Jespajo Realty Corp vs.

CA

FACTS:

The controversy springs from an apartment building owned by the Jespajo

Realty Corp. The said corporation lead by its President Jesus Uy executed a
contract of lease with herein respondents Tan Te and Co Tong. Pursuant to
the said contract, Tan Te occupied rm. no. 217 of the said building at a
monthly rate of P814 while Tong occupied the penthouse at a monthly rate of
P917.

The contract of lease explicitly stipulates: that the lessees may occupy the
said premises as long as that payment for monthly rental is updated. The
lessees may terminate the contract anytime provided that they give a 60 day
prior written notice.

The lessor may terminate the contract anytime should the lessees commit
any violation of the terms of agreement.

For 5 years, the lessees were able to pay petitioner-corporation religiously.

However, as of Jan. 1990, the petitioner sent them a letter asking for an
increase in the monthly rent. From the original price agreed (P800-900), it
became 3,500 for each of them,

In reply to the said proposal, the respondents through their counsel, sent a
letter of opposition to the said proposal. Due to the opposition, the petitioner-
corporation, filed an ejectment case against the respondents, also ordering
them to pay P7,000 for the monthly rental on Feb.-March 1990.

Respondents gave extra efforts to pay the petitioner according to the original
price agreed in the contract. However, it refused.

May 1990 - respondent-lessees take refuge to the MTC, to consign their

payment for the monthly rentals.

Now. 1990 - MTC dismissed the ejectment case filed by the petitioner.

Feb. 1991 - the judge decreed an order allowing herein respondents to

deposit with the city treasurer of MLA the respective rentals of respondents
for 13 months. (from the date of the filing of the consignment, Feb 1990-Jan
1991).

jespajo appealed to the RTC, which became in favor of the said corporation.

CA reversed the decision of the RTC. Hence, this petition.

ISSUE:
Whether or not the contention of the petitioner-corporation that the
stipulation in a contract: The lease period shall subsist for an indefinite period
provided the lessess is up-to-date in the payment of his monthly rentals is
contrary to Art. 1308 of the civil code.

RULING:

The fact that such option is binding only on the lessor and can be exercised
only by the lessee does not render it void for lack of mutuality. After all,
the lessor is free to give or not to give the option to the lessee. And while the
lessee has a right to elect whether to continue with the lease or not, once he
exercises his option to continue and the lessor accepts, both parties are
thereafter bound by the new lease agreement. Their rights and obligations
become mutually fixed, and the lessee is entitled to retain possession of the
property for the duration of the new lease, and the lessor may hold him liable
for the rent therefor. The lessee cannot thereafter escape liability even if he
should subsequently decide to abandon the premises. Mutuality obtains in
such a contract and equality exists between the lessor and the lessee since
they remain with the same faculties in respect to fulfillment.

As correctly ruled by the MTC in its decision, the grant of benefit of the period
in favor of the lessee was given in exchange for no less than an automatic
20% yearly increase in monthly rentals.

Thus, the present petition is DENIED, the ruling of the CA is upheld.