1. OBLIGATIONS AND CONTRACTS; LEASE; WAR OR FORCE MAJEURE EXCUSES NONFULFILMENT. — Where the leasee’s failure, during enemy occupation, to comply with the terms of his contract for the lease of an Hacienda dedicated to the planting of sugar cane was due to an order of the President of the Philippines suspending the milling of sugar cane or prohibiting such planting during the Japanese occupation, or to the fact that he was prevented from doing so by the uncertain conditions of peace and order then prevailing, which the courts may well take judicial notice of, he is relieved from responsibility for such failure. In the light of the authorities and precedents, such causes are deemed sufficient to justify nonfulfilment.

2. OBLIGATIONS AND CONTRACTS; LEASE; SUGAR LIMITATIONS; INTERPRETATION OF TERMS. — The lease contract of L executed in 1932 specifically provides that the rental will consist in "la mitad del veinte dos por ciento (1/2 del 22%) de la Cuota Total, asignada anual, a la Hacienda Biason." In the lease of contract of C executed in 1938 the rental was fixed on the basis of the quota assigned to the hacienda in question. Do the words "Cuota Total, asignada anual, a la Hacienda Biason" in the 1932 contract mean that the rent stipulated therein was on the basis of the sugar that may be obtained from the hacienda? Held: If in L’s contract the rental was based on the total amount of sugar that may be obtained from the hacienda, it can only be attributed to the fact that said contract was executed in 1932, when the word "quota" in the production of sugar was still unknown. At that time, the Tydings- McDuffie Law and the Sugar Limitation Law (Act 4166) were not yet in force. The first law took effect in 1933 and the second in 1934. The assignment of quotas to every hacienda in the the Philippines came only as a necessary consequence of the application of said laws. And when C’s contract was entered into in 1938, said laws were already in operation and so there was need to fix the rental on the basis of the quota assigned to the hacienda in question. When, therefore, L’s contract speaks of "cuota total, asignada anual, a la Hacienda Biason", that must necessarily refer to the amount of sugar that may be produced from said hacienda, subject only to the limitation as to quota. It is preposterous to claim that the rental can be divorced from the hacienda or can be filled from sugar obtained elsewhere. Such was never contemplated by the parties, nor was it their intention. This is apparent, not only from provisions of the contract, but also from an examination of the provisions of the Tydings-McDuffie Law and the Sugar Limitation Law regarding allocation of quotas to the different plantation owners and sugar mills in the Philippines. Any other interpretation would be unfair and arbitrary.

This is an appeal from a decision of the Court of First Instance of Negros Occidental absolving the defendant completely from the complaints filed against him in two separate cases. These two cases were tried jointly by agreement of the parties because, while they emanate from two distinct contracts of lease executed separately on January 9, 1938, they were made in favor of the same lessee, Jose G. Longa, and refer to the same property which consists of the undivided interest of the lessors in Hacienda Biason situated in Bais, Negros Oriental.

In G. R. No. 2152 (case No. 478), plaintiffs seek to recover from the defendant the rentals corresponding to the crop years 1940-1941, 1941-1942, 1942-1943, 1943-1944 and 1944-1945, plus damages, due to the alleged failure of the defendant to deliver the Hacienda Biason upon the termination of the lease at the time and in the condition agreed upon in the contract of lease. The case was tried under the third amended complaint. The original complaint and the first and second amended complaints were ordered stricken out upon motion of the defendant because they contained allegations tending to open the way for the introduction of parol evidence to vary the terms of the written contract, to wit, to prove a supposed verbal agreement to the effect that the defendant agreed to pay the rentals and fulfil all of the conditions of the contract in spite of war or force majeure.

In G. R. No. 2153 (civil case No. 480), the plaintiff seeks to recover from the defendant the amount of 731 piculs of centrifugal sugar representing the rental which the defendant allegedly failed to deliver to the plaintiff for the agricultural year 1941-1942, and damages for the sum of P29,340, plus attorney’s fees and costs. Plaintiff alleges that for the third year of his lease contract with the defendant (1941-1942), the latter failed to deliver to the plaintiff the rental due for said year in the amount of 731 piculs of centrifugal sugar; that for the fourth, fifth and sixth year of the contract (1942-1943, 1943-1944, 1944-1945), the defendant likewise failed to pay to the plaintiff the corresponding rentals due for said years; that the defendant violated the provisions of paragraph 15 of the lease contract by not delivering to the plaintiff on or before June 30, 1944, twenty (20) hectares of vacant fields free from cogon grass and appropriate for planting sugar cane; and that the defendant violated the provisions of paragraph 18 of the contract for his failure to secure and furnish the plaintiff with a bond of P10,000 which should have been subscribed by one Gaspar Vicente to guarantee the faithful performance of the terms of the contract. However, plaintiff later renounced her claim over the rentals for the agricultural years 1942-1943, 1943-1944, 1944-1945, for the reason that the Central Azucarera de Bais was not able to mill any sugar cane for the said period due to the Japanese occupation.

In both cases, the defendant filed his answer traversing the material allegations of the complaint and alleged, as his affirmative defense, the fact that due to the recent war, or to the Japanese occupation, he was unable to fulfill the terms of his lease contract and, consequently, should be excused from complying with the same. The two cases were tried jointly and were decided as stated in the early part of this decision. From this decision the plaintiffs in both cases appealed and filed a joint record on appeal.

The Hacienda Biason is located in the municipality of Bais, Negros Oriental, and was owned pro-indiviso until 1946 by Simeona M. de Castro, her niece Paz Diago de Castro, and the heirs of the late Joaquin Montenegro, represented by their mother and guardian Ines Escay. The land was subject to the usufructuary right of Ines Lezana, widow of Nicolas Montenegro and mother of Simeona N. de Castro, which right terminated upon her death on July 4, 1939. The share pertaining to each co-owner, including that of the usufructuary, was one-fourth. Upon the usufructuary’s death, their share became one-third each held pro-indiviso until 1946.

On January 9, 1938, Simeona M. de Castro, with the approval of her husband, Luis F. de Castro, executed a contract of lease of their undivided shares in the said hacienda in favor of Jose G. Longa for a period of six agricultural years beginning from the crop year 1939- 1940 up to and including the 1944-1945 agricultural crop. A supplementary contract was executed on the same date wherein it was provided that the lessee would advance to the lessors on January 1 of every year the sum of P3,000 which would be liquidated upon the sale of the sugar corresponding to the lessors. This sum was later increased to P3,500 upon the death of the usufructuary.

On the same date of January 9, 1938, Paz Diago de Castro, together with Ines Lezana, executed a contract of lease of their undivided shares in the said hacienda in favor of Jose G. Longa for the same period of six agricultural years beginning from the crop year 1939-1940 up to and including the 1944-1945 agricultural crop. On February 9, 1940, a supplementary contract was also executed by the same parties to include some parcels of land not covered by the first contract.

Jose G. Longa took possession of the hacienda in accordance with the aforesaid contracts of lease and was able to pay to the plaintiffs the corresponding rentals due for the agricultural years 1939-1940 and 1940-1941 by means of quedans issued by the Central Azucarera de Bais in the name of the lessors, and from the time of the issuance of said quedans the sugar represented by the same was placed at the disposal of the lessors. The rental corresponding to the lessors for each crop year is 731 piculs of sugar considering the percentage agreed upon in the contract of lease. Out of the rental corresponding to the year 1940-1941, 160 piculs were disposed of by lessor Simeona M. de Castro, and the balance of 571 piculs remained deposited in the warehouse of the aforementioned Central at the disposal of said lessor. During the crop year 1941-1942, the lessee was able to mill only about 1,319.92 piculs of sugar out of his quota of 9,086 piculs. For said period, 96.69 piculs were the share of Simeona M. de Castro as rental, and the same were credited to the said lessor by the Central pursuant to their understanding. However, no quedans were issued by the Central for said sugar due to the fact that the Inspector of the Philippine Sugar Administration had absented himself from the Central, and without his signature no quedans could be issued. The above-mentioned balance of 571 piculs of sugar and the 96.69 piculs which was the rental for the crop year 1941-1942 were sold by Julian Teves, acting as President of the Bais Planters Association, obeying the orders of the Japanese Military Administration, to the Mitsui Bushi Shovi Kaisha, its purchasing agent, together with all the sugar of other planters which was stored in the warehouse of the Central Azucarera de Bais. The proceeds of the sale of the said 667.79 piculs of sugar were withdrawn from the Taiwan Bank of Cebu by Simeona M. de Castro and her husband through their attorney-in-fact Mateo Teves.

As regards Paz Diago de Castro, the lessee was also able to pay her the rentals due for the crop years 1939-1940 and 1940-1941 by means of quedans issued by the Central in her name. Paz Diago de Castro, however, claims that she has not received any sugar as rental for the crop year 1941-1942 contrary to the claim of the lessee that the rental for that year was 96.69 piculs which were placed at her disposal by the Central or credited to her account. However, no quedan was issued in her name for said sugar in view of the absence from the Central of the Inspector of the Philippine Sugar Administration without whose signature no quedan could be issued.

The foregoing facts are practically admitted by both parties in the two cases that we now have before us, with few exceptions which we will point out hereafter when the time comes for their discussion. While the appellants in both cases have submitted a joint record on appeal, however, they are here represented by different counsels who have submitted separate briefs, each assigning different and separate errors. Because some of those errors are similar in nature, raise the same questions, and are met by the same line of defense by the appellee, for the sake of brevity, and to avoid repetitions, we have decided to discuss them jointly without prejudice to punctuating the questions and issues that have a direct bearing or reference to the particular party affected.

Setting aside for the present all collateral matters or issues raised by counsel for both parties, the basic issue to be determined in this appeal in the opinion of the court is whether the lessee, Jose G. Longa, defendant in both cases, can be legally required to pay the sugar rentals he has obligated himself to pay under the contracts of lease to the lessors not only inspite of war or force majeure but also inspite of the invasion and occupation of the Philippines by the enemy, or, in other words, whether the defendant can allege war or force majeure as a defense to relieve himself from his obligation to comply with the terms and conditions of the contracts of lease.

Let us discuss the theories of both parties in connection with this basic issue.

The Hacienda Biason was alloted a quota of 9,081 piculs of sugar cane. For the agricultural years 1939-1940 and 1940-1941, appellee was able to plant and mill all the quota allotted to said hacienda. It is admitted by appellants that for the crop year 1939-1940 the appellee complied with all his obligations under the contracts of lease. For the crop years 1939-1940 and 1940-1941, the quedans representing the rentals were issued by the Central Azucarera de Bais in favor of the appellants, following the practice adopted by the Central on the matter, that is, the Central issued quedans for 731 piculs of sugar for each of said crop years in favor of appellants as agreed upon. From the time of the issuance of said quedans, the sugar was placed at the disposal of the lessors.

For the agricultural year 1941-1942, appellee was able to plant in said hacienda sufficient sugar cane to cover the whole quota allotted to it. However, due to the existence of war, and the order given by the late President Quezon prohibiting the milling of sugar cane to forestall any help to the enemy in his war effort, appellee was able to mill only 1,319.92 piculs for said year, of which 96.69 piculs were the share corresponding to each of appellants Simeona M. de Castro and Paz Diago de Castro. The said sugar was credited to them by the Central pursuant to the contract, although no quedans were issued in their favor due to the fact that the Inspector of the Philippine Sugar Administration had absented himself from the Central and the latter could not legally issue the quedans without the said inspector’s signature. The letter of Don Jose Maria Rosales, Manager of the Central, which explains the whole situation on the matter, reads as follows:jgc:chanrobles.com.ph

"CENTRAL AZUCARERA DE BAIS

BAIS CENTRAL, NEGROS ORIENTAL.

Bais Central, 17 de

Diciembre de 1946.

Sres. Nolan and Manaloto

Abogados,

P. O. Box 51,

Bacolod.

Muy Señores Nuestros:chanrob1es virtual 1aw library

Correspondemos a su carta del 12 de los corrientes, en la que nos piden datos referentes a Hda. Biasong, y en contestacion, pasamos a manifestarles lo siguienta:chanrob1es virtual 1aw library

1. Esta Central comenzo su molienda de 1941-1942 el 18 de Diciembre de 1941, y termino de moler el 1.