Santi v. Court of Appeals
REITERATIONFacts
The Antecedents: Esperanza Jose, owner of a parcel of land, leased a portion to spouses Eugenio Vitan and Beatriz Francisco for 20 years, with a stipulation for an "automatically extended" period of another 20 years. The lessees constructed a cinema house. In 1962, Augusto A. Reyes, Jr. purchased the rights and interests of the lessees. A new lease contract was entered into between Jose and Reyes for 20 years from April 1, 1962, with a monthly rental of P180.00, stating "said period of lease being extendable for another period of twenty (20) years with a monthly rental increased to P220.00." Subsequently, Jose sold her rights to Vicente J. Santi. Procedural History: Upon the expiration of the lease on March 31, 1982, Santi informed Reyes' heirs of the termination and demanded possession. The heirs refused, claiming the lease was automatically extended based on their lawyer's advice, and tendered the P220.00 monthly rental, which Santi refused. Santi filed a complaint for ejectment after barangay conciliation failed. The trial court ruled in favor of Santi, ordering the turnover of possession, payment of P1,000.00 monthly rental from April 1, 1982, and attorney's fees. The Court of Appeals affirmed the trial court's decision. The Petition: Santi filed a petition for review, arguing that the phrase "being extendable" meant "capable of being extended," requiring a subsequent agreement for extension, not an automatic one. The private respondents contended that the contract terms were clear and should be automatically extended.
Issue(s)
Whether the phrase "said period of lease being extendable for another period of twenty (20) years" in the lease contract between Esperanza Jose and Augusto A. Reyes, Jr. signifies an automatic extension of the lease or merely an option for extension requiring a new agreement. Whether, given the lessee's continued enjoyment of the property after the original lease term, Article 1670 of the Civil Code applies to create an implied new lease, and if so, what are the terms of that implied lease, particularly concerning the monthly rental amount.
Ruling
The petition is GRANTED. The appealed decision of the Court of Appeals is REVERSED and SET ASIDE. The decision of the trial court is REINSTATED and MODIFIED. The private respondent is ordered to turn over possession of the property and to pay a monthly rental of P220.00 starting from April 1, 1982, until possession is vacated, and to pay P5,000.00 as attorney's fees.
Ratio Decidendi
On the interpretation of "said period of lease being extendable": The Court disagreed with the lower courts' interpretation, emphasizing that clear stipulations should control. The phrase "being extendable" indicates a possibility, not an automatic renewal, distinguishing it from the original contract's "automatically extended" clause. The lessor reserved the option to decide on an extension, necessitating a new contract. If an automatic extension was intended, a straight forty-year contract could have been provided. On the application of Article 1670 of the Civil Code and the terms of the implied lease: The Court found Article 1670 applicable, creating an implied new lease due to the lessee's continued enjoyment of the property with the lessor's acquiescence. The terms of the original contract are revived, except for the period. The monthly rental for the implied new lease is P220.00, as stipulated for the extended period in the original contract, correcting the trial court's imposition of P1,000.00.
Main Doctrine
The phrase "said period of lease being extendable" in a contract of lease signifies the lessor's option to extend, not an automatic extension, requiring a new agreement for the extension to be valid, unless the contract explicitly states an automatic extension.