CASE DIGEST: Ngei Multi-Purpose vs. Ronquillo

G.R. No. 184950 : October 11, 2012




On March 7, 1990, petitioner NGEI Multi-Purpose Cooperative Inc. (NGEI Coop) leased to respondent Filipinas Palmoil Plantation, Inc. (FPPI) an agricultural land for palm oil plantations commencing on September 27, 1988 and ending on December 31, 2007. Under the lease agreement, FPPI shall pay NGEI Coop a yearly fixed rental of ₱635.00 per hectare.

On January 29, 1998, the parties executed an Addendum to the Lease Agreement (Addendum) which provided for the extension of the lease contract for another 25 years from January 1, 2008 to December 2032. The Addendum was signed by Antonio Dayday, Chairman of the NGEI Coop, and respondent Dennis Villareal, the President of FPPI. The annual lease rental remained at ₱635.00 per hectare, but the package of economic benefits for the bona fide members of NGEI Coop was amended and increased.

On June 20, 2002, NGEI Coop and petitioner Hernancito Ronquillo filed a complaint for the nullification of the lease agreements before the DARAB. NGEI Coop alleged, among others, that the Addendum was null and void because the stipulated yearly lease rental of ₱635.00 per hectare was unconscionable. The Regional Adjudicator dismissed the complaint. On appeal, the DARAB Central Office upheld the Regional Adjudicator.

The CA sustained the validity of the Addendum based on the principle of mutuality of contracts wherein the parties were bound by the terms and conditions unequivocally expressed in the Addendum which was the law between them. Hence, NGEI Coop and Ronquillo interposed the present petition.

ISSUE: Whether or not the terms and conditions of the Addendum are binding to the parties?

HELD: The Court finds the petition bereft of merit.

CIVIL LAW: principle of mutuality of contracts

The Court understands the predicament of these farmer-beneficiaries of NGEI Coop.Under the prevailing circumstances, however, it cannot save them from the consequences of the binding lease agreement, the Addendum.The petitioners, having freely and willingly entered into the Addendum with FPPI, cannot and should not now be permitted to renege on their compliance under it, based on the supposition that its terms are unconscionable. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.

It is basic that a contract is the law between the parties. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Unless the stipulations in a contract are contrary to law, morals, good customs, public order or public policy, the same are binding as between the parties. The petitioners failed to show that the Addendums stipulated rental rates and economic benefits violated any law or public policy.

Petition is DENIED.