Allied Banking Corporation v. Court of Appeals

Summary

Allied Banking Corporation leased property from Tanqueco spouses under 14-year contract with clause allowing renewal 'for like term at option of lessee.' When lessors refused renewal and Allied exercised its option, lower courts declared renewal clause void for violating mutuality principle under Civil Code Article 1308. Supreme Court reversed, ruling that such option clauses are valid as they form part of lease consideration and both parties become mutually bound once option is exercised. Court held renewal must be under same terms as original contract unless expressly providing otherwise. Since Allied had already vacated premises, renewed lease was terminated but Allied liable for rentals during holdover period. Court also ruled Allied lacked standing to challenge deed of donation over leased property, not being party to donation. Case establishes important precedent on validity of unilateral renewal options in lease contracts and requirements for challenging third-party transactions.