CASE #10:

G.R. No. 129018      November 15, 2001

CARMELITA LEAÑO, assisted by her husband GREGORIO CUACHON, petitioner,

vs.
COURT OF APPEALS and HERMOGENES FERNANDO, respondents.

PARDO, J.:

The Case

The case is a petition for review on certiorari of the decision 1 of the Court of Appeals affirming that of the
Regional Trial Court, Malolos, Branch 72 ordering petitioner Leaño to pay respondent Hermogenes Fernando the
sum of P183,687.70 corresponding to her outstanding obligations under the contract to sell, with interest and
surcharges due thereon, attorney's fees and costs. 1âwphi1.nêt

The Facts

On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leaño, as vendee executed a
contract to sell involving a piece of land, Lot No. 876-B, with an area of 431 square meters, located at Sto.
Cristo, Baliuag, Bulacan.3

In the contract, Carmelita Leaño bound herself to pay Hermogenes Fernando the sum of one hundred seven
thousand and seven hundred and fifty pesos (P107,750.00) as the total purchase price of the lot. The manner of
paying the total purchase price was as follows:

"The sum of TEN THOUSAND SEVEN HUNDRED SEVENTY FIVE (P10,775.00) PESOS, shall be paid
at the signing of this contract as DOWN PAYMENT, the balance of NINETY SIX THOUSAND NINE
HUNDRED SEVENTY FIVE PESOS (P96,975.00) shall be paid within a period of TEN (10) years at a
monthly amortization of P1,747.30 to begin from December 7, 1985 with interest at eighteen per cent
(18%) per annum based on balances."4

The contract also provided for a grace period of one month within which to make payments, together with the
one corresponding to the month of grace. Should the month of grace expire without the installments for both
months having been satisfied, an interest of 18% per annum will be charged on the unpaid installments. 5

Should a period of ninety (90) days elapse from the expiration of the grace period without the overdue and
unpaid installments having been paid with the corresponding interests up to that date, respondent Fernando, as
vendor, was authorized to declare the contract cancelled and to dispose of the parcel of land, as if the contract
had not been entered into. The payments made, together with all the improvements made on the premises, shall
be considered as rents paid for the use and occupation of the premises and as liquidated damages. 6

After the execution of the contract, Carmelita Leaño made several payments in lump sum. 7 Thereafter, she
constructed a house on the lot valued at P800,000.00. 8 The last payment that she made was on April 1, 1989.

On September 16, 1991, the trial court rendered a decision in an ejectment case 9 earlier filed by respondent
Fernando ordering petitioner Leaño to vacate the premises and to pay P250.00 per month by way of
compensation for the use and occupation of the property from May 27, 1991 until she vacated the premises,
attorney's fees and costs of the suit.10 On August 24, 1993, the trial court issued a writ of execution which was
duly served on petitioner Leaño.

On September 27, 1993, petitioner Leaño filed with the Regional Trial Court of Malolos, Bulacan a complaint for
specific performance with preliminary injunction.11 Petitioner Leaño assailed the validity of the judgment of the
municipal trial court12 for being violative of her right to due process and for being contrary to the avowed
intentions of Republic Act No. 6552 regarding protection to buyers of lots on installments. Petitioner Leaño
deposited P18,000.00 with the clerk of court, Regional Trial Court, Bulacan, to cover the balance of the total cost
of Lot 876-B.13
On November 4, 1993, after petitioner Leaño posted a cash bond of P50,000.00, 14 the trial court issued a writ of
preliminary injunction15 to stay the enforcement of the decision of the municipal trial court. 16

On February 6, 1995, the trial court rendered a decision, the dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered as follows:

"1. The preliminary injunction issued by this court per its order dated November 4, 1993 is hereby made
permanent;

"2. Ordering the plaintiff to pay to the defendant the sum of P103,090.70 corresponding to her
outstanding obligations under the contract to sell (Exhibit "A" – Exhibit "B") consisting of the principal of
said obligation together with the interest and surcharges due thereon as of February 28, 1994, plus
interest thereon at the rate of 18% per annum in accordance with the provision of said contract to be
computed from March 1, 1994, until the same becomes fully paid;

"3. Ordering the defendant to pay to plaintiff the amount of P10,000 as and by way of attorney's fees;

"4. Ordering the defendant to pay to plaintiff the costs of the suit in Civil Case No. 1680 aforementioned.

"SO ORDERED.

"Malolos, Bulacan, February 6, 1995.

"(sgd.) DANILO A. MANALASTAS

Judge"17

On February 21, 1995, respondent Fernando filed a motion for reconsideration 18 and the supplement19 thereto.
The trial court increased the amount of P103,090.70 to P183,687.00 and ordered petitioner Leaño ordered to
pay attorney's fees.20

According to the trial court, the transaction between the parties was an absolute sale, making petitioner Leaño
the owner of the lot upon actual and constructive delivery thereof. Respondent Fernando, the seller, was
divested of ownership and cannot recover the same unless the contract is rescinded pursuant to Article 1592 of
the Civil Code which requires a judicial or notarial demand. Since there had been no rescission, petitioner
Leaño, as the owner in possession of the property, cannot be evicted.

On the issue of delay, the trial court held:

"While the said contract provides that the whole purchase price is payable within a ten-year period, yet
the same contract clearly specifies that the purchase price shall be payable in monthly installments for
which the corresponding penalty shall be imposed in case of default. The plaintiff certainly cannot ignore
the binding effect of such stipulation by merely asserting that the ten-year period for payment of the
whole purchase price has not yet lapsed. In other words, the plaintiff has clearly defaulted in the
payment of the amortizations due under the contract as recited in the statement of account (Exhibit "2")
and she should be liable for the payment of interest and penalties in accordance with the stipulations in
the contract pertaining thereto."21

The trial court disregarded petitioner Leaños claim that she made a downpayment of P10,000.00, at the time of
the execution of the contract.

The trial court relied on the statement of account 22 and the summary23 prepared by respondent Fernando to
determine petitioner Leaño's liability for the payment of interests and penalties.

The trial court held that the consignation made by petitioner Leaño in the amount of P18,000.00 did not produce
any legal effect as the same was not done in accordance with Articles 1176, 1177 and 1178 of the Civil Code.

In time, petitioner Leaño appealed the decision to the Court of Appeals. 24 On January 22, 1997, Court of Appeals
promulgated a decision affirming that of the Regional Trial Court in toto.25 On February 11, 1997, petitioner
Leaño filed a motion for reconsideration.26 On April 18, 1997, the Court of Appeals denied the motion. 27
Hence, this petition.28

The Issues

The issues to be resolved in this petition for review are (1) whether the transaction between the parties in an
absolute sale or a conditional sale; (2) whether there was a proper cancellation of the contract to sell; and (3)
whether petitioner was in delay in the payment of the monthly amortizations.

The Court's Ruling

Contrary to the findings of the trial court, the transaction between the parties was a conditional sale not an
absolute sale. The intention of the parties was to reserve the ownership of the land in the seller until the buyer
has paid the total purchase price.

Consider the following:

First, the contract to sell makes the sale, cession and conveyance "subject to conditions" set forth in the contract
to sell.29

Second, what was transferred was the possession of the property, not ownership. The possession is even
limited by the following: (1) that the vendee may continue therewith "as long as the VENDEE complies with all
the terms and conditions mentioned, and (2) that the buyer may not sell, cede, assign, transfer or mortgage or in
any way encumber any right, interest or equity that she may have or acquire in and to the said parcel of land nor
to lease or to sublease it or give possession to another person without the written consent of the seller. 30

Finally, the ownership of the lot was not transferred to Carmelita Leaño. As the land is covered by a torrens title,
the act of registration of the deed of sale was the operative act that could transfer ownership over the lot. 31 There
is not even a deed that could be registered since the contract provides that the seller will execute such a deed
"upon complete payment by the VENDEE of the total purchase price of the property" with the stipulated
interest.32

In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive
condition, the failure of which is not considered a breach, casual or serious, but simply an event that prevented
the obligation of the vendor to convey title from acquiring any obligatory force. 33 The transfer of ownership and
title would occur after full payment of the price.34

In the case at bar, petitioner Leaño's non-payment of the installments after April 1, 1989, prevented the
obligation of respondent Fernando to convey the property from arising. In fact, it brought into effect the provision
of the contract on cancellation.

Contrary to the findings of the trial court, Article 1592 of the Civil Code is inapplicable to the case at
bar.35 However, any attempt to cancel the contract to sell would have to comply with the provisions of Republic
Act No. 6552, the "Realty Installment Buyer Protection Act."

R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the
right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an
event that prevents the obligation of the vendor to convey title from acquiring binding force. 36 The law also
provides for the rights of the buyer in case of cancellation. Thus, Sec. 3 (b) of the law provides that:

"If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments
on the property equivalent to fifty percent of the total payments made and, after five years of
installments, an additional five percent every year but not to exceed ninety percent of the total payment
made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt
by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act
and upon full payment of the cash surrender value to the buyer." [Emphasis supplied]

The decision in the ejectment case37 operated as the notice of cancellation required by Sec. 3(b). As petitioner
Leaño was not given then cash surrender value of the payments that she made, there was still no actual
cancellation of the contract. Consequently, petitioner Leaño may still reinstate the contract by updating the
account during the grace period and before actual cancellation. 38
Should petitioner Leaño wish to reinstate the contract, she would have to update her accounts with respondent
Fernando in accordance with the statement of account 39 which amount was P183,687.00.40

On the issue of whether petitioner Leaño was in delay in paying the amortizations, we rule that while the contract
provided that the total purchase price was payable within a ten-year period, the same contract specified that the
purchase price shall be paid in monthly installments for which the corresponding penalty shall be imposed in
case of default. Petitioner Leaño cannot ignore the provision on the payment of monthly installments by claiming
that the ten-year period within which to pay has not elapsed.

Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by the other begins. 1âwphi1.nêt

In the case at bar, respondent Fernando performed his part of the obligation by allowing petitioner Leaño to
continue in possession and use of the property. Clearly, when petitioner Leaño did not pay the monthly
amortizations in accordance with the terms of the contract, she was in delay and liable for damages. 41 However,
we agree with the trial court that the default committed by petitioner Leaño in respect of the obligation could be
compensated by the interest and surcharges imposed upon her under the contract in question. 42

It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its stipulation shall control. 43 Thus, as there is
no ambiguity in the language of the contract, there is no room for construction, only compliance.

The Fallo

IN VIEW WHEREOF, we DENY the petition and AFFIRM the decision of the Court of Appeals44 in toto.

No costs.

SO ORDERED.

CASE #11:

G.R. No. 141634      February 5, 2001

Heirs of Spouses REMEDIOS R. SANDEJAS and ELIODORO P. SANDEJAS SR. -- ROBERTO R.

SANDEJAS, ANTONIO R. SANDEJAS, CRISTINA SANDEJAS MORELAND, BENJAMIN R. SANDEJAS,
REMEDIOS R. SANDEJAS, and heirs of SIXTO S. SANDEJAS II, RAMON R. SANDEJAS, TERESITA R.
SANDEJAS, and ELIODORO R. SANDEJAS JR., all represented by ROBERTO R. SANDEJAS, petitioners,
vs.
ALEX A. LINA, respondent.

PANGANIBAN, J.:

A contract of sale is not invalidated by the fact that it is subject to probate court approval. The transaction
remains binding on the seller-heir, but not on the other heirs who have not given their consent to it. In settling the
estate of the deceased, a probate court has jurisdiction over matters incidental and collateral to the exercise of
its recognized powers. Such matters include selling, mortgaging or otherwise encumbering realty belonging to
the estate. Rule 89, Section 8 of the Rules of Court, deals with the conveyance of real property contracted by the
decedent while still alive. In contrast with Sections 2 and 4 of the same Rule, the said provision does not limit to
the executor or administrator the right to file the application for authority to sell, mortgage or otherwise encumber
realty under administration. The standing to pursue such course of action before the probate court inures to any
person who stands to be benefited or injured by the judgment or to be entitled to the avails of the suit. 1âwphi1.nêt

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to reverse and set aside the
Decision1 dated April 16, 1999 and the Resolution2 dated January 12, 2000, both promulgated by the Court of
Appeals in CA-GR CV No. 49491. The dispositive portion of the assailed Decision reads as follows: 3
 "WHEREFORE, for all the foregoing, [w]e hereby MODIFY the [O]rder of the lower court dated January
13, 1995, approving the Receipt of Earnest Money With Promise to Buy and Sell dated June 7, 1982,
only to the three-fifth (3/5) portion of the disputed lots covering the share of [A]dministrator Eliodoro
Sandejas, Sr. [in] the property. The intervenor is hereby directed to pay appellant the balance of the
purchase price of the three-fifth (3/5) portion of the property within thirty (30) days from receipt of this
[O]rder and x x x the administrator [is directed] to execute the necessary and proper deeds of
conveyance in favor of appellee within thirty (30) days thereafter."

The assailed Resolution denied reconsideration of the foregoing disposition.

The Facts

The facts of the case, as narrated by the Court of Appeals (CA), are as follows: 4

"On February 17, 1981, Eliodoro Sandejas, Sr. filed a petition (Record, SP. Proc. No. R-83-15601, pp. 8-
10) in the lower court praying that letters of administration be issued in his favor for the settlement of the
estate of his wife, REMEDIOS R. SANDEJAS, who died on April 17, 1955. On July 1, 1981, Letters of
Administration [were issued by the lower court appointing Eliodoro Sandejas, Sr. as administrator of the
estate of the late Remedios Sandejas (Record, SP. Proc. No. R-83-15601, p. 16). Likewise on the same
date, Eliodoro Sandejas, Sr. took his oath as administrator (Record, SP. Proc. No. R-83-15601, p. 17). x
x x.

"On November 19, 1981, the 4th floor of Manila City Hall was burned and among the records burned
were the records of Branch XI of the Court of First Instance of Manila. As a result, [A]dministrator
Eliodoro Sandejas, Sr. filed a [M]otion for [R]econstitution of the records of the case on February 9, 1983
(Record, SP. Proc. No. R-83-15601, pp. 1-5). On February 16, 1983, the lower court in its [O]rder
granted the said motion (Record, SP. Proc. No. R-83-15601, pp. 28-29).

"On April 19, 1983, an Omnibus Pleading for motion to intervene and petition-in-intervention was filed by
[M]ovant Alex A. Lina alleging among others that on June 7, 1982, movant and [A]dministrator Eliodoro
P. Sandejas, in his capacity as seller, bound and obligated himself, his heirs, administrators, and
assigns, to sell forever and absolutely and in their entirety the following parcels of land which formed part
of the estate of the late Remedios R. Sandejas, to wit:

1. 'A parcel of land (Lot No.22 Block No. 45 of the subdivision plan Psd-21121, being a portion of
Block 45 described on plan Psd-19508, G.L.R.O. Rec. No. 2029), situated in the "Municipality of
Makati, province of Rizal, containing an area of TWO HUNDRED SEVENTY (270) SQUARE
METERS, more or less, with TCT No. 13465;

2. 'A parcel of land (Lot No. 21 Block No. 45 of the subdivision plan Psd-21141, being a portion
of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of
Makati, Province of Rizal, containing an area of TWO HUNDRED SEVENTY (270) SQUARE
METERS, more or less, with TCT No. 13464;'

3. 'A parcel of land (Lot No. 5 Block No. 45 of the subdivision plan Psd-21141, being a portion of
Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of
Makati, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE
METERS, more or less, with TCT No. 13468;'

4. 'A parcel of land (Lot No. 6, Block No. 45 of the subdivision plan Psd-21141, being a portion of
Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of
Makati, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE
METERS, more or less, with TCT No. 13468;'

"The [R]eceipt of the [E]arnest [M]oney with [P]romise to [S]ell and to [B]uy is hereunder quoted, to wit:

'Received today from MR. ALEX A. LINA the sum of ONE HUNDRED THOUSAND
(P100,000.00) PESOS, Philippine Currency, per Metropolitan Bank & Trust Company Chec[k]
No. 319913 dated today for P100,000.00, x x x as additional earnest money for the following:

xxx      xxx      xxx
 all registered with the Registry of Deeds of the [P]rovince of Rizal (Makati Branch Office) in the
name of SELLER 'EL!ODORO SANDEJAS, Filipino Citizen, of legal age, married to Remedios
Reyes de Sandejas;' and which undersigned, as SELLER, binds and obligates himself, his heirs,
administrators and assigns, to sell forever and absolutely in their entirety (all of the four (4)
parcels of land above described, which are contiguous to each other as to form one big lot) to
said Mr. Alex A. Lina, who has agreed to buy all of them, also binding on his heirs, administrators
and assigns, for the consideration of ONE MILLION (P1,000,000.00) PESOS, Philippine
Currency, upon such reasonable terms of payment as may be agreed upon by them. The parties
have, however, agreed on the following terms and conditions:

'1. The P100,000.00 herein received is in addition to the P70,000.00 earnest money already
received by SELLER from BUYER, all of which shall form part of, and shall be deducted from,
the purchase price of P1,000,000.00, once the deed of absolute [sale] shall be executed;

'2. As a consideration separate and distinct from the price, undersigned SELLER also
acknowledges receipt from Mr. Alex A. Lina of the sum of ONE THOUSAND (P1,000.00)
PESOS, Philippine Currency, per Metropolitan Bank & Trust Company Check No. 319912 dated
today and payable to SELLER for P1,000.00;

'3. Considering that Mrs. Remedios Reyes de Sandejas is already deceased and as there is a
pending intestate proceedings for the settlement of her estate (Spec. Proc. No.138393, Manila
CFI, Branch XI), wherein SELLER was appointed as administrator of said Estate, and as
SELLER, in his capacity as administrator of said Estate, has informed BUYER that he (SELLER)
already filed a [M]otion with the Court for authority to sell the above parcels of land to herein
BUYER, but which has been delayed due to the burning of the records of said Spec. Pro. No.
138398, which records are presently under reconstitution, the parties shall have at least ninety
(90) days from receipt of the Order authorizing SELLER, in his capacity as administrator, to sell
all THE ABOVE DESCRIBED PARCELS OF LAND TO HEREIN BUYER (but extendible for
another period of ninety (90) days upon the request of either of the parties upon the other), within
which to execute the deed of absolute sale covering all above parcels of land;

'4. In the event the deed of absolute sale shall not proceed or not be executed for causes either
due to SELLER'S fault, or for causes of which the BUYER is innocent, SELLER binds himself to
personally return to Mr. Alex A. Lina the entire ONE HUNDRED SEVENTY THOUSAND
([P]170,000.00) PESOS In earnest money received from said Mr. Lina by SELLER, plus fourteen
(14%) percentum interest per annum, all of which shall be considered as liens of said parcels of
land, or at least on the share therein of herein SELLER;

'5. Whether indicated or not, all of above terms and conditions shall be binding on the heirs,
administrators, and assigns of both the SELLER (undersigned MR. ELIODORO P. SANDEJAS,
SR.) and BUYER (MR. ALEX A. LINA).' (Record, SP. Proc. No. R-83-15601, pp. 52-54)

"On July 17, 1984, the lower court issued an [O]rder granting the intervention of Alex A. Lina (Record,
SP. Proc. No. R-83-15601, p. 167).

"On January 7, 1985, the counsel for [A]dministrator Eliodoro P. Sandejas filed a [M]anifestation alleging
among others that the administrator, Mr. Eliodoro P. Sandejas, died sometime in November 1984 in
Canada and said counsel is still waiting for official word on the fact of the death of the administrator. He
also alleged, among others that the matter of the claim of Intervenor Alex A. Lina becomes a money
claim to be filed in the estate of the late Mr. Eliodoro P. Sandejas (Record, SP. Proc. No. R-83-15601, p.
220). On February 15, 1985, the, lower court issued an [O]rder directing, among others, that the counsel
for the four (4) heirs and other heirs of Teresita R. Sandejas to move for the appointment of [a] new
administrator within fifteen (15) days from receipt of this [O]rder (Record, SP. Proc. No. R-83-15601, p.
227). In the same manner, on November 4, 1985, the lower court again issued an order, the content of
which reads:

'On October 2, 1985, all the heirs, Sixto, Roberto, Antonio, Benjamin all surnamed Sandejas
were ordered to move for the appointment of [a] new administrator. On October 16, 1985, the
same heirs were given a period of fifteen (15) days from said date within which to move for the
appointment of the new administrator. Compliance was set for October 30, 1985, no appearance
for the aforenamed heirs. The aforenamed heirs are hereby ordered to show cause within fifteen
 (15) days from receipt of this Order why this Petition for Settlement of Estate should not be
dismissed for lack of interest and failure to comply with a lawful order of this Court.

'SO ORDERED.' (Record, SP. Proc. No. R-83-15601, p. 273).

"On November 22, 1985, Alex A. Lina as petitioner filed with the Regional Trial Court of Manila an
Omnibus Pleading for (1) petition for letters of administration [and] (2) to consolidate instant case with
SP. Proc. No. R-83-15601 RTC-Branch XI-Manila, docketed therein as SP. Proc. No. 85- 33707 entitled
'IN RE: INTESTATE ESTATE OF ELIODORO P. SANDEJAS, SR., ALEX A. LINA PETITIONER", [for
letters of administration] (Record, SP. Proc. No.85-33707, pp. 1-7). On November 29, 1985, Branch
XXXVI of the Regional Trial Court of Manila issued an [O]rder consolidating SP. Proc. No. 85-33707,
with SP. Proc. No. R-83-15601 (Record, SP. Proc. No. 85-33707, p. 13). Likewise, on December 13,
1985, the Regional Trial Court of Manila, Branch XI, issued an [O]rder stating that 'this Court has no
objection to the consolidation of Special proceedings No. 85-331707, now pending before Branch XXXVI
of this Court, with the present proceedings now pending before this Branch' (Record, SP. Proc. No. R-
83- 15601, p. 279).

"On January 15, 1986, Intervenor Alex A. Lina filed [a] Motion for his appointment as a new administrator
of the Intestate Estate of Remedios R. Sandejas on the following reasons:

'5.01. FIRST, as of this date, [i]ntervenor has not received any motion on the part of the heirs
Sixto, Antonio, Roberto and Benjamin, all surnamed Sandejas, for the appointment of anew
[a]dministrator in place of their father, Mr. Eliodoro P. Sandejas, Sr.;

'5.02. SECOND, since Sp. Proc. 85-33707, wherein the [p]etitioner is herein Intervenor Alex A.
Lina and the instant Sp. PROC. R-83-15601, in effect are already consolidated, then the
appointment of Mr. Alex Lina as [a]dministrator of the Intestate Estate of Remedios R. Sandejas
in instant Sp. Proc. R-83-15601, would be beneficial to the heirs and also to the Intervenor;

'5.03. THIRD, of course, Mr. Alex A. Lina would be willing to give way at anytime to any
[a]dministrator who may be proposed by the heirs of the deceased Remedios R. Sandejas, so
long as such [a]dministrator is qualified.' (Record, SP. Proc. No. R-83-15601, pp. 281-283)

"On May 15, 1986, the lower court issued an order granting the [M]otion of Alex A. Lina as the new
[a]dministrator of the Intestate Estate of Remedios R. Sandejas in this proceedings. (Record, SP. Proc.
No. R-83-15601, pp. 288- 290)

"On August 281 1986, heirs Sixto, Roberto, Antonio and Benjamin, all surnamed Sandejas, and heirs
[sic] filed a [M]otion for [R]econsideration and the appointment of another administrator Mr. Sixto
Sandejasl in lieu of [I]ntervenor Alex A. Lina stating among others that it [was] only lately that Mr. Sixto
Sandejas, a son and heir, expressed his willingness to act as a new administrator of the intestate estate
of his mother, Remedios R. Sandejas (Record, SP. Proc. No. 85-33707, pp. 29-31). On October 2, 1986,
Intervenor Alex A. Lina filed his [M]anifestation and [C]ounter [M]otion alleging that he ha[d] no objection
to the appointment of Sixto Sandejas as [a]dministrator of the [i]ntestate [e]state of his mother Remedios
R. Sandejas (Sp. Proc. No.85-15601), provided that Sixto Sandejas be also appointed as administrator
of the [i]ntestate [e]state of his father, Eliodoro P . Sandejas, Sr. (Spec. Proc. No. 85-33707), which two
(2) cases have been consolidated (Record, SP. Proc. No. 85-33707, pp. 34-36). On March 30, 1987, the
lower court granted the said [M]otion and substituted Alex Lina with Sixto Sandejas as petitioner in the
said [P]etitions (Record, SP. Proc. No. 85-33707, p. 52). After the payment of the administrator's bond
(Record, SP. Proc. No. 83-15601, pp. 348-349) and approval thereof by the court (Record, SP. Proc. No.
83-15601, p. 361), Administrator Sixto Sandejas on January 16, 1989 took his oath as administrator of
the estate of the deceased Remedios R. Sandejas and Eliodoro P. Sandejas (Record, SP. Proc. No. 83-
15601, p. 367) and was likewise issued Letters of Administration on the same day (Record, SP. Proc.
No. 83-15601, p. 366).

"On November 29, 1993, Intervenor filed [an] Omnibus Motion (a) to approve the deed of conditional sale
executed between Plaintiff-in-lntervention Alex A. Lina and Elidioro [sic] Sandejas, Sr. on June 7, 1982;
(b) to compel the heirs of Remedios Sandejas and Eliodoro Sandejas, Sr. thru their administrator, to
execute a deed of absolute sale in favor of [I]ntervenor Alex A. Lina pursuant to said conditional deed of
sale (Record, SP. Proc. No. 83-15601, pp. 554-561) to which the administrator filed a [M]otion to
[D]ismiss and/or [O]pposition to said omnibus motion on December 13, 1993 (Record, SP. Proc. No.83-
15601, pp. 591-603).
 "On January 13, 1995, the lower court rendered the questioned order granting intervenor's [M]otion for
the [A]pproval of the Receipt of Earnest Money with promise to buy between Plaintiff-in-lntervention Alex
A. Lina and Eliodoro Sandejas, Sr. dated June 7, 1982 (Record, SP. Proc. No. 83-15601, pp. 652-654 ).
x x x."

The Order of the intestate courts disposed as follows:

"WHEREFORE, [i]ntervenor's motion for the approval of the Receipt Of Earnest Money With Promise To
Sell And To Buy dated June 7, 1982, is granted. The [i]ntervenor is directed to pay the balance of the
purchase price amounting to P729,000.00 within thirty (30) days from receipt of this Order and the
Administrator is directed to execute within thirty (30) days thereafter the necessary and proper deeds of
conveyancing."6

Ruling of the Court of Appeals

Overturning the RTC ruling, the CA held that the contract between Eliodoro Sandejas Sr. and respondent was
merely a contract to sell, not a perfected contract of sale. It ruled that the ownership of the four lots was to
remain in the intestate estate of Remedios Sandejas until the approval of the sale was obtained from the
settlement court. That approval was a positive suspensive condition, the nonfulfillment of which was not
tantamount to a breach. It was simply an event that prevented the obligation from maturing or becoming
effective. If the condition did not happen, the obligation would not arise or come into existence.

The CA held that Section 1, Rule 897 of the Rules of Court was inapplicable, because the lack of written notice to
the other heirs showed the lack of consent of those heirs other than Eliodoro Sandejas Sr. For this reason, bad
faith was imputed to him, for no one is allowed to enjoyed a claim arising from one’s own wrongdoing. Thus,
Eliodoro Sr. was bound, as a matter of justice and good faith, to comply with his contractual commitments as an
owner and heir. When he entered into the agreement with respondent, he bound his conjugal and successional
shares in the property.

Hence, this Petition.8

Issues

In their Memorandum, petitioners submit the following issues for our resolution:

"a) Whether or not Eliodoro P. Sandejas Sr. is legally obligated to convey title to the property referred to
in the subject document which was found to be in the nature of a contract to sell - where the suspensive
condition set forth therein [i.e.] court approval, was not complied with;

"b) Whether or not Eliodoro P. Sandejas Sr. was guilty of bad faith despite the conclusion of the Court of
Appeals that the respondent [bore] the burden of proving that a motion for authority to sell ha[d] been
filed in court;

"c) Whether or not the undivided shares of Eliodoro P. Sandejas Sr. in the subject property is three-fifth
(3/5) and the administrator of the latter should execute deeds of conveyance therefor within thirty days
from receipt of the balance of the purchase price from the respondent; and

"d) Whether or not the respondent's petition-in-intervention was converted to a money claim and whether
the [trial court] acting as a probate court could approve the sale and compel the petitioners to execute [a]
deed of conveyance even for the share alone of Eliodoro P. Sandejas Sr." 9

In brief, the Petition poses the main issue of whether the CA erred in modifying the trial court's Decision and in
obligating petitioners to sell 3/5 of the disputed properties to respondent, even if the suspensive condition had
not been fulfilled. It also raises the following collateral issues: (1) the settlement court's jurisdiction; (2)
respondent-intervenor's standing to file an application for the approval of the sale of realty in the settlement
case, (3) the decedent's bad faith, and (4) the computation of the decedent's share in the realty under
administration.

This Court’s Ruling

The Petition is partially meritorious.

 Main Issue:

Obligation With a Suspensive Condition

Petitioners argue that the CA erred in ordering the conveyance of the disputed 3/5 of the parcels of land, despite
the nonfulfillment of the suspensive condition -- court approval of the sale -- as contained in the "Receipt of
Earnest Money with Promise to Sell and to Buy" (also referred to as the "Receipt"). Instead, they assert that
because this condition had not been satisfied, their obligation to deliver the disputed parcels of land was
converted into a money claim.

We disagree. Petitioners admit that the agreement between the deceased Eliodoro Sandejas Sr. and respondent
was a contract to sell. Not exactly. In a contract to sell, the payment of the purchase price is a positive
suspensive condition. The vendor's obligation to convey the title does not become effective in case of failure to
pay.10

On the other hand, the agreement between Eliodoro Sr. and respondent is subject to a suspensive condition --
the procurement of a court approval, not full payment. There was no reservation of ownership in the agreement.
In accordance with paragraph 1 of the Receipt, petitioners were supposed to deed the disputed lots over to
respondent. This they could do upon the court's approval, even before full payment. Hence, their contract was a
conditional sale, rather than a contract to sell as determined by the CA.

When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the
condition happens or is fulfilled. 11 Thus, the intestate court's grant of the Motion for Approval of the sale filed by
respondent resulted in petitioners' obligation to execute the Deed of Sale of the disputed lots in his favor. The
condition having been satisfied, the contract was perfected. Henceforth, the parties were bound to fulfil what
they had expressly agreed upon.

Court approval is required in any disposition of the decedent's estate per Rule 89 of the Rules of Court.
Reference to judicial approval, however, cannot adversely affect the substantive rights of heirs to dispose of their
own pro indiviso shares in the co-heirship or co-ownership. 12 In other words, they can sell their rights, interests or
participation in the property under administration. A stipulation requiring court approval does not affect the
validity and the effectivity of the sale as regards the selling heirs. It merely implies that the property may be
taken out of custodia legis, but only with the court's permission.13 It would seem that the suspensive condition in
the present conditional sale was imposed only for this reason.

Thus, we are not persuaded by petitioners' argument that the obligation was converted into a mere monetary
claim. Paragraph 4 of the Receipt, which petitioners rely on, refers to a situation wherein the sale has not
materialized. In such a case," the seller is bound to return to the buyer the earnest money paid plus interest at
fourteen percent per annum. But the sale was approved by the intestate court; hence, the proviso does not
apply.

Because petitioners did not consent to the sale of their ideal shares in the disputed lots, the CA correctly limited
the scope of the Receipt to the pro-indiviso share of Eliodoro Sr. Thus, it correctly modified the intestate court's
ruling by excluding their shares from the ambit of the transaction.

First Collateral Issue:

Jurisdiction of Settlement Court

Petitioners also fault the CA Decision by arguing, inter alia, (a) jurisdiction over ordinary civil action seeking not
merely to enforce a sale but to compel performance of a contract falls upon a civil court, not upon an intestate
court; and (b) that Section 8 of Rule 89 allows the executor or administrator, and no one else, to file an
application for approval of a sale of the property under administration.

Citing Gil v. Cancio14 and Acebedo v. Abesamis,15 petitioners contend that the CA erred in clothing the

settlement court with the jurisdiction to approve the sale and to compel petitioners to execute the Deed of Sale.
They allege factual differences between these cases and the instant case, as follows: in Gil, the sale of the
realty in administration was a clear and an unequivocal agreement for the support of the widow and the adopted
child of the decedent; and in Acebedo, a clear sale had been made, and all the heirs consented to the
disposition of their shares in the realty in administration.
We are not persuaded. We hold that Section 8 of Rule 89 allows this action to proceed. The factual differences
alleged by petitioners have no bearing on the intestate court's jurisdiction over the approval of the subject
conditional sale. Probate jurisdiction covers all matters relating to the settlement of estates (Rules 74 & 86-91)
and the probate of wills (Rules 75-77) of deceased persons, including the appointment and the removal of
administrators and executors (Rules 78-85). It also extends to matters incidental and collateral to the exercise of
a probate court's recognized powers such as selling, mortgaging or otherwise encumbering realty belonging to
the estate. Indeed, the rules on this point are intended to settle the estate in a speedy manner, so that the
benefits that may flow from such settlement may be immediately enjoyed by the heirs and the beneficiaries. 16

In the present case, the Motion for Approval was meant to settle the decedent's obligation to respondent; hence,
that obligation clearly falls under the jurisdiction of the settlement court. To require respondent to file a separate
action -- on whether petitioners should convey the title to Eliodoro Sr.'s share of the disputed realty -- will
unnecessarily prolong the settlement of the intestate estates of the deceased spouses.

The suspensive condition did not reduce the conditional sale between Eliodoro Sr. and respondent to one that
was "not a definite, clear and absolute document of sale," as contended by petitioners. Upon the occurrence of
the condition, the conditional sale became a reciprocally demandable obligation that is binding upon the
parties.17 That Acebedo also involved a conditional sale of real property 18 proves that the existence of the
suspensive condition did not remove that property from the jurisdiction of the intestate court.

Second Collateral Issue:

Intervenor's Standing

Petitioners contend that under said Rule 89, only the executor or administrator is authorized to apply for the
approval of a sale of realty under administration. Hence, the settlement court allegedly erred in entertaining and
granting respondent's Motion for Approval. 1âwphi1.nêt

We read no such limitation. Section 8, Rule 89 of the Rules of Court, provides:

"SEC. 8. When court may authorize conveyance of realty which deceased contracted to convey. Notice.
Effect of deed. -- Where the deceased was in his lifetime under contract, binding in law, to deed real
property, or an interest therein, the court having jurisdiction of the estate may, on application for that
purpose, authorize the executor or administrator to convey such property according to such contract, or
with such modifications as are agreed upon by the parties and approved by the court; and if the contract
is to convey real property to the executor or administrator, the clerk of the court shall execute the deed. x
x x."

This provision should be differentiated from Sections 2 and 4 of the same Rule, specifically requiring only the
executor or administrator to file the application for authority to sell, mortgage or otherwise encumber real estate
for the purpose of paying debts, expenses and legacies (Section 2); 19 or for authority to sell real or personal
estate beneficial to the heirs, devisees or legatees and other interested persons, although such authority is not
necessary to pay debts, legacies or expenses of administration (Section 4). 20 Section 8 mentions only an
application to authorize the conveyance of realty under a contract that the deceased entered into while still alive.
While this Rule does not specify who should file the application, it stands to reason that the proper party must be
one .who is to be benefited or injured by the judgment, or one who is to be entitled to the avails of the suit. 21

Third Collateral Issue:

Bad Faith

Petitioners assert that Eliodoro Sr. was not in bad faith, because (a) he informed respondent of the need to
secure court approval prior to the sale of the lots, and (2) he did not promise that he could obtain the approval.

We agree. Eliodoro Sr. did not misrepresent these lots to respondent as his own properties to which he alone
had a title in fee simple. The fact that he failed to obtain the approval of the conditional sale did not automatically
imply bad faith on his part. The CA held him in bad faith only for the purpose of binding him to the conditional
sale. This was unnecessary because his being bound to it is, as already shown, beyond cavil.

Fourth Collateral Issue:

 Computation of Eliodoro's Share

Petitioners aver that the CA's computation of Eliodoro Sr.'s share in the disputed parcels of land was erroneous
because, as the conjugal partner of Remedios, he owned one half of these lots plus a further one tenth of the
remaining half, in his capacity as a one of her legal heirs. Hence, Eliodoro's share should be 11/20 of the entire
property. Respondent poses no objection to this computation. 22

On the other hand, the CA held that, at the very least, the conditional sale should cover the one half (1/2) pro
indiviso conjugal share of Eliodoro plus his one tenth (1/10) hereditary share as one of the ten legal heirs of the
decedent, or a total of three fifths (3/5) of the lots in administration. 23

Petitioners' correct. The CA computed Eliodoro's share as an heir based on one tenth of the entire disputed
property. It should be based only on the remaining half, after deducting the conjugal share. 24

The proper determination of the seller-heir's shares requires further explanation. Succession laws and
jurisprudence require that when a marriage is dissolved by the death of the husband or the wife, the decedent's
entire estate - under the concept of conjugal properties of gains -- must be divided equally, with one half going to
the surviving spouse and the other half to the heirs of the deceased. 25 After the settlement of the debts and
obligations, the remaining half of the estate is then distributed to the legal heirs, legatees and devices. We
assume, however, that this preliminary determination of the decedent's estate has already been taken into
account by the parties, since the only issue raised in this case is whether Eliodoro's share is 11/20 or 3/5 of the
disputed lots.

WHEREFORE, The Petition is hereby PARTIALLY GRANTED. The appealed Decision and Resolution

are AFFIRMED with the MODIFICATION that respondent is entitled to only a pro-indiviso share equivalent to
11/20 of the disputed lots.

SO ORDERED.

CASE #12:

G.R. No. 162155               August 28, 2007

COMMISSIONER OF INTERNAL REVENUE and ARTURO V. PARCERO in his official capacity as Revenue
District Officer of Revenue District No. 049 (Makati), Petitioners,
vs.
PRIMETOWN PROPERTY GROUP, INC., Respondent.

DECISION

CORONA, J.:

This petition for review on certiorari 1 seeks to set aside the August 1, 2003 decision 2 of the Court of Appeals
(CA) in CA-G.R. SP No. 64782 and its February 9, 2004 resolution denying reconsideration. 3

On March 11, 1999, Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund
or credit of income tax respondent paid in 1997. In Yap's letter to petitioner revenue district officer Arturo V.
Parcero of Revenue District No. 049 (Makati) of the Bureau of Internal Revenue (BIR), 4 he explained that the
increase in the cost of labor and materials and difficulty in obtaining financing for projects and collecting
receivables caused the real estate industry to slowdown. 5 As a consequence, while business was good during
the first quarter of 1997, respondent suffered losses amounting to ₱71,879,228 that year. 6

According to Yap, because respondent suffered losses, it was not liable for income taxes. 7 Nevertheless,
respondent paid its quarterly corporate income tax and remitted creditable withholding tax from real estate sales
to the BIR in the total amount of ₱26,318,398.32.8 Therefore, respondent was entitled to tax refund or tax credit. 9

On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to submit additional documents to
support its claim.10 Respondent complied but its claim was not acted upon. Thus, on April 14, 2000, it filed a
petition for review11 in the Court of Tax Appeals (CTA).
On December 15, 2000, the CTA dismissed the petition as it was filed beyond the two-year prescriptive period
for filing a judicial claim for tax refund or tax credit. 12 It invoked Section 229 of the National Internal Revenue
Code (NIRC):

Sec. 229. Recovery of Taxes Erroneously or Illegally Collected. -- No suit or proceeding shall be maintained in
any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or
illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum
alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has
been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax,
penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of
payment of the tax or penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even without a claim therefor, refund or credit any
tax, where on the face of the return upon which payment was made, such payment appears clearly to have been
erroneously paid. (emphasis supplied)

The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or
credit commenced on that date.13

The tax court applied Article 13 of the Civil Code which states:

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.

If the months are designated by their name, they shall be computed by the number of days which they
respectively have.

In computing a period, the first day shall be excluded, and the last included. (emphasis supplied)

Thus, according to the CTA, the two-year prescriptive period under Section 229 of the NIRC for the filing of
judicial claims was equivalent to 730 days. Because the year 2000 was a leap year, respondent's petition, which
was filed 731 days14 after respondent filed its final adjusted return, was filed beyond the reglementary period. 15

Respondent moved for reconsideration but it was denied. 16 Hence, it filed an appeal in the CA.17

On August 1, 2003, the CA reversed and set aside the decision of the CTA. 18 It ruled that Article 13 of the Civil
Code did not distinguish between a regular year and a leap year. According to the CA:

The rule that a year has 365 days applies, notwithstanding the fact that a particular year is a leap year. 19

In other words, even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April 14, 1999
and April 15, 1999 to April 14, 2000 should still be counted as 365 days each or a total of 730 days. A statute
which is clear and explicit shall be neither interpreted nor construed. 20

Petitioners moved for reconsideration but it was denied. 21 Thus, this appeal.

Petitioners contend that tax refunds, being in the nature of an exemption, should be strictly construed against
claimants.22 Section 229 of the NIRC should be strictly applied against respondent inasmuch as it has been
consistently held that the prescriptive period (for the filing of tax refunds and tax credits) begins to run on the day
claimants file their final adjusted returns.23 Hence, the claim should have been filed on or before April 13, 2000 or
within 730 days, reckoned from the time respondent filed its final adjusted return.

The conclusion of the CA that respondent filed its petition for review in the CTA within the two-year prescriptive
period provided in Section 229 of the NIRC is correct. Its basis, however, is not.

The rule is that the two-year prescriptive period is reckoned from the filing of the final adjusted return. 24 But how
should the two-year prescriptive period be computed?
As already quoted, Article 13 of the Civil Code provides that when the law speaks of a year, it is understood to
be equivalent to 365 days. In National Marketing Corporation v. Tecson,25 we ruled that a year is equivalent to
365 days regardless of whether it is a regular year or a leap year.26

However, in 1987, EO27 292 or the Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I
thereof provides:

Sec. 31. Legal Periods. — "Year" shall be understood to be twelve calendar months; "month" of thirty days,
unless it refers to a specific calendar month in which case it shall be computed according to the number of days
the specific month contains; "day", to a day of twenty-four hours and; "night" from sunrise to sunset. (emphasis
supplied)

A calendar month is "a month designated in the calendar without regard to the number of days it may
contain."28 It is the "period of time running from the beginning of a certain numbered day up to, but not including,
the corresponding numbered day of the next month, and if there is not a sufficient number of days in the next
month, then up to and including the last day of that month." 29 To illustrate, one calendar month from December
31, 2007 will be from January 1, 2008 to January 31, 2008; one calendar month from January 31, 2008 will be
from February 1, 2008 until February 29, 2008. 30

A law may be repealed expressly (by a categorical declaration that the law is revoked and abrogated by another)
or impliedly (when the provisions of a more recent law cannot be reasonably reconciled with the previous
one).31 Section 27, Book VII (Final Provisions) of the Administrative Code of 1987 states:

Sec. 27. Repealing clause. — All laws, decrees, orders, rules and regulation, or portions thereof, inconsistent
with this Code are hereby repealed or modified accordingly.

A repealing clause like Sec. 27 above is not an express repealing clause because it fails to identify or designate
the laws to be abolished.32 Thus, the provision above only impliedly repealed all laws inconsistent with the
Administrative Code of 1987. 1avvphi1

Implied repeals, however, are not favored. An implied repeal must have been clearly and unmistakably intended
by the legislature. The test is whether the subsequent law encompasses entirely the subject matter of the former
law and they cannot be logically or reasonably reconciled. 33

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal
with the same subject matter — the computation of legal periods. Under the Civil Code, a year is equivalent to
365 days whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is
composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days
is irrelevant.

There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code
and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the
Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Lex
posteriori derogat priori.

Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-year
prescriptive period (reckoned from the time respondent filed its final adjusted return 34 on April 14, 1998)
consisted of 24 calendar months, computed as follows:

Year 1 1st calendar April 15, 1998 to May 14, 1998

month
  2nd calendar May 15, 1998 to June 14, 1998
month
  3rd calendar June 15, 1998 to July 14, 1998
month
  4th calendar July 15, 1998 to August 14, 1998
month
  5th calendar August 15, 1998 to September 14,
 month 1998
  6th calendar September 15, to October 14, 1998
month 1998
  7th calendar October 15, 1998 to November 14, 1998
month
  8th calendar November 15, 1998 to December 14, 1998
month
  9th calendar December 15, 1998 to January 14, 1999
month
  10th calendar January 15, 1999 to February 14, 1999
month
  11th calendar February 15, 1999 to March 14, 1999
month
  12th calendar March 15, 1999 to April 14, 1999
month
Year 2 13th calendar April 15, 1999 to May 14, 1999
month
  14th calendar May 15, 1999 to June 14, 1999
month
  15th calendar June 15, 1999 to July 14, 1999
month
  16th calendar July 15, 1999 to August 14, 1999
month
  17th calendar August 15, 1999 to September 14,
month 1999
  18th calendar September 15, to October 14, 1999
month 1999
  19th calendar October 15, 1999 to November 14, 1999
month
  20th calendar November 15, 1999 to December 14, 1999
month
  21st calendar December 15, 1999 to January 14, 2000
month
  22nd calendar January 15, 2000 to February 14, 2000
month
  23rd calendar February 15, 2000 to March 14, 2000
month
  24th calendar March 15, 2000 to April 14, 2000
month

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.

Accordingly, the petition is hereby DENIED. The case is REMANDED to the Court of Tax Appeals which is
ordered to expeditiously proceed to hear C.T.A. Case No. 6113 entitled Primetown Property Group, Inc. v.
Commissioner of Internal Revenue and Arturo V. Parcero.

No costs.
SO ORDERED.

CASE #13:

G.R. No. L-29131             August 27, 1969

NATIONAL MARKETING CORPORATION, plaintiff-appellant,

vs.
MIGUEL D. TECSON, ET AL., defendants,
MIGUEL D. TECSON, defendant-appellee,
THE INSURANCE COMMISSIONER, petitioner.

Government Corporate Counsel Leopoldo M. Abellera and Trial Atty. Antonio M. Brillantes for plaintiff-appellant.
Antonio T. Lacdan for defendant-appellee.
Office of the Solicitor General for petitioner.

CONCEPCION, C.J.:

This appeal has been certified to us by the Court of Appeals only one question of law being involved therein.

On November 14, 1955, the Court of First Instance of Manila rendered judgment, in Civil Case No. 20520
thereof, entitled "Price Stabilization Corporation vs. Miguel D. Tecson and Alto Surety and Insurance Co., Inc.,"
the dispositive part of which reads as follows:

For the foregoing consideration, the Court decides this case:

(a) Ordering the defendants Miguel D. Tecson and Alto Surety Insurance Co., Inc. to pay jointly and
severally plaintiff PRATRA the sum of P7,200.00 plus 7% interest from May 25, 1960 until the amount is
fully paid, plus P500.00 for attorney's fees, and plus costs;

(b) ordering defendant Miguel D. Tecson to indemnify his co-defendant Alto Surety & Insurance Co., Inc.
on the cross-claim for all the amounts it would be made to pay in this decision, in case defendant Alto
Surety & Insurance Co., Inc. pay the amount adjudged to plaintiff in this decision. From the date of such
payment defendant Miguel D. Tecson would pay the Alto Surety & Insurance Co., Inc., interest at 12%
per annum until Miguel D. Tecson has fully reimbursed plaintiff of the said amount.

Copy of this decision was, on November 21, 1955, served upon the defendants in said case. On December 21,
1965, the National Marketing Corporation, as successor to all the properties, assets, rights, and choses in action
of the Price Stabilization Corporation, as plaintiff in that case and judgment creditor therein, filed, with the same
court, a complaint, docketed as Civil Case No. 63701 thereof, against the same defendants, for the revival of the
judgment rendered in said Case No. 20520. Defendant Miguel D. Tecson moved to dismiss said complaint, upon
the ground of lack of jurisdiction over the subject matter thereof and prescription of action. Acting upon the
motion and plaintiff's opposition thereto, said Court issued, on February 14, 1966, an order reading:

Defendant Miguel Tecson seeks the dismissal of the complaint on the ground of lack of jurisdiction and
prescription. As for lack of jurisdiction, as the amount involved is less than P10,000 as actually these
proceedings are a revival of a decision issued by this same court, the matter of jurisdiction must be
admitted. But as for prescription. Plaintiffs admit the decision of this Court became final on December 21,
1955. This case was filed exactly 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 so that when
this present case was filed it was filed two days too late.

The complaint insofar as Miguel Tecson is concerned is, therefore, dismissed as having prescribed. 1äwphï1.ñët

The National Marketing Corporation appealed from such order to the Court of Appeals, which, on March 20,
1969t certified the case to this Court, upon the ground that the only question therein raised is one of law,
namely, whether or not the present action for the revival of a judgment is barred by the statute of limitations.

Pursuant to Art. 1144(3) of our Civil Code, an action upon a judgment "must be brought within ten years from the
time the right of action accrues," which, in the language of Art. 1152 of the same Code, "commences from the
time the judgment sought to be revived has become final." This, in turn, took place on December 21, 1955, or
thirty (30) days from notice of the judgment — which was received by the defendants herein on November 21,
1955 — no appeal having been taken therefrom. 1 The issue is thus confined to the date on which ten (10) years
from December 21, 1955 expired.

Plaintiff-appellant alleges that it was December 21, 1965, but appellee Tecson maintains otherwise, because
"when the laws speak of years ... it shall be understood that years are of three hundred sixty-five days each" —
according to Art. 13 of our Civil Code — and, 1960 and 1964 being leap years, the month of February in both
had 29 days, so that ten (10) years of 365 days each, or an aggregate of 3,650 days, from December 21, 1955,
expired on December 19, 1965. The lower court accepted this view in its appealed order of dismissal.

Plaintiff-appellant insists that the same "is erroneous, because a year means a calendar year (Statutory
Construction, Interpretation of Laws, by Crawford, p. 383) and since what is being computed here is the number
of years, a calendar year should be used as the basis of computation. There is no question that when it is not a
leap year, December 21 to December 21 of the following year is one year. If the extra day in a leap year is not a
day of the year, because it is the 366th day, then to what year does it belong? Certainly, it must belong to the
year where it falls and, therefore, that the 366 days constitute one year."  2

The very conclusion thus reached by appellant shows that its theory contravenes the explicit provision of Art. 13
of the Civil Code of the Philippines, limiting the connotation of each "year" — as the term is used in our laws —
to 365 days. Indeed, prior to the approval of the Civil Code of Spain, the Supreme Court thereof had held, on
March 30, 1887, that, when the law spoke of months, it meant a "natural" month or "solar" month, in the absence
of express provision to the contrary. Such provision was incorporated into the Civil Code of Spain, subsequently
promulgated. Hence, the same Supreme Court declared  3 that, pursuant to Art. 7 of said Code, "whenever
months ... are referred to in the law, it shall be understood that the months are of 30 days," not the "natural," or
"solar" or "calendar" months, unless they are "designated by name," in which case "they shall be computed by
the actual number of days they have. This concept was later, modified in the Philippines, by Section 13 of the
Revised Administrative Code, Pursuant to which, "month shall be understood to refer to a calendar month."  4 In
the language of this Court, in People vs. Del Rosario, 5 with the approval of the Civil Code of the Philippines
(Republic Act 386) ... we have reverted to the provisions of the Spanish Civil Code in accordance with which a
month is to be considered as the regular 30-day month ... and not the solar or civil month," with the particularity
that, whereas the Spanish Code merely mentioned "months, days or nights," ours has added thereto the
term "years" and explicitly ordains that "it shall be understood that years are of three hundred sixty-five days."

Although some members of the Court are inclined to think that this legislation is not realistic, for failure to
conform with ordinary experience or practice, the theory of plaintiff-appellant herein cannot be upheld without
ignoring, if not nullifying, Art. 13 of our Civil Code, and reviving Section 13 of the Revised Administrative Code,
thereby engaging in judicial legislation, and, in effect, repealing an act of Congress. If public interest demands a
reversion to the policy embodied in the Revised Administrative Code, this may be done through legislative
process, not by judicial decree.

WHEREFORE, the order appealed from should be as it is hereby affirmed, without costs. It is so ordered.

Dizon, Makalintal, Sanchez, Castro, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Reyes, J.B.L., and Zaldivar, JJ., are on leave.

CASE #14:

G.R. No. L-3784           October 17, 1952

ERNEST BERG, plaintiff-appellee,

vs.
MAGDALENA ESTATE, INC., defendant-appellant.

Claro M. Recto and Eusebio C. Encarnacion for appellant.

Alva Hill, Tañada, Pelaez and Teehankee for appellee.

BAUTISTA ANGELO, J.:

This is an action for partition of the property known as Crystal Arcade situated in the City of Manila.
The complaint avers that plaintiff and defendant are co-owners of said property, the former being the owner of
one-third interest and the latter of the remaining two-thirds. The division is asked because plaintiff and defendant
are unable to agree upon the management of the property and upon the partition thereof.

Defendant answered setting up a special defense and a counterclaim. As a special defense, defendant claims
that on September 22, 1943, it sold to plaintiff one-third of the property in litigation subject to the express
condition that should either vendor or vendee decide to sell his or its undivided share, the party selling would
grant to the other part first an irrevocable option to purchase the same at the seller's price. It avers that on
January 1946 plaintiff fixed the sum of P200,000 as the price of said share and offered to sell it to defendant,
which offer was accepted, and for the payment of said price plaintiff gave defendant a period of time which,
including the extensions granted, would expire on May 31, 1947. Defendant claims that, in spite of the
acceptance of the offer, plaintiff refused to accept the payment of the price, and for this refusal defendant
suffered damages in the amount of P100,000. For these reasons, defendant asks for specific performance.

Plaintiff filed a reply setting forth therein that the transaction referred to by the defendant in its special defense
relative to the property in litigation is not supported by any note or memorandum subscribed by the parties, as in
fact no such note or memorandum has been made evidencing the transaction, for which reason, plaintiff claims,
this transaction falls under the statute of frauds and cannot form the basis of the special defense invoked by the
defendant.

After trial, at which the parties presented testimonial and documentary evidence, the lower court found for the
plaintiff holding that no agreement has been reached between the parties relative to the purchase and sale of
the property in question, and, recognizing the right of plaintiff to demand partition under the provisions of Rule 71
of the Rules of Court, it granted the relief prayed for in the complaint. Hence this appeal.

The pivotal issue to be determined is whether an agreement to sell has actually been reached between plaintiff
and defendant of the share of the former in the property in litigation for the sum of P200,000, as claimed by
defendants, or whether there have been merely negotiations between them which never ripened into an
agreement, as claimed by plaintiff. And in the determination of this issue, the preliminary question to be threshed
out is the point raised by plaintiff touching on the evidence submitted by defendant in the light of the principle
underlying the statute of frauds.

It is an undisputed facts that since September 22, 1943, plaintiff and defendant were co owners pro indiviso of
the property known as Crystal Arcade in the proportion of one-third interest belonging to the former and two-
thirds to the latter. In the deed of sale executed by the parties on said date, they stipulated that, should either of
them decide to sell his or her share, the other party will have an irrevocable option to purchase it at the seller's
price. Then a disagreement ensued between the parties as to what really occurred concerning the deal.

Thus, while Berg claims that his negotiations with Hemady ended when an offer by the latter to the former to buy
his interest for the sum of P350,000, Hemady on the other hand claims that Berg offered to sell it to him for
P200,000 subject to the condition that the necessary permit be obtained from the United States Treasury
Department.

It should be stated that, aside from the testimony of Berg and Hemady, no document has been presented
evidencing that alleged agreement to sell, and so when defendant made attempts to prove, through the
testimony of Hemady, that plaintiff made an offer to sell his interest to defendant for the sum of P200,000, the
attempt met the vigorous opposition of plaintiff invoking the rule that such agreement can only be established by
a contract in writing, or by a note or memorandum subscribed by the party sought to be charged, as prescribed
by the statute of frauds. It was then that defendant submitted in evidence exhibits "3" and "4", contending that
these documents, read in connection with the option to sell embodied in exhibit "1", constitute a written proof
contemplated by said statute. The crux of this case, therefore, lies in the determination of whether said exhibits
partake of the nature of a note or memorandum within the purview of said statute as contended by defendant.

It appears that right after the liberation of the Philippines, both Ernest Berg and K.H. Hemady were accused of
collaboration for which reason the Treasury Department of the United States ordered the freezing of their
properties under the law known as Trading with the Enemy Act. Under the provisions of this Act both Berg and
Hemady could not sell or dispose of their properties without first securing the permit required by it, and so to
comply this requirement, both Berg and Hemady filed separately an application with said Department for the
purchase and sale of the property in litigation. These applications are the ones marked as exhibits "3" and "4". In
the application exhibit "3", Ernest berg stated that he desires a license in order to sell his interest in the Crystal
Arcade, Escolta, Manila, for P200,000 in cash to Magdalena Estate, Inc. asking at the same time for permission
to place the amount in an account in his name or in the name of the company he represents and to apply the
same from time to time to the payment of the obligations of Red Star Store Inc. In the application exhibit "4",
defendant in turn stated, through its president K. H. Hemady, that it desires 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."

It is now defendant's position that if the option granted in exhibit "1" (deed of sale containing the irrevocable
option) is considered in relation to Berg's application exhibit "3" and defendant's application exhibit "4", these
documents constitute a sufficient note or memorandum of the parties' alleged contract of purchase and sale
within the purview of the statute of frauds. This claim is disputed by Ernest Berg, appellee herein. Which of these
contentions is correct?

Before we proceed, it is important to state at this juncture some principles governing the meaning, extent and
scope of the rule underlying the statute of frauds relative to the note or memorandum that may serve as proof to
determine the existence of an oral contract or agreement contemplated by it, and for our purpose, it suffices for
us to quote the following authorities:

No particular form of language or instrument is necessary to constitute a memorandum or note in writing

under the statute of frauds; any document or writing, formal or informal, written either for the purpose of
furnishing evidence of the contract or for another purpose, which satisfies all the requirements of the
statute as to contents and signature, as discussed respectively infra secs. 178-200, and infra secs. 201-
215, is a sufficient memorandum or note. A memorandum may be written as well as with lead pencil as
with pen and ink. It may also be filled in on a printed form (37 C.J.S., 653-654).

The note or memorandum required by the statute of fraud need not be contained in a single document,
nor, when contained in two or more papers, need each paper to be sufficient as to contents and
signature to satisfy the statute. Two or more writings properly connected may be considered together,
matters missing or uncertain in one may be supplied or rendered certain by another, and their sufficiency
will depend on whether, taken together, they meet the requirement of the statute as to contents and the
requirements of the statute as to signature, as considered respectively infra secs. 179-200 and secs.
201-215.

Papers connected. — The rule is frequently applied to two or more, or a series of letters or telegrams, or
letters and telegrams sufficiently connected to allow their consideration together; but the rule is not
confined in its application to letters and telegrams; any other documents can be read together when one
refers to the other. Thus, the rule has been applied so as to allow the consideration together, when
properly connected, of a letter and an order of court, a letter and order for goods, a letter and a
deposition, letters or telegrams and undelivered deeds, wills, corresponding and related papers, a check
and a letter, a receipt and a check, deeds and a map, a memorandum of agreement and a deed, a
memorandum of sale and an abstract of title, a memorandum of sale and a will, a memorandum of sale
and a receipt, and a contract, deed and instruction to a depository in escrow. The number of papers
connected to make out a memorandum is immaterial. (37 C.J.S. sec. 656-659).

Bearing in mind the foregoing rules, we are of the opinion that the applications marked exhibits "3" and "4",
whether considered separately or jointly, satisfy all the requirements of the statute as to contents and signature
and, as such, they constitute sufficient proof to evidence the agreement in question. And we say so because in
both applications all the requirements of a contract are present, namely, the parties, the price or consideration,
and the subject-matter. In the application exhibit "3", Ernest Berg appears as the seller and the Magdalena
Estate Inc. as the purchaser, the former's interest in the Crystal Arcade as the subject-matter, and the sum of
P200,000 as the consideration. As the application appears signed by Ernest Berg, the party sought to be
charged by the obligation. In other words, it can clearly be implied that between Ernest Berg and the Magdalena
Estate Inc. there has been a clear agreement to sell said property for P200,000. From the language of the
application no other logical conclusion can be drawn for if there has not been any previous agreement between
the parties it is fool hardly to suppose that Ernest Berg would take the trouble of filling an application with the
Treasury Department of the United States to secure a license to sell the property. the claim of Ernest Berg that
the negotiations he had with the Hemady ended with an offer on his part to buy his interest for P350,000 cannot
be sustained, for if such is the case it is indeed hard to comprehend why he should state in his application that
he was selling the property for P200,000. The fact that in the same application Berg also asked for license to
place the money in an account in his name, or in the name of the company he represents, and to apply the same
to the payment of the obligations of said company is of no consequence, nor does it argue against the purpose
of the application, for that request only means that, should the sale be carried out, he would deposit the money
in the name of the company and later would apply it to the payment of its obligations.
We do not agree with the claim that the application Exhibit "4" submitted by the Magdalena Estate Inc. does not
harmonize with the terms appearing in the application Exhibit "3", for, contrary to the claim, those two
applications, considered together, harmonize and complement each other. And we say so because the
application Exhibit "4" states specifically that a portion of the sum of P400,000 which is desired to be raised as a
loan will be used for the purchase of the one-third interest of Ernest Berg, which portion undoubtedly refers to
the sum of P200,000 mentioned in the application Exhibit "3". This can be plainly seen by harmonizing together
the two applications. As the rule well points out, the sufficiency of the two documents will depend on whether,
taken together, they meet the requirements of the statute as to contents and as to signature, and here both
requirements are met because the two documents should be consider as a whole. Whether, therefore, we
consider the two applications jointly or separately, it is safe to state that they meet the requirements of the
principle underlying the statutes of frauds.

Let us now take the terms of the agreement to sell, considering that this has been properly established to see if
defendant has complied with them and can ask now for specific performance. We have already seen that plaintiff
agreed to sell to defendant his undivided one-third interest in the property for the sum of P200,000. The next
question is: within what period shall this consideration be paid? Here are two possible theories: one under
application Exhibit "3" and the other application Exhibit "4". If we follow the application Exhibit "3", it is clear that
payment is to be made in cash, or as soon as the license has been granted to effect the transaction. This means
that it shall be effected immediately upon obtaining the license, or within a reasonable time thereafter. It is not
disputed that this license was granted, but we find that defendant failed to make good its offer within a
reasonable time for lack of money, it being a fact that defendant was only able to raise funds for that purpose
when it succeeded in selling a portion of its real estate to a foreign corporation one year thereafter, or on March
14, 1947. It is true that, in its answer, defendant claims that plaintiff granted to defendant an extension of time up
to May 31, 1947, within which to realize the transaction, but this claim is not supported by any proof. In the
opinion of the Court, this delay has the effect of relieving plaintiff of his obligation under the law (Articles 1124-
1451, of the old Civil Code).

Supposing that the term of payment is, as contended by defendant, until defendant has obtained the loan of
P400,000 from the National City Bank of New York, or after it has obtained funds from other sources
(considering the terms of application Exhibit "4") what is the legal effect of this alternative clause? Can it be
considered a term within the meaning of our old Civil Code? Let us analyze it. Under article 1125 of said code,
obligations, for the fulfillment of which a day certain has been fixed, shall be demandable only when the day
arrives. A day certain is understood to be that which must necessarily arrive, even though it is not known 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.

Viewing in this light the clause on which 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. As a matter of fact, 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. In any event it is apparent that the
fulfillment of the condition contained in this second alternative is made to depend upon the defendant's exclusive
will, and viewed in this light, we are of the opinion that plaintiff's obligation to sell did not arise, for, under Article
1115 of the old Civil Code, "when the fulfillment of the condition depends upon the exclusive will of the debtor
the conditional obligation shall be void."

Having reached the foregoing conclusions, we find no legal way by which plaintiff could be compelled to carry
out the terms of his agreement to sell considering the circumstances surrounding the transaction. To our mind, it
is clear that there was an agreement to sell between the parties under the terms appearing in the applications
Exhibit "3" and "4". But it also appears that the plaintiff has decided to agree to sell his interest because of his
need of money at the time. He needed it not only for his immediate needs but to pay the obligations of his own
company, the Red Star Stores. Inc. At that time the values of real estate were fast moving. They were growing
up in a rapid fashion. Time element was then of the essence of every transaction, and the parties knew it. When,
therefore, more than a year had transpired since the negotiations started and defendant failed to come across,
plaintiff changed his mind. The interest of defendant to purchase the share of plaintiff in the property is
understandable, not only because of the advisability to consolidate its ownership in said property, but because it
was a handsome transaction with a brighter prospect in the future. But it is to be regretted that both Berg and
Hemady who were both experienced businessmen did not put the terms of their agreement clearly in writing.
Had they done so perhaps this case would have been avoided.
Finding no error in the decision appealed from, the same is hereby affirmed, with costs against appellant.

Pablo, Padilla and Montemayor, JJ., concur.

Separate Opinions

BENGZON, J., concurring:

I concur in the result. I believe no agreement has been duly proved.

LABRADOR, J., concurring:

I concur. There might be some objection to considering Exhibit 3 (application of Ernest Berg with the United
States Treasury Department to sell his interest in the Crystal Arcade Building for P200,000 cash) and Exhibit 4
(application of the Magdalena Estate, Inc., with the United States Treasury Department for a portion of the
P200,000 requested as loan from the National City Bank of New York to purchase one-third of the Crystal
Arcade Building belonging to Ernest Berg) as notes or memoranda of the contract entered into between the
parties for the sale of the property, within the meaning of the statute of frauds. In some jurisdictions it is held that
in order to comply with the requirements of the statute of frauds a letter must be sent to the contracting party or
his agent (27 C.J.S., sec. 386, p. 302). Such a rule is the one adopted in the State of New Jersey. But in the
Code of Civil Procedure of the State of California (sections 1973-1974), from which our original statute of frauds
was taken (section 335 of Act No. 190), the rule is that a letter or telegram of the party sought to be charged to a
third person may be considered as a sufficient memorandum within the meaning of the statute. Ibid.; Moss vs.
Atkinson, 44 Cal. 3). This doctrine is also followed in Kansas, Missouri, New York, Iowa, North Carolina, New
England, and Ontario. (See footnotes to 27 C.J.S. 302.) In a case decided in Kansas it was expressly held:

Nor is it necessary, in the case of a memorandum in the form of a letter, that it should be addressed to
the vendee. Letters to a third person are sufficient memoranda. Browne, St. Frauds (5th Ed.) Sec. 354a.
"The principle upon which these decisions are based we understand to be that the statute was not
intended to apply to written contracts, out to the information of oral contracts when properly evidenced,
as by the admission in writing of the party to be charged. If the party sought to be charged has in writing
admitted the contract, this is sufficient, as we understand, to take the case out of the statute, no matter to
whom the writing may have been addressed. Warfield v. Cranberry Co., 33 Iowa, 312, 19 N.W. 224.
(Miller v. Kansas City, Ft. S. & M. R. Co., et al., 58 Kan. 189, 48 P. 853, 854).

As section 21 of Rule 123, Rules of Court, our statute of frauds when the communications to the United States
Treasury Department were sent by the parties to this case, is a rule of evidence (as to the character of the new
provision [article 1403] of the New Civil Code, quaere), and the written memorandum is not the contract itself,
but merely evidence thereof, it is not necessary for the admission as evidence of any note or memorandum
signed by a party thereto, that it be signed by, or addressed to, the other also.

Defendant-appellant's counterclaim to compel plaintiff-appellee to sell the property must, however, be denied, for
the reason that the conditions under which the contract to sell were to be carried out did not materialize within a
reasonable time after it was entered into, and both parties, upon failure of the contingencies relied upon,
impliedly withdrew therefrom. The agreement was that the sale shall be carried out when the vendor will get the
necessary permit to sell from the United States Treasury Department, and the Magdalena Estate, Inc., will get
the loan from the National City Bank of New York with which to pay the price. These conditions are suspensive.
The sale was to be carried out only if these should materialize.

En el segundo parrafo del articulo 1.113 y en el 1.114 inicia el Codigo la clasificacion mas importante de
las condiciones en suspensivas y resolutorias, desenvolviendola luego en los articulos 1.122 y
siguientes, al determinar los efectos, consecuencia del complimiento de unas y otras. Su diferencia es
bien clara; unas y otras influyen en la existencia de la obligacion, pero por modos diametralmente
opuestos: si la condicion suspensiva se cumple, la obligacion surge; si se cumple la resolutoria, la
obligacion se extingue; si la una no se realiza, el vinculo de derecho no llega a aparecer; si la otra no se
verifica, la relacion de derecho se consolida; mientras dura la duda, la obligacion, en el primer caso, no
aparece, pero su existencia es una esperanza; y en el segundo, surte sus efectos, pero pesa sobre ella
una amenaza de caducidad. (8 Manresa, 122

That there were suspensive conditions may be inferred from their conduct. The defendant-appellant's manager
did not demand that the sale be carried out until after the filing of the complaint in the month of April, 1947, or
fully one year after the contract to sell had been agreed upon. Berg, the vendor, also raised the funds he needed
for his business by selling a property of his in Quezon City to the vendee itself. (Deposition of Ernest Berg,
Exhibit A, p. 4.) During all the time that they were in continuous correspondence regarding the administration of
the property, never was a word said about carrying out the sale. All these show that they actually desisted from
carrying out the terms of the contract to sell.

Paras, C.J. and Jugo, JJ., concur.

CASE #15: 

G.R. No. L-30736 April 14, 1975

LIRAG TEXTILE MILLS, INC. and FELIX K. LIRAG, petitioners,

vs.
COURT OF APPEALS and CRISTAN ALCANTARA, respondents.

A. O. Benitez for petitioners.

Rosauro Alvarez for private respondent.

ESGUERRA, J.: ñé+.£ªwph!1

Petitioners Lirag Textile Mills, Inc. and Felix K. Lirag seek a review by certiorari of the decision of the respondent
Court of Appeals in its C. A. G.R. No. 33116-R, entitled "Cristan Alcantara, plaintiff-appellee vs. Lirag Textile
Mills, Inc. and Felix Lirag, defendants-appellants", which affirmed with costs against the appellants the decision
dated September 19, 1963, of the Court of First Instance of Rizal (Branch VI) in its Civil Case No. 6884, in favor
of respondent Cristan Alcantara (plaintiff in Civil Case No. 6884 and appellee in C. A. G.R. No. 33116-R), which
provides as follows:  têñ.£îhqwâ£

However, as he (respondent Cristan Alcantara) was dismissed without cause in violation of the
contract of employment, and as he was at the time earning P500.00 monthly, the Court finds,
and so adjudges, that he is entitled to recover from defendants as actual damages the sum of
P12,500.00 representing his salaries for 25 months ending September 22, 1963, plus the sum of
P500.00 monthly thereafter until the whole amounts due him are fully paid and settled by
defendants. As to moral damages claimed, the Court finds that, considering the circumstances of
the case and there being no justification and/or cause for his removal or dismissal, he is entitled
to recover from defendants moral damages in the sum of P5,000.00 plus attorney's fees in the
sum of P3,000.00.

In view of the foregoing, judgment is hereby rendered sentencing defendants, jointly and
severally, to pay plaintiff the amounts above set forth, plus the costs of this suit. It is so ordered.

During the trial of Civil Case No. 6884 in the Court of First Instance of Rizal (Branch VI), petitioners and private
respondent Alcantara entered into a stipulation of facts, as follows:  têñ.£îhqwâ£

1. That on May 11, 1960 and for sometime prior and subsequent thereto, defendant Felix Lirag
was a member of the Board of Directors of the Philippine Chamber of Industries;

2. That for about two months, more or less, prior to May 11, 1960, plaintiff worked in a temporary
capacity with defendant Lirag Textile Mills, Inc.;

3. That during this same period of time, defendant Felix Lirag was a director and Chairman of the
Board of Directors of defendant Lirag Textile Mills, Inc.;

4. That on May 9, 1960, defendant Lirag Textile Mills, Inc. wrote a letter to plaintiff (Alcantara)
advising him that, effective May 11, 1960, his temporary designation as Technical Assistant to
the Administrative Officer was made permanent, the said letter marked Exhibit "A", being
attached herewith and made a part hereof;
 5. That as Assistant to the Administrative Officer of the Lirag Textile Mills, Inc. as of May 11,
1960 plaintiff received a salary of P400.00 and allowance of P100.00 per month;

6. That plaintiff's tenure of employment, per defendant Lirag Textile Mills, Inc.'s above letter of
May 9, 1960 was to be 'for an indefinite period, unless sooner terminated by reason of voluntary
resignation or by virtue of a valid cause or causes' (Emphasis supplied)

7. That on March 4, 1960, per letter of defendant Lirag Textile Mills, Inc. of that date, signed by
its Executive Vice President and General Manager, plaintiff was advised that effective November
15, 1960 he (Alcantara) was promoted to the position of Assistant Administrative Officer, the said
letter, marked Exhibit "B", being attached herewith and made a part hereof;

8. That on July 22, 1961, defendant Lirag Textile Mills, Inc. wrote plaintiff (Alcantara) a letter
advising him that because the company 'has suffered some serious reverses, both in terms of
pecuniary loss and in market opportunities,' the company was terminating his services and
effecting his separation from defendant corporation effective at the close of working hours of
August 22, 1961, the said letter, marked Exhibit "C", being attached herewith and made a part
thereof; (Emphasis supplied)

9. That defendant Lirag Textile Mills Inc.'s original capital of P5,000,000.00 was, on May 2, 1961,
increased to P15,000,000.00 per certification issued by the Security and Exchange Commission,
a copy of which marked Exhibit "D" is herewith attached and made a part hereof;

10. That the financial position of defendant Lirag Textile Mills, Inc. in the years 1960 and 1961 is
reflected in the financial statements for the said years to be marked Exhibits "E" and "E-I",
respectively, hereafter to be submitted by the parties and to be considered incorporated herewith
and made a part hereof;

11. That plaintiff, through counsel, wrote a letter of demand to defendants, copies whereof
marked Exhibits "F" and "F-1" with their respective registry receipts and registry return cards
attached, are herewith appended and made a part hereof; and

12. That defendant Lirag Textile Mills, Inc., through counsel, in answer to plaintiff's letter, wrote
the letter marked Exhibit "G" herewith attached and made a part hereof.

Private respondent Cristan Alcantara as plaintiff in Civil Case No. 6884 (C.F.I. of Rizal, Branch VI), through his
counsel, made a written request for admission of certain facts, pursuant to the provision of the Rules of Court,
addressed to petitioners Lirag Textile Mills, Inc. and Felix Lirag (as defendants therein), which was answered by
them as reproduced herein to wit: têñ.£îhqwâ£

1. That, per payrolls of the defendant Lirag Textile Mills, Inc., the salaries of:

(a). Mr. Basilio Lirag, President of the Lirag Textile Mills, Inc. was effective March
1, 1961, raised from P2,500.00 to P5,000.00 monthly;

(b). Mr. Nemesio L. Reyes, executive vice president and general manager of said
corporation, was, effective April 16, 1961, raised from P1,000.00 to P2,500.00
monthly;

(c). Mr. Danilo Lacerna, corporate secretary of defendant Lirag Textile Mills, Inc.
was effective April 16, 1961, raised from P700.00 to P1,000.00 monthly;

(d). Mr. Winifred Salvacion, assistant of E. V. President, was, effective April 16,
1961 raised from P500.00 to P1,000.00 monthly; and

(e). Mr. Manuel Sison, assistant corporate secretary of the aforementioned

Company was, effective May 15, 1961, raised from P150.00 to P300.00 monthly."

('Defendants admit the matters set forth in sub-paragraphs (a) and (c) of
paragraph 1, but specifically deny sub-paragraphs (b), (d) and (e), the figures
therein being not accurate'.)
 2. That the wages of the laborers of defendant Lirag Textile Mills, Inc. was
increased 25 cents a day effective the year 1961.

('Defendants admit paragraph 2, but hereby manifest, however, that the

increases in the salaries of the laborers and of the persons named in paragraph 1
were resolved at the time the corporation was still earning a reasonable return of
its investment'.)

3. That, shortly before and/or after separation of plaintiff (Alcantara) from the
services of defendant Corporation, the latter took in and employed new personnel
among whom were:

(a). a certain Mr. Niguidula with a salary of P800.00 a month;

(b). Mr. Nemesio Joves with a salary of P600.00 a month; and

(c). a general manager's new secretary who was employed and taken in only one
or two days before plaintiff's separation from defendant's services.

('Defendants admit that Mr. Pacifico Niguidula who is a mechanical engineer was employed on
July 6, 1961 with a salary of P800.00 a month, but his services were indispensably needed by
the corporation for the planning of the machinery layout for its integration program. Besides, the
services of a professional mechanical engineer for the size of an industrial plant as that of Lirag
Textile Mills, Inc. is required by law.

`Defendants specifically deny sub-paragraph (b) of paragraph 3; the corporation has not at any
time employed any person by the name of Nemesio Joves.

`Defendants specifically deny sub-paragraph (c) of paragraph 3; it was the General Manager, not
the corporation, who hired a private secretary whose salary was paid out of his personal funds.') .

Respondent Court of Appeals in its decision promulgated May 16, 1969, in C. A. G.R. No. 33116-R, penned by
Hon. Hermogenes Concepcion, Jr. and concurred in by then Presiding Justice Julio Villamor and then Associate
Justice Angel H. Mojica (deceased), affirmed the decision of the lower court in Civil Case No. 6884 (C.F.I.,
Branch VI, of Rizal), principally its conclusion that the trial court did not commit any error in its evaluation of the
evidence when it found that it was not true that petitioner Lirag Textile Mills (then defendant) suffered pecuniary
loss and in market opportunities which it used as a justification to terminate the services of plaintiff Alcantara;
that it was not also true that the latter suffered from lack of skill; that, therefore, there was a violation of the
written contract of employment executed by and between petitioners and private respondent Alcantara; that
petitioner (then defendant) Felix Lirag was responsible for inducing private respondent Alcantara to leave his
employment with the Philippine Chamber of Industries where he was holding a permanent position and to accept
employment with petitioner (then defendant) Lirag Textile Mills; and that appellee Alcantara was correctly
awarded moral damages and attorney's fees.

Petitioners are now before Us questioning the respondent Appellate Court's decision and alleging that it erred in
"sentencing the petitioners to pay respondent Cristan Alcantara back salaries from the time of dismissal up to
final judgment for the dismissal without cause of respondent Alcantara as employee of the petitioner Lirag
Textile Mills, Inc".; "in awarding moral damages to the respondent Alcantara by the mere fact alone that the
respondent Alcantara was separated by the petitioner corporation from his employment without just cause in the
absence of any finding that the employer acted with malice or evident bad faith"; and "in allowing respondent
Alcantara to recover from the petitioner company attorney's fees."

The main thrust of petitioners' contention is that an employer's liability for terminating without just cause the
employment of an employee is governed by the provisions of Republic Act 1787, amending Republic Act 1052,
which limits said liability as follows: 
têñ.£îhqwâ£

Sec. 1. In case of employment without a definite period, in a commercial, industrial, or

agricultural establishment or enterprise, the employer ... may terminate at any time the
employment with just cause, or without just cause ... or in the case of an employer, by serving
such notice to the employee at least one month in advance or one half month for every year of
service of the employee, whichever is longer, ....
 The emloyee, upon whom no such notice was served in case of termination of employment
without just cause shall be entitled to compensation from the date of termination of his
employment in an amount equivalent to his salaries or wages corresponding to the required
period of notice. (Republic Act 1787) (Emphasis supplied) .

The fatal defect of petitioner's argument is that the above quoted provision of the law does not and cannot apply
to an employer-employee relationship with an express contract for a period of employment. As could be clearly
seen from the stipulation of facts between the parties in Civil Case No. 6884 and as a fact recognized by both
the trial court and the respondent Appellate Court, the contract of employment was for an indefinite period as it
shall continue without ending, subject to a resolutory period, unless sooner terminated by reason of voluntary
resignation or by virtue of a valid cause or causes (the resolutory period). There is an indefinite period of time for
employment agreed upon by and between petitioners and the private respondent, subject only to the resolutory
period agreed upon which may end the indeterminate period of employment, namely — voluntary resignation on
the part of private respondent Alcantara or termination of employment at the option of petitioner Lirag Textile
Mills, but for a "valid cause or causes". It necessarily follows that if the petitioner-employer Lirag Textile Mills
terminates the employment without a "valid cause or causes", as it admittedly did, it committed a breach of the
contract of employment executed by and between the parties. The measure of an employer's liability provided
for in Republic Act 1052, as amended by R. A. 1787, is solely intended for contracts of employment without a
stipulated period. It cannot possibly apply as a limitation to an employer's liability in cases where the employer
commits a breach of contract by violating an indefinite period of employment expressly agreed upon through his
wrongful act of terminating said employment without any valid cause or causes, which act may even amount to
bad faith on the employer's part. The law (Art. 1170 of the Civil Code) governing liability for damages is explicit
when it states: 
têñ.£îhqwâ£

Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages. (Emphasis
supplied).

A "period" has been defined "as a space of time which has an influence on obligation as a result of a juridical
act, and either suspends their demandableness or produces their extinguishment." Obligations with a period are
those whose consequences are subjected in one way or another to the expiration of said period or term. (8
Manresa 158) Art. 1193 of the Civil Code, provides, among others, that "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". In the light of the foregoing provisions We have no
doubt that the "indefinite period" of employment expressly agreed upon by and between the parties in this case
is really a resolutory period because the employment is bound to terminate on a future "day certain" such as the
employee's resignation or employer's termination of employment upon a valid cause or causes, like death of the
employee or termination of employer's corporate existence, although it may not be known when.

A cursory examination of the complaint filed by private Alcantara in the Court of First Instance of Rizal Civil Case
No. 6884) immediately discloses that this was originally an action for damages based on petitioner's (then
defendant's)alleged wrongful acts in terminating without just cause his employment with the petitioner (then
defendant) Lirag Textile Mills, thus violating the contract of employment; and that the "clearly unfounded,
unwarranted and illegal act of enticing and instigating him (Alcantara) to leave his first job and dismissing him
without a valid cause from the second" caused him feelings of "mental anguish, besmirched reputation, wounded
feelings and moral degradation". In short, at the very incipiency of the action, private respondent Alcantara
already alleged that petitioner's act in terminating the employment without just cause was tainted with fraud and
bad faith.

Evaluating the evidence presented, the trial court found no truth nor basis for petitioner Lirag Textile Mills'
contention that the valid cause for terminating private respondent Alcantara's employment was that the former
"has suffered serious reverses, both in terms of pecuniary loss and in market opportunities. " On the contrary,
the trial court found that petitioner Lirag Textile Mills, Inc.'s original capital of five million pesos was, on May 2,
1961, or just two months prior to defendants sending the note of separation (Exh. "C"), increased to fifteen
million; that the salary of Mr. Basilio Lirag, president of defendant Lirag Textile Mills, Inc. was, effective March 1,
1961, or just four months before the notice of separation, raised from P2,500.00 to P5,000.00 monthly, whereas
that of Mr. Danilo Lacerna, corporate secretary of defendant corporation was, three months prior to notice of
separation, raised from P700.00 to P1,000.00 monthly; that shortly before and/or after plaintiff's separation from
the service of defendant corporation, the latter took in and employed new personnel among whom was a certain
Mr. Niguidula with a starting salary of P800 monthly; that from the financial statements, Exhs. "E" to "I",
presented by defendants themselves and the testimony of their accountants, it appears that although in 1961 the
corporation did not realize as big a profit as in the previous year, nevertheless, it realized profits in the amount of
P1,173,098.00 rather than sustain losses; that reserves for incentive bonuses were increased to 106,436.50 as
compared to P90,744.23 for 1960; and that finally the defendant corporation's total assets in 1961 was
P39,640,153.53 as compared to P26,900,562.63 for 1960, or an increase of about P13,000,000. The findings of
respondent Appellate Court as to petitioner Lirag Textile Mills, Inc's. financial condition during that period is
substantially the same as that of the trial court, to wit: 
têñ.£îhqwâ£

Anent the first ground (serious losses both in terms of pecuniary loss and in market opportunities
that appellant company has suffered), it is enough to point out that of the eight exhibits (Exhs. 1-
8) enumerated by the appelants on pages 10 and 11 of their brief, only Exhibit 1 shows that
appelant company suffered a gross loss of P36,826.70 during July, 1961. On the other hand, the
rest of the exhibits (Exhs. 2-8) veritably show that the same company realized net profits. True
enough that the net profits decreased as compared to previous years, but just the same they are
profits in any language, and they are not small ones. So that, it is not true that the corporation
has suffered serious losses during the months immediately prior to appellee's dismissal. On the
contrary, it realized profits, not gigantic in the in the way it wanted them.

The Appellate Court went further when, on the question raised by petitioner Lirag Textile Mills, Inc. of the alleged
lack of skill of respondent Alcantara as a valid cause to terminate his employment, it ruled:  têñ.£îhqwâ£

With respect to the second ground (lack of skill on the part of the appellee) suffice it to say that it
is too late for the appellants to allege such lack of skill. Nowhere in appellant's answer did they
plead the defense of lack of skill on the part of the appellee. We can, however, glean from
appellant corporation's letter dated November 14, 1960, congratulating the appellee for his
promotion he fully deserves, that the latter was proficient for the position he was taken in (Exh.
"B"). And if the appellee lacked skills for the position he was originally appointed to on a
temporary basis, he would not have been promoted, and his temporary designation would not
have been made permanent (Exh. "A").

Inasmuch as We see no compelling reason to disturb both the trial court's and the respondent Appellate Court's
rulings that the written contract of employment was violated by petitioner Lirag Textile Mills, Inc. when it
terminated the employment of private respondent Alcantara without a valid cause, what remains to be
determined is whether or not there was fraud or bad faith on the part of petitioner Lirag Textile Mills, Inc. when it
committed that breach of contract. To Our mind, there can be no greater, nor more eloquent manifestation of
fraud when petitioner Lirag Textile Mills, Inc. tried its very best both in the trial court and in the respondent
Appellate Court to convince both courts that it suffered "serious losses both in terms of pecuniary loss and in
market opportunities" as a valid cause for the termination of private respondent Alcantara's employment, said
petitioners knowing fully well that such was not the truth as said allegation was a falsehood. The bad faith
consisted of petitioner's knowledge that its allegation was a falsehood and yet used it as basis for the wrongful
act of terminating the contract of employment. Its bad faith in committing the breach of the contract of
employment was compounded when petitioners as appellants in the respondent Appellate Court tried to raise for
the first time the question of private respondent Alcantara's alleged lack of skill in its desperate effort to find a
"valid cause" for that wrongful breach. The very act of petitioners in trying to pull the wool over the eyes of both
the trial court and the respondent Appellate Court as to its true financial condition in its attempt to establish a
false "valid cause" for its wrongful act is not only indicative of fraud and bad faith but likewise highly
reprehensible because it is deliberate distortion of the truth to subvert the ends of justice.

Article 2201 of the Civil Code provides "... In case of fraud, bad faith, malice or wanton attitude, the obligor shall
be responsible for all damages which may be reasonably attributed to the non-performance of the obligation",
which, in effect, makes the petitioners in this case liable for all damages which may be reasonably attributed to
the non-performance of its obligation.

In Fernando Lopez et al vs. Pan American Airways, 16 SCRA 431, this Court, held:  têñ.£îhqwâ£

Bad faith means a breach of a known duty through some motive of interest or ill will. Self-
enrichment or fraternal interest, and not personal ill-will, may have been the motive, but it is
malice nevertheless.

First, moral damages are recoverable in breach of contracts where the defendant acted
fraudulently or in bad faith (Art. 2220, new Civil Code). Second, in addition to moral damages,
exemplary or corrective damages may be imposed by way of example or correction for the public
good, in breach of contract where the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. (Arts, 2229, 2232, new Civil Code)
On petitioner Felix Lirag's liability, the respondent Appellate Court correctly ruled: 
têñ.£îhqwâ£

In his attempt to escape liability whatsoever for the dismissal of the appellee by appellant
corporation, appellant Felix Lirag claims that he had nothing to do with appellee's appointment.
This is of no moment, for it was appellant Felix Lirag who invited the appellee (Alcantara) to join
appellant corporation. And in doing so, the appellee gave up his employment with the Philippine
Chamber of Industries where he was holding a permanent position as a writer-statistician. And
when the then Executive Secretary Armando Isip of the Philippine Chamber of Industries was
resigning from his post, appellee applied for the position and furnished the Board of Directors of
which Felix Lirag was a member, with his application and curriculum vitae that, thereafter, Felix
Lirag called him over the phone and told him that he (Felix Lirag) wanted to see him; that
because of the phone call, appellee went to see Felix Lirag who was then the Chairman of the
Board of Directors of defendant corporation, and then invited him (appellee) to join appellant
corporation, saying that he (appellee) would have a better job there; that appellee answered that
he would think it over; that after a week, appellant Felix Lirag called him again to his office; that
because of this call, appellee went to see him (Felix Lirag) in the latter's office; that appellant
Felix Lirag asked appellee if he had already reached a decision as to his proposal to which
appellee answered that he could not accept the proposition because his job in the Philippine
Chamber of Industries was permanent while the one offered by said appellant was just
temporary; that then appelant Felix Lirag answered that the problem could easily be solved ....

The foregoing finding shows without the slightest doubt that it was petitioner Felix Lirag who induced private
respondent Alcantara to resign from his permanent position in the Philippine Chamber of Industries and accept,
the job offered to him by the petitioner Felix Lirag in the petitioner Lirag Textile Mills, Inc. The respondent
Appellate Court was also convinced that private respondent Alcantara did his best to contact petitioner Felix
Lirag so he could remonstrate against his unjust separation from the service, but he was not able to do so;
hence the conclusion of the respondent Court that petitioner Felix Lirag should also be held liable for moral
damages.

It is clear that petitioner Lirag Textile Mills, Inc. violated the contract of employment with private respondent
Alcantara when the former terminated his services without a valid cause. The act was attended with bad faith
and deceit because said petitioner made false allegations of a supposed valid cause knowing them to be false,
thus making itself liable for payment of actual, moral and exemplary damages, plus attorneys fees to private
respondent Alcantara. Petitioner Lirag Textile Mills, Inc. cannot with impunity be allowed the absolute and
unilateral power to terminate without valid cause a contract of employment with a definite period it voluntarily
entered into merely on the basis of its whim or caprice and under the false pretense of financial distress. To
countenance its wrongful act would be to place its employees in the disadvantageous position of not being able
to protect themselves from the arbitrary, oppressive and wrongful acts of an economically powerful employer.
The laudable ends of social justice would not be served in that manner, especially in the era of a compassionate
society. Petitioner Felix Lirag should also be held liable to private respondent Alcantara for having induced the
latter to leave a permanent position in the Philippine Chamber of Industries to accept a job in the Lirag Textile
Mills, Inc., and when private respondent Alcantara was dismissed without any valid cause, petitioner Felix Lirag
did not do anything to help him although he was in a position to do so by reason of his eminent position in the
petitioner corporation. His responsibility is not only moral but also legal as under Art. 21 of the Civil Code: "Any
person who willfully causes loss or injury to another in a manner that is contrary to morals, good custom or
public policy shall compensate the latter for the damage." .

WHEREFORE, the decision of the respondent Court of Appeals is affirmed with costs against petitioners.

SO ORDERED.

Makalintal, C.J., Castro, Teehankee and Makasiar, JJ., concur. 1äwphï1.ñët

CASE #16:

G.R. No. L-6515           October 18, 1954

DAGUHOY ENTERPRISES, INC., plaintiff-appellee,

vs.
RITA L. PONCE, with whom is joined her husband, DOMINGO PONCE,
defendants-appellants.
Marcelino Lontok and Marcelino Lontok, Jr. for appellants.
Zavalla, Bautista and Nuevas for appellee.

MONTEMAYOR, J.:

The Daguhoy Enterprises, Inc., a local corporation, with principal office in the City of Manila filed in the Court of
First Instance of the City Civil Case No. 15923 against Rita L. Ponce and her husband Domingo Ponce, for the
collection of a loan of P6,190 with interest at 12 per cent per annum from June 24, 1950, plus P2,500 as
attorney's fees and P34 as expenses of litigation. Defendant filed an answer admitting practically all the
allegations of the complaint, set up affirmative defenses, and a counterclaim asking for the cancellation of the
mortgage which secured the payment of the loan of P6,190. They also filed a petition for the inclusion of
Potenciano Gapol as a third party litigant, at the same time filing a third party complaint against him asking for
damages in the amount of P25,000. The plaintiff corporation answered the counterclaim and opposed the
petition for the inclusion of a third party litigant. Thereafter, plaintiff corporation filed a motion for judgment on the
pleadings which petition was opposed by the defendants. Then, on October 9, 1952, the trial court rendered
judgment whose dispositive part we reproduce below:

EN VIRTUD DE TODO LO EXPUESTO, el Juzgado dicta sentencia de acuerdon con los escritos,
condemnando a los demandados a pagar a la demandante la suma de P6,190 mas sus intereses a
razon de 12 por ciento anual desde el 10 de marzo de 1951 hasta su completo pago, mas P1,000 como
honorarios de abogado y P34 como gastos de la incoaccion de esta demanda.

Asi se ordena.

Defendants are now appealing from that decision.

The above-mentioned decision was rendered on the pleadings. The facts of the case which we gathered from
the said pleadings and which we find are as follows. In the year 1950, defendant-appellant Domingo Ponce was
Chairman and Manager and his son Buhay M. Ponce was Secretary-Treasurer, of the plaintiff corporation
Daguhoy Enterprises, Inc. on June 24th of said year Rita L. Ponce, wife of Domingo, executed in favor of plaintiff
corporation a deed of mortgage over a parcel of land including the improvements thereon, situated in Manila, to
secure the payment of a loan of P5,000 granted to her by said corporation, payable within six years with interest
at 12 per cent per annum. On March 10, 1951, Rita L. Ponce with the consent of her husband Domingo
executed another mortgage deed amending the first one, whereby the loan was increased from P5,000 to
P6,190, the terms and conditions of the mortgage remaining the same. Rita and Domingo presented the two
mortgage deeds for registration in the office of the register of deeds, but the said register after going over the
papers noted defects and deficiencies and advised Rita and Domingo to cure the defects and furnish the
necessary data. Instead of complying with the suggestion and requirements, the two withdrew the two mortgage
deeds and then mortgaged the same parcel of land in favor of the Rehabilitation Finance Corporation (RFC) to
secure a loan.

Potenciano Gapol was the majority stockholder in the Daguhoy Enterprises, Inc., and naturally was interested in
the security of the payment of the loan aforesaid. Upon learning that the deeds of mortgage were not registered
and what is more, that they were withdrawn from the office of the register of deeds and the land covered by the
two deeds was again mortgaged to the RFC, he filed Civil Case No. 13753 entitle "Potenciano Gapol, for and on
behalf of Daguhoy Enterprises, Inc. vs. Domingo Ponce and Buhay M. Ponce" for accounting, not only for the
amount of the loan of P6,190 but apparently for other sums, possibly on the theory that the loan in question was
granted by Domingo and Buhay acting as Chairman-Manager and Secretary-Treasurer, respectively of the
corporation. To account for the amount of said loan, Domingo and his son Buhay filed in court in said Civil Case
No. 13753 a check of the RFC in the amount of P6,190 in favor of the Daguhoy Enterprises, Inc. and interests
amounting to P266.10. After the deposit of said check and interests, Potenciano Gapol in representation of the
Daguhoy Enterprises, Inc. petitioned the court in said Civil Case No. 13753 for permission to withdraw the
amounts, presumably to apply them to the payment of the loan. Because of the opposition of defendants therein
to the withdrawal unless the mortgage by Rita was cancelled the court denied the petition. A second petition for
withdrawal was filed by Gapol, agreeing to the cancellation of the mortgage as soon as the amounts were
withdrawn from the Court and deposited with the Bank of America, in the name of Daguhoy Enterprises, Inc.
Because of the failure of defendants therein to agree to said second petition, the same was similarly denied.
Thereafter, the Daguhoy Enterprises, Inc. filed the present action against Rita and her husband Domingo, as
already stated, to collect the amount of the loan, including interests. Later, plaintiff corporation filed a
manifestation on September 18, 1952, saying that in the course of the pre-trial conference held that same
morning in Civil Case No. 13753 the plaintiff therein waived his cause of action for accounting for said sum,
which waiver was approved by the presiding Judge.
Although the original loan of P5,000.00 including the increase of P1,190 was payable within six years from June
1950, and so did not become due and payable until 1956, the trial court held that under article 1198 of the new
Civil Code, the debtor lost the benefit of the period by reason of her failure to give the security in the form of the
two deeds of mortgage and register them, including the defendants' act in withdrawing said two deeds from the
office of the register of deeds and then mortgaging the same property in favor of the RFC; and so the obligation
became pure and without any condition and consequently, the loan became due and immediately demandable.
On this, we agree with the trial Court.

One of the affirmative defenses set up by the defendants is that the plaintiff corporation had no legal capacity to
sue for the reason that as a corporation it no longer was in existence because on April 16, 1951, at a meeting
held by the stockholders and attended by Potenciano Gapol, the majority stockholder, a resolution was adopted
dissolving the said corporation, and that as a matter of fact, Gapol was designated Assignee. However, as
contended by counsel for the appellee, a mere resolution by the stockholders or by the Board of Directors of a
corporation to dissolve the same does not effect the dissolution but that some other step, administrative or
judicial, is necessary. Furthermore, as stated by the trial court in its decision, under section 77 of the Corporation
Law, a corporation dissolved will continue in existence as a judicial entity for a period of three years after the
declaration of its dissolution, to windup its affairs and protect its interests during the period of liquidation.

The point that remains for determination is the effect, if any, on the present case, of the deposit of the amount of
P6,190 with part of the interest, in civil Case No. 33753. There is no question that said deposit was in favor of
the Daguhoy Enterprises, Inc. and eventually would be given to it. But did the said deposit relieve the present
defendants from the payment of interests from the time of deposit, on the theory that the deposit amounted to a
payment of the loan? The answer must be in the negative. It should be remembered that Civil Case No. 13753
though in the same Court of First Instance of Manila, is a separate and different action, for accounting not only
for the amount of the loan but for other sums. The plaintiff in that case was Gapol in behalf of the Daguhoy
Enterprises, Inc. and the defendants are Domingo Ponce and his son Buhay M. Ponce. The parties in the
present case are different. Furthermore, when the plaintiff in said case 13753 petitioned the trial court for
permission to withdraw the deposit, presumably to pay the loan involved in the present action, his petition was
denied by the court because of the opposition of the defendants therein, one of whom is Domingo Ponce, co-
defendant of Rita Ponce in the present case. The result was that the present plaintiff corporation could not take
possession and dispose of said amount. In other words, the loan is not yet paid.

We find no necessity for or profit in discussing and ruling on the other points raised in the appeal.

In view of the foregoing, with the modification that the amount of attorney's fees be reduced from P1,000 to P300
considering that no hearing was held, judgment having been rendered on the pleadings, the decision appealed
from is hereby affirmed, with costs.

The sum in the form of an RFC check, and some interest, deposited in Civil Case No. 13753 may be withdrawn
to satisfy the judgment in this case, especially to pay the loan of P6,190 and part of the interest due.

Paras, C.J., Pablo Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo, Concepcion, and Reyes, J.B.L.,
JJ., concur.

CASE #17:

G.R. No. L-6648             July 25, 1955

VICTORIAS PLANTERS ASSOCIATION, INC., NORTH NEGROS PLANTERS ASSOCIATION, INC.,

FERNANDO GONZAGA, JOSE GASTON and CESAR L. LOPEZ, on their own behalf and on behalf of
other sugar cane planters in Manapla, Cadiz and Victorias Districts, petitioners-appellees,
vs.
VICTORIAS MILLING CO., INC., respondent-appellant.

Ross, Selph, Carrascoso and Janda for appellant.

Tañada, Pelaez and Teehankee for appellees.

PADILLA, J.:

This is an action for declaratory judgment under Rule 66. The relief prayed for calls for an interpretation of
contracts entered into by and between the sugar cane planters in the districts of Manapla, Cadiz and Victorias,
Occidental Negros, and the Victorias Milling Company, Inc. After issues had been joined the parties submitted
the case for judgment upon the testimony of Jesus Jose Ossorio and the following stipulation of facts:

1. That petitioners Victorias Planters Association, Inc. and North Negros Planters Association, Inc. are
non-stock corporations duly established and existing under and by virtue of the laws of the Philippines,
with main offices at Victorias, Negros Occidental, and Manapla, Negros Occidental, respectively, and
were organized by, and are composed of, sugar cane planters in the districts of Victorias, Manapla and
Cadiz, respectively, having been established principally as the representative entities of the numerous
sugar cane planters in said districts whose sugar cane productions are milled by the respondent
corporation, with the main object of safeguarding their interests and of taking up with the latter problems
and questions which from time to time, may come up between the said respondent corporation the said
sugar cane planters; the other petitioners are Filipinos, of legal age, and together with numerous other
sugar cane planters who own sugar cane producing properties at Victorias, Manapla, and Cadiz
Districts, Negros Occidental, are bona fide officials and members of either one of the two petitioner
associations; that petitioner Fernando Gonzaga is a resident of Victorias, Negros Occidental, petitioner
Jose Gaston is a resident of Victorias, Negros Occidental, and petitioner Cesar L. Lopez is a resident of
Bacolod City, Negros Occidental; and that said petitioners bring this action for the benefit and on behalf
of all their fellow sugar cane planters, owners of sugar cane producing lands in the said districts of
Victorias, Manapla, and Cadiz, whose sugar cane productions are milled by respondent corporation, and
who are so numerous that it would be impractical to include them all as parties herein;

2. That respondent Victorias Milling Co., Inc. is a corporation likewise duly organized and established
under and by virtue of the laws of the Philippines, with main offices at Ayala Building Manila, where it
may be served with summons;

3. That at various dates, from the year 1917 to 1934, the sugar cane planters pertaining to the districts of
Manapla and Cadiz, Negros Occidental, executed identical milling contracts, setting forth the terms and
conditions under which the sugar central "North Negros Sugar Co. Inc." would mill the sugar produced
by the sugar cane planters of the Manapla and Cadiz districts;

A copy of the standard form of said milling contracts with North Negros Sugar Co., Inc. is hereto
attached and made an integral part hereof as Annex "A.

As may be seen from the said standard form of milling contract, Annex "A," the sugar cane planters of
Manapla and Cadiz, Negros Occidental had executed on November 17, 1916 with Miguel J. Ossorio, a
contract entitled "Contrato de la Central Azucarrera de 300 Toneladas," whereby said Miguel J. Ossorio
was given a period up to December 31, 1916 within which to make a study of and decide whether he
would construct a sugar central or mill with a capacity of milling 300 tons of sugar cane every 24 hours
and setting forth the mutual obligations and undertakings of such central and the planters and the terms
and conditions under which the sugar cane produced by said sugar can planters would be milled in the
event of the construction of such sugar central by said Miguel J. Ossorio. Such central was in fact
constructed by said Miguel J. Ossorio in Manapla, Negros Occidental, through the North Negros Sugar
Co., Inc., where after the standard form of milling contracts (Annex "A") were executed, as above stated.

The parties cannot stipulate as to the milling contracts executed by the planters by Victorias, Negros
Occidental, other than as follows; a number of them executed such milling contracts with the North
Negros Sugar Co., Inc., as per the standard forms hereto attached and made an integral part as
Annexes "B" and "B-1," while a number of them executed milling contracts with the Victorias Milling Co.,
Inc., which was likewise organized by Miguel J. Ossorio and which had constructed another Central at
Victorias, Negros Occidental, as per the standard form hereto attached and made an integral part hereof
as Annex "C".

4. The North Negros Sugar Co., Inc. had its first molienda or milling during the 1918-1919 crop year, and
the Victorias Milling Co., had its first molienda or milling during the 1921-1922 crop year.

Subsequent moliendas or millings took place every successive crop year thereafter, except the 6-year
period, comprising 4 years of the last World War II and 2 years of post-war reconstruction of
respondent's central at Victorias, Negros Occidental.

5. That after the liberation, the North Negros Sugar Co., Inc. did not reconstruct its destroyed central at
Manapla, Negros Occidental, and in 1946, it advised the North Negros Planters Association, Inc. that it
had made arrangements with the respondent Victorias Milling Co., Inc. for said respondent corporation to
 mill the sugar cane produced by the planters of Manapla and Cadiz holding milling contracts with it.
Thus, after the war, all the sugar cane produced by the planters of petitioner associations, in Manapla,
Cadiz, as well as in Victorias, who held milling contracts, were milled in only one central, that of the
respondent corporation at Victorias;

6. Beginning with the year 1948, and in the following years, when the planters-members of the North
Negros Planters Association, Inc. considered that the stipulated 30-year period of their milling contracts
executed in the year 1918 had already expired and terminated in the crop year 1947-1948, and the
planters-members of the Victorias Planters Association, Inc. likewise considered the stipulated 30-year
period of their milling contracts, as having likewise expired and terminated in the crop year 1948-1949,
under the pertinent provisions of the standard milling contract (Annex "A") on the duration thereof, which
provided in Par. 21 thereof as follows:

(a) Que entregaran a la Central de la `North Negros Sugar Co., Inc.' o a la que se construya en Victorias
por Don Miguel J. Ossorio o sus cesionarios por espacio de treinta (30) años desde la primera molienda,
la caña que produzcan sus respectivas haciendas, obligandose ademas a sembrar anualmente con
cañadulce por lo menos en tres quintas partes de su extension total apropiado para caña, incluyendo en
esta denominacion tanto la siembra con puntas nuevas como el cultivo del retoño o cala-anan y
sujetando la siembra a las epocas convenientes designadas por el comite de hacenderos a fin de poder
proporcionar caña a la Central de conformidad con las clausulas 17 y 18 de esta escritura.

xxx     xxx     xxx

(i) Los hacenderos' imponen sobre sus haciendas mencionadas y citadas en esta escritura
servidumbres voluntarias a favor de Don Miguel J. Ossorio de sembrar caña por lo menos en tres
quintas partes (3/5) de su extension superficial y entregar la caña que produzcan a Don Miguel J.
Ossorio, de acuerdo con este contrato, por espacio de treinta (30) años, a contar un (1) año desde la
fecha de la primera molienda. repeated representation were made with respondent corporation for
negotiations regarding the execution of new milling contracts which would take into consideration the
charged circumstances presently prevailing in the sugar industry as compared with those prevailing over
30 years ago and would provide for an increased participation in the milled sugar for the benefit of the
planters and their workers.

7. That notwithstanding these repeated representations made by the herein petitioners with the
respondent corporation for the negotiation and execution of new milling contracts, the herein respondent
has refused and still refuses to accede to the same, contending that under the provisions of the mining
contract (Annex "A".) "It is the view of the majority of the stockholder-investors, that our contracts with
the planters call for 30 years of milling — not 30 years in time" and that "as there was no milling during 4
years of the recent war and two years of reconstruction, when these six years are added on to the
earliest of our contracts in Manapla, the contracts by this view terminate in the autumn of 1952," and the
"the contracts for the Victorias Planters would terminate in 1957, and still later for those in the Cadiz
districts," and that "apart from the contractual agreements, the Company believes these war and
reconstruction years accrue to it in equity.

The trial court rendered judgment the dispositive part of which is —

Wherefore, the Court renders judgment in favor of the petitioners and against the respondent and
declares that the milling contracts executed between the sugar cane planters of Victorias, Manapla and
Cadiz, Negros Occidental, and the respondent corporation or its predecessors-in-interest, the North
Negros Sugar Co., Inc., expired and terminated upon the lapse of the therein stipulated 30-year period,
and that respondent corporation is not entitled to claim any extension of or addition to the said 30-year
term or period of said milling contracts by virtue of an equivalent to 6 years of the last war and
reconstruction of its central, during which there was no planting and/or milling.

From this judgment the respondent corporation has appealed.

The appellant contends that the term stipulated in the contracts is thirty milling years and not thirty calendar
years and postulates that the planters fulfill their obligation — the six installments of their indebtedness--which
they failed to perform during the six milling years from 1941-42 to 1946-47. The reason the planters failed to
deliver the sugar cane was the war or a fortuitious event. The appellant ceased to run its mill due to the same
cause.
Fortuitious event relieves the obligor from fulfilling a contractual obligation. 1 The fact that the contracts make
reference to "first milling" does not make the period of thirty years one of thirty milling years. The term "first
milling" used in the contracts under consideration was for the purpose of reckoning the thirty-year period
stipulated therein. Even if the thirty-year period provided for in the contracts be construed as milling years, the
deduction or extension of six years would not be justified. At most on the last year of the thirty-year period
stipulated in the contracts the delivery of sugar cane could be extended up to a time when all the amount of
sugar cane raised and harvested should have been delivered to the appellant's mill as agreed upon. The
seventh paragraph of Annex "C", not found in the earlier contracts (Annexes "A", "B", and "B-1"), quoted by the
appellant in its brief, where the parties stipulated that in the event of flood, typhoon, earthquake, or other force
majeure, war, insurrection, civil commotion, organized strike, etc., the contract shall be deemed suspended
during 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
planters from delivering sugar cane and the central from milling it. In order that the central, the herein appellant,
may be entitled to demand from the other parties 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 planters to deliver the sugar cane which they failed to deliver during the four years of the
Japanese occupation and the two years after liberation when the mill was being rebuilt is to demand from the
obligors the fulfillment of an obligation which was impossible of performance at the time it became due. Nemo
tenetur ad impossibilia. The obligee not being entitled to demand from the obligors the performance of the
latters' 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 plaintiffs be compelled to
deliver sugar cane to the appellant for six more years to make up for what they failed to deliver during those
trying years, the fulfillment of which was impossible, if granted, would in effect be an extension of the term of the
contracts entered into by and between the parties.

In accord with the rule laid down in the case of Lacson vs. Diaz, 47 Off. Gaz., Supp. No. 12, p. 337, where
despite the fact that the lease contract stipulated seven sugar crops and not seven crop years as the term
thereof, we held that such stipulation contemplated seven consecutive agricultural years and affirmed the
judgment which declared that the leasee was not entitled to an extension of the term of the lease for the number
of years the country was occupied by the Japanese Army during which no sugar cane was planted 2 we are of the
opinion and so hold that the thirty-year period stipulated in the contracts expired on the thirtieth agricultural year.
The period of six years — four during the Japanese occupation when the appellant did not operate its mill and
the last two during which the appellant reconstructed its mill — cannot be deducted from the thirty-year period
stipulated in the contracts.

The judgment appealed from is affirmed, with costs against the appellant.

Bengzon, Acting C. J., Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador, Concepcion, and Reyes, J. B.
L., JJ., concur.

CASE #18:

[ GR No. 113626, Sep 27, 2002 ]

JESPAJO REALTY CORPORATION v. CA +
438 Phil. 574
AUSTRIA-MARTINEZ, J.:
 Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to review and set aside
the decision of the Court of Appeals promulgated on January 26, 1994 in CA-G.R. SP No. 27312[1] which reversed the
decision of the Regional Trial Court in Civil Case No. 91-57757[2] and reinstated the Metropolitan Trial Court rulings
in Civil Case No. 134022-CV, entitled, "Jespajo Realty Corp., Plaintiff, vs. Tan Te Gutierrez and Co Tong,
Defendants."[3]
The uncontroverted facts of the case as found by the Court of Appeals are as follows: 
"The subject of this controversy is an apartment building located at 619 Asuncion Street, Binondo, Manila and
owned by Jespajo Realty Corporation. On February 1, 1985, said corporation, represented by its President, Jesus L.
Uy, entered into separate contracts of lease with Tan Te Gutierrez and Co Tong.xxx Pursuant to the contract, Tan Te
occupied room No. 217 of the subject building at a monthly rent of P847.00 while Co Teng occupied the Penthouse
at a monthly rent of P910.00xxx The terms of the contract among others are the following:
'PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985 and shall continue for an indefinite
period provided the lessee is up-to-date in the payment of his monthly rentals. The LESSEE may, at his option,
terminate this contract any time by giving sixty (60) days prior written notice of termination to the LESSOR. 
'However, violation of any of the terms and conditions of this contract shall be a sufficient ground for termination
thereof by the LESSOR.
'xxx                      xxx                      xxx
'RENT INCREASE - For the duration of this contract, the LESSEE agrees to an automatic 20% yearly increase in the
monthly rentals.'
 
"Since the effectivity of the lease agreement on February 1985, the lessees religiously paid their respective monthly
rentals together with the 20% yearly increased (sic) in the monthly rentals as stipulated in the contract. On January
2, 1990, the lessor corporation sent a written notice to the lessees informing them of the formers' intention to
increase the monthly rentals on the occupied premises to P3,500.00 monthly effective February 1, 1990. The lessees
through its counsel in a letter dated March 10, 1990 xxx manifested their opposition alleging that the same is in
contravention of the terms of the contract of lease as agreed upon. Due to the opposition and the failure of the
lessees to pay the increased monthly rentals in the amount of P3,500.00, the lessor through its counsel in a letter
dated April 10,1990 xxx demanded that the lessees vacate the premises and pay the amount of P7,000.00
corresponding to the months of February and March, 1990.
"The lessees exerted effort to pay the rentals due for the months of February and March 1990 at the monthly rate
stipulated in the contract but was refused by the lessor so that on May 2, 1990, they instituted before the
Metropolitan Trial Court of Manila, Branch 16 a case for consignation xxx
"In the said complaint, plaintiffs alleged that the amount of P2,107.60 and P2,264.40 are the monthly rental
obligations of Tan Te and Co Tong respectively. They sought to consign with the court their monthly rental
obligations at the rate above mentioned for the months of February up to April 1990. Additionally, they prayed that
the court issue an order directing the defendant to honor the terms and conditions of the lease.
"It is to be noted that on February 6, 1991, the trial judge in the consignation case issued an order allowing the
plaintiffs therein to deposit with the City Treasurer of Manila the amount of P33,480.28 for Co Tong and the amount
of P32,710.32 for Tan Te Gutierrez representing their respective rentals for thirteen (13) months from February,
1990 to January, 1991. This order however is without prejudice to the final outcome of the case. Plaintiffs duly
complied with the order as evidenced by an official receipts (sic) xxx in the name of Tan Te Gutierrez and Co Tong,
respectively, issued by the City Treasurer on February 11, 1991.
"On November 15, 1990, or more than six (6) months from the filing of the case for consignation, the lessor
instituted an ejectment suit against the lessees before the Metropolitan Trial Court of Manila Branch 20 xxx. The
court in its decision dated May 10, 1991 rendered a decision dismissing the ejectment suit for lack of merit. xxx"[4]
 
Portions of the MTC decision read:
 
"Furthermore, it appears that the plaintiff realizing that it had virtually surrendered certain aspects of its rights of
ownership over the subject premises in stipulating that the lease 'shall continue for an indefinite period provided the
LESSEE is up-to-date in the payment of his monthly rentals', has raised the monthly rental to P3,500.00 which is
much higher than the correct rental in accordance with their stipulated 20% automatic increase annually. This was
done by the plaintiff apparently in order to create an artificial cause of action, as when the LESSEES would refuse, as
in fact they refused, to pay the monthly rentals at the increase rate. This pretext of the plaintiff cannot be
countenanced by law.
"Anent the final issue as to whether or not the defendants are already in arrears in the payment of rentals on the
premises, it is noteworthy that the instant case for Unlawful Detainer was filed by the plaintiff-LESSOR herein only on
November 15, 1990, while the LESSEES' consignation case against the LESSOR-plaintiff herein based on the latter's
refusal to accept the rentals have been pending with Branch XVI of this Court since May 2, 1990. And, in accordance
with the consignation case, the LESSEES, upon proper motion approved by the Court, deposited the amounts of
"P33,480.28 covered by O.R. No. B-578503 (for CO TONG) and P32,710.32 covered by O.R. B-578502 (for TAN TE
GUTIERREZ) both receipts dated February 11, 1991.
"IN VIEW OF THE FOREGOING, and after careful scrutiny of the entire record including all documentary evidence
adduced by both parties, this Court is of the opinion and so holds that the plaintiff (Jespajo Realty Corporation) has
failed to establish its claims by preponderance of evidence.
"WHEREFORE, this case is hereby dismissed for utter lack of merit. The counterclaim is likewise dismissed for lack of
evidence to support the same. No pronouncement as to costs.
"SO ORDERED."[5]
 
Jespajo Realty Corporation then appealed to the Regional Trial Court which ruled in its favor, thus:
 
"The Court is fully convinced that the sum demanded by appellant as increase in appellees monthly rentals to the
premises which they are renting from appellant is very reasonable considering that the leased premises are located
in the commercial and business section of Manila in Binondo. It is also undisputed that appellant has a 24-hour
security unit over the property as well as parking spaces and provisions for electricity, water and telephone services.
"In the light of the foregoing, the Court is constrained to reverse the appealed decision and hereby orders another
judgment to be entered in favor of appellant.
"WHEREFORE, PREMISES CONSIDERED, judgment is rendered as follows:
"1. Reversing the decision of the court a quo insofar as it dismissed appellant's complaint;
"2. Declaring the termination or revocation [of the] lease contracts Annexes 'A' and 'A-1', Complaint executed
between appellant and appellees;
"3. Ordering appellees, their heirs and all other persons acting for and in their behalf to vacate and surrender
immediately the lease premises to appellant;
"4. Adjudging appellees to pay unto appellant their rental arrearages of P57,426.45 for appellee (Tan Te Gutierrez)
and P56,153.75 for appellee (Co Tong) as of April 30, 1991 and thereafter each appellee is ordered to pay also
appellant the sum of P3,500.00 every month starting May 1, 1991 until they shall have fully vacated and surrendered
the leased premises;
"5. Appellees are likewise adjudged to pay the sum of P10,000.00 as and for attorney's fees, and
"6. The costs of suit.
"SO ORDERED."[6]
 
However, said RTC decision was reversed by the Court of Appeals in the herein assailed decision, portions of which
read:
 
"Be that as it may, We find that it was the private respondent who, in fact, violated the lease agreement by charging
petitioners a monthly rental of P3,500.00, well in excess of the rental stipulated in the lease contract. We see in the
refusal of private respondent to accept the rental being offered by petitioners, a scheme to place petitioners in
default of their rental payments. However, said scheme was waylaid by petitioners' consignation of the rentals due
from them.
"In view of the foregoing discussion, We find no more necessity in discussing the last two (2) errors raised in the
petition. We likewise find that the respondent court committed an error of fact and law in reversing the decision of
the Metropolitan Trial Court of Manila and in arriving at the decision under review.
"WHEREFORE, the decision under review is hereby REVERSED and SET ASIDE. The decision dated May 10, 1991 of the
Metropolitan Trial Court of Manila, Branch XX which dismissed Civil Case No. 134022 CV for lack of merit is hereby
REINSTATED. No pronouncement as to costs.
"SO ORDERED."[7]
 
Petitioner comes before this Court with the following questions:
"I
"WHEN THE PARTIES TO A CONTRACT OF LEASE STIPULATED FOR AN INDEFINITE PERIOD AND SHALL CONTINUE FOR
AS LONG AS THE LESSEE IS PAYING THE RENT, IS THE SAID CONTRACT INTERMINABLE EVEN BY THE LESSOR?
"II
"WHEN THERE IS A DISAGREEMENT ON THE RENTALS TO BE PAID, SHOULD IT BE RESOLVED IN A CONSIGNATION
CASE OR IN AN EJECTMENT CASE?"[8]
Petitioner claims that the contracts of lease entered into between the petitioner and private respondents did not
provide for a definite period, hence, Art. 1687 of the New Civil Code applies. Said Article reads:
 
"Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed
upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day,
if the rent is to be paid daily. However, even though a monthly rent is paid, and no period for the lease has been set,
the courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the
rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six
months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the place for over
one month."
 
Petitioner cited Yek Seng Co. vs. Court of Appeals,[9]  where this Court held that: "[c]onformably, we hold that as the
rental in the case at bar was paid monthly and the term was not expressly agreed upon, the lease was understood
under Article 1687 of the Civil Code to be terminable from month to month."[10]
On the premise that the lease contract was effective on a monthly basis, petitioner claims that the contract of lease
with respondent has been terminated, without being renewed, after respondents refused to comply with the
increased monthly rate of P3,500.00 and that this refusal even after receiving a notice of termination and a final
demand letter is a valid cause of action for unlawful detainer.[11]
As to the second issue, petitioner argues that the Court of Appeals erred in ruling that their allegation of
respondents' non-payment of rentals in the complaint for ejectment was false. Petitioner insists that when it filed
the case of ejectment, private respondents had failed and refused to pay the demanded P3,500.00 monthly rentals.
Thus, petitioner correctly alleged non-payment of this rental as another ground for ejectment aside from the basic
allegation of termination of the lease contract. Petitioner also contends that the issue of whether or not the
P3,500.00 monthly rental should be the correct rental to be paid by the private respondents cannot properly be
determined in the consignation case earlier filed by private respondents since the issue can be resolved only in the
ejectment case.[12]
Crucial in the resolution of this case is the construction of the lease agreement, particularly the portion on the period
of lease, which reads:
 
"PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985 and shall continue for an indefinite
period provided the lessee is up-to-date in the payment of his monthly rentals. xxx"
 
Petitioner 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.
The Court of Appeals opined otherwise. It reasoned that the application of Art. 1687 in this case is misplaced
because 'when there is a fixed period for the lease, whether the period be definite or indefinite or when the period
of the lease is expressly left to the will of the lessee, Art. 1687 will not apply'[13] , citing Eleizagui vs. Manila Lawn
Tennis Club, 2 Phil 309.
We agree with the ruling of the Court of Appeals. Art. 1687 finds no application in the case at bar.
The lease contract between petitioner and respondents is with a period subject to a resolutory condition. The
wording of the agreement is unequivocal: "The lease period xxx shall continue for an indefinite period provided the
lessee is up-to-date in the payment of his monthly rentals." The condition imposed in order that the contract shall
remain effective is that the lessee is up-to-date in his monthly payments. It is undisputed that the lessees Gutierrez
and Co Tong religiously paid their rent at the increasing rate of 20% annually. The agreement between the lessor and
the lessees are therefore still subsisting, with the original terms and conditions agreed upon, when the petitioner
unilaterally increased the rental payment to more than 20% or P3,500.00 a month.
Petitioner cites Puahay Lao vs. Suarez[14] where it said that "the Court in the earlier case of Singson v. Baldomar,
[15]  rejected the theory that a lease could continue for an indefinite term so long as the lessee paid the rent,
because then its continuance and fulfillment would depend solely on the free and uncontrolled choice of the tenant
between continuing to pay rentals or not, thereby depriving the lessors of all say in the matter as it would be
contrary to the spirit of Article 1256 of the Old Civil Code, now Article 1308 of the New Civil Code of the Philippines
which provides that validity or compliance of contracts can not be left to the will of one of the parties."[16]
A review of the Puahay and Singson cases shows that the factual backgrounds therein are not the same as in the
case at bar. In those cases, the lessees were actually in arrears with their rental payments. The Court, in the Puahay
case, ruled that the lessor had the right to terminate the lease under par. 3, Art. 1673 of the Civil Code, declaring
that the lessor may judicially eject the lessee for violation of any of the conditions agreed upon in the contract.
[17] In the case of Singson, the lease contract was expressly on a month-to-month basis.
The contention of the petitioner that a provision in a contract that the lease period shall subsist for 'an indefinite
period provided the lessee is up-to-date in the payment of his monthly rentals'  is contrary to Art. 1308 of the Civil
Code is not plausible. As expounded by the Court in the case of Philippine Banking Corporation vs. Lui She:[18]
 
"We have had occasion to delineate the scope and application of article 1308 in the early case of Taylor v. Uy Tieng
Piao.[19] We said in that case:
'Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the insertion in a contract for
personal service of a resolutory condition permitting the cancellation of the contract by one of the parties. Such a
stipulation, as can be readily seen, does not make either the validity or the fulfillment of the contract dependent
upon the will of the party to whom is conceded the privilege of cancellation; for where the contracting parties have
agreed that such option shall exist, the exercise of the option is as much in the fulfillment of the contract as any
other act which may have been the subject of agreement. xxx.'[20] "
 
Also held in the recent case of Allied Banking Corp. vs. CA[21] where this Court upheld the validity of a contract
provision in favor of the lessee:
 
"xxx Article 1308 of the Civil Code expresses what is known in law as the principle of mutuality of contracts. xxx This
binding effect of a contract on both parties is based on the principle that the obligations arising from contracts have
the force of law between the contracting parties, and there must be mutuality between them based essentially on
their equality under which it is repugnant to have one party bound by the contract while leaving the other free
therefrom. The ultimate purpose is to render void a contract containing a condition which makes its fulfillment
dependent solely upon the uncontrolled will of one of the contracting parties.
"An express agreement which gives the lessee the sole option to renew the lease is frequent and subject to statutory
restrictions, valid and binding on the parties. This option, which is provided in the same lease agreement, is
fundamentally part of the consideration in the contract and is no different from any other provision of the lease
carrying an undertaking on the part of the lessor to act conditioned on the performance by the lessee. xxx
"The fact that such option is binding only on the lessor and can be exercised only by the lessee does not render it
void for lack of mutuality. After all, the lessor is free to give or not to give the option to the lessee. And while the
lessee has a right to elect whether to continue with the lease or not, once he exercises his option to continue and
the lessor accepts, both parties are thereafter bound by the new lease agreement. Their rights and obligations
become mutually fixed, and the lessee is entitled to retain possession of the property for the duration of the new
lease, and the lessor may hold him liable for the rent therefor. The lessee cannot thereafter escape liability even if he
should subsequently decide to abandon the premises. Mutuality obtains in such a contract and equality exists
between the lessor and the lessee since they remain with the same faculties in respect to fulfillment.[22] (Emphasis
supplied)
 
As correctly ruled by the MTC in its decision, the grant of benefit of the period in favor of the lessee was given in
exchange for no less than an automatic 20% yearly increase in monthly rentals. This additional condition was not
present in the Puahay and Singson cases.
Moreover, the express provision in the lease agreement of the parties that violation of any of the terms and
conditions of the contract shall be sufficient ground for termination thereof by the lessor, removes the contract from
the application of Article 1308.
Lastly, after having the lessees believe that their lease contract is one with an indefinite period subject only to
prompt payment of the monthly rentals by the lessees, we agree with private respondents that the lessor is
estopped from claiming otherwise.[23]
In the case of Opulencia vs. Court of Appeals,[24]  this Court held that petitioner is estopped from backing out of her
representations in the contract with respondent, that is, she may not renege on her own acts and representations,
to the prejudice of the respondents who relied on them. We have held in a long line of cases that neither the law nor
the courts will extricate a party from an unwise or undesirable contract he or she entered into with all the required
formalities and will full awareness of its consequences.[25]
Anent the second issue, we likewise hold that the contention of petitioner is without merit. The Court of Appeals
found that the petitioner's allegation of respondents' non-payment is false. This is a finding of fact which we respect
and uphold, absent any showing of arbitrariness or grave abuse on the part of the court. Furthermore, the statement
of petitioner that the correct amount of rents cannot be considered in a consignation case but only in the ejectment
case is misleading because nowhere in the decision of the appellate court did it state otherwise. This second issue is
clearly just a futile attempt to overthrow the appellate court's ruling. 
  Nevertheless, suffice it to be stated that under Article 1258 of the Civil Code which provides:
 
"Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before
whom to tender of payment shall be proved, in a proper case, and the announcement of the consignation in other
cases.
"The consignation having been made, the interested parties shall also be notified thereof."
 
the rationale for consignation is to avoid the performance of an obligation becoming more onerous to the debtor by
reason of causes not imputable to him.[26] Whether or not petitioner has a cause of action to eject private
respondents from the leased premises due to refusal of the lessees to pay the increased monthly rentals had been
duly determined in the ejectment case by the Municipal Trial Court which was correctly upheld by the Court of
Appeals.
WHEREFORE, finding no error in the assailed decision, we DENY the petition for lack of merit and AFFIRM the
decision of the Court of Appeals.
Costs against petitioner.
SO ORDERED.