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R&M General Merchandise, Inc. vs. CA (366 SCRA 679)




PETITIONER: R&M General Merchanduse, Inc.

RESPONDENT: CA and La Perla Industries, Inc

PONENTE: Mendoza, J.

This case arose from the decision of the CA affirming the decision of the MTC,
Branch 67 or Makati City, ordering R&M Merchandise, Inc. to be ejected from the
property of La Perla Industries, Inc.

The parties entered into four lease contracts for definite periods of 5, 3,3, and 5
years, respectively starting from 1975. The first contract provided for its automatic
renewal for five years and gave the option NOT to renew the contract only to the
petitioner, to be done within 6 months prior to the expiration of the contract. The
succeeding 3 contracts granted the same option to both parties, with the
notification, stipulated to be done a shortened period of 45 days before the
expiration of the contract.

Upon the expiration of the contract and the notification of respondent that they do
not wish to renew the lease contract, R&M General Merchandise asserted that
there was an oral/supplemental agreement between them and the late, Johnny
Cheng Sr. (then President of La Perla) that it had the option the renew the lease
contract for another five years and that should the respondent wish to not renew
the lease contract, it should express so immediately preceding the renewal of the

Whether the alleged oral/supplemental agreement Eufronio Raz, Jr. and Johnny
Cheng, Sr. (for a lease of 30 years with the last five year lease contract containing a
provision that the same would be the last renewal of the contract, and that the
notification of the non-renewal of the lease contract should be done immediately
preceding the contract renewal in order to enable the petitioner to prepare for the
final termination of the contract and to recover what it had spent for the
construction and renovation on the building) should be honored along with the
stipulations of the contract recently executed.

Article 1315
Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in keeping with good
faith, usage and law. (1258)


No. The oral agreement of Eufronia Raz Jr. and Johnny Cheng, Sr. cannot be
honored. It is a time-honored rule that a contract constitutes the law between
parties and they are 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.

The recent contract stipulated that the lease shall be for a period of five years
starting November 16, 1991 to November 15, 1996 renewable for another five
years subject to terms and conditions to be mutually agreed upon between the
parties. In case the either party elects not to renew the lease contract after five
years, a written notice shall be made within forty-five days prior to the expiration of
the contract. The private respondent exercised its option NOT to renew the lease
contract by serving notice to that effect in advance before the 45-day agreed
period. The lease contract expired on November 16, 1996 and private respondent
was justified in seeking the ejectment of the petitioner.