VICENTE J. SANTI, PETITIONER, VS. HON. COURT OF APPEALS, HEIRS OF AUGUSTO A. REYES, JR., REPRESENTED BY ALEXANDER REYES, RESPONDENTS.

The sole issue of the instant case is the interpretation
specifically of paragraph 3 of the Contract of Lease^[1]
executed between Esperanza Jose, predecessor-in-interest of herein petitioner
and Augusto Reyes, Jr.

The undisputed facts of the case as summarized by the trial court
are as follows:

“Esperanza Jose was in her lifetime the registered owner and
in absolute possession of a parcel of land known as Lot 3, Block 89, situated
in Cavite City, more particularly described in TCT No. 5508 (RT-3159) with an area
of 1, 472 square meters; that sometime on July 12, 1957 she leased a portion of
the property unto spouses Eugenio Vitan and Beatriz Francisco for a period of
20 years “automatically extended” for another 20 years but with a
rental of P220.00 per month as per Lease Contract ratified before Notary Public
Abraham F. Aguilar (Exhibit ‘8’) and on which the lessees constructed a cinema
house; that sometime in 1962, the lessees sold all their rights, interest and
participation over the cinema house together with the leasehold rights on the
lessor’s property unto Augusto A. Reyes, Jr. and a new contract of lease was
entered into between the new owner and Esperanza Jose (Exhibit ‘A’) for a
period of 20 years from and after April 1, 1962 with a monthly rental of P180.00
payable in advance, said period of lease being ‘extendable’ for another period
of 20 years with the monthly rental increased to P220.00 also payable in
advance on or about the first day of each month (Exhibit ‘2-B’). In the interim, Esperanza Jose sold all her
rights and participation over the parcel of land to Vicente J. Santi and TCT
No. T-3968 of the Land Records of Cavite City was issued in his favor, on
February 23, 1982 the lease having expired, plaintiff wrote Alexander Reyes as
representative of Augusto Reyes, Jr., who had died, informing him of the
termination of the lease on March 31, 1982 and demanding peaceful turn-over of
possession, defendant refused on the ground that after consulting his lawyer,
Atty. Gregorio R. Familiar the latter informed him that the lease was
automatically extended for another 20 years at the rate of P220.00 a month and
which amount he tendered unto the plaintiff who refused and by virtue thereof,
religiously deposited the said amounts with the Clerk of Court of the Municipal
Trial Court of Cavite City (Exhibits ‘5’ and ‘6’). In view of defendant’s refusal to vacate plaintiff filed a
routine complaint against Alexander Reyes with the office of the Barangay
Captain of Barangay 34, ‘Lapu-lapu’ of the City of Cavite; and no settlement
having been reached the Barangay Captain
issued a certification to file action (Exh. ‘B’).

During the pre-trial, the parties agreed that the only question to
be resolved in this case is the interpretation of Par. 3 of the Contract of
Lease, Exhibit ‘A’, of the plaintiff and Exhibit ‘2’ for defendant which reads
as follows:

“That this lease shall be for a period of twenty (20) years
from and after the date of the execution of this document with a monthly rental
of ONE HUNDRED EIGHTY PESOS (P180.00) payable in advance, said period of lease being
extendable for another period of twenty (20) years with a monthly rental of
TWO HUNDRED TWENTY PESOS (P220.00) also payable in advance on or before the 1st
day of each month;” (pp. 73-75, orig. rec.), Emphasis supplied.

The trial court rendered judgment for the petitioner, the
dispositive portion of which reads:

“WHEREFORE, in view of the foregoing, the Court finds for
plaintiff and orders defendant Alexander Reyes as representative of the heirs
of Augusto Reyes, Jr., to turn
over the possession of the property, Lot 3, Block 89 on which the cine house is
erected unto plaintiff, to pay monthly rental of P1,000.00 commencing April 1,
1982 up to and until they shall have vacated and turned over the possession of
the premises unto plaintiff, to pay the sum of P5,000.00 as attorney’s fees,
and to pay the costs.

SO ORDERED.”^[2]

It is the contention of herein petitioner that to extend the
lease contract for another 20 years requires a subsequent agreement between the
parties as the phrase “being extendable” meant “capable of being
extended.”^[3]

On the other hand, private respondents argue that the terms of
the lease contract are clear and that the same should be automatically extended
upon the expiration of the first 20 years.

The court a quo however, gave merit to the contention of
herein private respondents and said:

“To enter into new negotiations to extend the contract would,
therefore, be superfluous and unnecessary, an idle ceremony, for the lease
contract already contains all that is necessary for the extension thereof.
“

x x x

“The suggestion to enter into new negotiations run counter to
the lease contract for, as already said, everything necessary for its renewal
or extension has been agreed upon. All
that was left was to abide by the lease contract. x x x”^[4]

We disagree.

Inasmuch as both the parties to the lease contract have already
died, a resort to the terms and conditions of the lease contract is inevitable
in order to ascertain the true intent of the parties.

In a wealth of cases and as provided for in Articles 1370 and
1372 of the Civil Code,^[5] we
have ruled that when the terms and stipulations embodied in a contract are
clear and leave no room for doubt, such should be read in its literal sense and
that there is absolutely no reason to construe the same in another meaning.^[6]

Thus, the lease contract executed between Esperanza Jose and
spouses Eugenio Vitan and Beatriz Francisco on July 12, 1957,^[7]
being clear and unambiguous, providing for an automatic extension of twenty
(20) years from the expiration of the first twenty (20) years, there is no
reason why said contract should not be interpreted in the way the contracting
parties meant it to be, that is the automatic extension of the lease for
another twenty (20) years. Thus,
paragraph 3 of the contract reads:

“3. That the period of
TWENTY YEARS (20) herein above provided shall be automatically extended
for another TWENTY YEARS (20) but with the rental of TWO HUNDRED & TWENTY
PESOS (P220.00) per month payable also in advance on or before the 1st day of
each corresponding month, at the residence of the Party of the First
part.”^[8]
(Emphasis supplied).

The same could not be said in the case at bar. The phrase “automatically
extended” did not appear and was not used in the lease contract
subsequently entered into by Esperanza Jose and Augusto Reyes, Jr. for the
simple reason that the lessor does not want to be bound by the stipulation of
automatic extension as provided in the previous lease contract.

To our mind, the stipulation “said period of lease being
extendable for another period of twenty (20) years x x ” is clear that the
lessor’s intention is not to automatically extend the lease contract but to
give her time to ponder and think whether to extend the lease. If she decides to do so, then a new contract
shall be entered into between the lessor and lessee for a term of another
twenty years and at a monthly rental of P220.00. This must be so, for twenty (20) years is rather a long period of
time and the lessor may have other plans for her property.

If the intention of the parties were to provide for an automatic
extension of the lease contract, then they could have easily provided for a
straight forty years contract instead of twenty.

We find the trial court’s decision more in accord with the true
intention of the parties except that portion wherein private respondents were
ordered to pay a monthly rental of P1,000 starting from April 1, 1982 up to and
until they shall have vacated and turned over the possession of the premises
unto herein petitioner.^[9] This
is in error.

The law in point is Article 1670 of the Civil Code, which reads:

“If at the end of the contract the lessee should continue
enjoying the thing leased for fifteen days with the acquiescence of the lessor,
and unless a notice to the contrary by either party has previously been given,
it is understood that there is an implied new lease, not for the period of the
original contract, but for the time established in Articles 1682 and 1687. The other terms of the original contract
shall be revived.”

Article 1687 provides as follows:

“If the period for the lease has not been fixed, it is
understood to be from year to year, if the rent agreed upon is annual; from
month to month, if it is monthly; from week to week, if the rent is weekly, and
from day to day, if the rent is to be paid daily. However, even though a monthly rent is paid, and no period for
the lease has been set, the courts may fix a longer term for the lease after the
lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise determine a longer
period after the lessee has been in possession for over six months. In case of daily rent, the courts may also
fix a longer period after the lessee has stayed in the place for over one
month.”

The law provides that if after the end of the lease contract, the
parties continue to enjoy the thing leased, an implied lease is created for the
period mentioned in Article 1687, hence, herein private respondents may
continue to occupy the leased premises provided such is with the permission and
consent of herein petitioner-lessor. Since the lease contract provided for a monthly rental of P220 to be
paid by the lessee upon the expiration of the first twenty years, the latter
shall be bound by such amount which shall be paid by herein private respondents
to petitioner-lessor.

ACCORDINGLY, herein private respondent is hereby ordered to turn
over the possession of the disputed property and to pay a monthly rental of
P220 starting from April 1, 1982 up to and until they shall have vacated and
turned over the possession of the premises to herein petitioner, and to pay the
sum of P5,000 as attorney’s fees.

WHEREFORE, the petition is hereby GRANTED, and the
appealed decision REVERSED and SET ASIDE. The decision of the trial court is hereby REINSTATED and MODIFIED as
provided for in the preceding paragraph. With costs.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Puno, JJ., concur.

^[1]
Exhibit “A”, Records, pp. 44-45.

^[2]
Records, p. 77.

^[3]
Rollo, p. 7, Petitioner’s Petition, p. 6.

^[4]
Rollo, p. 30.

^[5]
Article 1370: If the terms of a
contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control.

If the words appear to be contrary
to the evident intention of the parties, the latter shall prevail over the
former.

Article 1372: However general the terms of a contract may
be, they shall not be understood to comprehend things that are distinct and
cases that are different from those upon which the parties intended to agree.

^[6]
Papa vs. Alonzo, 188 SCRA 564, G.R. No. 79318, June 27, 1991.

^[7]
Exhibit “8”, Records, pp. 62-64.

^[8]
Id. at p. 63.

^[9]
Records, p. 77.