DBP v.
CA
Requisites: Conditional Obligations
FACTS:
Private respondents were the original owners of an agricultural
land (113,695 square meters). They mortgage such to petitioner.
They defaulted in their obligation hence petitioners foreclosed
the mortgaged and emerged as the sole bidder in an auction.
Title was transferred.
Petitioner and Private respondents entered into a Deed of
Conditional Sale to reconvey the foreclosed property.
Upon completing such payment, private respondent demanded
the execution of a Deed of Conveyance but they were informed
that it was impossible because of the CARL (10 June 1988).
Private respondents filed a complaint for specific performance
with damages.
HELD:
In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes the
condition.
Applying in this case, the full payment by the Appellee retroacts
to the time the contract of conditional sale was executed on April
6, 1984. Hence it does not come under the coverage of RA 6657.
The Deed of Condition sale was executed on 6 April 1984. They
paid in full on 6 April 1990.
Petitioner allowed the private respondents to fulfill the
condition of effecting full payment and invoked CARL which was
enacted on 10 June 1988.
CARL was not intended to impair the contract that was
concluded.
Moreover, Section 6 of CARL deals with “execution by the
original land owner” who is not the petitioner but the private
respondents.
TOMIMBANG v. TOMIMBANG
Suspensive Condition: Meaning
FACTS:
Maria and Atty. Jose are siblings. Their parents donated to
Maria an 8-door apartment with the CONDITION that during
the parent’s lifetime, they shall retain control over the property
and Maria shall be the administrator thereof.
Maria tried and failed to apply for a loan from PAG-IBIG for
renovations.
Jose offered to extend a credit line to Maria on the ff conditions:
1. P shall keep a record of all the advances
2. P shall start paying the loan upon completion
3. Upon completion, a loan and mortgage agreement
based on the amount of the advances made shall be
executed
4. The loan agreement shall contain comfortable terms
and conditions which P could have obtained from PAG-
IBIG
P accepted.
7 out of 8 was completed in the renovation. An altercation broke
out between P and R. They entered into a new agreement
whereby P shall start paying her loan and showed the records of
the cash advances.
P payed 93,500 in 5 months.
R quarreled with another sister and they had a hearing at their
barangay. R reminded the payment however, P allegedly
answered “wala tayong pinirmahan”
P left and could no longer be found and she stopped paying.
R filed a complaint demanding P to pay 3,989,802.25 plust 12%
interest per annum.
ISSUES:
(1) Whether petitioner's obligation is due and
demandable;
(2) Whether interest should be imposed on
petitioner's indebtedness and, if in the affirmative,
at what rate.
HELD:
(1) The loan obligation arising from the loan is due and
demandable.
Their younger brother testified that they made a new agreement
and Maria agreed to pay.
Hence, the parties mutually dispensed with the condition that P
shall only begin paying after the completion of all renovations.
There was a modificatory or partial novation.
Art. 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the
creditor.
Novation may either be extinctive or modificatory, much
being dependent on the nature of the change and the
intention of the parties. Extinctive novation is never
presumed; there must be an express intention to novate; x x
x.
An extinctive novation would thus have the twin effects of,
first, extinguishing an existing obligation and, second,
creating a new one in its stead. This kind of novation
presupposes a confluence of four essential requisites: (1) a
previous valid obligation; (2) an agreement of all parties
concerned to a new contract; (3) the extinguishment of the
old obligation; and (4) the birth of a new valid obligation.
Novation is merely modificatory where the change brought
about by any subsequent agreement is merely incidental to
the main obligation (e.g., a change in interest rates or an
extension of time to pay); in this instance, the new agreement
will not have the effect of extinguishing the first but would
merely supplement it or supplant some but not all of its
provisions.
There is partial novation when there is only a modification
or change in some principal conditions of the obligation. It is
total, when the obligation is completely extinguished. Also,
the term principal conditions in Article 1291 should be
construed to include a change in the period to comply with
the obligation. Such a change in the period would only be a
partial novation since the period merely affects the
performance, not the creation of the obligation
The payment by Maria is proof that the original agreement had
been novated.
There is partial novation when there is only a modification or
change in some principal conditions of the obligation. It is total,
when the obligation is completely extinguished. Also, the term
principal conditions in Article 1291 should be construed to
include a change in the period to comply with the obligation.
Such a change in the period would only be a partial novation
since the period merely affects the performance, not the creation
of the obligation
(2) Since the obligation in this case involves a loan and there is
no stipulation in writing as to interest due, the rate of interest
shall be 12% per annum computed from the date of extrajudicial
demand.
VDA. DE MISTICA v. NAGUIAT
Potestative Suspensive Conditions
FACTS:
Eulalio Mistica, predecessor-in-interest of petitioner, is the
owner of a land in Bulacan. A portion was leased to Bernardino
Naguiat.
Eulalio entered into a contract to sell with Naguiat on the lot
(200m) fo 20,000. Advance payment of 2,000. 18,000 to pay in
10 years to start immediately. Default, 12% per annum.
He gave a downpayment of 2,000 and a partial payment of 1000.
However he failed to make any payments and died in 1986.
Petitioner filed a complaint for rescission and to vacate the lot.
Rent 200 per month.
They answered that it cannot be rescinded because it was
stipulated that failure to pay will just earn a 12% interest.
In the wake of Eulalio, R contended that he also offered to pay
the balance but P refused hence there is no breach. R also said
that he is the present owner in fee simple of the subject lot by
virtue of Free Patent Title by the Bureau of Lands and his title
has already become indefeasible and incontrovertible.
HELD:
I. Recission in Article 1191
P contends that the interest did not extend the period to pay.
The Court disagrees. The contract was a Contract of Sale. There
was no stipulation that the title will be transferred until the full
payment; nor there was a stipulation giving the vendor the right
to unilaterally resolve the contract the moment the buyer fails to
pay within a fixed period.
The failure to pay in full the purchase price stipulated in a deed
of sale does not ipso facto grant the seller the right to rescind the
agreement. Unless otherwise stipulated by the parties,
rescission is allowed only when the breach of the contract is
substantial and fundamental to the fulfillment of the obligation.
The failure to pay within 10 years did not amount to a substantial
breach. It was stipulated in the Kasulatan that payment could be
made even after ten years from the execution of the Contract.
Moreover, there was no demand for the balance. P even refused
payment.
The code prohibits potestative, suspensive, conditional
obligations that depend on the will of the debtor, because it is
usually not meant to fulfill.
II. Rescission Unrelated to Registration
The issuance of a certificate of title in favor of respondents does
not determine whether petitioner is entitled to rescission.
III. Registration has never been a mode of acquiring ownership
over immovable property, because it does not create or vest title,
but merely confirms one already created or vested.
TRILLANA v. QUEZON COLLEGES
Potestative Suspensive Conditions
FACTS:
Damasa Crisostomo subscribed to 200 shares of stock (P100
each). Payment “pagkatapos na ako ay makapag-pahuli ng isda”
as initial payment and balance payable in accordance with law
and the RR of Quezon College.
He died. Quezon College presented a claim in her testate for
collection of 20,000. It was opposed by the administrator
(Trillana) and the CFU dismissed the claim for the subscription
was not registerd and authorized by SEC.
HELD:
There is nothing in the record to show that the College accepted
the term of payment. As the application was inconsistent with
the terms issued by Quezon College, it was necessary for the
College to express its agreement because it’s unfair to
immediately obligate the College in Damasa’s terms. Hence, the
offer had not ripened into an enforceable contract.
The proposal was solely based on his own will, facultative in
nature, rendering the obligation void.
VISCAYAN SAWMILL v. CA
Positive Suspensive Condition
FACTS:
RJH and Viscayan entered into a sale (May 1, 1983) involving
scrap iron subject to the condition that RJH will open a Letter
of Credit for 250,000.
RJH started to gather scrap iron at Viscayan’s premises (May
17). Viscayan directed Plaintiff-appellee’s men to stop in view of
an alleged case against RJH by Alberto Pursuelo (May 30).
Viscayan denied the matter and alleged that they sent a telegram
(May 23) to RJH cancelling the contract of sale because of failure
to comply with the conditions.
RJH informed that they opened the LOC at BPI on May 12 but
the transmittal was delayed.
May 26, BPI advised Viscayan that they received the opening of
the LOC.
July 19, RJH sent a series of telegrams stating that the case
against him had been dismissed and demanding that Viscayan
comply with the deed of sale, otherwise a case will be filed.
However, Viscayan is unwilling to continue the sale due to RJH’s
failure to comply with essential pre-conditions of the contract.
Hence, RJH filed a complaint. However, it was returned
unserved for Viscayan was no longer in operation and the scrap
iron and other pieces of machinery can no longer be found.
Private respondent ordered RJH to comply with the contract by
delivering him the scrap iron.
HELD:
Article 1497 of the Civil Code states:
'The thing sold shall be understood as delivered when
it is placed in the control and possession of the vendee.'
In the case at bar, control and possession over the subject matter
of the contract was given to Plaintiff-appellee, the buyer, when
the Viscayan as the seller, allowed the buyer and his men to enter
the corporation's premises and to dig-up the scrap iron. The
pieces of scrap iron then placed at the disposal of the buyer.
Delivery was therefore complete. The identification and
designation by the seller does not complete delivery.
Viscayan also argued that under Articles 1593 and 1597 of the
Civil Code, automatic rescission may take place by a mere notice
to the buyer if the latter committed a breach of the contract of
sale.
It cannot take please for delivery had already been made.
Moreover, in the case at bar, the trial court ruled that rescission
is improper because the breach was very slight and the delay in
opening the letter of credit was only 11 days.
The trial court assumed that it was a contract of sale.
However, the SC held that, Plaintiff-appellee’s obligation to sell
is unequivocally subject to a positive suspensive condition, i.e.,
the private respondent's opening, making or indorsing of an
irrevocable and unconditional letter of credit. Thus, there was
no actual sale yet.
And since, it is a contract to sell, the failure to open LOC cannot
even be considered a breach.
Hence, Article 1191 of the CC does not apply.
In the first place, said Article 1497 falls under the Chapter 15
Obligations of the Vendor, which is found in Title VI (Sales),
Book IV of the Civil Code. As such, therefore, the obligation
imposed therein is premised on an existing obligation to deliver
the subject of the contract. In the instant case, in view of the
private respondent's failure to comply with the positive
suspensive condition earlier discussed, such an obligation had
not yet arisen. In the second place, it was a mere
accommodation to expedite the weighing and hauling of the
iron in the event that the sale would materialize. The private
respondent was not thereby placed in possession of and control
over the scrap iron. Thirdly, We cannot even assume the
conversion of the initial contract or promise to sell into a
contract of sale by the petitioner corporation's alleged implied
delivery of the scrap iron because its action and conduct in the
premises do not support this conclusion. Indeed, petitioners
demanded the fulfillment of the suspensive condition and
eventually cancelled the contract.
DE LEON v. ONG
Effects of non-fulfillment of Suspensive condition
FACTS:
Petitioner Raymundo S. De Leon sold 3 parcels of land to
respondent Benita T. Ong. The said properties were mortgaged
to a financial institution, Real Savings & Loan Association Inc.
(RSLAI).
The parties then executed a notarized deed of absolute sale with
assumption of mortgage. As indicated in the deed of mortgage,
the parties stipulated that De Leon shall execute a deed of
assumption of mortgage in favor of Ong after full payment of the
415,000. They also agreed that Ong shall assume the mortgage
for the outstanding loan of 684,500.
The respondent then subsequently gave petitioner 415,000 as
partial payment. On the other hand, de Leon handed the keys to
Ong and de Leon wrote a letter to inform RSLAI that the
mortgage will be assumed by Ong.
Thereafter, Ong took repairs and made improvements in the
properties. Subsequently, Ong learned that the same properties
were sold to a certain Viloria after March 10, 1993 and changed
the locks, rendering the keys given to her useless. Respondent
proceeded to RSLAI but she was informed that the mortgage has
been fully paid and that the titles have been given to the said
person.
Respondent then filed a complaint for specific performance and
declaration of nullity of the second sale and damages.
Petitioner insists that he entered into a contract to sell since the
validity of the transaction was subject to a suspensive condition,
that is, the approval by RSLAI of respondent’s assumption of
mortgage. Because RSLAI did not allow respondent to assume
his (petitioner’s) obligation, the condition never materialized.
Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a
contract of sale as petitioner already conveyed full ownership of
the subject properties upon the execution of the deed.
ISSUE:
Whether the deed was a Contract of Sale which conveys
ownership or Contract to Sell which subjects to a Suspensive
condition?
RULING:
The deed was a contract of sale the parties entered into and not
subject to a suspensive condition.
In a contract of sale, the seller conveys ownership of the property
to the buyer upon the perfection of the contract. Should the
buyer default in the payment of the purchase price, the seller
may either sue for the collection thereof or have the contract
judicially resolved and set aside. The non-payment of the price
is therefore a negative resolutory condition.
On the other hand, a contract to sell is subject to a positive
suspensive condition. The buyer does not acquire ownership of
the property until he fully pays the purchase price. For this
reason, if the buyer defaults in the payment thereof, the seller
can only sue for damages.
Nothing in said instrument implied that petitioner reserved
ownership of the properties until the full payment of the
purchase price. On the contrary, the terms and conditions of the
deed only affected the manner of payment, not the immediate
transfer of ownership from petitioner as seller to respondent as
buyer. Otherwise stated, the said terms and conditions
pertained to the performance of the contract, not the perfection
thereof nor the transfer of ownership.
In the case at bar, petitioner executed a notarized deed of
absolute sale in favor of respondent. Moreover, not only did
petitioner turn over the keys to the properties to respondent, he
also authorized RSLAI to receive payment from respondent and
release his certificates of title to her. The totality of petitioner’s
acts clearly indicates that he had unqualifiedly delivered and
transferred ownership of the properties to respondent. Clearly,
it was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of
the parties was subject to the condition that RSLAI had to
approve the assumption of mortgage, the said condition was
considered fulfilled as petitioner prevented its fulfillment by
paying his outstanding obligation and taking back the
certificates of title without even notifying respondent. In this
connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment.
Hence, non-fulfillment of a suspensive condition (i.e paying the
outstanding mortgage obligation), does not prevent the
perfection of the contract.
CIR v. PRIMETOWN
Obligation with a period
FACTS:
Mar 11, 1999. Gilbert Yap, vice chair of primetown applied for
the refund or credit of income tax respondent paid in 1997.
In Yap’s letter to petitioner Parcero of BIR, he stated that the
increase in the cost of labor and materials and diff in obtaining
financing for projects cause the Real Estate Industry to
slowdown. Hence, Primetown suffered 71,879,228 that year.
And it was not liable for income tax. Still, Primetown paid its
quarterly corporate income tax and remitted creditable
withholding tax from RE sales to the BIR for 26,318,398.32. So
Primetown was entitled to tax refund or tax credit.
May 13, 1999, Revenue officer of BIR required respondent to
submit additional document to support.
Primetown responded but it was not acted upon.
April 14, 2000. Hence, it filed a petition for review in CTA.
Dec 15, 2000. CTA dismissed as it was filed beyond the 2 year
prescriptive period for filing a judicial claim for tax refund or tax
credit.
The CTA found that respondent filed its final adjusted return on
April 14, 1998.
CTA applied Article 13 of the Civil Code:
Art. 13. When the law speaks of years, months, days or nights, it
shall be understood that years are of three hundred sixty-five
days each; months, of thirty days; days, of twenty-four hours,
and nights from sunset to sunrise.
CTA stated that Section 229 of the NIRC is 730 days.
2000 was a leap year. Primetown’s petition was filed 731 days.
CA ruled, leap year is immaterial.
HELD:
Article 13 of the Civil Code provides that when the law speaks of
a year, it is understood to be equivalent to 365 days.
However, the Administrative Code of 1987 provides, year shall
be understood to be twelve calendar months. A calendar month
is a month designated in the calendar without regard to the
number of days it may contain.
Thus, the provision above only impliedly repealed all laws
inconsistent with the Administrative Code of 1987.
Being the more recent law, it governs the computation of legal
periods. Lex posteriori derogat priori.
We therefore hold that respondent's petition (filed on April 14,
2000) was filed on the last day of the 24th calendar month from
the day respondent filed its final adjusted return. Hence, it was
filed within the reglementary period.
NAMARCO v. TECSON
As compared to CIR v. Primetown
FACTS:
On 1955 CFi rendered judgment (Price Stabilization Corp v.
Tecson and Alto Surety):
a. Tecson and Alto pay jointly and severally PRATRA 7,00 + 7%
interest from May 25, 1960 until fully paid + 500 atty’s fees
b. Tecson to indemnify his co-defendant Alto in case Alto pay the
amount at 12% per annum
On Dec 21, 1965, NAMOCOR (as successor of Price Stab Corp),
filed against Tecson in the said case.
Tecson moved to dismiss, upon ground of lack of jurisdiction
over the subject matter and prescription action.
Plaintiffs admit the decision became final on December 21, 1955.
This case was filed on December 21, 1965 — but more than ten
years have passed a year is a period of 365 days (Art. 13, CCP).
Plaintiff forgot that 1960, 1964 were both leap years, hence this
present case was filed it was filed two days too late.
NAMOCOR stated that since what is being computed is the
number of years, a calendar year should be used as the basis of
computation.
HELD:
NAMOCOR’s theory contravenes the explicit provision of Art. 13
of the CC. When the law spoke of months, it meant a “natural”
month or “solar” month, in the absence of express provision to
the contrary.
Hence, a year is considered 365 days.
BERG v. MAGDALENA ESTATES
Disctinctions: Condition v. Period/Term
FACTS:
Ever since September 22, 1943 plaintiff, Berg and defendants
under Magdalena Estate, Inc. were co-owners of the Property,
Crystal Arcade. One third of it belonged to the plaintiff-
petitioner and two thirds, to the defendant-respondent. These
parties executed a deed of sale that should either of them sell his
share, the other party will have an irrevocable option to
purchase it at the seller’s at the seller’s price. The two, eventually
had a disagreement on what really happened with regard to the
deal.
On January. 1946, the petitioner offered his share for Php
200,000 and was accepted by the defendant, including the
stipulation that Berg was giving the defendant a period of time
which, including the extensions granted, would expire on May
31, 1947.
The defendant claimed that, in spite of the acceptance of the
offer, plaintiff refused to accept the payment of the price and
that because of this, they suffered damages in the amount of Php
100,000 and asked for specific performance. The plaintiff
argued that this transaction, referred to by the defendant, is not
supported by any note or memorandum subscribed by the
parties and that this transaction falls under the statue of frauds
and cannot be the basis of the defendant’s special defense.
Freezing of their properties. In an application to sell or dispose
their properties, both parties filed for separate applications
regarding the subject property. In the defendant’s application, it
desired a license in order “to use a portion of the P400,000
requested as a loan from the National City Bank of New York,
Manila, or from any other bank in Manila, together with funds
to be collected from old and new sales of his real estate
properties, for the purchase of the one-third (1/3) of the Crystal
Arcade property in the Escolta, Manila, belonging to Mr. Ernest
Berg.
The lower court found that there was no agreement reached
between the parties regarding the purchase and sale of the
property in question, it granted the case in favor of the
petitioner.
ISSUE:
Whether the term of payment stipulated in the defendant’s
application for license to sell/purchase, “until they have
obtained Php 400,000 from the National City Bank of New
York, or after it has obtained funds from other sources”, is in line
with the Civil Code.
APPLICABLE LAW:
Article 1193. Obligations for whose fulfillment a day certain has
been fixed, shall be demandable only when that day comes.
Obligations with a resolutory period take effect at once, but
terminate upon arrival of the day certain.
A day certain is understood to be that which must necessarily
come, although it may not be known when.
If the uncertainty consists in whether the day will come or not,
the obligation is conditional, and it shall be regulated by the
rules of the preceding Section. (1125a)
HELD:
Yes. The term of payment stipulated in the defendant’s
application for license to sell/purchase, “until they have
obtained Php 400,000 from the National City Bank of New
York, or after it has obtained funds from other sources”,is in line
with the Civil Code (Art. 1125).
A day certain is understood to be that which must necessarily
arrive, even though it is unknown when. In order that an
obligation may be with a term, it is, therefore, necessary that it
should arrive, sooner or later; otherwise, if its arrival is
uncertain, the obligation is conditional. To constitute a term, the
period must end on a day certain.
In considering this article as to which the defendant relies for
the enforcement of its right to buy the property, it would seem
that it is not a term, but a condition. Considering the first
alternative, that is, until defendant shall have obtained a loan
from the National City Bank of New York – it is clear that the
granting of such loans is not definite and cannot be held to come
within the terms “day certain” provided for in the Civil code, for
it may or it may not happen.
The loan did not materialize. And if we consider that the period
given was until such time as defendant could raise money from
other sources, we also find it to be indefinite and contingent and
so it is also a condition and not a term within the meaning of the
law.
Both parties did not put the terms in their agreement clearly in
writing. The lower courts’ judgment is affirmed.
VICTORIA PLANTERS v. VICTORIA MILLING
Disctinctions: Condition v. Period/Term
FACTS:
300 tons of sugar every day.
The petitioners Victorias Planters Association, Inc. and North
Negros Planters Association, Inc. and the respondent Victoria’s
Milling Co., Inc entered into a milling contract whereby they
stipulated a 30-year period within which the sugar cane
produced by the petitioner would be milled by the respondent
central.
The parties also stipulated that in the event of force majuere, the
contract shall be deemed suspended during this period. The
petitioner failed to deliver the sugar cane during the four years
of the Japanese occupation and the two years after liberation
when the mill was being rebuilt or a total of six years.
ISSUE:
Can the petitioners be compelled to deliver sugarcane for six
more years after the expiration of the 30-yearperiod to make up
for what they failed to deliver to the respondent?
RULING:
No. Fortuitous event relieves the obligor from fulfilling the
contractual obligation under Article 1174 of the Civil Code. The
stipulation in the contract that in the event of force majeure the
contract shall be deemed suspended during the said period does
not mean that the happening of any of those events stops the
running of the period agreed upon.
It only relieves the parties from the fulfillment of their respective
obligations during that time the petitioner from delivering the
sugar cane and the respondent central from milling. In order
that the respondent central may be entitled to demand from the
petitioner the fulfillment of their part in the contracts, the latter
must have been able to perform it but failed or refused to do so
and not when they were prevented by force majeure such as war.
To require the petitioners to deliver the sugar cane which they
failed to deliver during the six years is to demand from them the
fulfillment of an obligation, which was impossible of
performance during the time it became due. Nemo tenetur ed
impossibilia.
The respondent central not being entitled to demand from the
petitioners the performance of the latter’s part of the contracts
under those circumstances cannot later on demand its
fulfillment. The performance of what the law has written off
cannot be demanded and required. The prayer that the
petitioners be compelled to deliver sugar cannot for six years
more to make up for what they failed to deliver, the fulfillment
of which was impossible, of granted, would in effect be an
extension of the terms of the contracts entered into by and
between the parties.
JESPAJO REALTY v. CA
Potestative Period
FACTS:
Subject: Apartment Building owned by Jespajo Realty Corp.
Feb 1, 1985. It entered into separate contracts of lease with Tan
Te Gutierrez and Co Tong.
Tan Te occupied a room for 847 a month while Co Ten occupied
the Penthouse for 910 a month.
Period of Lease: Effective on Feb 1 and shall continue for an
indefinite period provided the lessee is up-to-date in the
payment of his monthly rentals. The LESSEE may terminate this
contract any time by giving 60 days prior written notice of
termination to the LESSOR. Viol will be a ground for
termination of contract.
Rent Increase: 20% yearly.
They paid until Jan 1990 when Lessor Corp. sent a notice to
them that the rent is now 3500 a month. They sent a reply
alleging that it is a contravention of the terms of increased
monthly rentals.
However, the lessor demanded that the lessees vacate the
premises and pay the amount of 7k.
The lessees offered to pay based on the contract but lessor
refused. Hence, they filed a case for consignation.
2107 and 2264 are the correct rentals. They prayed that the court
issue directing the LESSOR to honor the terms and conditions
of the lease contract.
They deposited with the City Treasurer of Manila for their
rentals until January 1991.
6 mos after. Lessor filed an ejectment suit.
Jespajo insists that the subject contract of lease did not provide
for a definite period hence it falls under the ambit of Art. 1687 of
the NCC, making the agreement effective on a month-to-month
basis since rental payments are made monthly.
HELD:
Art. 1687 finds no application in the case at bar.
The lease contract is with a period subject to a resolutory
condition. The condition imposed in order that the contract
shall remain effective is that the lessee is up-to-date in his
monthly payments.
BALUYUT v. POBLETE
Effects: Oblig with a Period/Term
FACTS:
July 20, 1981. Guillermina Baluyut loaned from spouses Eugolio
and Salud Poblete for 850k under a promissory note. Mature in
one 1 month.
Security: Real Estate Mortgage, house and lot.
She failed to pay her debt. Spouses extrajudicially foreclosed the
REM. August 27, 1982. It was sold by the Prov Sherrif to the
Spouses.
Baluyut filed to redeem the property within the period required
by law (1 year). Hence, the title was transferred to Eulogio and
heirs of Salud.
Baluyut remained and refused to vacate. The respondents filed
a petition for the issuance of a writ of possession. Before they
could take possession, Baluyut filed an action for annulment of
mortgage, extrajudicial foreclosure and sale of the subject
property and cancellation of title issued.
Baluyut contends that the maturity of the loan is one year,
evidence by the testimony of Atty. Mendoza, and that the issue
regarding the real date of the maturity can only be settled by a
formal letter of demand, in the absence, there is no demand.
HELD:
In the present case, the promissory note and the real estate
mortgage are the law between petitioner and private
respondents. It is not disputed that under the Promissory Note
dated July 20, 1981, the loan shall mature in one month from
date of the said Promissory Note.
Foreclosure proceeding: Presumption of regularity.
Petitioner failed to convince that there was actually no
compliance.
LL & CO. v HUANG
Effects: Obli with a Period/Term
FACTS:
Petitioner alleged that Huang and Fa violated their lease
contract over a 1,112 sq2 lot, when they did not pay monthly
rentals for a total of 4.32m. Contract expired on Sep 16, 1996 but
Huang refused to surrender possession and pay the rent despite
repeated demands.
The contract was entered into August 1991 (No exact date). They
amended on Aug 8:
1. They changed the lot from Lot 1A2 to 1A1.
2. Monthly rental shall be the same at 100 pesos per square
meters or 111.2k per month.
Terms and Conditions:
1. NO express demand is necessary for payment
2. The term is for FIVE years (Sept 16 1991 to Sept 15 1996), and
with the OPTION to renew.
3. The LESSEES shall have the option to Renovate at the
expense of the LESSEES and whatever improvements therein
shall become the property of the LESSOR without extra
compensation of the same
4. 1 year deposit to be paid: 50% upon signing and 50% upon the
effectivity date of the Contract of Lease. The deposit shall be
refundable.
5. The rental is subject to increase, based upon the imposition of
Real Estate Tax for every 2 years upon presentation of such to
the Lessees, but not more than 25%.
9. Violation of such is equivalent to forfeitures of the deposit in
favor of LESSOR and LESSEES agreed to vacate without going
to court.
Huang, joined by Tsai Chun International Resources, denied
allegations stating that:
1. The amended contract did not reflect the intentions of the
parties because it did not contemplate an obsolete building, such
that LL&CO did not become the owner of the new 24m building
they introduced on Lot 1A1 when the contract expired.
2. The failure to pay was due to LL&CO’s fault when it attempted
to increase the amount in viol of their contract
3. They are entitled to a renewal of their contract in view of the
stipulated automatic renewal and in view of the 24m
improvement.
MTC, RTC and CA affirmed the dismissal of the unlawful
detainer case and extension of the lease for another 5 years.
ISSUE:
Whether or not the court could still extend the term of the lease,
after its expiration. Is expiration of the lease a proper ground in
a case of unlawful detainer?
HELD:
It cannot be extended by courts. In general, the power of the
courts to fix a longer term for a lease is discretionary, but always
with due reference to the parties’ freedom to contract. Thus,
courts are not bound to extend the lease.
The Contract is for 5 years – “specifically” from Sept 16, 1991 to
September 15, 1996, hence, it was for a determinate time or
period. Art 1669, “it ceases upon the day fixed, without a need of
a demand”.
Ejectment was on Oct 6. Because there was no longer any lease
that could be extended, the MeTC, made a new contract for the
parties, a power it did not have.
Furthermore, the extension of a lease contract must be made
before the term of the agreement expires, not after.
Because the parties did not reach any agreement for renewal,
respondents can be ejected from the premises.
Automatic Renewal is not provided in the Contract:
It is also important to bear in mind that in a reciprocal contract
like a lease, the period of the lease must be deemed to have been
agreed upon for the benefit of both parties.
Its renewal may be authorized only upon their mutual
agreement or at their joint will.
First, demonstrating petitioner's disinterest in renewing the
contract was its letter. As a rule, the owner-lessor has the
prerogative to terminate the lease upon its expiration.
Second, disagreement over the increased rental precluded the
possibility of a mutual renewal.
Third, the improvements is not an intention to extend but its
obedience to the terms and conditions.
The improvements were a risk, having the knowledge that the
contract is only of a five-year lease period. The fact that the
contractual stipulations may turn out to be financially
disadvantageous will not relieve the latter of their obligations.
ISSUE:
Nonpayment of rentals
HELD:
Rental Reform Act of 2002: In case of refusal by the lessor to
accept payment, the lessee may deposit by way of consignation
in court or with the city treasurer or in the bank in the name and
with notice to the lessor, within one month after refusal.
Failure to deposit for 3 months shall constitute a ground for
ejectment.
Civil Code:
Art. 1673. The lessor may judicially eject the lessee for any of the
following causes:
(1) When the period agreed upon, or that which is fixed for the
duration of lease under Articles 1682 and 1687, has expired;
(2) Lack of payment of the price stipulated;
(3) Violation of any of the conditions agreed upon in the
contract;
(4) When the lessee devotes the thing leased to any use or service
not stipulated which causes the deterioration thereof; or if he
does not observe the requirement in No. 2 of Article 1657, as
regards the use thereof.
"The ejectment of tenants of agricultural lands is governed by
special laws."
Respondents should have deposited the rent based on the
previous rate. Respondents failed to pay the rent from October
1993 to March 1998.
Article 1658 of the Civil Code provides only two instances in
which the lessee may suspend payment of rent; namely, in case
the lessor fails to make the necessary repairs or to maintain the
lessee in peaceful and adequate enjoyment of the property
leased.
None of these is present in the case at bar.
Moreover, the mere subsequent payment of rentals by the lessee
and the receipt thereof by the lessor does not, absent any other
circumstance that may dictate a contrary conclusion, legitimize
the unlawful character of the possession. The lessor may still
pursue the demand for ejectment.
However, the Court cannot authorize a unilateral increase in the
rental rate, considering that (1) the option to renew is reciprocal
and, thus, the terms and conditions thereof -- including the
rental rate -- must likewise be reciprocal; and (2) the contracted
clause authorizing an increase -- "upon presentation of the
increased real estate tax to lessees" -- has not been complied
with by petitioner.