GR 94654; (September, 1991) (Digest)
G.R. No. 94654 September 24, 1991
HEIRS OF AMANDO DALISAY, represented by JUANITA VDA. DE DALISAY, et al., petitioners, vs. HONORABLE COURT OF APPEALS and FORTUNATO M. GUPIT, respondents.
FACTS
The late Dr. Amando Dalisay and Fortunato Gupit executed a 15-year lease contract over a parcel of land, extendible for another five years. The contract stipulated that before the end of the 15th year, the parties “may extend the lease for another five (5) years… under such terms and conditions that they may mutually agree upon.” Upon Dr. Dalisay’s death, his administratrix notified Gupit of the heirs’ intention not to renew the lease after its expiration. Gupit, however, notified the heirs of his intent to exercise the option to extend for five years and offered a higher rental. The heirs refused and demanded possession of the land and the building constructed by Gupit, which, per contract, would become the lessor’s property upon lease expiration.
ISSUE
Whether the private respondent-lessee can unilaterally extend the lease period for another five years based on the contractual provision for extension.
RULING
No. The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision. The Court abandoned the old rulings in Koh v. Ongsiaco and Cruz v. Alberto, which held that a lease contract extendible “at the will of both parties” granted the lessee a unilateral right to extend. Instead, the Court adopted the doctrine in Fernandez v. Court of Appeals. The lease provision stated the parties “may extend” the lease under terms “they may mutually agree upon.” This language clearly requires the mutual consent of both lessor and lessee for any extension. In a reciprocal contract like a lease, the period is deemed agreed upon for the benefit of both parties absent clear language to the contrary. There is no presumption that a lease term is for the sole benefit of the lessee. Therefore, the lessee cannot compel an extension without the lessor’s consent. The heirs validly refused to renew, and the lessee’s consignation of rentals did not cure the lack of mutual agreement for the extension.