R & M General Merchandise v CA G.R. No. 144189 Oct.

5, 2001
Ponente: Mendoza, J

FACTS:
 August 14, 1975 - petitioner (lessee) entered into a contract with Pioneer Realty &
General Enterprise Corporation (lessor) for the lease of a parcel of land and a building at
Makati City. The lease was for a period of 5 years (Nov. 16, 1975-Nov. 16, 1980),
renewable for another 5 years depending on the petitioner, unless the latter gave a written
notice of nonrenewal 6 months before the expiration of the contract. It was stipulated that
petitioner would construct on the lot a concrete building which would automatically
become the property of Pioneer upon the termination of the lease without any obligation
on the part of private respondent to reimburse petitioner for its cost.
 October 24, 1985 - another contract of lease was made over the same property subject of
the first lease contract. The lease was for 3 years renewable for another 3 years. The
agreement provided that either party may elect not to renew the contract after three years
by giving a written notice 45 days before the contract expired.
 October 10, 1988 - petitioner and private respondent entered into another lease contract
over the same property for a period of 3 years renewable for another 3 years. Except for
the amount of the rent, the contract provided for the same stipulations and had the same
signatories as the second contract.
 1991 - Later on, another lease contract was executed over the same property for a period
of five years renewable for another five years. The contract provided for the 45 day
written notice of nonrenewal in case either party did not wish to renew the contract.
 On February 27, 1996, private respondent sent notice of its intention not to renew the
lease contract after its expiration on Nov. 15, 1996.
 Petitioner said that it had the option to renew the lease contract for another 5 years. It had
been renewing it with the late Johnny Cheng Sr., and it was agreed that respondent
should notify on the immediately preceding contract that it would be renewed for the last
time. Respondent denied and stated that it had the right to contract to terminate the lease
upon expiration and that it followed the need of giving notice since it gave notice more
than 45 days before the expiration period.
 Petitioner failed to vacate the property which led the respondent to file a case for
unlawful detainer at the MTC of Makati. Private respondent also prayed for back rental,
legal interest from Nov. 16, 1996 (the day after the expiration of the last contract) until
the petitioner vacates the premises, moral damages, attorney’s fees and cost of suit.
 MTC of Makati ruled in favor of the plaintiff, asked the petitioner to vacate the premises.
RTC and CA affirmed such decision.

ISSUE/s:
1. WON CA erred in affirming the decision of the lower courts and ordering the petitioners
to vacate such property? NO
a. Err in concluding that the parties had no intention of entering and did not enter into a
thirty year lease of the subject property?
b. Err in failing to consider the proffered reason for and import of the renewal provision
contained in the lease contracts executed by the parties over the years from 1975 to 1991
– 1996?
c. Err in failing to accord consideration to the unrebutted testimony that the real agreement
between the parties was with the knowledge of [respondent] Johnny Cheng, Jr. and
accordingly apply the doctrine of estoppel against private respondent?
d. Err in concluding that petitioner is not exempted from the application of the Statute of
Frauds?
2. WON MTC of Makati acquired jurisdiction over the case and if there was forum
shopping and litiis pendentia?

HELD:
1. NO. It is a time honored rule that a contract constitutes the law between the parties and
they are, therefore, bound by its stipulations. If the terms of a contract are clear and leave
no doubt as to the intention of the contracting parties, the literal meaning of its
stipulations shall control.
a. The stipulations in the contracts clearly show that the parties entered into the four
lease contracts for definite periods of five, three, three, and five years,
respectively.
The 1975 contract provided for its automatic renewal for five years and gave the
option not to renew the contract only to petitioner, to be exercised by it within six
months prior to the expiration of the contract. However, the succeeding three
contracts granted the option not to renew the lease to both parties, to be exercised
by any of them within a shortened period of 45 days before the expiration of the
contract.
The evidence shows that private respondent exercised its option not to renew the
lease contract by serving notice to that effect way in advance of the agreed 45 day
period. Hence, the lease contract expired on November 16, 1996 and private
respondent was justified in seeking the ejectment of petitioner based on
Article 1673 (1) of the Civil Code.
b. Petitioners say that the four lease contracts did not state the real intention of the
parties with regard to the period of lease. They maintain that there was an oral
agreement with Johnny Cheng, Sr., private respondent, for the lease of the
property for 30 years from Nov. 16, 1975 and that the last 5 years of the lease
contract should contain a provision that it would be renewed only for another 5
years if the lessor did not want it to extend until 30 years.
Such has no merit. The stipulations in the lease contracts were in plain, simple
and unambiguous terms. There is no need to resort to evidence beyond the import
of the written contract to determine the period of effectivity of the contract. It
cannot be inferred, in all and especially in the last contract, that parties intended to
continue for 30 years or be renewed for 5 years should respondent opt not to
renew the contract until 2005.
c. The claim that these contracts are not governed by the Statute of fraud or
parole evidence is wrong. The oral lease agreement is unenforceable under the
Statute of Frauds, which requires that an agreement for the lease of real property
for a longer period than one year should be in writing and subscribed to by the
parties or their agents.
Petitioner said that the agreement did not show the real intention of the parties.
However, there is no evidence to sustain this. In order for the intention of the
parties to prevail over what is written in the contract, such must be proved by
competent evidence.
The renewal of the lease agreement for a total of 16 years from the original five
year period does not prove the existence of the alleged 30 year verbal lease
contract.
Records show that the 1975 contract was renewed because of the automatic
renewal clause in favor of petitioner, while the 1985 and the 1988 contracts were
renewed because they were mutually agreed upon by the contracting parties.

2. Yes. MTC has jurisdiction over the case. The nature of an action is determined by the
allegations in the complaint and the character of the relief sought. Since the complaint
alleged unlawful detainer, then MTC acquired jurisdiction.
a. For litis pendentia to be a ground for the dismissal of an action there must be:
i. Identity of the parties or at least such as to represent the same interest in
both actions
ii. identity of rights asserted and relief prayed for, the relief being founded on
the same acts
iii. the identity in the two cases should be such that the judgment which may
be rendered in one would, regardless of which party is successful, amount
to res judicata in the other.
b. Forum shopping exists where the elements of litis pendentia are present, and
where a final judgment in one case will amount to res judicata in the other.
c. Here, the relief sought before the RTC was the renewal of the 1991 lease contract
for another five year period, whereas in the MTC, the relief sought was the
recovery of possession of the leased property. There is no basis, therefore, for
petitioners contention that private respondent is guilty of forum-shopping.
d. There is no merit to the contention that the lessees supposed right to a renewal of
the lease contract cannot be decided in the ejectment suit. In Teodoro v Mirasol,
the Court held that such right is a proper and legitimate issue that could be raised
in an unlawful detainer case because it may be used as a defense to the action.
The mere fact that the unlawful detainer ejectment case was filed later would not
change the situation to depart from the application of the foregoing ruling.

OTHERS:
Summary of the 4 lease contracts:
1. 1975 contract
Term: This Contract of lease shall be for a period of five (5) years effective November 16, 1975, renewable for
another period of five (5) years. In case the LESSEE elects not to renew the lease contract after five (5) years,
the LESSEE shall inform the LESSOR by written notice six (6) months prior to the expiration of this lease
contract.
2. 1985 contract
Term: This Contract of Lease shall be for a period of three (3) years starting November 16, 1985 to November
15, 1988 renewable for another period of three (3) years subject to terms and conditions to be mutually agreed
upon between parties. In case either party elects not to renew the lease contract after three (3) years, a written
notice shall be made within forty five (45) days prior to the expiration of the lease contract.
3. 1988 contract
Term: This Contract of Lease shall be for a period of three (3) years starting November 16, 1988 to November
15, 1991 renewable for another period of three (3) years subject to the terms and conditions to be mutually
agreed upon between parties. In case either party elects not to renew the lease contract after three (3) years, a
written notice shall be made within forty five (45) days prior to the expiration of the lease contract.
4. 1991 contract
Term: This Contract of Lease shall be for a period of five (5) years starting November 16, 1991 to November
15, 1996 renewable for another period of five (5) years subject to terms and conditions to be mutually agreed
upon between the parties. In case either party elects not to renew the lease contract after five (5) years, a written
notice shall be made within forty five (45) days prior to the expiration of the lease contract.