G.R. No. L-2327

FACTS:
On September 29, 1898, the agent of the property owner, Rafael Perez Samanillo, agreed via letter to lease a building to defendant W.A. Whaley for five years, with an option for Whaley to renew for another five years. A formal lease contract was prepared and signed by the agent on September 30, 1898, but Whaley refused to sign it because it omitted the renewal option and included a room that was excepted in the letter. Whaley took possession under the letter’s terms. In March 1900, the agent filed a criminal complaint for estafa against Whaley, alleging he wrongfully collected rent for the disputed room. During conciliation and court proceedings, the agent asserted the letter was the only contract, while Whaley repudiated the letter, claiming novation, and later presented the previously unsigned formal lease, now bearing his and a witness’s signatures, as the governing contract. The court acquitted Whaley based on this lease. When the initial five-year term ended on October 1, 1903, the owner’s agent refused to renew, but Whaley, invoking the renewal option in the letter, refused to vacate. The administrator of the owner’s estate filed an ejectment suit.

ISSUE:
Whether Whaley was occupying the premises under the September 29, 1898 letter (granting a unilateral renewal option) or under the September 30, 1898 formal lease (requiring mutual consent for renewal) at the time the initial term expired in 1903.

RULING:
Whaley was occupying under the formal lease of September 30, 1898, and therefore had no right to unilaterally renew the lease. The Supreme Court held that Whaley, by his voluntary acts in the criminal casesigning the formal lease, presenting it to the court, and declaring it as the contract under which he held the premisesgave his consent to its terms. The owner’s agent, by recognizing the signed lease in the criminal case, accepted Whaley’s consent. This constituted a novation of the prior agreement (the letter) and created a binding contract under the lease’s terms, which did not include a unilateral renewal option. Consequently, Whaley was obligated to vacate upon the owner’s refusal to extend the lease. The judgment of the lower court was reversed, and the case was remanded for the assessment of damages for Whaley’s unlawful possession after October 1, 1903.