Case Summary (G.R. No. 136913)
Procedural History
Petitioner sued for specific performance and consignation before the RTC, praying that respondents accept rent at the original rate and honor the ten-year renewal. The RTC (Aug. 29, 1995) ruled the lease automatically renewed for ten years and fixed graduated rents: ₱400 (1990–1994), ₱1,000 (1994–1999), ₱1,500 (2000–2004). On appeal, the Court of Appeals reversed, held the lease expired on June 1, 1994 without renewal, ordered petitioner’s immediate ejectment, and assessed arrears at ₱1,000 per month. Petitioner elevated the case to the Supreme Court.
Issue
Whether the clause “subject to renewal for another ten (10) years under the same terms and conditions” created an automatic extension of the lease or merely an option requiring mutual agreement at the end of the original term.
Contractual Interpretation Principles
Under Article 1370, a contract’s clear and unequivocal terms prevail. Under Article 1371, ambiguous provisions are interpreted in light of the parties’ contemporaneous and subsequent acts. Legally, a renewal clause obliges the parties to execute a new lease; an extension clause operates of its own force to prolong the existing term.
Application of Fernandez Precedent
Fernandez v. Court of Appeals (166 SCRA 577) and Article 1196 of the Civil Code establish that, in reciprocal leases, the period benefits both parties unless a contract explicitly grants unilateral renewal rights. In the absence of specific language conferring an exclusive option to renew upon one party, renewal requires mutual consent.
Supreme Court’s Analysis
The renewal clause was ambiguous as to automatic operation and its intended beneficiary. Petitioner’s right to build improvements and early filing of suit did not evince an intent to renew automatically. Acceptance of increased rent likewise did not manifest a renewal agreement. In line with Fernandez and
...continue readingCase Syllabus (G.R. No. 136913)
Facts of the Case
- Petitioner leased a 56-sq.m. parcel of land at 2068 Quirino Avenue, Pandacan, Manila, from June 1, 1979 to June 1, 1994 “subject to renewal for another ten (10) years, under the same terms and conditions.”
- She constructed a building on the lot and paid an initial monthly rent of ₱200.
- Through their administrator, respondents gradually raised the rent to ₱400 by 1985.
- Petitioner paid ₱1,000 for July and August 1991.
- On December 6, 1991, respondents’ counsel demanded an increase to ₱1,576.58 per month effective January 1992 under the Rent Control Law.
- Petitioner thereafter tendered checks for only ₱400 (dated October 5, 1991 to January 2, 1993), which respondents refused to accept.
Procedural History
- 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 ₱200 rent, the fifteen-year term, and the ten-year renewal.
- Respondents answered, asserting:
• Rent should be ₱1,576.58 under RA 877 as amended.
• The renewal clause does not grant automatic renewal but an option requiring mutual agreement. - During trial, respondents reminded petitioner of lease expiry (June 1, 1994) and demanded arrears of ₱33,000.
- August 29, 1995 (RTC): Declared automatic renewal for ten years; fixed rents at ₱400 (1990–1994), ₱1,000 (1994–1999), and ₱1,500 (2000–2004) due to an “inevitable novation” arising from successive rent increases.
- Court of Appeals: Reversed; held lease expired June 1, 1994 without renewal; ordered petitioner to vacate and to pay arrea