G.R. No. 179018 - Paglaum Management and Development Corp. vs. Union Bank of the Philippines

In a lease contract dated September 15, 1980, Dolomite Mining Corporation (petitioner) entered into an agreement with Dionisia Montalbo (private respondent) for a parcel of land.
The contract clearly stated that the parcel measured 896 square meters, including specific boundaries and a tax declaration reference (Tax Declaration No. 10756).
Key contractual provisions included:

A representation by the lessor that she was the absolute owner of the property.
A lease term of twenty-five (25) years commencing on September 15, 1980.
An annual rental rate fixed at P0.15 per square meter, with provisions for renegotiation every five (5) years based on land value trends.

In August 1985, private respondent sought an increase in rent to P2.50 per square meter.
Petitioner offered only a 25% increase over the original rent, leading to an impasse in negotiations.
Private respondent subsequently filed a complaint (Civil Case No. CEB-4282) with demands including:

Recognition of the land area as 1,206 square meters (instead of the contracted 896 square meters).
A new rent rate pegged at P5.00 per square meter.
An award of moral damages, attorney’s fees, and litigation expenses.

The Regional Trial Court conducted a trial on the merits.
It upheld the lease contract’s stipulated area of 896 square meters, invoking the Parol Evidence Rule to bar any evidence contradicting the written contract.
Accordingly, the court fixed the annual rental for the period 1985–1990 at P1.20 per square meter and awarded private respondent P5,000.00 in attorney’s fees along with P2,000.00 for litigation expenses.

Both parties appealed the trial court’s decision, and the Court of Appeals reversed the finding on the land area.
The lower appellate court determined that the actual area of the leased property was 1,206 square meters, relying heavily on tax declarations as evidence.
Based on this determination, the Court of Appeals recalculated the annual rental to be P1.20 per square meter, resulting in a total of P1,447.20 per annum.
The award for attorney’s fees and litigation expenses was also affirmed.

Petitioner elevated the case to the Supreme Court arguing errors in the Court of Appeals’ findings on three main points:

The actual area leased should be 896 square meters rather than 1,206 square meters.
The new annual rental should reflect only a 25% increase over the original amount rather than the computed P1,447.20.
The award of attorney’s fees and litigation expenses was unjustifiable.

The petitioner’s evidence included the original lease contract, documents related to a request for survey, and a list of claimants; however, these were deemed self-serving and insufficient to undermine the tax declaration evidence.
Notably, the petitioner failed to produce the promised survey plan or convincing technical evidence comparing the 896 square meter measurement with the tax declaration indicating 1,206 square meters.

Whether the lease contract’s specified area of 896 square meters should control over the tax declaration indicating 1,206 square meters.
The sufficiency and credibility of the evidence presented by both parties to establish the correct area.

Whether the new rental rate should be based on a 25% increase over the initial rate or recalculated according to the larger area of 1,206 square meters at P1.20 per square meter.
The appropriateness of the rental adjustment given the discrepancy in land area measurements.

Whether private respondent was entitled to recover attorney’s fees and litigation expenses based on the circumstances of the case.
The extent to which the petitioner’s failure to produce credible survey evidence impacted the award.

Whether the Parol Evidence Rule should preclude extrinsic evidence disputing the contract’s stated area.
The weight to be given to tax declaration evidence versus the petitioner’s unsubstantiated survey evidence.