Allied Banking Corporation v. CA
G.R. No. 124290
January 16, 1998
ALLIED BANKING CORPORATION, petitioner, vs. COURT OF APPEALS, HON. JOSE C. DE GUZMAN, OSCAR D. TANQUECO, LUCIA D. TANQUECOMATIAS RUBEN D. TANQUECO and NESTOR D. TANQUECO, respondents
Facts:
Felimon Tanquenco and Lucia Domingo-Tanquenco owned a lot in Quezon City that they leased to the petitioner Allied Banking Corporation. In its Provision No. 1, the lease contract specifically states that “the term of the lease shall be fourteen years commencing from April 1, 1978, and may be renewed for a like term at the option of the lessee.” Allied constructed a building to be used as its office and, as stipulated, the ownership of the building would be transferred to the lessors upon the contract’s expiration. On February 1988, the lessor spouses executed a deed of donation over the subject property of their four children, herein respondents, who accepted the donation.
On February 13, 1991, the Tanquenco children told Allied that they were no longer interested in extending the lease, but Allied replied that it was exercising its option to renew their lease under the same terms with additional proposals. An action for ejectment was filed against Allied, and the trial court granted the same, declaring Provision No. 1 of the contract void for violating Article 1308 of the Civil Code which provides “The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.”
Issue:
Was Provision No. 1 valid?
Ruling:
Yes. The lease contract was mutually agreed upon and was hence valid and binding on both parties. The fact that the option is binding only on the lessor and can be exercised only by the lessee does not render the provision void for lack of mutuality because the lessor was free not to give the option to the lessee if he so desires. In addition, it is a settled rule that in case of uncertainty in granting extension to a contract of lease, the tenant is favored over the landlord.
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