[ASSUMPTION OF RISK]
3 is susceptible of only one ineluctable meaning, which
27
CIRIACA CANETE V. SAN ANTONIO AGRO-INDUSTRIAL DEVELOPMENT
CORPORATION (G.R. NO. L-51152)
WALTER BAYNOSA V. SAN ANTONIO AGRO-INDUSTRIAL DEVELOPMENT
CORPORATION (G.R. NO. 55440)
April 27, 1982 | Barredo, J. |
Doctrine: Insert doctrine here
Facts:
● Appellees, as lessors. entered into separate, identical lease contracts with
the appellant as lessee.
● In both contracts, paragraph 3 fixed the term of the lease at five years
beginning with the crop year 1968-69 and ending in crop year 1973-74 with
an option on the part of the lessee to extend the lease for another five years;
while paragraph 7 gives the lessee an option to buy the land if the lessor
was willing to sell "and likewise the LESSEE is given the option to lease . . .
in case the LESSOR is Likewise willing to lease -the same again."
● In 1973, when appellant wrote appellees of its intention to exercise its option
under par. 3 of the contracts, appellees informed appellant that they were
terminating the lease contract, invoking par. 7 thereof, and advised it to
vacate the premises. Appellant refused to vacate the land.
● Hence, appellees files suits for declaratory relief and damages against the
appellant with the Court of First Instance.
● The appellant, in its answer, averred that in par. 3 of the lease contract, it
has the exclusive unilateral option to extend the lease.
● The trial court rendered judgment declaring the lease contracts terminated
due to refusal of the lessor to extend the same.
● Appealed to the Court of Appeals, the cases were certified to the Supreme
Court the only issue being the correctness of the trial court's interpretation of
the lease contracts which is a question of law.
Issue:
W/N the trial court was correct in holding that the exercise of the option is dependent
on the approval of the lessor.
Held:
NO. Parties to a contract are free to deprive themselves of certain rights and
waive them, if any such exist in law, as long as such renunciation is not
violative of public policy or any contrary legal impediment. (Art. 6, NCC)
● Par. 3 is clear, but par. 7 is a little ambiguous.
● While par. 3 fixes the duration of the lease and explicitly and definitely adds
the conferment or granting on an unqualified option "on the part of the
LESSEE to extend" the said period for "another five years," par. 7, on the
other hand, refers to an option given to the said LESSEE "to purchase the
above-described parcels of land in case (the respective LESSOR) shall be
willing and desirous to sell the same." In the same breath it adds the
controversial grant of an option to the LESSEE "to lease the above parcels
of land in case the LESSOR is likewise willing to lease the same again."
● The language of par.
is, that the option to extend the leases in question has been given
exclusively and unqualifiedly to the LESSEE.
● On the other hand, par. 7 is open to two possible interpretations:
○ that the option unilaterally given to the lessee corporation to further
lease the lands concerned after the 1973-74 crop year should be
understood as qualified by the option granted to it under par. 7
which says "in case the LESSOR is likewise willing to lease the
same again"
○ that said option to "lease again" under par. 7 shall be exercisable
only after the option already granted under par. 3 shall have
already been exercised by the LESSEE.
● Conventional wisdom dictates that the option in par. 7 would defeat that
granted in par. 3, if the Court is to follow appellees’ posture that the option
given to the LESSEE under par. 3 is not unilateral or belonging to the
LESSEE alone.
○ “We are not prepared to believe that parties to a contract who are
sui juris and presumably knowledgeable of the purposes for which
they solemnly put into writing their agreements could be so
careless as to set down conflicting and inconsistent conditions in
such brief and simple contracts as those now before Us.”
● The best reconciliation between par. 3 and par. 7 is to give effect to the latter
only after the option in the former has already been exercised, thereby
avoiding conflict, contradiction and inconsistency within the four corners of
the same agreement.
● Appellee maintains that to construe paragraph 3 literally would leave the
extension of the period exclusively to appellant corporation, which, it is
alleged, is contrary to the principle of mutuality in contracts
○ There is nothing illegal or contrary to public policy in such a
stipulation.
Dispositive
ACCORDINGLY, judgment is hereby rendered reversing the judgment of the trial
court and We hereby recognize and declare it to be the right of appellant corporation
to have had an extension of its contracts of lease in issue up to crop year 1978-79.
Costs against appellees.