Title
Puen vs. Sta. Ana Agro-Aqua Corp.
Case
G.R. No. 156051
Decision Date
Jan 28, 2008
A prawn farm lessee delayed rental payments, sought lease pre-termination, and disputed claims of unpaid dues and unlawful harvests; courts ruled in favor of lessors, affirming liability.
unpaid rentals
unlawful appropriation
stocked prawns
A

Case Summary (G.R. No. 156051)

Factual Background: Delay, Communications, and Transfer Arrangements

Petitioner’s delay in paying rentals prompted Lacson to make phone calls reminding him of the arrears. In response, petitioner sent a letter dated May 3, 1989 explaining tight cash flow because of problems with another business. He promised to pay the arrears after the prawns were harvested on May 15, 1989. He also acknowledged that despite Lacson’s accommodating attitude, he had not been able to keep his promises.

Thereafter, Rosagaron, petitioner’s farm General Manager, wrote Lacson on May 19, 1989 to “formalize our verbal commitment,” stating that respondents would be paid forty nine percent (49%) of the gross sales from the initial harvest of eight ponds in Phase I. The letter further stated that after settling other small accounts of “King Prawn,” the percentage of gross sales from subsequent harvests would be proportionately increased to pay the full rentals due.

Lacson’s arrangements were later described by respondents through a letter dated May 25, 1989 from Rosagaron to petitioner, which informed him that the harvests in ponds 8 and 9, Phase I, were being withheld due to rental arrears and that, from that time, respondents would be in control of the prawn harvest. Rosagaron also provided a list of expected yield per pond totaling 57,494.67 kilos.

Petitioner then indicated on June 20, 1989 his intention to pre-terminate the lease contract. He stated he wanted to turn over the ponds to respondents as soon as they were harvested, expressed unwillingness to continue due to restraints including a drop in market prices, and stated he was amenable to paying rentals in full while asking that interest penalties be waived and that respondents “deem the contract terminated without imposing further sanctions.”

Respondents’ Counter-Proposals and the Reported Sales Proceeds

Respondents replied on July 6, 1989 with counter-proposals. They required payment of rentals from the time of pond delivery up to stated dates for Phase I and Phase II. They asserted that outstanding rentals were P395,592.11 and P625,000.00, respectively, excluding proceeds from four remaining ponds. They estimated those remaining proceeds at around P100,000.00 due to the prawns allegedly not being fed properly during the last three weeks. They also proposed a twenty percent (20%) termination fee on the balance of the contract, after acknowledging that, while they could legally demand the full amount, they chose compassion and therefore demanded only twenty percent (20%) upon termination. They stated the whole contract involved rental payments for four years for thirteen hectares at P500,000.00 per hectare, totaling P26,000,000.00, and that after paying rentals up to the required periods, a balance of P22,239,466.00 remained, making the twenty percent termination fee P4,447,000.00.

In respondents’ statement of rentals and payments as of July 6, 1989, the amount of P1,121,458.34 was recorded as proceeds from the sale of prawns harvested from the leased prawn farm. The records showed that petitioner never questioned the correctness of this amount or its application as payment for his delayed rentals.

Petitioner’s Claim of Forcible Dispossession and Respondents’ Demand

Later, Rosagaron sent Lacson a letter dated July 10, 1989 stating that, pursuant to petitioner’s letter and a verbal agreement on June 24, 1989, Phase I and II would be turned over to respondents’ office effective immediately. The letter authorized specified technicians to coordinate with respondents’ representatives to “spot check and account the facilities” to be turned over, and asked respondents to advise when the actual turnover would occur and with whom respondents should coordinate so that they could act immediately.

Subsequently, respondents’ counsel demanded payment of unpaid rentals for May, June, and July 1989 totaling P905,371.30, and unpaid electricity bills of P227,896.40, or a total of P1,133,267.70. Petitioner did not reply and failed to comply, prompting respondents to file a complaint for specific performance with damages.

In his Answer, petitioner alleged that respondents forcibly dispossessed him, harvested and sold the prawns and appropriated the proceeds, and, due to the allegedly wrongful takeover, left other prawns unattended and unfed, rendering them non-marketable and causing grave losses. He demanded accounting of the proceeds and payment of damages for losses from the wrongful take-over.

Proceedings in the RTC and the CA

After trial, the Regional Trial Court of Bacolod City, Branch 43 rendered a Decision dated June 10, 1995 in favor of respondents. The RTC ordered petitioner to pay respondents P3,163,868.34 representing unpaid and delayed rentals and CENECO bills, and dismissed petitioner’s counterclaim for lack of merit.

Petitioner appealed to the CA. The CA affirmed the RTC with modification. It held that where the lessor resumes possession for protection after the lessee has abandoned the leased property, the lessor may elect to hold the lessee responsible under the contract until termination. It further ruled that even if the contract granted an express option to pre-terminate after default in rental payments, resolution or termination was not mandatory on the lessor unless expressly stipulated; termination took effect when the lessor notified the lessee of the decision to resolve. The CA found that resort to specific performance was not barred, given the damages and unpaid rentals, penalty for late payment, and unpaid electric consumption.

However, the CA deleted the additional amount of P1,318,000.00 claimed for alleged lost income due to lack of clear proof. It affirmed the rest of the trial court’s award but reduced petitioner’s total liability to P1,845,868.34, representing rents in arrears inclusive of a three percent (3%) penalty per month and unpaid electric bills with CENECO. The CA denied petitioner’s motion for reconsideration in a Resolution dated November 13, 2002.

The Petition and the Core Dispute Before the Supreme Court

On further review, petitioner raised the issue whether respondents’ alleged appropriation and sale of his stocked prawns were unlawful. Petitioner asked for dismissal of the complaint and sought an order for respondents to restitute the alleged market value of the stocked prawns in the amount of P5,117,025.63, compensated against unpaid rentals and electricity bills totaling P1,845,868.34, with payment of the difference and damages.

The Court characterized the matter as turning on whether respondents forcibly took control of the leased prawn farm before petitioner’s stocked prawns were harvested. The Court also observed that while the RTC and CA did not explicitly state in categorical terms that respondents did not harvest or appropriate the stocked prawns, both courts nevertheless found that petitioner’s claim of being forcibly dispossessed could not be given credence.

The Parties’ Positions and the Governing Standard on Factual Findings

The Court held that petitioner had admitted indebtedness to respondents in the amount of P1,845,868.34. Thus, the remaining issue was whether respondents unlawfully harvested and appropriated the stocked prawns. The Court further reiterated the controlling rule that factual findings of the trial court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal, subject only to recognized exceptions. The Court found that the case did not fall under any of those exceptions.

In assessing why the claim of forcible takeover lacked credibility, the Court relied on petitioner’s own documentary evidence, particularly the July 10, 1989 letter sent by Rosagaron to Lacson. That letter showed petitioner’s intent to physically turn over Phase I and Phase II to respondents effective immediately, and it requested coordination for the actual turnover of facilities. The Court held that this statement belied petitioner’s claim that respondents had already taken back possession as early as May 1989 before all stocked prawns could be harvested.

The Court reasoned that it was “impossible to believe” that respondents could have harvested for themselves stocked prawns if they were not yet in possession and full control of the prawn farm at the time of harvest. The Court found consistency with Lacson’s testimony that respondents only took possession after petitioner’s employees had already harvested and sold a

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