G.R. No. 136913 - Buce vs. Court of Appeals

Anita C. Buce (petitioner) leased a 56-sqm parcel at 2068 Quirino Avenue, Pandacan, Manila, from the Tiongco spouses (respondents) under a written lease effective June 1, 1979 to June 1, 1994 “subject to renewal for another ten (10) years under the same terms and conditions.”
Petitioner constructed a building on the lot and initially paid P200 monthly. Respondents, through their administrator Jose Tiongco, later raised rent progressively to P400 by 1985, then to P1,000 for July–August 1991, and notified petitioner of a P1,576.58 rate effective January 1992 under the Rent Control Law (RA 877, as amended).

Between October 1991 and January 1993, petitioner tendered checks for only P400 monthly, which respondents refused. On August 9, 1993, petitioner filed a complaint for specific performance with prayer for consignation (RTC Manila Civil Case No. 93-67135), seeking enforcement of the original lease term and P200 rent.
Respondents countered that the lease had expired or been novated by higher rent payments and that renewal was not automatic but required mutual agreement.
The RTC declared the lease automatically renewed for ten years, fixed graduated rents (P400 to June 1994; P1,000 to June 1999; P1,500 thereafter), and upheld the rent increases as novating the contract.
The Court of Appeals reversed, holding the lease expired on June 1, 1994 without renewal, ordering petitioner to vacate and pay arrears at P1,000 monthly. Petitioner’s motion for reconsideration was denied.

Whether the clause “subject to renewal for another ten (10) years” in the lease contract creates an automatic renewal or merely an option to renew requiring mutual agreement.
Whether the Court of Appeals exceeded its authority in ordering petitioner’s ejectment absent a prayer or proper unlawful detainer proceedings.