G.R. No. 60015 - Chua Peng Hian vs. Court of Appeals

In 1948, Miguel C. Veneracion, owner of a 2,194-square-meter lot in Cabanatuan City, leased the property to Patrick Chua Peng Hian (doing business as Nueva Ecija Lumber) for ten years.
The lease was subsequently renewed for another ten-year period.
On May 25, 1968, following the expiration of the second lease, Veneracion entered into a three-year lease agreement (covering 1,850 square meters) with Chua, effective from May 1, 1968, to May 1, 1971, at a monthly rental of P1,500.
The lease contract contained key provisions:

Paragraph 5 stipulated that the contract "shall terminate automatically without extension and the lessee shall vacate and surrender the premises without any obstruction thereon."
Paragraph 7 provided for the automatic transfer of any buildings and improvements constructed by the lessee to the lessor if the lessee failed to vacate and remove such improvements upon lease expiration, with an additional three-month period allowed for removal under the condition that rental payments continue.

The agreement further required Chua to pay Veneracion "compensatory damages" of P20,000 and an attorney’s fee of P2,000 should judicial relief be sought for non-compliance or breach of the lease.

Chua constructed a two-storey building on the leased lot.
The ground floor of the building housed his sawmill and lumber business, while the family resided on the second floor.

On February 6, 1969, Miguel C. Veneracion died, leaving his heirs to assume control of his contractual rights and property interests.
After the lease expired on May 21, 1971, Veneracion’s heirs demanded that Chua vacate the leased premises and settle the accrued rental obligations.
Chua’s failure to comply with these demands set the stage for legal action.

On April 11, 1972, the heirs initiated an action for specific performance in the Court of First Instance of Nueva Ecija against Chua, seeking enforcement of the lease stipulations.
The trial court rendered a decision favorable to the heirs, prompting appeals from both parties.
On October 30, 1980, the Court of Appeals issued a judgment ordering:

Chua and his family to vacate the lot;
The conveyance of the buildings and improvements to the Veneracion heirs; and
Payment of monthly rental from June 1971 until possession was surrendered, as well as compensatory damages (P20,000) plus an attorney’s fee (P2,000).

Chua contested the jurisdiction of the trial court, arguing that the issues involved (possession of the lot and rights over the erected building) should not fall within its purview.
The contention was made that the construction of the improvements and associated lease terms might be considered a disposition of conjugal realty, allegedly requiring the wife’s consent.
Relevant earlier jurisprudence clarified that matters involving both the leased land and improvements thereon are within the exclusive jurisdiction of the Court of First Instance, and that the building improvements, being personal property under the lease contract, did not trigger the conjugal property issue.

Whether the Court of First Instance had jurisdiction over a case that involved both the possession of a leased lot and the rights over the improvements constructed by the lessee.
Whether the issues raised allowed the trial court to extend its subject-matter competence, rather than be confined to a municipal or city court's jurisdiction.

Whether the stipulation in the lease contract—providing for the automatic transfer of the buildings and improvements to the lessor upon the lessee’s failure to vacate—was valid and enforceable.
Whether Chua’s non-compliance with his contractual obligations (failure to vacate and removal of improvements) justified the remedies sought by the Veneracion heirs.

Whether claims raised by Chua regarding the lease extension and the alleged nature of the alienation of conjugal property deserved judicial scrutiny, notwithstanding the absence of a supporting memorandum in his petition.