chatto, and Cipriano Gamil. [3]

Pertinent provisions of each contract of lease included the following: (1)

stall space rented shall be exclusively used for business; (2) converting the
space into dwelling is strictly prohibited; (3) no subleasing is allowed without
the knowledge and consent of TWC; (4) all ordinances as to sanitary and
building permits shall be complied with; (5) rentals shall be paid monthly; (6)
the period of lease is for one year only; and (7) any violation of the lease
contract automatically rescinds the contract of lease.
[4]

The other petitioners, namely Crisosa Tapay, Julieta Duran, Panfilo

Laway, Crispin Penaso, Hadje Malik, Bernardo Gulleban, Kabsaran Mamacal,
Pedro Estoque and Eulalio Saramosing are sublessees of stalls in the lot. [5]

In a letter to petitioners dated January 6, 1990, TWC demanded that they

vacate the rented premises on the following grounds: expiration of lease
contracts, non-payment of rentals, and violations of the conditions of lease
including noncompliance with sanitary and building ordinances.  Another letter
[6]

of demand, dated July 16, 1990, was sent to petitioners who refused to vacate
the premises, however.
On February 25, 1993, TWC entered into a lease contract on the lot with
one Lambert Lim who at once paid a total of P240,000.00 representing
payment of rentals for the first twelve (12) months.  Petitioners nevertheless
[7]

refused to vacate the lot, they contending that the contract of lease between
TWC and Lambert Lim is null and void because TWC impliedly extended to
them new contracts of lease when it continued collecting monthly rentals from
them.
Petitioners soon filed on March 31, 1993 a petition against TWC and Lim
for prohibition, annulment of contract of lease, and damages with prayer for
the issuance of a writ of preliminary prohibitory injunction before the RTC of
Tagbilaran City, Bohol. [8]

In the meantime, petitioners consigned the monthly rentals before Branch

2 of the RTC (the trial court). [9]

By decision  of January 24, 1997, the trial court dismissed petitioners
[10]

petition, disposing as follows:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered in favor of

the defendants and against the plaintiffs and third-party defendants:

1. Ordering the dismissal of plaintiffs complaint/petition;

2. Declaring the lease contract between the First Defendant TWC and Second
defendant Lambert Lim to be valid and binding;
3. Ordering the plaintiffs, the third-party defendant and the herein occupants acting for
and in behalf of the plaintiffs and third-party defendants to vacate the premises of
the defendant TWCs lot under TCT No. (142) 21047, within three (3) months from
the finality of the Decision;
4. Declaring the rental deposits consigned by plaintiffs with the Clerk of Court in the
total sum of P176,585.00, as payment for all rentals and damages owing to the
defendants, by reason of the filing of the suit, in the equitable and proportionate
amount of P56,585.00 to the First Defendant TWC, and P140,000 to Second
Defendant Lambert Lim; and
5. To pay the costs.[11] (Underscoring supplied)

Petitioners appealed the trial courts decision before the Court of Appeals
which, by decision  of February 28, 2001, affirmed that of the trial court.
[12]
 Petitioners motion for reconsideration of the appellate courts decision
having been denied by Resolution  of June 11, 2001, they lodged the present
[13]

petition which raises the same issues raised before the trial court and the
appellate court, to wit: (1) granting that the contracts of lease between TWC
and petitioners have expired, whether implied new lease contracts existed
which justify petitioners continued occupation of the lot; (2) whether TWC
violated its obligation under Article 1654 (c) of the Civil Code when it entered
into a lease contract with Lim on February 25, 1993; and (3) whether the
provisions of Presidential Decree No. 1517, Presidential Decree No. 20,
Proclamation No. 1893, and Presidential Decree No. 1517 apply to the case
at bar.[14]

The petition fails.

The lease contracts executed by TWC and petitioners in 1986/1987 were
for a period of one year. Following Article 1669  of the Civil Code, the lease
[15]

contracts having been executed for a determinate time, they ceased on the
day fixed, that is, a year after their execution without need of further demand.
While no subsequent lease contracts extending the duration of the original
lease were forged, it appears that TWC allowed petitioners to continue
occupying the lot as in fact it continued to demand, collect and accept monthly
rentals.  An implied new lease (tacita reconduccion) was thus created
[16]

pursuant to Article 1670 of the New Civil Code which provides:

If at the end of the contract the lessee should continue enjoying the thing leased for
fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by
either party has previously been given, it is understood that there is an implied new
lease, not for the period of the original contract, but for the time established in
Articles 1682 and 1687. The other terms of the original contract shall be revived.

Since the period for the tacita reconduccion was not fixed and the rentals
were paid on a monthly basis, the contract was from month-to-month. [17]

A month-to-month lease under Article 1687  is a lease with a definite

[18]

period, hence, it is terminable at the end of each month upon demand to

vacate by the lessor. [19]

When notice to vacate dated January 6, 1990 was sent by TWC to

petitioners, followed by another dated July 16, 1990, the tacita
reconduccion was aborted. For a notice to vacate constitutes an express act
on the part of the lessor that it no longer consents to the continued occupation
by the lessees of its property.
The notice required [under Article 1670] is the one given after the expiration of the
lease period for the purpose of aborting an implied renewal of the lease.  (Emphasis
[20]

supplied)

As thus correctly found by the Court of Appeals,

[t]he implied lease of appellants expired upon demand made by the appellee TWC on
January 1990. From then on appellee TWC had the right to terminate the lease at the
end of the term of the impliedly renewed contracts whose expiration dates w[ere] at
the end of the month of January 1990. Although appellants continued to pay rent[al]s
after said date, it is clear that they no longer have the right to continue in the
possession of the subject lot because their continued stay therein was without the
consent of appellee TWC. [21]

Contrary to petitioners contention, the subsequent acceptance by the

lessor of rental payments does not, absent any circumstance that may dictate
a contrary conclusion, legitimize the unlawful character of their possession. [22]

As for petitioners contention that TWC violated Article 1654 (c) of the Civil
Code when it entered into a lease contract with Lim on February 25, 1993
without their previous consent, the same does not lie. For after TWC notified
petitioners, by letter of January 6, 1990, to vacate the occupied premises, the
implied new lease had been aborted and they, therefore, had no right to
continue occupying the lot. Their continued occupation of the premises had
thus become unlawful.
While TWC as a lessor is obliged to, under Article 1654 of the Civil Code,
maintain the lessee in the peaceful and adequate enjoyment of the lease, the
obligation persist only for the duration of the contract. [23]

As to whether petitioners are covered by P.D. No. 1517, Proclamation No.

1893, RA 7279 and Presidential Decree No. 20, this Court holds in the
negative.
Under P.D. 1517, only legitimate tenants who have resided on the land for
ten years or more who have built their homes on the land and residents who
have legally occupied the lands by contract, continuously for the
last ten years, are given the right of first refusal to purchase the land within a
reasonable time.  In the case at bar, petitioners entered into one year lease
[24]

contracts with TWC for commercial use only and conversion of the rented

premises to dwelling was strictly prohibited. On that score alone, petitioners
case does not fall under P.D. No. 1517.
 At all events, P.D. No. 1517 is indisputably applicable only in specific
areas declared to be located within the so-called urban zones.  As found by
[25]

the trial court, petitioners failed to show that there was a proclamation issued
by the President declaring the lot to be within the urban land reform zone, a
condition sine qua non under Section 4  of P.D. 1517.
[26] [27]

As for Proclamation No. 1893,  the same covers only the Metropolitan
[28]

Manila Area.
With respect to Section 28 of R.A. 7279, it covers only lands in urban
areas, including existing areas for priority development, zonal improvement
sites, slum improvement, resettlement sites, and other areas that may be
identified by the local government units as suitable for socialized housing.
 Petitioners have not shown, nay alleged, however, that the lot falls within the
[29]

coverage of said law.

Finally, with respect to Presidential Decree No. 20,  the same seeks to
[30]

regulate rentals of properties used for housing purposes and not for

commercial use, hence, its inapplication to petitioners case.
Finally, with respect to the disposition of the amount consigned in court by
petitioners, there being no factual basis to conclusively determine whether a
portion thereof represents rentals accruing before the execution on February
25, 1993 of the lease contract between Lim and TWC and whether said lease
contract remains unabrogated, the matter of determining who between TWC
and Lim has the right to the consigned amount and the accrued rentals rests
with the trial court.
WHEREFORE, the challenged decision of the appellate court which
affirmed that of the trial court is hereby AFFIRMED with MODIFICATION in
that petitioners and any occupants of the lot acting for and in their behalf are
ordered to PAY any unpaid and accrued monthly rentals plus legal interest
until the leased premises have been surrendered to the TWC and/or Lambert
Lim.
Let the records of the case be remanded to the court of origin, Branch 2 of
the Regional Trial Court of Tagbilaran City, which is directed to determine who
between respondents herein has a right to the consigned amount in the sum
of P176,585.00 and to any accrued and unpaid rentals to due petitioners.
Costs against petitioners.
SO ORDERED.
RENTAL REOFRM ACT OF 2001
REPUBLIC ACT NO. 9161       December 22, 2001

AN ACT ESTABLISHING REFORMS IN THE REGULATION OF RENTALS OF CERTAIN

RESIDENTIAL UNITS, PROVIDING THE MECHANISMS THEREFOR AND FOR OTHER
PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:

Section 1. Short Tittle. – This ACT shall be known and cited as the "Rental Reform Act of 2002"

Section 2. Declaration of Policy. – The State shall for the common good, undertake a continuing of
urban land reform an housing which will make available at affordable cost decent housing and basic
services to underprivileged and homeless citizens in urban centers and resettlement areas.

Toward this end, the State shall establish reforms in the regulation of retails of certain residential
units.

Section 3. Monthly Rental and Maximum Increase. – Beginning 01 January 2002 and for a duration
of three (3) years thereafter ending on 31 December 2004, the monthly rentals of all residential units
in the National Capital Region and other highly urbanized cities not exceeding Seven thousand five
hundred pesos (P7,500.00) and the monthly rentals of all residential units is all other areas not
exceeding Four thousand pesos (P4,000.00) shall not be increased annually by the lessor, without
prejudice to existing contracts, by more than ten (10%).

Section 4. Definition of Terms. – The following terms as used in this Act shall be understood as:

(a) "Rental" shall mean the amount paid for the use or occupancy of a residential unit whether
payment is made on a monthly or other basic.

(b) "Residential unit" shall refer to an apartment, house and/or land on which another's dwelling is
located and used for residential purpose and shall include not only buildings parts or units thereof
used solely as dwelling places, boarding houses, dormitories, rooms and bedspaces offered for rent
by their owners, except motels, motel rooms, hotels, hotels rooms, but also those used for home
industries, retail stores or other business purposes if the owner thereof and his or her family actually
live therein and use it principally for dwelling purposes.

(c) "Immediate members of family of the lessee or lessor" for purposes of repossessing the leased
promises, shall be limited to his or her spouse, direct descendants or ascendants, by consanguinity
or affinity.

(d) "Lessee" shall mean the person renting a residential unit.

(e) "Owner/Lessor" shall include the owner or administrator or agent of the owner of the residential
unit.

(f) "Sublessor" shall mean the person who leases or rents out a residential unit leased to him by an
owner.

(g) "Sublessee" shall mean the person who leased or rents out a residential unit from a sublessor.
(h) "Assignment of lease" shall mean the act contemplated in Article 1649 of the Civil Code of the
Philippines.

Section 5. Rental and Deposit. – Rental shall be paid in advance within the first five (5) days of
every current month or the beginning of the lease agreement unless the contract of lease provides
for a later date of payment. The lessor cannot demand more than one (1) month advance rental and
two (2) month's deposit.

Section 6. Assignment of Lease of Subleasing. – Assignment of lease of subleasing of the whole or

any portion of the residential unit, including the acceptance of boarders or bedspacers, without the
written consent of the owner/lessor is prohibited.

Section 7. Grounds for Judicial Ejectment. – Ejectment shall be allowed on be the following
grounds;

(a) Assignment of lease or subleasing of residential units in whole or part, including the acceptance
of boarders or bedspacers, without the written consent of the owner/lessor.

(b) Arrears in payment of rent for a total of three (3) months Provided. That in the case of refusal by
the lessor to accept payment of the rental agreed upon, the leased may either deposit by way of
consignation, the amount in court, or with the city or municipal treasurer, as the case may be, or in a
bank in the name of and with notice to the lessor, within one (1) month after the refusal of the lessor
to accept payment.

The lessee shall thereafter deposit the rental within ten (10) days of every current month. Failure to
deposit the rental for three (3) month shall constitute a ground for ejectment. If an ejectment case is
already pending, the court upon proper motion may order the lessee or any person or persons
claiming under him to immediately vacate the leased premises without prejudice to the continuation
of the ejectment proceedings. At any time, the lessor may, upon the authority of the court, withdraw
the rentals deposited.

The lessor, upon authority of the court in case of consignation or upon joint affidavit by him and the
lessee to be submitted to the city or municipal treasure and to the bank where deposit was made,
shall be allowed to withdraw the deposits;

(c) Legitimate need of the owner/lessor to repossess his or her property for his or her own use or for
the use of any immediate member of his or her family as a residential unit: Provided, however. That
the lease for a definite period has expired: Provided, further, That the lessor has given the lessee
formal notice three (3) months in advance of the lessor's intention to repossess the property
and: Provided finally; That the owner/lessor is prohibited from leasing the residential unit or allowing
its use by a third party for a period of at least one year from the time of repossession;

(d) Need of the lessor to make necessary repairs of the leased premises which is the subject of an
existing order of condemnation by appropriate authorities concerned in order to make the said
premises safe and habitable:Provided. That after said repair, the lessee ejected shall have the first
preference to lease the same promises:Provided, however. That the new rental shall be reasonably
commensurate with the expenses incurred for the repair of the said residential unit and: Provided,
finally; That if the residential unit is condemned or completely demolished, the lease of the new
building will no longer be subject to the aforementioned first-preference rule in this subsection; and

(e) Expiration of the period of the lease contract.

Section 8. Prohibition Against Ejectment by Reason of Sale or Mortgage. – No lessor or his
successor-in-interest shall be entitled to eject the lessee upon the ground that the leased premises
have been sold or mortgaged to a third person regardless of whether the lease or mortgage is
registered or not.

Section 9. Ret-to-Own Scheme. – At the option of the lessor, he or she may engage the lessee in a
written rent-to-own agreement that will result in the transfer or ownership of the particular dwelling in
favor of the latter. Such an agreement shall be except from the coverage of Section 3 of this Act.

Section 10. Application of the Civil Code and Rules of Court of the Philippines. – Except when the
lease is for a definite period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the
Philippines, insofar as they refers to residential units covered by this Act, shall be suspended during
the effectivity of this Act, but other provisions of the Civil Code and the Rules of Court on lease
contracts, insofar as they are not in conflict with the provisions of this Act shall apply.

Section 11. Coverage of this Act. - All residential units in the National Capital Region and other
highly urbanized cities the total monthly rental for each of which does not exceed Seven thousand
five hundred pesos (P7,500.00) and all residential units in all other areas the total monthly rental for
each of which does not exceed Four thousand pesos (P4,000.00) as of the effectivity date of this Act
shall be covered, without prejudice to existing contracts.

Section 12. Penalties. - a fine of not less than Five thousand pesos (P5,000) nor more than Fifteen
thousand pesos (15,000.00) or imprisonment of not less than one (1) month and (1) day to not more
than six (6) month or both shall be imposed on any person,natural or juridical, found guilty of
violating any provision of this Act.

Section 13. Information Drive. - The Department of the Interior and Local Government and the
Housing and Urban Development Coordinating Council, in coordination with other concern agencies,
are hereby mandated to conduct a continuing information drive about the provisions of this Act.

Section 14. Transition Program. - The Housing and Urban Development Coordinating Council is
hereby mandated to formulate, within six (6) months from effectivity hereof, a transition program
which will provide for safety measures to cushion the impact of a free rental market.

Section 15. Separability Clause. - If any provision or part hereof is held invalid or unconstitutional,
the remainder of the law or the provision not otherwise affected shall remain valid and subsisting.

Section 16. Repealing Clause. - Any law, presidential decree or issuance, executive order, letter of
instruction, administrative order, rule or regulation contrary to or inconsistent with, the provisions of
this Act is hereby repealed, modified or amended according.

Section 17. Effectivity Clause. - This Act shall take effect on 01 January 2002 following its
publication in at least two (2) newspapers of general circulation.

Approved,