G.R. No.

178610

November 17, 2010

HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF

RETIREMENT PLAN, Retirement Trust Fund, Inc.)Petitioner,
vs.
SPOUSES BIENVENIDO AND EDITHA BROQUEZA, Respondents.
DECISION
CARPIO, J.:
G.R. No. 178610 is a petition for review 1 assailing the
Decision2 promulgated on 30 March 2006 by the Court of Appeals (CA) in
CA-G.R. SP No. 62685. The appellate court granted the petition filed by
Fe Gerong (Gerong) and Spouses Bienvenido and Editha Broqueza
(spouses Broqueza) and dismissed the consolidated complaints filed by
Hongkong and Shanghai Banking Corporation, Ltd. - Staff Retirement
Plan (HSBCL-SRP) for recovery of sum of money. The appellate court
reversed and set aside the Decision 3 of Branch 139 of the Regional Trial
Court of Makati City (RTC) in Civil Case No. 00-787 dated 11 December
2000, as well as its Order 4 dated 5 September 2000. The RTCs decision
affirmed the Decision5 dated 28 December 1999 of Branch 61 of the
Metropolitan Trial Court (MeTC) of Makati City in Civil Case No. 52400
for Recovery of a Sum of Money.
The Facts
The appellate court narrated the facts as follows:
Petitioners Gerong and [Editha] Broqueza (defendants below) are
employees of Hongkong and Shanghai Banking Corporation (HSBC).
They are also members of respondent Hongkong Shanghai Banking
Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP, plaintiff below).
The HSBCL-SRP is a retirement plan established by HSBC through its
Board of Trustees for the benefit of the employees.
On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in
the amount of Php175,000.00. On December 12, 1991, she again applied
and was granted an appliance loan in the amount of Php24,000.00. On
the other hand, petitioner Gerong applied and was granted an emergency

loan in the amount of Php35,780.00 on June 2, 1993. These loans are

paid through automatic salary deduction.
Meanwhile [in 1993], a labor dispute arose between HSBC and its
employees. Majority of HSBCs employees were terminated, among
whom are petitioners Editha Broqueza and Fe Gerong. The employees
then filed an illegal dismissal case before the National Labor Relations
Commission (NLRC) against HSBC. The legality or illegality of such
termination is now pending before this appellate Court in CA G.R. CV No.
56797, entitled Hongkong Shanghai Banking Corp. Employees Union, et
al. vs. National Labor Relations Commission, et al.
Because of their dismissal, petitioners were not able to pay the monthly
amortizations of their respective loans. Thus, respondent HSBCL-SRP
considered the accounts of petitioners delinquent. Demands to pay the
respective obligations were made upon petitioners, but they failed to pay.6
HSBCL-SRP, acting through its Board of Trustees and represented by
Alejandro L. Custodio, filed Civil Case No. 52400 against the spouses
Broqueza on 31 July 1996. On 19 September 1996, HSBCL-SRP filed
Civil Case No. 52911 against Gerong. Both suits were civil actions for
recovery and collection of sums of money.
The Metropolitan Trial Courts Ruling
On 28 December 1999, the MeTC promulgated its Decision 7 in favor of
HSBCL-SRP. The MeTC ruled that the nature of HSBCL-SRPs demands
for payment is civil and has no connection to the ongoing labor dispute.
Gerong and Editha Broquezas termination from employment resulted in
the loss of continued benefits under their retirement plans. Thus, the
loans secured by their future retirement benefits to which they are no
longer entitled are reduced to unsecured and pure civil obligations. As
unsecured and pure obligations, the loans are immediately demandable.
The dispositive portion of the MeTCs decision reads:
WHEREFORE, premises considered and in view of the foregoing, the
Court finds that the plaintiff was able to prove by a preponderance of
evidence the existence and immediate demandability of the defendants

loan obligations as judgment is hereby rendered in favor of the plaintiff

and against the defendants in both cases, ordering the latter:
1. In Civil Case No. 52400, to pay the amount of Php116,740.00
at six percent interest per annum from the time of demand and in
Civil Case No. 52911, to pay the amount of Php25,344.12 at six
percent per annum from the time of the filing of these cases, until
the amount is fully paid;
2. To pay the amount of Php20,000.00 each as reasonable
attorneys fees;
3. Cost of suit.
SO ORDERED.8

Gerong and the spouses Broqueza then filed a Petition for Review under
Rule 42 before the CA.
The Ruling of the Court of Appeals
On 30 March 2006, the CA rendered its Decision 10 which reversed the 11
December 2000 Decision of the RTC. The CA ruled that the HSBCLSRPs complaints for recovery of sum of money against Gerong and the
spouses Broqueza are premature as the loan obligations have not yet
matured. Thus, no cause of action accrued in favor of HSBCL-SRP. The
dispositive portion of the appellate courts Decision reads as follows:
WHEREFORE, the assailed Decision of the RTC is REVERSED and SET
ASIDE. A new one is hereby rendered DISMISSING the consolidated
complaints for recovery of sum of money.

Gerong and the spouses Broqueza filed a joint appeal of the MeTCs
decision before the RTC. Gerongs case was docketed Civil Case No. 00786, while the spouses Broquezas case was docketed as Civil Case No.
00-787.

SO ORDERED.11

The Regional Trial Courts Ruling

The RTC initially denied the joint appeal because of the belated filing of
Gerong and the spouses Broquezas memorandum. The RTC later
reconsidered the order of denial and resolved the issues in the interest of
justice.

On 6 August 2007, HSBCL-SRP filed a manifestation withdrawing the

petition against Gerong because she already settled her obligations. In a
Resolution13 of this Court dated 10 September 2007, this Court treated
the manifestation as a motion to withdraw the petition against Gerong,
granted the motion, and considered the case against Gerong closed and
terminated.

On 11 December 2000, the RTC affirmed the MeTCs decision in toto.9

Issues

The RTC ruled that Gerong and Editha Broquezas termination from
employment disqualified them from availing of benefits under their
retirement plans. As a consequence, there is no longer any security for
the loans. HSBCL-SRP has a legal right to demand immediate settlement
of the unpaid balance because of Gerong and Editha Broquezas
continued default in payment and their failure to provide new security for
their loans. Moreover, the absence of a period within which to pay the
loan allows HSBCL-SRP to demand immediate payment. The loan
obligations are considered pure obligations, the fulfillment of which are
demandable at once.

HSBCL-SRP enumerated the following grounds to support its Petition:

HSBCL-SRP filed a motion for reconsideration which the CA denied for

lack of merit in its Resolution12 promulgated on 19 June 2007.

I. The Court of Appeals has decided a question of substance in a

way not in accord with law and applicable decisions of this
Honorable Court; and
II. The Court of Appeals has departed from the accepted and
usual course of judicial proceedings in reversing the decision of
the Regional Trial Court and the Metropolitan Trial Court. 14

The Courts Ruling

x x x. (Emphasis supplied.)

The petition is meritorious. We agree with the rulings of the MeTC and
the RTC.

We affirm the findings of the MeTC and the RTC that there is no date of
payment indicated in the Promissory Notes. The RTC is correct in ruling
that since the Promissory Notes do not contain a period, HSBCL-SRP
has the right to demand immediate payment. Article 1179 of the Civil
Code applies. The spouses Broquezas obligation to pay HSBCL-SRP is
a pure obligation. The fact that HSBCL-SRP was content with the prior
monthly check-off from Editha Broquezas salary is of no moment. Once
Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a
demand to enforce a pure obligation.

The Promissory Notes uniformly provide:

PROMISSORY NOTE
P_____ Makati, M.M. ____ 19__
FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to
pay to THE HSBC RETIREMENT PLAN (hereinafter called the "PLAN")
at its office in the Municipality of Makati, Metro Manila, on or before until
fully paid the sum of PESOS ___ (P___) Philippine Currency without
discount, with interest from date hereof at the rate of Six per cent (6%)
per annum, payable monthly.
I/WE agree that the PLAN may, upon written notice, increase the interest
rate stipulated in this note at any time depending on prevailing conditions.
I/WE hereby expressly consent to any extensions or renewals hereof for
a portion or whole of the principal without notice to the other(s), and in
such a case our liability shall remain joint and several.
1avvphi1

In case collection is made by or through an attorney, I/WE jointly and

severally agree to pay ten percent (10%) of the amount due on this note
(but in no case less than P200.00) as and for attorneys fees in addition
to expenses and costs of suit.
In case of judicial execution, I/WE hereby jointly and severally waive our
rights under the provisions of Rule 39, Section 12 of the Rules of Court. 15
In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of
the Civil Code:
Art. 1179. Every obligation whose performance does not depend upon a
future or uncertain event, or upon a past event unknown to the parties,
is demandable at once.

In their Answer, the spouses Broqueza admitted that prior to Editha

Broquezas dismissal from HSBC in December 1993, she "religiously
paid the loan amortizations, which HSBC collected through payroll checkoff."16 A definite amount is paid to HSBCL-SRP on a specific date. Editha
Broqueza authorized HSBCL-SRP to make deductions from her payroll
until her loans are fully paid. Editha Broqueza, however, defaulted in her
monthly loan payment due to her dismissal. Despite the spouses
Broquezas protestations, the payroll deduction is merely a convenient
mode of payment and not the sole source of payment for the loans.
HSBCL-SRP never agreed that the loans will be paid only through salary
deductions. Neither did HSBCL-SRP agree that if Editha Broqueza
ceases to be an employee of HSBC, her obligation to pay the loans will
be suspended. HSBCL-SRP can immediately demand payment of the
loans at anytime because the obligation to pay has no period. Moreover,
the spouses Broqueza have already incurred in default in paying the
monthly installments.
Finally, the enforcement of a loan agreement involves "debtor-creditor
relations founded on contract and does not in any way concern employee
relations. As such it should be enforced through a separate civil action in
the regular courts and not before the Labor Arbiter."17
WHEREFORE, we GRANT the petition. The Decision of the Court of
Appeals in CA-G.R. SP No. 62685 promulgated on 30 March 2006
is REVERSED and SET ASIDE. The decision of Branch 139 of the
Regional Trial Court of Makati City in Civil Case No. 00-787, as well as
the decision of Branch 61 of the Metropolitan Trial Court of Makati City in
Civil Case No. 52400 against the spouses Bienvenido and Editha
Broqueza, are AFFIRMED. Costs against respondents.

G.R. No. L-29900 June 28, 1974

IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA,
Deceased, GEORGE PAY, petitioner-appellant,
vs.
SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.
Florentino B. del Rosario for petitioner-appellant.
Manuel V. San Jose for oppositor-appellee.

FERNANDO, J.:p
There is no difficulty attending the disposition of this appeal by petitioner
on questions of law. While several points were raised, the decisive issue
is whether a creditor is barred by prescription in his attempt to collect on
a promissory note executed more than fifteen years earlier with the
debtor sued promising to pay either upon receipt by him of his share from
a certain estate or upon demand, the basis for the action being the latter
alternative. The lower court held that the ten-year period of limitation of
actions did apply, the note being immediately due and demandable, the
creditor admitting expressly that he was relying on the wording "upon
demand." On the above facts as found, and with the law being as it is, it
cannot be said that its decision is infected with error. We affirm.

From the appealed decision, the following appears: "The parties in this
case agreed to submit the matter for resolution on the basis of their
pleadings and annexes and their respective memoranda submitted.
Petitioner George Pay is a creditor of the Late Justo Palanca who died in
Manila on July 3, 1963. The claim of the petitioner is based on a
promissory note dated January 30, 1952, whereby the late Justo Palanca
and Rosa Gonzales Vda. de Carlos Palanca promised to pay George
Pay the amount of P26,900.00, with interest thereon at the rate of 12%
per annum. George Pay is now before this Court, asking that Segundina
Chua vda. de Palanca, surviving spouse of the late Justo Palanca, he
appointed as administratrix of a certain piece of property which is a
residential dwelling located at 2656 Taft Avenue, Manila, covered by Tax
Declaration No. 3114 in the name of Justo Palanca, assessed at
P41,800.00. The idea is that once said property is brought under
administration, George Pay, as creditor, can file his claim against the
administratrix." 1 It then stated that the petition could not prosper as there
was a refusal on the part of Segundina Chua Vda. de Palanca to be
appointed as administratrix; that the property sought to be administered no
longer belonged to the debtor, the late Justo Palanca; and that the rights of
petitioner-creditor had already prescribed. The promissory note, dated
January 30, 1962, is worded thus: " `For value received from time to time
since 1947, we [jointly and severally promise to] pay to Mr. [George Pay] at
his office at the China Banking Corporation the sum of [Twenty Six Thousand
Nine Hundred Pesos] (P26,900.00), with interest thereon at the rate of 12%
per annum upon receipt by either of the undersigned of cash payment from
the Estate of the late Don Carlos Palanca or upon demand'. . . . As stated,
this promissory note is signed by Rosa Gonzales Vda. de Carlos Palanca
and Justo Palanca." 2 Then came this paragraph: "The Court has inquired
whether any cash payment has been received by either of the signers of this
promissory note from the Estate of the late Carlos Palanca. Petitioner
informed that he does not insist on this provision but that petitioner is only
claiming on his right under the promissory note ." 3 After which, came the
ruling that the wording of the promissory note being "upon demand," the
obligation was immediately due. Since it was dated January 30, 1952, it was
clear that more "than ten (10) years has already transpired from that time
until to date. The action, therefore, of the creditor has definitely
prescribed." 4 The result, as above noted, was the dismissal of the petition.
In an exhaustive brief prepared by Attorney Florentino B. del Rosario,
petitioner did assail the correctness of the rulings of the lower court as to
the effect of the refusal of the surviving spouse of the late Justo Palanca
to be appointed as administratrix, as to the property sought to be

administered no longer belonging to the debtor, the late Justo Palanca,

and as to the rights of petitioner-creditor having already prescribed. As
noted at the outset, only the question of prescription need detain us in the
disposition of this appeal. Likewise, as intimated, the decision must be
affirmed, considering the clear tenor of the promissory note.
From the manner in which the promissory note was executed, it would
appear that petitioner was hopeful that the satisfaction of his credit could
he realized either through the debtor sued receiving cash payment from
the estate of the late Carlos Palanca presumptively as one of the heirs,
or, as expressed therein, "upon demand." There is nothing in the record
that would indicate whether or not the first alternative was fulfilled. What
is undeniable is that on August 26, 1967, more than fifteen years after the
execution of the promissory note on January 30, 1952, this petition was
filed. The defense interposed was prescription. Its merit is rather obvious.
Article 1179 of the Civil Code provides: "Every obligation whose
performance does not depend upon a future or uncertain event, or upon
a past event unknown to the parties, is demandable at once." This used
to be Article 1113 of the Spanish Civil Code of 1889. As far back
as Floriano v. Delgado, 5 a 1908 decision, it has been applied according to
its express language. The well-known Spanish commentator, Manresa, on
this point, states: "Dejando con acierto, el caracter mas teorico y grafico del
acto, o sea la perfeccion de este, se fija, para determinar el concepto de la
obligacion pura, en el distinctive de esta, y que es consecuencia de aquel:
la exigibilidad immediata." 6
The obligation being due and demandable, it would appear that the filing
of the suit after fifteen years was much too late. For again, according to
the Civil Code, which is based on Section 43 of Act No. 190, the
prescriptive period for a written contract is that of ten years. 7 This is
another instance where this Court has consistently adhered to the express
language of the applicable norm. 8 There is no necessity therefore of passing
upon the other legal questions as to whether or not it did suffice for the
petition to fail just because the surviving spouse refuses to be made
administratrix, or just because the estate was left with no other property. The
decision of the lower court cannot be overturned.
WHEREFORE, the lower court decision of July 24, 1968 is affirmed.
Costs against George Pay.

Zaldivar (Chairman), Barredo, Antonio, Fernandez and Aquino, JJ.,

concur.

pesos (P2,000) each, as to the delivery of which stipulation was made,

couched in these words: "Approximate delivery within ninety days.
This is not guaranteed."
The tanks arrived at Manila on the 27th of April, 1919: the expellers on
the 26th of October, 1918; and the motors on the 27th of February, 1919.
The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of
these goods, but Mr. Sotelo refused to receive them and to pay the prices
stipulated.
The plaintiff brought suit against the defendant, based on four separate
causes of action, alleging, among other facts, that it immediately notified
the defendant of the arrival of the goods, and asked instructions from him
as to the delivery thereof, and that the defendant refused to receive any
of them and to pay their price. The plaintiff, further, alleged that the
expellers and the motors were in good condition. (Amended complaint,
pages 16-30, Bill of Exceptions.)

G.R. No. L-16570

March 9, 1922

SMITH, BELL & CO., LTD., plaintiff-appellant,

vs.
VICENTE SOTELO MATTI, defendant-appellant.
Ross and Lawrence and Ewald E. Selph for plaintiff-appellant.
Ramon Sotelo for defendant-appellant.
ROMUALDEZ, J.:
In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente
Sotelo, entered into contracts whereby the former obligated itself to sell,
and the latter to purchase from it, two steel tanks, for the total price of
twenty-one thousand pesos (P21,000), the same to be shipped from New
York and delivered at Manila "within three or four months;" two expellers
at the price of twenty five thousand pesos (P25,000) each, which were to
be shipped from San Francisco in the month of September, 1918, or as
soon as possible; and two electric motors at the price of two thousand

In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila
Oil Refining and By-Products Co., Inc., denied the plaintiff's allegations
as to the shipment of these goods and their arrival at Manila, the
notification to the defendant, Mr. Sotelo, the latter's refusal to receive
them and pay their price, and the good condition of the expellers and the
motors, alleging as special defense that Mr. Sotelo had made the
contracts in question as manager of the intervenor, the Manila Oil
Refining and By-Products Co., Inc which fact was known to the plaintiff,
and that "it was only in May, 1919, that it notified the intervenor that said
tanks had arrived, the motors and the expellers having arrived incomplete
and long after the date stipulated." As a counterclaim or set-off, they also
allege that, as a consequence of the plaintiff's delay in making delivery of
the goods, which the intervenor intended to use in the manufacture of
cocoanut oil, the intervenor suffered damages in the sums of one
hundred sixteen thousand seven hundred eighty-three pesos and ninetyone centavos (P116,783.91) for the nondelivery of the tanks, and twentyone thousand two hundred and fifty pesos (P21,250) on account of the
expellers and the motors not having arrived in due time.
The case having been tried, the court below absolved the defendants
from the complaint insofar as the tanks and the electric motors were
concerned, but rendered judgment against them, ordering them to

"receive the aforesaid expellers and pay the plaintiff the sum of fifty
thousand pesos (P50,00), the price of the said goods, with legal interest
thereon from July 26, 1919, and costs."
Both parties appeal from this judgment, each assigning several errors in
the findings of the lower court.
The principal point at issue in this case is whether or not, under the
contracts entered into and the circumstances established in the record,
the plaintiff has fulfilled, in due time, its obligation to bring the goods in
question to Manila. If it has, then it is entitled to the relief prayed for;
otherwise, it must be held guilty of delay and liable for the consequences
thereof.
To solve this question, it is necessary to determine what period was fixed
for the delivery of the goods.
As regards the tanks, the contracts A and B (pages 61 and 62 of the
record) are similar, and in both of them we find this clause:
To be delivered within 3 or 4 months The promise or indication
of shipment carries with it absolutely no obligation on our part
Government regulations, railroad embargoes, lack of vessel
space, the exigencies of the requirement of the United States
Government, or a number of causes may act to entirely vitiate the
indication of shipment as stated. In other words, the order is
accepted on the basis of shipment at Mill's convenience, time of
shipment being merely an indication of what we hope to
accomplish.
In the contract Exhibit C (page 63 of the record), with reference to the
expellers, the following stipulation appears:
The following articles, hereinbelow more particularly described, to
be shipped at San Francisco within the month of September /18,
or as soon as possible. Two Anderson oil expellers . . . .
And in the contract relative to the motors (Exhibit D, page 64, rec.) the
following appears:

Approximate delivery within ninety days. This is not

guaranteed. This sale is subject to our being able to obtain
Priority Certificate, subject to the United States Government
requirements and also subject to confirmation of manufactures.
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays caused by fires, riots on
land or on the sea, strikes or other causes known as "Force
Majeure" entirely beyond the control of the sellers or their
representatives.
Under these stipulations, it cannot be said that any definite date was
fixed for the delivery of the goods. As to the tanks, the agreement was
that the delivery was to be made "within 3 or 4 months," but that period
was subject to the contingencies referred to in a subsequent clause. With
regard to the expellers, the contract says "within the month of September,
1918," but to this is added "or as soon as possible." And with reference to
the motors, the contract contains this expression, "Approximate delivery
within ninety days," but right after this, it is noted that "this is not
guaranteed."
The oral evidence falls short of fixing such period.
From the record it appears that these contracts were executed at the time
of the world war when there existed rigid restrictions on the export from
the United States of articles like the machinery in question, and maritime,
as well as railroad, transportation was difficult, which fact was known to
the parties; hence clauses were inserted in the contracts, regarding
"Government regulations, railroad embargoes, lack of vessel space, the
exigencies of the requirements of the United States Government," in
connection with the tanks and "Priority Certificate, subject to the United
State Government requirements," with respect to the motors. At the time
of the execution of the contracts, the parties were not unmindful of the
contingency of the United States Government not allowing the export of
the goods, nor of the fact that the other foreseen circumstances therein
stated might prevent it.
Considering these contracts in the light of the civil law, we cannot but
conclude that the term which the parties attempted to fix is so uncertain
that one cannot tell just whether, as a matter of fact, those articles could

be brought to Manila or not. If that is the case, as we think it is, the

obligations must be regarded as conditional.
Obligations for the performance of which a day certain has been
fixed shall be demandable only when the day arrives.
A day certain is understood to be one which must necessarily
arrive, even though its date be unknown.
If the uncertainty should consist in the arrival or non-arrival of the
day, the obligation is conditional and shall be governed by the
rules of the next preceding section. (referring to pure and
conditional obligations). (Art. 1125, Civ. Code.)
And as the export of the machinery in question was, as stated in the
contract, contingent upon the sellers obtaining certificate of priority and
permission of the United States Government, subject to the rules and
regulations, as well as to railroad embargoes, then the delivery was
subject to a condition the fulfillment of which depended not only upon the
effort of the herein plaintiff, but upon the will of third persons who could in
no way be compelled to fulfill the condition. In cases like this, which are
not expressly provided for, but impliedly covered, by the Civil Code, the
obligor will be deemed to have sufficiently performed his part of the
obligation, if he has done all that was in his power, even if the condition
has not been fulfilled in reality.
In such cases, the decisions prior to the Civil Code have held that
the obligee having done all that was in his power, was entitled to
enforce performance of the obligation. This performance, which is
fictitious not real is not expressly authorized by the Code,
which limits itself only to declare valid those conditions and the
obligation thereby affected; but it is neither disallowed, and the
Code being thus silent, the old view can be maintained as a
doctrine. (Manresa's commentaries on the Civil Code [1907], vol.
8, page 132.)
The decisions referred to by Mr. Manresa are those rendered by the
supreme court of Spain on November 19, 1896, and February 23, 1871.
In the former it is held:

First. That when the fulfillment of the conditions does not depend
on the will of the obligor, but on that of a third person who can in
no way be compelled to carry it out, and it is found by the lower
court that the obligor has done all in his power to comply with the
obligation, the judgment of the said court, ordering the other party
to comply with his part of the contract, is not contrary to the law of
contracts, or to Law 1, Tit. I, Book 10, of the "Novsima
Recopilacin," or Law 12, Tit. 11, of Partida 5, when in the said
finding of the lower court, no law or precedent is alleged to have
been violated. (Jurisprudencia Civil published by the directors of
theRevista General de Legislacion y Jurisprudencia [1866], vol.
14, page 656.)
In the second decision, the following doctrine is laid down:
Second. That when the fulfillment of the condition does not
depend on the will of the obligor, but on that of a third person,
who can in no way be compelled to carry it out, the obligor's part
of the contract is complied withalf Belisario not having exercised
his right of repurchase reserved in the sale of Basilio Borja
mentioned in paragraph (13) hereof, the affidavit of Basilio Borja
for the consolidacion de dominio was presented for record in the
registry of deeds and recorded in the registry on the same date.
(32) The Maximo Belisario left a widow, the opponent Adelina
Ferrer and three minor children, Vitaliana, Eugenio, and Aureno
Belisario as his only heirs.
(33) That in the execution and sales thereunder, in which C. H.
McClure appears as the judgment creditor, he was represented
by the opponent Peter W. Addison, who prepared and had charge
of publication of the notices of the various sales and that in none
of the sales was the notice published more than twice in a
newspaper.
The claims of the opponent-appellant Addison have been very
fully and ably argued by his counsel but may, we think, be
disposed of in comparatively few words. As will be seen from the
foregoing statement of facts, he rest his title (1) on the sales
under the executions issued in cases Nos. 435, 450, 454, and
499 of the court of the justice of the peace of Dagupan with the

priority of inscription of the last two sales in the registry of deeds,

and (2) on a purchase from the Director of Lands after the land in
question had been forfeited to the Government for non-payment
of taxes under Act No. 1791.
The sheriff's sales under the execution mentioned are fatally
defective for what of sufficient publication of the notice of sale.
Section 454 of the Code of civil Procedure reads in part as
follows:
SEC. 454. Before the sale of property on execution, notice
thereof must be given, as follows:
1. In case of perishable property, by posing written notice of the
time and place of the sale in three public places of the
municipality or city where the sale is to take place, for such time
as may be reasonable, considering the character and condition of
the property;
2. *

3. In cases of real property, by posting a similar notice particularly

describing the property, for twenty days in three public places of
the municipality or city where the property is situated, and also
where the property is to be sold, and publishing a copy thereof
once a week, for the same period, in some newspaper published
or having general circulation in the province, if there be one. If
there are newspaper published in the province in both the
Spanish and English languages, then a like publication for a like
period shall be made in one newspaper published in the Spanish
language,
and
in
one
published
in
the
English
language: Provided, however, That such publication in a
newspaper will not be required when the assessed valuation of
the property does not exceed four hundred pesos;
4. *

Examining the record, we find that in cases Nos. 435 and 450 the sales
took place on October 14, 1916; the notice first published gave the date
of the sale as October 15th, but upon discovering that October 15th was

a Sunday, the date was changed to October 14th. The correct notice was
published twice in a local newspaper, the first publication was made on
October 7th and the second and last on October 14th, the date of the
sale itself. The newspaper is a weekly periodical published every
Saturday afternoon.
In case No. 454 there were only two publications of the notice in a
newspaper, the first publication being made only fourteen days before the
date of the sale. In case No. 499, there were also only two publications,
the first of which was made thirteen days before the sale. In the last case
the sale was advertised for the hours of from 8:30 in the morning until
4:30 in the afternoon, in violation of section 457 of the Code of Civil
Procedure. In cases Nos. 435 and 450 the hours advertised were from
9:00 in the morning until 4.30 in the afternoon. In all of the cases the
notices of the sale were prepared by the judgment creditor or his agent,
who also took charged of the publication of such notices.
In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil.,
808), this court held that if a sheriff sells without the notice prescribe by
the Code of Civil Procedure induced thereto by the judgment creditor and
the purchaser at the sale is the judgment creditor, the sale is absolutely
void and not title passes. This must now be regarded as the settled
doctrine in this jurisdiction whatever the rule may be elsewhere.
It appears affirmatively from the evidence in the present case that there is
a newspaper published in the province where the sale in question took
place and that the assessed valuation of the property disposed of at each
sale exceeded P400. Comparing the requirements of section 454, supra,
with what was actually done, it is self-evident that notices of the sales
mentioned were not given as prescribed by the statute and taking into
consideration that in connection with these sales the appellant Addison
was either the judgment creditor or else occupied a position analogous to
that of a judgment creditor, the sales must be held invalid.
The conveyance or reconveyance of the land from the Director of Lands
is equally invalid. The provisions of Act No. 1791 pertinent to the
purchase or repurchase of land confiscated for non-payment of taxes are
found in section 19 of the Act and read:
. . . In case such redemption be not made within the time above
specified the Government of the Philippine Islands shall have an

absolute, indefeasible title to said real property. Upon the

expiration of the said ninety days, if redemption be not made, the
provincial treasurer shall immediately notify the Director of Lands
of the forfeiture and furnish him with a description of the property,
and said Director of Lands shall have full control and custody
thereof to lease or sell the same or any portion thereof in the
same manner as other public lands are leased or
sold: Provided, That the original owner, or his legal
representative, shall have the right to repurchase the entire
amount of his said real property, at any time before a sale or
contract of sale has been made by the director of Lands to a third
party, by paying therefore the whole sum due thereon at the time
of ejectment together with a penalty of ten per centum . . . .
The appellant Addison repurchased under the final proviso of the section
quoted and was allowed to do so as the successor in interest of the
original owner under the execution sale above discussed. As we have
seen, he acquired no rights under these sales, was therefore not the
successor of the original owner and could only have obtained a valid
conveyance of such titles as the Government might have by following the
procedure prescribed by the Public Land Act for the sale of public lands.
he is entitled to reimbursement for the money paid for the redemption of
the land, with interest, but has acquired no title through the redemption.
The question of the priority of the record of the sheriff's sales over that of
the sale from Belisario to Borja is extensively argued in the briefs, but
from our point of view is of no importance; void sheriff's or execution
sales cannot be validated through inscription in the Mortgage Law
registry.
The opposition of Adelina Ferrer must also be overruled. She maintained
that the land in question was community property of the marriage of
Eulalio Belisario and Paula Ira: that upon the death of Paula Ira inealed
from is modified, and the defendant Mr. Vicente Sotelo Matti, sentenced
to accept and receive from the plaintiff the tanks, the expellers and the
motors in question, and to pay the plaintiff the sum of ninety-six thousand
pesos (P96,000), with legal interest thereon from July 17, 1919, the date
of the filing of the complaint, until fully paid, and the costs of both
instances. So ordered.

Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor, Ostrand,

and Johns, JJ., concur.
[G.R. No. L-27454. April 30, 1970.]
ROSENDO O. CHAVES, Plaintiff-Appellant, v. FRUCTUOSO
GONZALES, Defendant-Appellee.
Chaves, Elio, Chaves & Associates, for Plaintiff-Appellant.
Sulpicio E. Platon, for Defendant-Appellee.
SYLLABUS
1. CIVIL LAW; CONTRACTS; BREACH OF CONTRACT FOR NONPERFORMANCE; FIXING OF PERIOD BEFORE FILING OF
COMPLAINT FOR NON-PERFORMANCE, ACADEMIC. Where the
time for compliance had expired and there was breach of contract by
non-performance, it was academic for the plaintiff to have first petitioned
the court to fix a period for the performance of the contract before filing
his
complaint.
2. ID.; ID.; ID.; DEFENDANT CANNOT INVOKE ARTICLE 1197 OF THE
CIVIL CODE OF THE PHILIPPINES. Where the defendant virtually
admitted non-performance of the contract by returning the typewriter that
he was obliged to repair in a non-working condition, with essential parts
missing, Article 1197 of the Civil Code of the Philippines cannot be
invoked. The fixing of a period would thus be a mere formality and would
serve
no
purpose
than
to
delay.
3. ID.; ID.; ID.; DAMAGES RECOVERABLE; CASE AT BAR. Where
the defendant-appellee contravened the tenor of his obligation because
he not only did not repair the typewriter but returned it "in shambles, he
is liable for the cost of the labor or service expended in the repair of the
typewriter, which is in the amount of P58.75, because the obligation or
contract was to repair it. In addition, he is likewise liable under Art. 1170
of the Code, for the cost of the missing parts, in the amount of P31.10, for
in his obligation to repair the typewriter he was bound, but failed or
neglected, to return it in the same condition it was when he received it.
4. ID.; ID.; ID.; CLAIMS FOR DAMAGES OR ATTORNEYS FEES NOT
RECOVERABLE; NOT ALLEGED OR PROVED IN INSTANT CASE.

Claims for damages and attorneys fees must be pleaded, and the
existence of the actual basis thereof must be proved. As no findings of
fact were made on the claims for damages and attorneys fees, there is
no factual basis upon which to make an award therefor.
5. REMEDIAL LAW; APPEALS; APPEAL FROM COURT OF FIRST
INSTANCE TO SUPREME COURT; ONLY QUESTIONS OF LAW
REVIEWABLE. Where the appellant directly appeals from the decision
of the trial court to the Supreme Court on questions of law, he is bound
by the judgment of the court a quo on its findings of fact.
DECISION
REYES, J.B.L., J.:
This is a direct appeal by the party who prevailed in a suit for breach of
oral contract and recovery of damages but was unsatisfied with the
decision rendered by the Court of First Instance of Manila, in its Civil
Case No. 65138, because it awarded him only P31.10 out of his total
claim of P690 00 for actual, temperate and moral damages and attorneys
fees.
The appealed judgment, which is brief, is hereunder quoted in
full:jgc:chanrobles.com.ph
"In the early part of July, 1963, the plaintiff delivered to the defendant,
who is a typewriter repairer, a portable typewriter for routine cleaning and
servicing. The defendant was not able to finish the job after some time
despite repeated reminders made by the plaintiff. The defendant merely
gave assurances, but failed to comply with the same. In October, 1963,
the defendant asked from the plaintiff the sum of P6.00 for the purchase
of spare parts, which amount the plaintiff gave to the defendant. On
October 26, 1963, after getting exasperated with the delay of the repair of
the typewriter, the plaintiff went to the house of the defendant and asked
for the return of the typewriter. The defendant delivered the typewriter in a
wrapped package. On reaching home, the plaintiff examined the
typewriter returned to him by the defendant and found out that the same
was in shambles, with the interior cover and some parts and screws
missing. On October 29, 1963. the plaintiff sent a letter to the defendant
formally demanding the return of the missing parts, the interior cover and
the sum of P6.00 (Exhibit D). The following day, the defendant returned to

the plaintiff some of the missing parts, the interior cover and the P6.00.
"On August 29, 1964, the plaintiff had his typewriter repaired by Freixas
Business Machines, and the repair job cost him a total of P89.85,
including
labor
and
materials
(Exhibit
C).
"On August 23, 1965, the plaintiff commenced this action before the City
Court of Manila, demanding from the defendant the payment of P90.00
as actual and compensatory damages, P100.00 for temperate damages,
P500.00 for moral damages, and P500.00 as attorneys fees.
"In his answer as well as in his testimony given before this court, the
defendant made no denials of the facts narrated above, except the claim
of the plaintiff that the typewriter was delivered to the defendant through a
certain Julio Bocalin, which the defendant denied allegedly because the
typewriter was delivered to him personally by the plaintiff.
"The repair done on the typewriter by Freixas Business Machines with
the total cost of P89.85 should not, however, be fully chargeable against
the defendant. The repair invoice, Exhibit C, shows that the missing parts
had
a
total
value
of
only
P31.10.
"WHEREFORE, judgment is hereby rendered ordering the defendant to
pay the plaintiff the sum of P31.10, and the costs of suit.
"SO

ORDERED."cralaw

virtua1aw

library

The error of the court a quo, according to the plaintiff-appellant, Rosendo

O. Chaves, is that it awarded only the value of the missing parts of the
typewriter, instead of the whole cost of labor and materials that went into
the repair of the machine, as provided for in Article 1167 of the Civil
Code,
reading
as
follows:jgc:chanrobles.com.ph
"ART. 1167. If a person obliged to do something fails to do it, the same
shall
be
executed
at
his
cost.
This same rule shall be observed if he does it in contravention of the
tenor of the obligation. Furthermore it may be decreed that what has
been
poorly
done
he
undone."cralaw
virtua1aw
library
On the other hand, the position of the defendant-appellee, Fructuoso
Gonzales, is that he is not liable at all, not even for the sum of P31.10,
because his contract with plaintiff-appellant did not contain a period, so
that plaintiff-appellant should have first filed a petition for the court to fix

the period, under Article 1197 of the Civil Code, within which the
defendant appellee was to comply with the contract before said
defendant-appellee could be held liable for breach of contract.
Because the plaintiff appealed directly to the Supreme Court and the
appellee did not interpose any appeal, the facts, as found by the trial
court,
are
now
conclusive
and
non-reviewable.
1
The appealed judgment states that the "plaintiff delivered to the
defendant . . . a portable typewriter for routine cleaning and servicing" ;
that the defendant was not able to finish the job after some time despite
repeated reminders made by the plaintiff" ; that the "defendant merely
gave assurances, but failed to comply with the same" ; and that "after
getting exasperated with the delay of the repair of the typewriter", the
plaintiff went to the house of the defendant and asked for its return, which
was done. The inferences derivable from these findings of fact are that
the appellant and the appellee had a perfected contract for cleaning and
servicing a typewriter; that they intended that the defendant was to finish
it at some future time although such time was not specified; and that such
time had passed without the work having been accomplished, far the
defendant returned the typewriter cannibalized and unrepaired, which in
itself is a breach of his obligation, without demanding that he should be
given more time to finish the job, or compensation for the work he had
already done. The time for compliance having evidently expired, and
there being a breach of contract by non-performance, it was academic for
the plaintiff to have first petitioned the court to fix a period for the
performance of the contract before filing his complaint in this case.
Defendant cannot invoke Article 1197 of the Civil Code for he virtually
admitted non-performance by returning the typewriter that he was obliged
to repair in a non-working condition, with essential parts missing. The
fixing of a period would thus be a mere formality and would serve no
purpose than to delay (cf. Tiglao. Et. Al. V. Manila Railroad Co. 98 Phil.
18l).
It is clear that the defendant-appellee contravened the tenor of his
obligation because he not only did not repair the typewriter but returned it
"in shambles", according to the appealed decision. For such
contravention, as appellant contends, he is liable under Article 1167 of
the Civil Code. jam quot, for the cost of executing the obligation in a
proper manner. The cost of the execution of the obligation in this case
should be the cost of the labor or service expended in the repair of the
typewriter, which is in the amount of P58.75. because the obligation or
contract
was
to
repair
it.

In addition, the defendant-appellee is likewise liable, under Article 1170 of

the Code, for the cost of the missing parts, in the amount of P31.10, for in
his obligation to repair the typewriter he was bound, but failed or
neglected, to return it in the same condition it was when he received it.
Appellants claims for moral and temperate damages and attorneys fees
were, however, correctly rejected by the trial court, for these were not
alleged in his complaint (Record on Appeal, pages 1-5). Claims for
damages and attorneys fees must be pleaded, and the existence of the
actual basis thereof must be proved. 2 The appealed judgment thus
made no findings on these claims, nor on the fraud or malice charged to
the appellee. As no findings of fact were made on the claims for damages
and attorneys fees, there is no factual basis upon which to make an
award therefor. Appellant is bound by such judgment of the court, a quo,
by reason of his having resorted directly to the Supreme Court on
questions
of
law.
IN VIEW OF THE FOREGOING REASONS, the appealed judgment is
hereby modified, by ordering the defendant-appellee to pay, as he is
hereby ordered to pay, the plaintiff-appellant the sum of P89.85, with
interest at the legal rate from the filing of the complaint. Costs in all
instances
against
appellee
Fructuoso
Gonzales.
Concepcion, C.J.,
Teehankee

Dizon, Makalintal, Zaldivar, Castro,

and
Villamor, JJ.,

Barredo, J., did not take part.

Fernando,
concur.

G.R. No. L-264

October 4, 1946

VICENTE SINGSON ENCARNACION, plaintiff-appellee,

vs.
JACINTA BALDOMAR, ET AL., defendants-appellants.
HILADO, J.:
Vicente Singson Encarnacion, owner of the house numbered 589
Legarda Street, Manila, some six years ago leased said house to Jacinto
Baldomar and her son, Lefrado Fernando, upon a month-to-month basis
for the monthly rental of P35. After Manila was liberated in the last war,
specifically on March 16, 1945, and on April 7, of the same year, plaintiff
Singson Encarnacion notified defendants, the said mother and son, to
vacate the house above-mentioned on or before April 15, 1945, because
plaintiff needed it for his offices as a result of the destruction of the
building where said plaintiff had said offices before. Despite this demand,
defendants insisted on continuing their occupancy. When the original
action was lodged with the Municipal Court of Manila on April 20, 1945,
defendants were in arrears in the payment of the rental corresponding to
said month, the agrees rental being payable within the first five days of
each month. That rental was paid prior to the hearing of the case in the
municipal court, as a consequence of which said court entered judgment
for restitution and payment of rentals at the rate of P35 a month from May
1, 1945, until defendants completely vacate the premises. Although
plaintiff included in said original complaint a claim for P500 damages per
month, that claim was waived by him before the hearing in the municipal
court, on account of which nothing was said regarding said damages in
the municipal court's decision.
When the case reached the Court of First Instance of Manila upon
appeal, defendants filed therein a motion to dismiss (which was similar to
a motion to dismiss filed by them in the municipal court) based upon the
ground that the municipal court had no jurisdiction over the subject matter
due to the aforesaid claim for damages and that, therefore, the Court of
First Instance had no appellate jurisdiction over the subject matter of the
action. That motion to dismiss was denied by His Honor, Judge Mamerto

Roxas, by order dated July 21, 1945, on the ground that in the municipal
court plaintiff had waived said claim for damages and that, therefore, the
same waiver was understood also to have been made in the Court of
First Instance.

defendants on account of rentals with the clerk of said court, and in said
judgment it is disposed that the amounts thus deposited should be
delivered to plaintiff.

lawphil.net

In the Court of First Instance the graveman of the defense interposed by

defendants, as it was expressed defendant Lefrado Fernando during the
trial, was that the contract which they had celebrated with plaintiff since
the beginning authorized them to continue occupying the house
indefinetly and while they should faithfully fulfill their obligations as
respects the payment of the rentals, and that this agreement had been
ratified when another ejectment case between the parties filed during the
Japanese regime concerning the same house was allegedly
compounded in the municipal court. The Court of First Instance gave
more credit to plaintiff's witness, Vicente Singson Encarnacion, jr., who
testified that the lease had always and since the beginning been upon a
month-to-month basis. The court added in its decision that this defense
which was put up by defendant's answer, for which reason the Court
considered it as indicative of an eleventh-hour theory. We think that the
Court of First Instance was right in so declaring. Furthermore, carried to
its logical conclusion, the defense thus set up by defendant Lefrado
Fernando would leave to the sole and exclusive will of one of the
contracting parties (defendants in this case) the validity and fulfillment of
the contract of lease, within the meaning of article 1256 of the Civil Code,
since the continuance and fulfillment of the contract would then depend
solely and exclusively upon their free and uncontrolled choice between
continuing paying the rentals or not, completely depriving the owner of all
say in the matter. If this defense were to be allowed, so long as
defendants elected to continue the lease by continuing the payment of
the rentals, the owner would never be able to discontinue it; conversely,
although the owner should desire the lease to continue, the lessees could
effectively thwart his purpose if they should prefer to terminate the
contract by the simple expedient of stopping payment of the rentals. This,
of course, is prohibited by the aforesaid article of the Civil Code. (8
Manresa, 3d ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil., 100.)
During the pendency of the appeal in the Court of First Instance and
before the judgment appealed from was rendered on October 31, 1945,
the rentals in areas were those pertaining to the month of August, 1945,
to the date of said judgment at the rate of P35 a month. During the
pendency of the appeal in that court, certain deposits were made by

Upon the whole, we are clearly of opinion that the judgment appealed
from should be, as it is hereby, affirmed, with the costs of the three
instances to appellants. So ordered.
Paras, Pablo, Perfecto and Padilla, JJ., concur.

G.R. No. 967

May 19, 1903

DARIO AND GAUDENCIO ELEIZEGUI, plaintiffs-appellees,

vs.
THE MANILA LAWN TENNIS CLUB, defendant-appellant.
Pillsburry
and
Sutro
Manuel Torres Vergara for appellee.

for

appellant.

ARELLANO, C. J.:
This suit concerns the lease of a piece of land for a fixed consideration
and to endure at the will of the lessee. By the contract of lease the lessee
is expressly authorized to make improvements upon the land, by erecting
buildings of both permanent and temporary character, by making fills,
laying pipes, and making such other improvements as might be
considered desirable for the comfort and amusement of the members.
With respect to the term of the lease the present question has arisen. In
its decision three theories have been presented: One which makes the
duration depend upon the will of the lessor, who, upon one month's notice
given to the lessee, may terminate the lease so stipulated; another which,
on the contrary, makes it dependent upon the will of the lessee, as
stipulated; and the third, in accordance with which the right is reversed to
the courts to fix the duration of the term.
The first theory is that which has prevailed in the judgment below, as
appears from the language in which the basis of the decision is
expressed: "The court is of the opinion that the contract of lease was
terminated by the notice given by the plaintiff on August 28 of last

year . . . ." And such is the theory maintained by the plaintiffs, which
expressly rests upon article 1581 of the Civil Code, the law which was in
force at the time the contract was entered into (January 25, 1890). The
judge, in giving to this notice the effect of terminating the lease,
undoubtedly considers that it is governed by the article relied upon by the
plaintiffs, which is of the following tenor: "When the term has not been
fixed for the lease, it is understood to be for years when an annual rental
has been fixed, for months when the rent is monthly. . . ." The second
clause of the contract provides as follows: "The rent of the said land is
fixed at 25 pesos per month." (P. 11, Bill of Exceptions.)
In accordance with such a theory, the plaintiffs might have terminated the
lease the month following the making of the contract at any time after
the first month, which, strictly speaking, would be the only month with
respect to which they were expressly bound, they not being bound for
each successive month except by a tacit renewal (art. 1566) an effect
which they might prevent by giving the required notice.
Although the relief asked for in the complaint, drawn in accordance with
the new form of procedure established by the prevailing Code, is the
restitution of the land to the plaintiffs (a formula common to various
actions), nevertheless the action which is maintained can be no other
than that of desahucio, in accordance with the substantive law governing
the contract. The lessor says article 1569 of the Civil Code may
judicially dispossess the lessee upon the expiration of the conventional
term or of the legal term; the conventional term that is, the one agreed
upon by the parties; the legal term, in defect of the conventional, fixed for
leases by articles 1577 and 1581. We have already seen what this legal
term is with respect to urban properties, in accordance with article 1581.
Hence, it follows that the judge has only to determine whether there is or
is not conventional term. If there be a conventional term, he can not apply
the legal term fixed in subsidium to cover a case in which the parties
have made no agreement whatsoever with respect to the duration of the
lease. In this case the law interprets the presumptive intention of the
parties, they having said nothing in the contract with respect to its
duration. "Obligations arising from contracts have the force of
law between the contracting parties and must be complied with according
to the tenor of the contracts." (Art. 1091 of the Civil Code.)
The obligations which, with the force of law, the lessors assumed by the
contract entered into, so far as pertaining to the issues, are the following:
"First. . . . They lease the above-described land to Mr. Williamson, who
takes it onlease, . . . for all the time the members of the said club may

desire to use it . . . Third. . . . the owners of the land undertake to

maintain the club as tenant as long as the latter shall see fit, without
altering in the slightest degree the conditions of this contract, even
though the estate be sold."
It is necessary, therefore, to answer the first question: Was there, or was
there not, a conventional term, a duration, agreed upon in the contract in
question? If there was an agreed duration, a conventional term, then the
legal term the term fixed in article 1581 has no application; the
contract is the supreme law of the contracting parties. Over and above
the general law is the special law, expressly imposed upon themselves
by the contracting parties. Without these clauses 1 and 3, the contract
would contain no stipulation with respect to the duration of the lease, and
then article 1581, in connection with article 1569, would necessarily be
applicable. In view of these clauses, however, it can not be said that
there is no stipulation with respect to the duration of the lease, or that,
notwithstanding these clauses, article 1581, in connection with article
1569, can be applied. If this were so, it would be necessary to hold that
the lessors spoke in vain that their words are to be disregarded a
claim which can not be advanced by the plaintiffs nor upheld by any court
without citing the law which detracts all legal force from such words or
despoils them of their literal sense.
It having been demonstrated that the legal term can not be applied, there
being a conventional term, this destroys the assumption that the contract
of lease was wholly terminated by the notice given by the plaintiffs, this
notice being necessary only when it becomes necessary to have
recourse to the legal term. Nor had the plaintiffs, under the contract, any
right to give such notice. It is evident that they had no intention of
stipulating that they reserved the right to give such notice. Clause 3
begins as follows: "Mr. Williamson, or whoever may succeed him as
secretary of said club, may terminate this lease whenever desired without
other formality than that of giving a month's notice. The owners of the
land undertake to maintain the club as tenant as long as the latter shall
see fit." The right of the one and the obligation of the others being thus
placed in antithesis, there is something more, much more, than
the inclusio unius, exclusio alterius. It is evident that the lessors did not
intend to reserve to themselves the right to rescind that which they
expressly conferred upon the lessee by establishing it exclusively in favor
of the latter.
It would be the greatest absurdity to conclude that in a contract by which
the lessor has left the termination of the lease to the will of the lessee,
such a lease can or should be terminated at the will of the lessor.

It would appear to follow, from the foregoing, that, if such is the force of
the agreement, there can be no other mode of terminating the lease than
by the will of the lessee, as stipulated in this case. Such is the conclusion
maintained by the defendant in the demonstration of the first error of law
in the judgment, as alleged by him. He goes so far, under this theory, as
to maintain the possibility of a perpetual lease, either as such lease, if the
name can be applied, or else as an innominate contract, or under any
other denomination, in accordance with the agreement of the parties,
which is, in fine, the law of the contract, superior to all other law, provided
that there be no agreement against any prohibitive statute, morals, or
public policy.
It is unnecessary here to enter into a discussion of a perpetual lease in
accordance with the law and doctrine prior to the Civil Code now in force,
and which has been operative since 1889. Hence the judgment of the
supreme court of Spain of January 2, 1891, with respect to a lease made
in 1887, cited by the defendant, and a decision stated by him to have
been rendered by the Audiencia of Pamplona in 1885 (it appears to be
rather a decision by the head office of land registration of July 1, 1885),
and any other decision which might be cited based upon the constitutions
of Cataluna, according to which a lease of more than ten years is
understood to create a life tenancy, or even a perpetual tenancy, are
entirely out of point in this case, in which the subject-matter is a lease
entered into under the provisions of the present Civil Code, in
accordance with the principles of which alone can this doctrine be
examined.
It is not to be understood that we admit that the lease entered into was
stipulated as a life tenancy, and still less as a perpetual lease. The terms
of the contract express nothing to this effect. They do, whatever, imply
this idea. If the lease could last during such time as the lessee might see
fit, because it has been so stipulated by the lessor, it would last, first, as
long as the will of the lessee that is, all his life; second, during all the
time that he may have succession, inasmuch as he who contracts does
so for himself and his heirs. (Art. 1257 of the Civil Code.) The lease in
question does not fall within any of the cases in which the rights and
obligations arising from a contract can not be transmitted to heirs, either
by its nature, by agreement, or by provision of law. Furthermore, the
lessee is an English association.
Usufruct is a right of superior degree to that which arises from a lease. It
is a real right and includes all the jus utendi and jus fruendi.
Nevertheless, the utmost period for which a usufruct can endure, if
constituted in favor a natural person, is the lifetime of the usufructuary

(art. 513, sec. 1); and if in favor of juridical person, it can not be created
for more than thirty years. (Art. 515.) If the lease might be perpetual, in
what would it be distinguished from an emphyteusis? Why should the
lessee have a greater right than the usufructuary, as great as that of an
emphyteuta, with respect to the duration of the enjoyment of the property
of another? Why did they not contract for a usufruct or an emphyteusis?
It was repeatedly stated in the document that it was a lease, and nothing
but a lease, which was agreed upon: "Being in the full enjoyment of the
necessary legal capacity to enter into this contract of lease . . . they have
agreed upon the lease of said estate . . . They lease to Mr. Williamson,
who receives it as such. . . . The rental is fixed at 25 pesos a month. . . .
The owners bind themselves to maintain the club as tenant. . . . Upon the
foregoing conditions they make the present contract of lease. . . ." (Pp. 9,
11, and 12, bill of exceptions.) If it is a lease, then it must be for
a determinate period. (Art. 1543.) By its very nature it must be temporary,
just as by reason of its nature an emphyteusis must be perpetual, or for
an unlimited period. (Art. 1608.)
On the other hand, it can not be concluded that the termination of the
contract is to be left completely at the will of the lessee, because it has
been stipulated that its duration is to be left to his will.
The Civil Code has made provision for such a case in all kinds of
obligations. In speaking in general of obligations with a term it has
supplied the deficiency of the former law with respect to the "duration of
the term when it has been left to the will of the debtor," and provides that
in this case the term shall be fixed by the courts. (Art. 1128, sec. 2.) In
every contract, as laid down by the authorities, there is always a creditor
who is entitled to demand the performance, and a debtor upon whom
rests the obligation to perform the undertaking. In bilateral contracts the
contracting parties are mutually creditors and debtors. Thus, in this
contract of lease, the lessee is the creditor with respect to the rights
enumerated in article 1554, and is the debtor with respect to the
obligations imposed by articles 1555 and 1561. The term within which
performance of the latter obligation is due is what has been left to the will
of the debtor. This term it is which must be fixed by the courts.
The only action which can be maintained under the terms of the contract
is that by which it is sought to obtain from the judge the determination of
this period, and not the unlawful detainer action which has been brought
an action which presupposes the expiration of the term and makes it
the duty of the judge to simply decree an eviction. To maintain the latter
action it is sufficient to show the expiration of the term of the contract,
whether conventional or legal; in order to decree the relief to be granted

in the former action it is necessary for the judge to look into the character
and conditions of the mutual undertakings with a view to supplying the
lacking element of a time at which the lease is to expire. In the case of a
loan of money or a commodatum of furniture, the payment or return to be
made when the borrower "can conveniently do so" does not mean that he
is to be allowed to enjoy the money or to make use of the thing
indefinitely or perpetually. The courts will fix in each case, according to
the circumstances, the time for the payment or return. This is the theory
also maintained by the defendant in his demonstration of the fifth
assignment of error. "Under article 1128 of the Civil Code," thus his
proposition concludes, "contracts whose term is left to the will of one of
the contracting parties must be fixed by the courts, . . . the conditions as
to the term of this lease has a direct legislative sanction," and he cites
articles 1128. "In place of the ruthless method of annihilating a solemn
obligation, which the plaintiffs in this case have sought to pursue, the
Code has provided a legitimate and easily available remedy. . . . The
Code has provided for the proper disposition of those covenants, and a
case can hardly arise more clearly demonstrating the usefulness of that
provision than the case at bar." (Pp. 52 and 53 of appellant's brief.)

The judgment is reversed and the case will be remanded to the court
below with directions to enter a judgment of dismissal of the action in
favor of the defendant, the Manila Lawn Tennis Club, without special
allowance as to the recovery of costs. So ordered.

The plaintiffs, with respect to this conclusion on the part of their

opponents, only say that article 1128 "expressly refers to obligations in
contracts in general, and that it is well known that a lease is included
among special contracts." But they do not observe that if contracts,
simply because special rules are provided for them, could be excepted
from the provisions of the articles of the Code relative to obligations and
contracts in general, such general provisions would be wholly without
application. The system of the Code is that of establishing general rules
applicable to all obligations and contracts, and then special provisions
peculiar to each species of contract. In no part of Title VI of Book IV,
which treats of the contract of lease, are there any special rules
concerning pure of conditional obligations which may be stipulated in a
lease, because, with respect to these matters, the provisions of section 1,
chapter 3, Title I, on the subject of obligations are wholly sufficient. With
equal reason should we refer to section 2, which deals with obligations
with a term, in the same chapter and title, if a question concerning the
term arises out of a contract of lease, as in the present case, and within
this section we find article 1128, which decides the question.

Should the obligation not fix a period, but it can be inferred from
its nature and circumstances that there was an intention to grant
it to the debtor, the courts shall fix the duration of the same.

The judgment was entered below upon the theory of the expiration of a
legal term which does not exist, as the case requires that a term be fixed
by the courts under the provisions of article 1128 with respect to
obligations which, as is the present, are terminable at the will of the
obligee. It follows, therefore, that the judgment below is erroneous.

Mapa
and
Torres, J., disqualified.

Ladd,

JJ., concur.

Separate Opinions
WILLARD, J., concurring:
I concur in the foregoing opinion so far as it holds that article 1581 has no
application to the case and that the action can not be maintained. But as
to the application of article 1128 I do not concur. That article is as follows:

The court shall also fix the duration of the period when it may
have been left to the will of the debtor.
The court has applied the last paragraph of the article to the case of a
lease. But, applying the first paragraph to leases, we have a direct
conflict between this article and article 1581. Let us suppose the lease of
a house for 50 pesos a month. Nothing is said about the number of
months during which the lessee shall occupy it. If article 1581 is
applicable to this case, the law fixes the duration of the term and the
courts have no power to change it. If article 1128 is applied to it, the
courts fix the duration of the lease without reference to article 1581. It
will, I think, be agreed by everyone that article 1581 is the law applicable
to the case, and that article 1128 has nothing to do with it.
It seems clear that both parts of the article must refer to the same kind of
obligations. The first paragraph relates to obligations in which the parties
have named no period, the second to the same kind of obligations in
which the period is left to the will of the debtor. If the first paragraph is not
applicable to leases, the second is not.

The whole article was, I think, intended to apply generally to unilateral

contracts to those in which the creditor had parted with something of
value, leaving it to the debtor to say when it should be returned. In such
cases the debtor might never return it, and the creditor might thus be
deprived of his property and entirely defeated in his rights. It was to
prevent such a wrong that the article was adopted. But it has no
application to this case. The plaintiffs are not deprived of their rights.
They get every month the value which they themselves put upon the use
of the property. The time of the payment of this rent has not been left by
the contract to the will of the debtor. It is expressly provided in the
contract that it shall be paid "within the first five days after the expiration
of each month."
Article 1255 of the Civil Code is as follows:
The contracting parties may make the agreement and establish
the clauses and conditions which they may deem advisable,
provided they are not in contravention of law, morals, or public
order.
That the parties to this contract distinctly agreed that the defendant
should have this property so long as he was willing to pay 25 pesos a
month for it, is undisputed.
I find nothing in the Code to show that when a natural person is the
tenant such an agreement would be contrary to law, morality, or public
policy. In such a case the contract would terminate at the death of the
tenant. Such is the doctrine of the French Cour de Cassation.
(Houet vs. Lamarge, July 20, 1840.)
The tenant is the only person who has been given the right to say how
long the contract shall continue. That right is personal to him, and is not
property in such a sense as to pass to his heirs.
In this case the question is made more difficult by the fact that the tenant
is said to be juridical person, and it is said that the lease is therefore a
perpetual one. Just what kind of a partnership or association the
defendant is does not appear, and without knowing what kind of an entity
it is we can not say that this contract is a perpetual lease. Even if the
defendant has perpetual succession, the lease would not necessarily last
forever. A breach of any one of the obligations imposed upon the lessee
by article 1555 of the Civil Code would give the landlord the right to
terminate it.

G.R. No. L-17587

September 12, 1967

PHILIPPINE BANKING CORPORATION, representing the estate of

JUSTINA SANTOS Y CANON FAUSTINO, deceased, plaintiffappellant,
vs.
LUI SHE in her own behalf and as administratrix of the intestate
estate of Wong Heng, deceased, defendant-appellant.

CASTRO, J.:
Justina Santos y Canon Faustino and her sister Lorenzo were the owners
in common of a piece of land in Manila. This parcel, with an area of
2,582.30 square meters, is located on Rizal Avenue and opens into
Florentino Torres street at the back and Katubusan street on one side. In
it are two residential houses with entrance on Florentino Torres street and
the Hen Wah Restaurant with entrance on Rizal Avenue. The sisters lived
in one of the houses, while Wong Heng, a Chinese, lived with his family
in the restaurant. Wong had been a long-time lessee of a portion of the
property, paying a monthly rental of P2,620.
On September 22, 1957 Justina Santos became the owner of the entire
property as her sister died with no other heir. Then already well advanced
in years, being at the time 90 years old, blind, crippled and an invalid, she

was left with no other relative to live with. Her only companions in the
house were her 17 dogs and 8 maids. Her otherwise dreary existence
was brightened now and then by the visits of Wong's four children who
had become the joy of her life. Wong himself was the trusted man to
whom she delivered various amounts for safekeeping, including rentals
from her property at the corner of Ongpin and Salazar streets and the
rentals which Wong himself paid as lessee of a part of the Rizal Avenue
property. Wong also took care of the payment; in her behalf, of taxes,
lawyers' fees, funeral expenses, masses, salaries of maids and security
guard, and her household expenses.
"In grateful acknowledgment of the personal services of the lessee to
her," Justina Santos executed on November 15, 1957 a contract of lease
(Plff Exh. 3) in favor of Wong, covering the portion then already leased to
him and another portion fronting Florentino Torres street. The lease was
for 50 years, although the lessee was given the right to withdraw at any
time from the agreement; the monthly rental was P3,120. The contract
covered an area of 1,124 square meters. Ten days later (November 25),
the contract was amended (Plff Exh. 4) so as to make it cover the entire
property, including the portion on which the house of Justina Santos
stood, at an additional monthly rental of P360. For his part Wong
undertook to pay, out of the rental due from him, an amount not
exceeding P1,000 a month for the food of her dogs and the salaries of
her maids.
On December 21 she executed another contract (Plff Exh. 7) giving
Wong the option to buy the leased premises for P120,000, payable within
ten years at a monthly installment of P1,000. The option, written in
Tagalog, imposed on him the obligation to pay for the food of the dogs
and the salaries of the maids in her household, the charge not to exceed
P1,800 a month. The option was conditioned on his obtaining Philippine
citizenship, a petition for which was then pending in the Court of First
Instance of Rizal. It appears, however, that this application for
naturalization was withdrawn when it was discovered that he was not a
resident of Rizal. On October 28, 1958 she filed a petition to adopt him
and his children on the erroneous belief that adoption would confer on
them Philippine citizenship. The error was discovered and the
proceedings were abandoned.
On November 18, 1958 she executed two other contracts, one (Plff Exh.
5) extending the term of the lease to 99 years, and another (Plff Exh. 6)
fixing the term of the option of 50 years. Both contracts are written in
Tagalog.

In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279),
she bade her legatees to respect the contracts she had entered into with
Wong, but in a codicil (Plff Exh. 17) of a later date (November 4, 1959)
she appears to have a change of heart. Claiming that the various
contracts were made by her because of machinations and inducements
practiced by him, she now directed her executor to secure the annulment
of the contracts.
On November 18 the present action was filed in the Court of First
Instance of Manila. The complaint alleged that the contracts were
obtained by Wong "through fraud, misrepresentation, inequitable
conduct, undue influence and abuse of confidence and trust of and (by)
taking advantage of the helplessness of the plaintiff and were made to
circumvent the constitutional provision prohibiting aliens from acquiring
lands in the Philippines and also of the Philippine Naturalization Laws."
The court was asked to direct the Register of Deeds of Manila to cancel
the registration of the contracts and to order Wong to pay Justina Santos
the additional rent of P3,120 a month from November 15, 1957 on the
allegation that the reasonable rental of the leased premises was P6,240
a month.
In his answer, Wong admitted that he enjoyed her trust and confidence as
proof of which he volunteered the information that, in addition to the sum
of P3,000 which he said she had delivered to him for safekeeping,
another sum of P22,000 had been deposited in a joint account which he
had with one of her maids. But he denied having taken advantage of her
trust in order to secure the execution of the contracts in question. As
counterclaim he sought the recovery of P9,210.49 which he said she
owed him for advances.
Wong's admission of the receipt of P22,000 and P3,000 was the cue for
the filing of an amended complaint. Thus on June 9, 1960, aside from the
nullity of the contracts, the collection of various amounts allegedly
delivered on different occasions was sought. These amounts and the
dates of their delivery are P33,724.27 (Nov. 4, 1957); P7,344.42 (Dec. 1,
1957); P10,000 (Dec. 6, 1957); P22,000 and P3,000 (as admitted in his
answer). An accounting of the rentals from the Ongpin and Rizal Avenue
properties was also demanded.
In the meantime as a result of a petition for guardianship filed in the
Juvenile and Domestic Relations Court, the Security Bank & Trust Co.
was appointed guardian of the properties of Justina Santos, while
Ephraim G. Gochangco was appointed guardian of her person.

In his answer, Wong insisted that the various contracts were freely and
voluntarily entered into by the parties. He likewise disclaimed knowledge
of the sum of P33,724.27, admitted receipt of P7,344.42 and P10,000,
but contended that these amounts had been spent in accordance with the
instructions of Justina Santos; he expressed readiness to comply with
any order that the court might make with respect to the sums of P22,000
in the bank and P3,000 in his possession.
The case was heard, after which the lower court rendered judgment as
follows:
[A]ll the documents mentioned in the first cause of action, with the
exception of the first which is the lease contract of 15 November
1957, are declared null and void; Wong Heng is condemned to
pay unto plaintiff thru guardian of her property the sum of
P55,554.25 with legal interest from the date of the filing of the
amended complaint; he is also ordered to pay the sum of
P3,120.00 for every month of his occupation as lessee under the
document of lease herein sustained, from 15 November 1959,
and the moneys he has consigned since then shall be imputed to
that; costs against Wong Heng.
From this judgment both parties appealed directly to this Court. After the
case was submitted for decision, both parties died, Wong Heng on
October 21, 1962 and Justina Santos on December 28, 1964. Wong was
substituted by his wife, Lui She, the other defendant in this case, while
Justina Santos was substituted by the Philippine Banking Corporation.
Justina Santos maintained now reiterated by the Philippine Banking
Corporation that the lease contract (Plff Exh. 3) should have been
annulled along with the four other contracts (Plff Exhs. 4-7) because it
lacks mutuality; because it included a portion which, at the time, was
in custodia legis; because the contract was obtained in violation of the
fiduciary relations of the parties; because her consent was obtained
through undue influence, fraud and misrepresentation; and because the
lease contract, like the rest of the contracts, is absolutely simulated.
Paragraph 5 of the lease contract states that "The lessee may at any time
withdraw from this agreement." It is claimed that this stipulation offends
article 1308 of the Civil Code which provides that "the contract must bind
both contracting parties; its validity or compliance cannot be left to the will
of one of them."

We have had occasion to delineate the scope and application of article

1308 in the early case of Taylor v. Uy Tieng Piao.1 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. Indeed, the
cancellation of a contract in accordance with conditions agreed
upon beforehand is fulfillment.2
And so it was held in Melencio v. Dy Tiao Lay 3 that a "provision in a lease
contract that the lessee, at any time before he erected any building on
the land, might rescind the lease, can hardly be regarded as a violation of
article 1256 [now art. 1308] of the Civil Code."
The case of Singson Encarnacion v. Baldomar 4 cannot be cited in
support of the claim of want of mutuality, because of a difference in
factual setting. In that case, the lessees argued that they could occupy
the premises as long as they paid the rent. This is of course untenable,
for as this Court said, "If this defense were to be allowed, so long as
defendants elected to continue the lease by continuing the payment of
the rentals, the owner would never be able to discontinue it; conversely,
although the owner should desire the lease to continue the lessees could
effectively thwart his purpose if they should prefer to terminate the
contract by the simple expedient of stopping payment of the rentals."
Here, in contrast, the right of the lessee to continue the lease or to
terminate it is so circumscribed by the term of the contract that it cannot
be said that the continuance of the lease depends upon his will. At any
rate, even if no term had been fixed in the agreement, this case would at
most justify the fixing of a period5 but not the annulment of the contract.
Nor is there merit in the claim that as the portion of the property formerly
owned by the sister of Justina Santos was still in the process of
settlement in the probate court at the time it was leased, the lease is
invalid as to such portion. Justina Santos became the owner of the entire
property upon the death of her sister Lorenzo on September 22, 1957 by
force of article 777 of the Civil Code. Hence, when she leased the
property on November 15, she did so already as owner thereof. As this

Court explained in upholding the sale made by an heir of a property

under judicial administration:

A She agreed first . . .

Q Agreed what?

That the land could not ordinarily be levied upon while in custodia
legis does not mean that one of the heirs may not sell the right,
interest or participation which he has or might have in the lands
under administration. The ordinary execution of property
in custodia legis is prohibited in order to avoid interference with
the possession by the court. But the sale made by an heir of his
share in an inheritance, subject to the result of the pending
administration, in no wise stands in the way of such
administration.6
It is next contended that the lease contract was obtained by Wong in
violation of his fiduciary relationship with Justina Santos, contrary to
article 1646, in relation to article 1941 of the Civil Code, which
disqualifies "agents (from leasing) the property whose administration or
sale may have been entrusted to them." But Wong was never an agent of
Justina Santos. The relationship of the parties, although admittedly close
and confidential, did not amount to an agency so as to bring the case
within the prohibition of the law.
Just the same, it is argued that Wong so completely dominated her life
and affairs that the contracts express not her will but only his. Counsel for
Justina Santos cites the testimony of Atty. Tomas S. Yumol who said that
he prepared the lease contract on the basis of data given to him by Wong
and that she told him that "whatever Mr. Wong wants must be followed." 7
The testimony of Atty. Yumol cannot be read out of context in order to
warrant a finding that Wong practically dictated the terms of the contract.
What this witness said was:
Q Did you explain carefully to your client, Doa Justina, the
contents of this document before she signed it?
A I explained to her each and every one of these conditions and I
also told her these conditions were quite onerous for her, I don't
really know if I have expressed my opinion, but I told her that we
would rather not execute any contract anymore, but to hold it as it
was before, on a verbal month to month contract of lease.
Q But, she did not follow your advice, and she went with the
contract just the same?

A Agreed with my objectives that it is really onerous and that I

was really right, but after that, I was called again by her and she
told me to follow the wishes of Mr. Wong Heng.
xxx

xxx

xxx

Q So, as far as consent is concerned, you were satisfied that this

document was perfectly proper?
xxx

xxx

xxx

A Your Honor, if I have to express my personal opinion, I would

say she is not, because, as I said before, she told me
"Whatever Mr. Wong wants must be followed."8
Wong might indeed have supplied the data which Atty. Yumol embodied
in the lease contract, but to say this is not to detract from the binding
force of the contract. For the contract was fully explained to Justina
Santos by her own lawyer. One incident, related by the same witness,
makes clear that she voluntarily consented to the lease contract. This
witness said that the original term fixed for the lease was 99 years but
that as he doubted the validity of a lease to an alien for that length of
time, he tried to persuade her to enter instead into a lease on a month-tomonth basis. She was, however, firm and unyielding. Instead of heeding
the advice of the lawyer, she ordered him, "Just follow Mr. Wong
Heng."9 Recounting the incident, Atty. Yumol declared on cross
examination:
Considering her age, ninety (90) years old at the time and her
condition, she is a wealthy woman, it is just natural when she said
"This is what I want and this will be done." In particular reference
to this contract of lease, when I said "This is not proper," she said
"You just go ahead, you prepare that, I am the owner, and if
there is any illegality, I am the only one that can question the
illegality."10
Atty. Yumol further testified that she signed the lease contract in the
presence of her close friend, Hermenegilda Lao, and her maid, Natividad
Luna, who was constantly by her side. 11 Any of them could have testified

on the undue influence that Wong supposedly wielded over Justina

Santos, but neither of them was presented as a witness. The truth is that
even after giving his client time to think the matter over, the lawyer could
not make her change her mind. This persuaded the lower court to uphold
the validity of the lease contract against the claim that it was procured
through undue influence.
Indeed, the charge of undue influence in this case rests on a mere
inference12 drawn from the fact that Justina Santos could not read (as she
was blind) and did not understand the English language in which the
contract is written, but that inference has been overcome by her own
evidence.
Nor is there merit in the claim that her consent to the lease contract, as
well as to the rest of the contracts in question, was given out of a
mistaken sense of gratitude to Wong who, she was made to believe, had
saved her and her sister from a fire that destroyed their house during the
liberation of Manila. For while a witness claimed that the sisters were
saved by other persons (the brothers Edilberto and Mariano Sta. Ana) 13 it
was Justina Santos herself who, according to her own witness, Benjamin
C. Alonzo, said "very emphatically" that she and her sister would have
perished in the fire had it not been for Wong.14 Hence the recital in the
deed of conditional option (Plff Exh. 7) that "[I]tong si Wong Heng ang
siyang nagligtas sa aming dalawang magkapatid sa halos ay tiyak na
kamatayan", and the equally emphatic avowal of gratitude in the lease
contract (Plff Exh. 3).
As it was with the lease contract (Plff Exh. 3), so it was with the rest of
the contracts (Plff Exhs. 4-7) the consent of Justina Santos was given
freely and voluntarily. As Atty. Alonzo, testifying for her, said:

it believe his statement that he paid P1,000 as consideration for each of

the contracts (namely, the option to buy the leased premises, the
extension of the lease to 99 years, and the fixing of the term of the option
at 50 years), but that the amount was returned to him by her for
safekeeping. Instead, the court relied on the testimony of Atty. Alonzo in
reaching the conclusion that the contracts are void for want of
consideration.
Atty. Alonzo declared that he saw no money paid at the time of the
execution of the documents, but his negative testimony does not rule out
the possibility that the considerations were paid at some other time as the
contracts in fact recite. What is more, the consideration need not pass
from one party to the other at the time a contract is executed because the
promise of one is the consideration for the other.16
With respect to the lower court's finding that in all probability Justina
Santos could not have intended to part with her property while she was
alive nor even to lease it in its entirety as her house was built on it, suffice
it to quote the testimony of her own witness and lawyer who prepared the
contracts (Plff Exhs. 4-7) in question, Atty. Alonzo:
The ambition of the old woman, before her death, according to
her revelation to me, was to see to it that these properties be
enjoyed, even to own them, by Wong Heng because Doa
Justina told me that she did not have any relatives, near or far,
and she considered Wong Heng as a son and his children her
grandchildren; especially her consolation in life was when she
would hear the children reciting prayers in Tagalog. 17

[I]n nearly all documents, it was either Mr. Wong Heng or Judge
Torres and/or both. When we had conferences, they used to tell
me what the documents should contain. But, as I said, I would
always ask the old woman about them and invariably the old
woman used to tell me: "That's okay. It's all right."15

She was very emphatic in the care of the seventeen (17) dogs
and of the maids who helped her much, and she told me to see to
it that no one could disturb Wong Heng from those properties.
That is why we thought of the ninety-nine (99) years lease; we
thought of adoption, believing that thru adoption Wong Heng
might acquire Filipino citizenship; being the adopted child of a
Filipino citizen.18

But the lower court set aside all the contracts, with the exception of the
lease contract of November 15, 1957, on the ground that they are
contrary to the expressed wish of Justina Santos and that their
considerations are fictitious. Wong stated in his deposition that he did not
pay P360 a month for the additional premises leased to him, because
she did not want him to, but the trial court did not believe him. Neither did

This is not to say, however, that the contracts (Plff Exhs. 3-7) are valid.
For the testimony just quoted, while dispelling doubt as to the intention of
Justina Santos, at the same time gives the clue to what we view as a
scheme to circumvent the Constitutional prohibition against the transfer
of lands to aliens. "The illicit purpose then becomes the
illegal causa"19 rendering the contracts void.

Taken singly, the contracts show nothing that is necessarily illegal, but
considered collectively, they reveal an insidious pattern to subvert by
indirection what the Constitution directly prohibits. To be sure, a lease to
an alien for a reasonable period is valid. So is an option giving an alien
the right to buy real property on condition that he is granted Philippine
citizenship. As this Court said in Krivenko v. Register of Deeds:20
[A]liens are not completely excluded by the Constitution from the
use of lands for residential purposes. Since their residence in the
Philippines is temporary, they may be granted temporary rights
such as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever and share
our fortunes and misfortunes, Filipino citizenship is not impossible
to acquire.
But if an alien is given not only a lease of, but also an option to buy, a
piece of land, by virtue of which the Filipino owner cannot sell or
otherwise dispose of his property,21 this to last for 50 years, then it
becomes clear that the arrangement is a virtual transfer of ownership
whereby the owner divests himself in stages not only of the right to enjoy
the land ( jus possidendi, jus utendi, jus fruendi and jus abutendi) but also
of the right to dispose of it ( jus disponendi) rights the sum total of
which make up ownership. It is just as if today the possession is
transferred, tomorrow, the use, the next day, the disposition, and so on,
until ultimately all the rights of which ownership is made up are
consolidated in an alien. And yet this is just exactly what the parties in
this case did within the space of one year, with the result that Justina
Santos' ownership of her property was reduced to a hollow concept. If
this can be done, then the Constitutional ban against alien landholding in
the Philippines, as announced in Krivenko v. Register of Deeds,22 is
indeed in grave peril.
It does not follow from what has been said, however, that because the
parties are in pari delicto they will be left where they are, without relief.
For one thing, the original parties who were guilty of a violation of the
fundamental charter have died and have since been substituted by their
administrators to whom it would be unjust to impute their guilt. 23 For
another thing, and this is not only cogent but also important, article 1416
of the Civil Code provides, as an exception to the rule on pari delicto, that
"When the agreement is not illegal per se but is merely prohibited, and
the prohibition by law is designed for the protection of the plaintiff, he
may, if public policy is thereby enhanced, recover what he has paid or
delivered." The Constitutional provision that "Save in cases of hereditary
succession, no private agricultural land shall be transferred or assigned

except to individuals, corporations, or associations qualified to acquire or

hold lands of the public domain in the Philippines" 24 is an expression of
public policy to conserve lands for the Filipinos. As this Court said
in Krivenko:
It is well to note at this juncture that in the present case we have
no choice. We are construing the Constitution as it is and not as
we may desire it to be. Perhaps the effect of our construction is to
preclude aliens admitted freely into the Philippines from owning
sites where they may build their homes. But if this is the solemn
mandate of the Constitution, we will not attempt to compromise it
even in the name of amity or equity . . . .
For all the foregoing, we hold that under the Constitution aliens
may not acquire private or public agricultural lands, including
residential lands, and, accordingly, judgment is affirmed, without
costs.25
That policy would be defeated and its continued violation sanctioned if,
instead of setting the contracts aside and ordering the restoration of the
land to the estate of the deceased Justina Santos, this Court should
apply the general rule of pari delicto. To the extent that our ruling in this
case conflicts with that laid down in Rellosa v. Gaw Chee Hun 26 and
subsequent similar cases, the latter must be considered as pro
tanto qualified.
The claim for increased rentals and attorney's fees, made in behalf of
Justina Santos, must be denied for lack of merit.
And what of the various amounts which Wong received in trust from her?
It appears that he kept two classes of accounts, one pertaining to amount
which she entrusted to him from time to time, and another pertaining to
rentals from the Ongpin property and from the Rizal Avenue property,
which he himself was leasing.
With respect to the first account, the evidence shows that he received
P33,724.27 on November 8, 1957 (Plff Exh. 16); P7,354.42 on December
1, 1957 (Plff Exh. 13); P10,000 on December 6, 1957 (Plff Exh. 14) ; and
P18,928.50 on August 26, 1959 (Def. Exh. 246), or a total of P70,007.19.
He claims, however, that he settled his accounts and that the last amount
of P18,928.50 was in fact payment to him of what in the liquidation was
found to be due to him.

He made disbursements from this account to discharge Justina Santos'

obligations for taxes, attorneys' fees, funeral services and security guard
services, but the checks (Def Exhs. 247-278) drawn by him for this
purpose amount to only P38,442.84. 27 Besides, if he had really settled his
accounts with her on August 26, 1959, we cannot understand why he still
had P22,000 in the bank and P3,000 in his possession, or a total of
P25,000. In his answer, he offered to pay this amount if the court so
directed him. On these two grounds, therefore, his claim of liquidation
and settlement of accounts must be rejected.
After subtracting P38,442.84 (expenditures) from P70,007.19 (receipts),
there is a difference of P31,564 which, added to the amount of P25,000,
leaves a balance of P56,564.3528 in favor of Justina Santos.
As to the second account, the evidence shows that the monthly income
from the Ongpin property until its sale in Rizal Avenue July, 1959 was
P1,000, and that from the Rizal Avenue property, of which Wong was the
lessee, was P3,120. Against this account the household expenses and
disbursements for the care of the 17 dogs and the salaries of the 8 maids
of Justina Santos were charged. This account is contained in a notebook
(Def. Exh. 6) which shows a balance of P9,210.49 in favor of Wong. But it
is claimed that the rental from both the Ongpin and Rizal Avenue
properties was more than enough to pay for her monthly expenses and
that, as a matter of fact, there should be a balance in her favor. The lower
court did not allow either party to recover against the other. Said the
court:
[T]he documents bear the earmarks of genuineness; the trouble
is that they were made only by Francisco Wong and Antonia
Matias, nick-named Toning, which was the way she signed the
loose sheets, and there is no clear proof that Doa Justina had
authorized these two to act for her in such liquidation; on the
contrary if the result of that was a deficit as alleged and sought to
be there shown, of P9,210.49, that was not what Doa Justina
apparently understood for as the Court understands her
statement to the Honorable Judge of the Juvenile Court . . . the
reason why she preferred to stay in her home was because there
she did not incur in any debts . . . this being the case, . . . the
Court will not adjudicate in favor of Wong Heng on his
counterclaim; on the other hand, while it is claimed that the
expenses were much less than the rentals and there in fact
should be a superavit, . . . this Court must concede that daily
expenses are not easy to compute, for this reason, the Court
faced with the choice of the two alternatives will choose the

middle course which after all is permitted by the rules of proof,

Sec. 69, Rule 123 for in the ordinary course of things, a person
will live within his income so that the conclusion of the Court will
be that there is neither deficit nor superavit and will let the matter
rest here.
Both parties on appeal reiterate their respective claims but we agree with
the lower court that both claims should be denied. Aside from the reasons
given by the court, we think that the claim of Justina Santos totalling
P37,235, as rentals due to her after deducting various expenses, should
be rejected as the evidence is none too clear about the amounts spent by
Wong for food29 masses30 and salaries of her maids.31 His claim for
P9,210.49 must likewise be rejected as his averment of liquidation is
belied by his own admission that even as late as 1960 he still had
P22,000 in the bank and P3,000 in his possession.
ACCORDINGLY, the contracts in question (Plff Exhs. 3-7) are annulled
and set aside; the land subject-matter of the contracts is ordered returned
to the estate of Justina Santos as represented by the Philippine Banking
Corporation; Wong Heng (as substituted by the defendant-appellant Lui
She) is ordered to pay the Philippine Banking Corporation the sum of
P56,564.35, with legal interest from the date of the filing of the amended
complaint; and the amounts consigned in court by Wong Heng shall be
applied to the payment of rental from November 15, 1959 until the
premises shall have been vacated by his heirs. Costs against the
defendant-appellant.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P.,
Zaldivar, Sanchez and Angeles, JJ., concur.

Separate Opinions

FERNANDO, J., concurring:

With the able and well-written opinion of Justice Castro, I am in full
agreement. The exposition of the facts leaves nothing to be desired and
the statement of the law is notable for its comprehensiveness and clarity.

This concurring opinion has been written solely to express what I

consider to be the unfortunate and deplorable consequences of applying
the pari delicto concept, as was, to my mind, indiscriminately done, to
alien landholding declared illegal under the Krivenko doctrine in some
past decisions.

impliedly sanctions by allowing the alien vendees to retain the lots in

question is either escheat or reversion. Thus: "By following either of these
remedies, or by approving an implementary law as above suggested, we
can enforce the fundamental policy of our Constitution regarding our
natural resources without doing violence to the principle of pari delicto."7

It is to be remembered that in Krivenko v. The Register of Deeds of

Manila,1 this
Court
over
strong
dissents
held
that residential and commercial lots may be considered agricultural within
the meaning of the constitutional provision prohibiting the transfer of any
private agricultural land to individuals, corporations or associations not
qualified to acquire or hold lands of the public domain in the Philippines
save in cases of hereditary succession.

Were the parties really in pari delicto? Had the sale by and between
Filipino-vendor and alien-vendee occurred after the decision in
the Krivenko case, then the above view would be correct that both
Filipino-vendor and alien-vendee could not be considered as innocent
parties within the contemplation of the law. Both of them should be held
equally guilty of evasion of the Constitution.

That provision of the Constitution took effect on November 15, 1935

when the Commonwealth Government was established. The
interpretation as set forth in the Krivenko decision was only handed down
on November 15, 1947. Prior to that date there were many who were of
the opinion that the phrase agricultural land should be construed strictly
and not be made to cover residential and commercial lots. Acting on that
belief, several transactions were entered into transferring such lots to
alien vendees by Filipino-vendors.
After the Krivenko decision, some Filipino vendors sought recovery of the
lots in question on the ground that the sales were null and void. No
definite ruling was made by this Court until September of 1953, when on
the 29th of said month, Rellosa v. Gaw Chee Hun,2 Bautista v. Uy
Isabelo,3 Talento v. Makiki,4 Caoile v. Chiao Peng5 were decided.
Of the four decisions in September, 1953, the most extensive discussion
of the question is found in Rellosa v. Gaw Chee Hun, the opinion being
penned by retired Justice Bautista Angelo with the concurrence only of
one Justice, Justice Labrador, also retired. Former Chief Justice Paras as
well as the former Justices Tuason and Montemayor concurred in the
result. The necessary sixth vote for a decision was given by the then
Justice Bengzon, who had a two-paragraph concurring opinion
disagreeing with the main opinion as to the force to be accorded to the
two cases,6 therein cited. There were two dissenting opinions by former
Justices Pablo and Alex Reyes. The doctrine as announced in
the Rellosa case is that while the sale by a Filipino-vendor to an alienvendee of a residential or a commercial lot is null and void as held in
the Krivenko case, still the Filipino-vendor has no right to recover under a
civil law doctrine, the parties being in pari delicto. The only remedy to
prevent this continuing violation of the Constitution which the decision

Since, however, the sales in question took place prior to

the Krivenko decision, at a time when the assumption could be honestly
entertained that there was no constitutional prohibition against the sale of
commercial or residential lots by Filipino-vendor to alien-vendee, in the
absence of a definite decision by the Supreme Court, it would not be
doing violence to reason to free them from the imputation of evading the
Constitution. For evidently evasion implies at the very least knowledge of
what is being evaded. The new Civil Code expressly provides: "Mistakes
upon a doubtful or difficult question of law may be the basis of good
faith."8
According to the Rellosa opinion, both parties are equally guilty of
evasion of the Constitution, based on the broader principle that "both
parties are presumed to know the law." This statement that the sales
entered into prior to the Krivenko decision were at that time already
vitiated by a guilty knowledge of the parties may be too extreme a view. It
appears to ignore a postulate of a constitutional system, wherein the
words of the Constitution acquire meaning through Supreme Court
adjudication.
1awphl.nt

Reference may be made by way of analogy to a decision adjudging a

statute void. Under the orthodox theory of constitutional law, the act
having been found unconstitutional was not a law, conferred no rights,
imposed no duty, afforded no protection. 9 As pointed out by former Chief
Justice Hughes though in Chicot County Drainage District v. Baxter State
Bank:10 "It is quite clear, however, that such broad statements as to the
effect of a determination of unconstitutionality must be taken with
qualifications. The actual existence of a statute, prior to such a
determination, is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of subsequent ruling as to invalidity may

have to be considered in various aspects, with respect to particular

relations, individual and corporate, and particular conduct, private and
official. Questions of rights claimed to have become vested, of status, of
prior determinations deemed to have finality and acted upon accordingly,
of public policy in the light of the nature both of the statute and of its
previous application, demand examination."
After the Krivenko decision, there is no doubt that continued possession
by alien-vendee of property acquired before its promulgation is violative
of the Constitution. It is as if an act granting aliens the right to acquire
residential and commercial lots were annulled by the Supreme Court as
contrary to the provision of the Constitution prohibiting aliens from
acquiring private agricultural land.
The question then as now, therefore, was and is how to divest the alien of
such property rights on terms equitable to both parties. That question
should be justly resolved in accordance with the mandates of the
Constitution not by a wholesale condemnation of both parties for entering
into a contract at a time when there was no ban as yet arising from
the Krivenko decision, which could not have been anticipated.
Unfortunately, under the Rellosa case, it was assumed that the parties,
being in pari delicto, would be left in the situation in which they were,
neither being in a position to seek judicial redress.
Would it not have been more in consonance with the Constitution, if
instead the decision compelled the restitution of the property by the alienvendee to the Filipino-vendor? Krivenko decision held in clear, explicit
and unambigous language that: "We are deciding the instant case under
section 5 of Article XIII of the Constitution which is more comprehensive
and more absolute in the sense that it prohibits the transfer to aliens of
any private agricultural land including residential land whatever its origin
might have been . . . . This prohibition [Rep. Act No. 133] makes no
distinction between private lands that are strictly agricultural and private
lands that are residential or commercial. The prohibition embraces the
sale of private lands of any kind in favor of aliens, which is again a clear
implementation and a legislative interpretation of the constitutional
prohibition. . . . It is well to note at this juncture that in the present case
we have no choice. We are construing the Constitution as it is and not as
we may desire it to be. Perhaps the effect of our construction is to
preclude aliens, admitted freely into the Philippines, from owning sites
where they may build their homes. But if this is the solemn mandate of
the Constitution, we will not attempt to compromise it even in the name of
amity or equity."11

Alien-vendee is therefore incapacitated or disqualified to acquire and hold

real estate. That incapacity and that disqualification should date from the
adoption of the Constitution on November 15, 1935. That incapacity and
that disqualification, however, was made known to Filipino-vendor and to
alien-vendee only upon the promulgation of the Krivenko decision on
November 15, 1947. Alien-vendee, therefore, cannot be allowed to
continue owning and exercising acts of ownership over said property,
when it is clearly included within the Constitutional prohibition. Alienvendee should thus be made to restore the property with its fruits and
rents to Filipino-vendor, its previous owner, if it could be shown that in the
utmost good faith, he transferred his title over the same to alien-vendee,
upon restitution of the purchase price of course.
The Constitution bars alien-vendees from owning the property in
question. By dismissing those suits, the lots remained in alien hands.
Notwithstanding the solution of escheat or reversion offered, they are still
at the moment of writing, for the most part in alien hands. There have
been after almost twenty years no proceedings for escheat or reversion.
Yet it is clear that an alien-vendee cannot consistently with the
constitutional provision, as interpreted in theKrivenko decision, continue
owning and exercising acts of ownership over the real estate in question.
It ought to follow then, if such a continuing violation of the fundamental
law is to be put an end to, that the Filipino-vendor, who in good faith
entered into, a contract with an incapacitated person, transferring
ownership of a piece of land after the Constitution went into full force and
effect, should, in the light of the ruling in the Krivenko case, be restored to
the possession and ownership thereof, where he has filed the appropriate
case or proceeding. Any other construction would defeat the ends and
purposes not only of this particular provision in question but the rest of
the Constitution itself.
The Constitution frowns upon the title remaining in the alien-vendees.
Restoration of the property upon payment of price received by Filipino
vendor or its reasonable equivalent as fixed by the court is the answer. To
give the constitutional provision full force and effect, in consonance with
the dictates of equity and justice, the restoration to Filipino-vendor upon
the payment of a price fixed by the court is the better remedy. He thought
he could transfer the property to an alien and did so. After
the Krivenko case had made clear that he had no right to sell nor an
alien-vendee to purchase the property in question, the obvious solution
would be for him to reacquire the same. That way the Constitution would
be given, as it ought to be given, respect and deference.

It may be said that it is too late at this stage to hope for such a solution,
the Rellosa opinion, although originally concurred in by only one justice,
being too firmly imbedded. The writer however sees a welcome sign in
the adoption by the Court in this case of the concurring opinion of the
then Justice, later Chief Justice, Bengzon. Had it been followed then, the
problem would not be still with us now. Fortunately, it is never too late
not even in constitutional adjudication.

G.R. No. L-34338 November 21, 1984

LOURDES
VALERIO
vs.
PEOPLE OF THE PHILIPPINES, respondent.
RELOVA, J.:

LIM, petitioner,

Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and
was sentenced "to suffer an imprisonment of four (4) months and one (1)
day as minimum to two (2) years and four (4) months as maximum, to
indemnify the offended party in the amount of P559.50, with subsidize
imprisonment in case of insolvency, and to pay the costs." (p. 14, Rollo)
From this judgment, appeal was taken to the then Court of Appeals which
affirmed the decision of the lower court but modified the penalty imposed
by sentencing her "to suffer an indeterminate penalty of one (1) month
and one (1) day of arresto mayor as minimum to one (1) year and one (1)
day of prision correccional as maximum, to indemnify the complainant in
the amount of P550.50 without subsidiary imprisonment, and to pay the
costs of suit." (p. 24, Rollo)

The question involved in this case is whether the receipt, Exhibit "A", is a
contract of agency to sell or a contract of sale of the subject tobacco
between petitioner and the complainant, Maria de Guzman Vda. de
Ayroso, thereby precluding criminal liability of petitioner for the crime
charged.

Medio mahirap ang maningil sa palengke ng Cabanatuan dahil

nagsisilipat ang mga suki ko ng puesto. Huwag kang mabahala at tiyak
na babayaran kita.
Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).
Ludy

The findings of facts of the appellate court are as follows:

... The appellant is a businesswoman. On January 10, 1966, the
appellant went to the house of Maria Ayroso and proposed to sell
Ayroso's tobacco. Ayroso agreed to the proposition of the appellant to sell
her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to
receive the overprice for which she could sell the tobacco. This
agreement was made in the presence of plaintiff's sister, Salud G.
Bantug. Salvador Bantug drew the document, Exh. A, dated January 10,
1966, which reads:
To Whom It May Concern:
This is to certify that I have received from Mrs. Maria de Guzman Vda. de
Ayroso. of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to
be sold at Pl.30 per kilo. The proceed in the amount of Seven Hundred
Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as
it was sold.

Pursuant to this letter, the appellant sent a money order for P100.00 on
October 24, 1967, Exh. 4, and another for P50.00 on March 8, 1967; and
she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2,
dated April 18, 1967, or a total of P240.00. As no further amount was
paid, the complainant filed a complaint against the appellant for estafa.
(pp. 14, 15, 16, Rollo)

This was signed by the appellant and witnessed by the complainant's

sister, Salud Bantug, and the latter's maid, Genoveva Ruiz. The appellant
at that time was bringing a jeep, and the tobacco was loaded in the jeep
and brought by the appellant. Of the total value of P799.50, the appellant
had paid to Ayroso only P240.00, and this was paid on three different
times. Demands for the payment of the balance of the value of the
tobacco were made upon the appellant by Ayroso, and particularly by her
sister, Salud Bantug. Salud Bantug further testified that she had gone to
the house of the appellant several times, but the appellant often eluded
her; and that the "camarin" the appellant was empty. Although the
appellant denied that demands for payment were made upon her, it is a
fact that on October 19, 1966, she wrote a letter to Salud Bantug which
reads as follows:
Dear Salud,
Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa
ang nasisingil kong pera, magintay ka hanggang dito sa linggo ito at tiak
na ako ay magdadala sa iyo. Gosto ko Salud ay makapagbigay man lang
ako ng marami para hindi masiadong kahiyahiya sa iyo. Ngayon kung
gosto mo ay kahit konte muna ay bibigyan kita. Pupunta lang kami ni
Mina sa Maynila ngayon. Salud kung talagang kailangan mo ay bukas ay
dadalhan kita ng pera.

In this petition for review by certiorari, Lourdes Valerio Lim poses the
following questions of law, to wit:
1. Whether or not the Honorable Court of Appeals was legally right in
holding that the foregoing document (Exhibit "A") "fixed a period" and "the
obligation was therefore, immediately demandable as soon as the
tobacco was sold" (Decision, p. 6) as against the theory of the petitioner
that the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended in which case
the only action that can be maintained is a petition to ask the court to fix
the duration thereof;
2. Whether or not the Honorable Court of Appeals was legally right in
holding that "Art. 1197 of the New Civil Code does not apply" as against
the alternative theory of the petitioner that the fore. going receipt (Exhibit
"A") gives rise to an obligation wherein the duration of the period
depends upon the will of the debtor in which case the only action that can
be maintained is a petition to ask the court to fix the duration of the
period; and
3. Whether or not the honorable Court of Appeals was legally right in
holding that the foregoing receipt is a contract of agency to sell as
against the theory of the petitioner that it is a contract of sale. (pp. 3-4,
Rollo)
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of
the tobacco should be turned over to the complainant as soon as the
same was sold, or, that the obligation was immediately demandable as
soon as the tobacco was disposed of. Hence, Article 1197 of the New
Civil Code, which provides that the courts may fix the duration of the
obligation if it does not fix a period, does not apply.
Anent the argument that petitioner was not an agent because Exhibit "A"
does not say that she would be paid the commission if the goods were
sold, the Court of Appeals correctly resolved the matter as follows:

... Aside from the fact that Maria Ayroso testified that the appellant asked
her to be her agent in selling Ayroso's tobacco, the appellant herself
admitted that there was an agreement that upon the sale of the tobacco
she would be given something. The appellant is a businesswoman, and it
is unbelievable that she would go to the extent of going to Ayroso's house
and take the tobacco with a jeep which she had brought if she did not
intend to make a profit out of the transaction. Certainly, if she was doing a
favor to Maria Ayroso and it was Ayroso who had requested her to sell
her tobacco, it would not have been the appellant who would have gone
to the house of Ayroso, but it would have been Ayroso who would have
gone to
the house of the appellant and deliver the tobacco to the appellant. (p.
19, Rollo)
The fact that appellant received the tobacco to be sold at P1.30 per kilo
and the proceeds to be given to complainant as soon as it was sold,
strongly negates transfer of ownership of the goods to the petitioner. The
agreement (Exhibit "A') constituted her as an agent with the obligation to
return the tobacco if the same was not sold.
ACCORDINGLY, the petition for review on certiorari is dismissed for
lack of merit. With costs.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr. and De la
Fuente, JJ., concur. .
G.R. No. L-22558

May 31, 1967

GREGORIO ARANETA, INC., petitioner,

vs.
THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO.,
LTD., respondent.
REYES, J.B.L., J.:
Petition for certiorari to review a judgment of the Court of Appeals, in its
CA-G.R. No. 28249-R, affirming with modification, an amendatory
decision of the Court of First Instance of Manila, in its Civil Case No.
36303, entitled "Philippine Sugar Estates Development Co., Ltd., plaintiff,
versus J. M. Tuason & Co., Inc. and Gregorio Araneta, Inc., defendants."
As found by the Court of Appeals, the facts of this case are:

J. M. Tuason & Co., Inc. is the owner of a big tract land situated in
Quezon City, otherwise known as the Sta. Mesa Heights Subdivision, and
covered by a Torrens title in its name. On July 28, 1950, through Gregorio
Araneta, Inc., it (Tuason & Co.) sold a portion thereof with an area of
43,034.4 square meters, more or less, for the sum of P430,514.00, to
Philippine Sugar Estates Development Co., Ltd. The parties stipulated,
among in the contract of purchase and sale with mortgage, that the buyer
will
Build on the said parcel land the Sto. Domingo Church and
Convent

dated May 31, 1960), upholding the defenses interposed by defendant

Gregorio Araneta, Inc.
1wph1.t

Plaintiff moved to reconsider and modify the above decision, praying that
the court fix a period within which defendants will comply with their
obligation to construct the streets in question.
Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that
plaintiff's complaint did not expressly or impliedly allege and pray for the
fixing of a period to comply with its obligation and that the evidence
presented at the trial was insufficient to warrant the fixing of such a
period.

while the seller for its part will

Construct streets on the NE and NW and SW sides of the land
herein sold so that the latter will be a block surrounded by streets
on all four sides; and the street on the NE side shall be named
"Sto. Domingo Avenue;"
The buyer, Philippine Sugar Estates Development Co., Ltd., finished the
construction of Sto. Domingo Church and Convent, but the seller,
Gregorio Araneta, Inc., which began constructing the streets, is unable to
finish the construction of the street in the Northeast side named (Sto.
Domingo Avenue) because a certain third-party, by the name of Manuel
Abundo, who has been physically occupying a middle part thereof,
refused to vacate the same; hence, on May 7, 1958, Philippine Sugar
Estates Development Co., Lt. filed its complaint against J. M. Tuason &
Co., Inc., and instance, seeking to compel the latter to comply with their
obligation, as stipulated in the above-mentioned deed of sale, and/or to
pay damages in the event they failed or refused to perform said
obligation.
Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc.
answered the complaint, the latter particularly setting up the principal
defense that the action was premature since its obligation to construct
the streets in question was without a definite period which needs to he
fixed first by the court in a proper suit for that purpose before a complaint
for specific performance will prosper.
The issues having been joined, the lower court proceeded with the trial,
and upon its termination, it dismissed plaintiff's complaint (in a decision

On July 16, 1960, the lower court, after finding that "the proven facts
precisely warrants the fixing of such a period," issued an order granting
plaintiff's motion for reconsideration and amending the dispositive portion
of the decision of May 31, 1960, to read as follows:
WHEREFORE, judgment is hereby rendered giving defendant
Gregorio Araneta, Inc., a period of two (2) years from notice
hereof, within which to comply with its obligation under the
contract, Annex "A".
Defendant Gregorio Araneta, Inc. presented a motion to reconsider the
above quoted order, which motion, plaintiff opposed.
On August 16, 1960, the lower court denied defendant Gregorio Araneta,
Inc's. motion; and the latter perfected its appeal Court of Appeals.
In said appellate court, defendant-appellant Gregorio Araneta, Inc.
contended mainly that the relief granted, i.e., fixing of a period, under the
amendatory decision of July 16, 1960, was not justified by the pleadings
and not supported by the facts submitted at the trial of the case in the
court below and that the relief granted in effect allowed a change of
theory after the submission of the case for decision.
Ruling on the above contention, the appellate court declared that the
fixing of a period was within the pleadings and that there was no true
change of theory after the submission of the case for decision since
defendant-appellant Gregorio Araneta, Inc. itself squarely placed said

issue by alleging in paragraph 7 of the affirmative defenses contained in

its answer which reads
7. Under the Deed of Sale with Mortgage of July 28, 1950, herein
defendant has a reasonable time within which to comply with its
obligations to construct and complete the streets on the NE, NW
and SW sides of the lot in question; that under the circumstances,
said reasonable time has not elapsed;
Disposing of the other issues raised by appellant which were ruled as not
meritorious and which are not decisive in the resolution of the legal
issues posed in the instant appeal before us, said appellate court
rendered its decision dated December 27, 1963, the dispositive part of
which reads
IN VIEW WHEREOF, judgment affirmed and modified; as a
consequence, defendant is given two (2) years from the date of
finality of this decision to comply with the obligation to construct
streets on the NE, NW and SW sides of the land sold to plaintiff
so that the same would be a block surrounded by streets on all
four sides.
Unsuccessful in having the above decision reconsidered, defendantappellant Gregorio Araneta, Inc. resorted to a petition for review
by certiorari to this Court. We gave it due course.
We agree with the petitioner that the decision of the Court of Appeals,
affirming that of the Court of First Instance is legally untenable. The fixing
of a period by the courts under Article 1197 of the Civil Code of the
Philippines is sought to be justified on the basis that petitioner (defendant
below) placed the absence of a period in issue by pleading in its answer
that the contract with respondent Philippine Sugar Estates Development
Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within
which to comply with its obligation to construct and complete the streets."
Neither of the courts below seems to have noticed that, on the hypothesis
stated, what the answer put in issue was not whether the court should fix
the time of performance, but whether or not the parties agreed that the
petitioner should have reasonable time to perform its part of the bargain.
If the contract so provided, then there was a period fixed, a "reasonable
time;" and all that the court should have done was to determine if that
reasonable time had already elapsed when suit was filed if it had passed,

then the court should declare that petitioner had breached the contract,
as averred in the complaint, and fix the resulting damages. On the other
hand, if the reasonable time had not yet elapsed, the court perforce was
bound to dismiss the action for being premature. But in no case can it be
logically held that under the plea above quoted, the intervention of the
court to fix the period for performance was warranted, for Article 1197 is
precisely predicated on the absence of any period fixed by the parties.
Even on the assumption that the court should have found that no
reasonable time or no period at all had been fixed (and the trial court's
amended decision nowhere declared any such fact) still, the complaint
not having sought that the Court should set a period, the court could not
proceed to do so unless the complaint in as first amended; for the original
decision is clear that the complaint proceeded on the theory that the
period for performance had already elapsed, that the contract had been
breached and defendant was already answerable in damages.
Granting, however, that it lay within the Court's power to fix the period of
performance, still the amended decision is defective in that no basis is
stated to support the conclusion that the period should be set at two
years after finality of the judgment. The list paragraph of Article 1197 is
clear that the period can not be set arbitrarily. The law expressly
prescribes that
the Court shall determine such period as may under the
circumstances been probably contemplated by the parties.
All that the trial court's amended decision (Rec. on Appeal, p. 124) says
in this respect is that "the proven facts precisely warrant the fixing of such
a period," a statement manifestly insufficient to explain how the two
period given to petitioner herein was arrived at.
It must be recalled that Article 1197 of the Civil Code involves a two-step
process. The Court must first determine that "the obligation does not fix a
period" (or that the period is made to depend upon the will of the debtor),"
but from the nature and the circumstances it can be inferred that a period
was intended" (Art. 1197, pars. 1 and 2). This preliminary point settled,
the Court must then proceed to the second step, and decide what period
was "probably contemplated by the parties" (Do., par. 3). So that,
ultimately, the Court can not fix a period merely because in its opinion it is
or should be reasonable, but must set the time that the parties are shown

to have intended. As the record stands, the trial Court appears to have
pulled the two-year period set in its decision out of thin air, since no
circumstances are mentioned to support it. Plainly, this is not warranted
by the Civil Code.
In this connection, it is to be borne in mind that the contract shows that
the parties were fully aware that the land described therein was occupied
by squatters, because the fact is expressly mentioned therein (Rec. on
Appeal, Petitioner's Appendix B, pp. 12-13). As the parties must have
known that they could not take the law into their own hands, but must
resort to legal processes in evicting the squatters, they must have
realized that the duration of the suits to be brought would not be under
their control nor could the same be determined in advance. The
conclusion is thus forced that the parties must have intended to defer the
performance of the obligations under the contract until the squatters were
duly evicted, as contended by the petitioner Gregorio Araneta, Inc.
The Court of Appeals objected to this conclusion that it would render the
date of performance indefinite. Yet, the circumstances admit no other
reasonable view; and this very indefiniteness is what explains why the
agreement did not specify any exact periods or dates of performance.
It follows that there is no justification in law for the setting the date of
performance at any other time than that of the eviction of the squatters
occupying the land in question; and in not so holding, both the trial Court
and the Court of Appeals committed reversible error. It is not denied that
the case against one of the squatters, Abundo, was still pending in the
Court of Appeals when its decision in this case was rendered.
In view of the foregoing, the decision appealed from is reversed, and the
time for the performance of the obligations of petitioner Gregorio Araneta,
Inc. is hereby fixed at the date that all the squatters on affected areas are
finally evicted therefrom.
Costs against respondent Philippine Sugar Estates Development, Co.,
Ltd. So ordered.
Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez
and Castro, JJ., concur.

G.R. No. L-55480 June 30, 1987

PACIFICA MILLARE, petitioner,
vs.
HON. HAROLD M. HERNANDO, In his capacity as Presiding Judge,
Court of Instance of Abra, Second Judicial District, Branch I,
ANTONIO CO and ELSA CO, respondents.

FELICIANO, J.:
On 17 June 1975, a five-year Contract of Lease

1 was executed between petitioner

Pacifica Millare as lessor and private respondent Elsa Co, married to Antonio Co, as lessee. Under the
written agreement, which was scheduled to expire on 31 May 1980, the lessor-petitioner agreed to rent
out to thelessee at a monthly rate of P350.00 the "People's Restaurant", a commercial establishment
located at the corner of McKinley and Pratt Streets in Bangued, Abra.

The present dispute arose from events which transpired during the
months of May and July in 1980. According to the Co spouses, sometime
during the last week of May 1980, the lessor informed them that they
could continue leasing the People's Restaurant so long as they were
amenable to paying creased rentals of P1,200.00 a month. In response,
a counteroffer of P700.00 a month was made by the Co spouses. At this
point, the lessor allegedly stated that the amount of monthly rentals could
be resolved at a later time since "the matter is simple among us", which
alleged remark was supposedly taken by the spouses Co to mean that
the Contract of Lease had been renewed, prompting them to continue
occupying the subject premises and to forego their search for a substitute
place to rent. 2 In contrast, the lessor flatly denied ever having considered,
much less offered, a renewal of the Contract of Lease.

The variance in versions notwithstanding, the record shows that on 22

July 1980, Mrs. Millare wrote the Co spouses requesting them to vacate
the leased premises as she had no intention of renewing the Contract of
Lease which had, in the meantime, already expirecl. 3 In reply, the Co
spouses reiterated their unwillingness to pay the Pl,200.00 monthly rentals
supposedly sought bv Mrs. Millare which they considered "highly excessive,
oppressive and contrary to existing laws". They also signified their intention
to deposit the amount of rentals in court, in view of Mrs. Millare's refusal to
accept their counter-offer. 4 Another letter of demand from Mrs. Millare was
received on 28 July 1980 by the Co spouses, who responded by depositing
the rentals for June and July (at 700.00 a month) in court.
On 30 August 1980, a Saturday, the Co spouses jumped the gun, as it
were, and filed a Complaint 5 (docketed as Civil Case No. 1434) with the
then Court of First Instance of Abra against Mrs. Millare and seeking
judgment (a) ordering the renewal of the Contract of Lease at a rental rate of
P700.00 a nionth and for a period of ten years, (b) ordering the defendant to
collect the sum of P1,400.00 deposited by plaintiffs with the court, and (c)
ordering the defendant to pay damages in the amount of P50,000.00. The
following Monday, on 1 September 1980, Mrs. Millare filed an ejectment case
against the Co spouses in the Municipal Court of Bangued, Abra, docketed
as Civil Case No. 661. The spouses Co, defendants therein, sut)sequently
set up lis pendens as a Civil Case No. 661. The spouses Co, defendants
therein, subsequently set up lis pendens as a defense against the complaint
for ejectment.
Mrs. Millare, defendant in Civil Case No. 1434, countered with an
Omnibus Motion to Dismiss 6 rounded on (a) lack of cause of action due to
plaintiffs' failure to establish a valid renewal of the Contract of Lease, and (b)
lack of jurisdiction by the trial court over the complaint for failure of plaintiffs
to secure a certification from the Lupong Tagapayapa of the barangay
wherein both disputants reside attesting that no amicable settlement between
them had been reached despite efforts to arrive at one, as required by
Section 6 of Presidential Decree No. 1508. The Co spouses opposed the
motion to dismiss. 7
In an Order dated 15 October 1980, respondent judge denied the motion
to dismiss and ordered the renewal of the Contract of Lease.
Furthermore plaintiffs were allowed to deposit all accruing monthly rentals
in court, while defendant Millare was directed to submit her answer to the
complaint. 8 A motion for reconsideration 9 was subsequently filed which,
however, was likewise denied. 10 Hence, on 13 November 1980, Mrs. Millare filed the

instant Petition for Certiorari, Prohibition and Mandamus, seeking injunctive relief from the
abovementioned orders. This Court issued a temporary restraining order on 21 November 1980
enjoining respondent, judge from conducting further proceedings in Civil Case No.
1434. 11 Apparently, before the temporary restraining order could be served on the respondent judge,
he rendered a "Judgment by Default" dated 26 November 1980 ordering the renewal of the lease
contract for a term of 5 years counted from the expiration date of the original lease contract, and fixing
monthly rentals thereunder at P700.00 a month, payable in arrears. On18 March 1981, this Court gave
due course to the Petition for Certiorari, Prohibition and Mandamus. 12

13. This contract of lease is subject to the laws and

regulations ofthe goverrunent; and that this contract of
lease may be renewed after a period of five (5) years
under the terms and conditions as will be mutually agreed
upon by the parties at the time of renewal; ... (Emphasis
supplied.)

Two issues are presented for resolution: (1) whether or not the trial court
acquired jurisdiction over Civil Case No. 1434; and (2) whether or not
private respondents have a valid cause of action against petitioner.

The respondent judge, in his Answer and Comment to the Petition, urges
that under paragraph 13 quoted above.

Turning to the first issue, petitioner's attack on the jurisdiction of the trial
court must fail, though for reasons different from those cited by the
respondent judge. 13 We would note firstly that the conciliation procedure required under P.D.
1508 is not a jurisdictional requirement in the sense that failure to have prior recourse to such
procedure would not deprive a court of its jurisdiction either over the subject matter or over the person
of the defendant.14 Secondly, the acord shows that two complaints were submitted to the barangay
authorities for conciliation one by petitioner for ejectment and the other by private respondents for
renewal of the Contract of Lease. It appears further that both complaints were, in fact, heard by
the Lupong Tagapayapa in the afternoon of 30 August 1980. After attempts at conciliation had proven
fruitless, Certifications to File Action authorizing the parties to pursue their respective claims in court
were then issued at 5:20 p.m. of that same aftemoon, as attested to by the Barangay Captain in a
Certification presented in evidence by petitioner herself. 15

Petitioner would, nonetheless, assail the proceedings in the trial court on

a technicaety, i.e., private respondents allegedly filed their complaint at
4:00 p.m. of 30 August 1980, or one hour and twenty minutes before the
issuance of the requisite certification by the Lupng Tagapayapa. The
defect in procedure admittedly initially present at that particular moment
when private respondents first filed the complaint in the trial court, was
cured by the subsequent issuance of the Certifications to File Action by
the barangay Lupong Tagapayapa Such certifications in any event
constituted substantial comphance with the requirement of P.D. 1508.
We turn to the second issue, that is, whether or not the complaint in Civil
Case No. 1434 filed by the respondent Co spouses claiming renewal of
the contract of lease stated a valid cause of action. Paragraph 13 of the
Contract of Lease reads as follows:

there was already a consummated and finished mutual

agreement of the parties to renew the contract of lease
after five years; what is only left unsettled between the
parties to the contract of lease is the amount of the
monthly rental; the lessor insists Pl,200 a month, while
the lessee is begging P700 a month which doubled the
P350 monthly rental under the original contract .... In
short, the lease contract has never expired because
paragraph 13 thereof had expressly mandated that it is
renewable. ... 16
In the "Judgment by Default" he rendered, the respondent Judge
elaborated his views obviously highly emotional in character in the
following extraordinary tatements:
However, it is now the negative posture of the defendantlessor to block, reject and refuse to renew said lease
contract. It is the defendant-lessor's assertion and
position that she can at the mere click of her fingers, just
throw-out the plaintiffs-lessees from the leased premises
and any time after the original term of the lease contract
had already expired; This negative position of the
defendantlessor, to the mind of this Court does not
conform to the principles and correct application of the
philosophy underlying the law of lease; for indeed, the law
of lease is impressed with public interest, social justice
and equity; reason for which, this Court cannot sanction
lot owner's business and commercial speculations by
allowing them with "unbridled discretion" to raise rentals
even to the extent of "extraordinary gargantuan
proportions, and calculated to unreasonably and unjustly

eject the helpless lessee because he cannot afford said

inflated monthly rental and thereby said lessee is placed
without any alternative, except to surrender and vacate
the premises mediately,-" Many business establishments
would be closed and the public would directly suffer the
direct consequences; Nonetheless, this is not the correct
concept or perspective the law of lease, that is, to place
the lessee always at the mercy of the lessor's "Merchant
of Venice" and to agit the latter's personal whims and
caprices; the defendant-lessor's hostile attitude by
imposing upon the lessee herein an "unreasonable and
extraordinary gargantuan monthly rental of P1,200.00", to
the mind of this Court, is "fly-by night unjust
enrichment" at the expense of said lessees; but, no Man
should unjustly enrich himself at the expense of another;
under these facts and circumstances surrounding this
case, the action therefore to renew the lease contract! is
"tenable" because it falls squarely within the coverage
and command of Articles 1197 and 1670 of the New Civil
Code, to wit:
xxx xxx xxx
The term "to be renewed" as expressly stipulated by the
herein parties in the original contract of lease means that
the lease may be renewed for another term of five (5)
years; its equivalent to a promise made by the lessor to
the lessee, and as a unilateral stipulation, obliges the
lessor to fulfill her promise; of course the lessor is free to
comply and honor her commitment or back-out from her
promise to renew the lease contract; but, once expressly
stipulated, the lessor shall not be allowed to evade or
violate the obligation to renew the lease because,
certainly, the lessor may be held hable for damages
caused to the lessee as a consequence of the
unjustifiable termination of the lease or renewal of the
same; In other words, the lessor is guilty of breach of
contract: Since the original lease was fixed for five (5)
years, it follows, therefore, that the lease contract is
renewable for another five (5) years and the lessee is not
required before hand to give express notice of this fact to

the lessor because it was expressly stipulated in the

original lease contract to be renewed; Wherefore, the
bare refusal of the lessor to renew the lease contract
unless the monthly rental is P1,200.00 is contrary to law,
morals, good customs, public policy, justice and equity
because no one should unjustly enrich herself at the
expense of another. Article 1197 and 1670 of the New
Civil Code must therefore govern the case at bar and
whereby this Court is authorized to fix the period thereof
by ordering the renewal of the lease contract to another
fixed term of five (5) years. 17
Clearly, the respondent judge's grasp of both the law and the Enghsh
language is tenuous at best. We are otherwise unable to comprehend
how he arrived at the reading set forth above. Paragraph 13 of the
Contract of Lease can only mean that the lessor and lessee may agree to
renew the contract upon their reaching agreement on the terms and
conditions to be embodied in such renewal contract. Failure to reach
agreement on the terms and conditions of the renewal contract will of
course prevent the contract from being renewed at all. In the instant
case, the lessor and the lessee conspicuously failed to reach agreement
both on the amount of the rental to be payable during the renewal term,
and on the term of the renewed contract.
The respondent judge cited Articles 1197 and 1670 of the Civil Code to
sustain the "Judgment by Default" by which he ordered the renewal of the
lease for another term of five years and fixed monthly rentals thereunder
at P700.00 a month. Article 1197 of the Civil Code provides as follows:
If the obligation does not fix a period, but from its nature
and the circumstances it can be inferred that a period was
intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it
depends upon the will of the debtor.
In every case, the courts shall determine such period as
may, under the circumstances, have been probably
contemplated by the parties. Once fixed by the courts, the
period cannot be changed by them. (Emphasis supplied.)

The first paragraph of Article 1197 is clearly inapplicable, since the

Contract of Lease did in fact fix an original period of five years, which had
expired. It is also clear from paragraph 13 of the Contract of Lease that
the parties reserved to themselves the faculty of agreeing upon the
period of the renewal contract. The second paragraph of Article 1197 is
equally clearly inapplicable since the duration of the renewal period was
not left to the wiu of the lessee alone, but rather to the will of both the
lessor and the lessee. Most importantly, Article 1197 applies only where a
contract of lease clearly exists. Here, the contract was not renewed at all,
there was in fact no contract at all the period of which could have been
fixed.

not obtain here, courts have no authority to prescribe the terms and
conditions of a contract for the parties. As pointed out by Mr. Justice
J.B.L. Reyes in Republic vs. Philippine Long Distance Telephone,Co., 18
[P]arties cannot be coerced to enter into a contract where
no agreement is had between them as to the principal
terms and conditions of the contract. Freedom to stipulate
such terms and conditions is of the essence of our
contractual system, and by express provision of the
statute, a contract may be annulled if tainted by violence,
intimidation or undue influence (Article 1306, 1336, 1337,
Civil Code of the Philippines).

Article 1670 of the Civil Code reads thus:

If at the end of the contract the lessee should continue
enjoying the thing left for 15 days with the acquiescence
of the lessor and unless a notice to the contrary by either
party has previously been given. It is understood that
there is an implied new lease, not for the period of the
original contract but for the time established in Articles
1682 and 1687. The ther terms of the original contract
shall be revived. (Emphasis suplied.)
The respondents themselves, public and private, do not pretend that the
continued occupancy of the leased premises after 31 May 1980, the date
of expiration of the contract, was with the acquiescence of the lessor.
Even if it be assumed that tacite reconduccion had occurred, the implied
new lease could not possibly have a period of five years, but rather would
have been a month-to-month lease since the rentals (under the original
contract) were payable on a monthly basis. At the latest, an implied new
lease (had one arisen) would have expired as of the end of July 1980 in
view of the written demands served by the petitioner upon the private
respondents to vacate the previously leased premises.

Contractual terms and conditions created by a court for two parties are a
contradiction in terms. If they are imposed by a judge who draws upon
his own private notions of what morals, good customs, justice, equity and
public policy" demand, the resulting "agreement" cannot, by definition, be
consensual or contractual in nature. It would also follow that such
coerced terms and conditions cannot be the law as between the parties
themselves. Contracts spring from the volition of the parties. That volition
cannot be supplied by a judge and a judge who pretends to do so, acts
tyrannically, arbitrarily and in excess of his jurisdiction. 19
WHEREFORE, the Petition for Certiorari, Prohibition and mandamus is
granted. The Orders of the respondent judge in Civil Case No. 1434
dated 26 September 1980 (denying petitioner's motion to dismiss) and 4
November 1980 (denying petitioner's motion for reconsideration), and the
"Judgment by Default" rendered by the respondent judge dated 26
November 1980, are hereby annulled and set aside and Civil Case No.
1434 is hereby dismissed. The temporary restraining order dated 21
November 1980 issued by this ourt, is hereby made permanent. No
pronouncement as to costs.
SO ORDERED.

It follows that the respondent judge's decision requiring renewal of the

lease has no basis in law or in fact. Save in the limited and exceptional
situations envisaged inArticles ll97 and 1670 of the Civil Code, which do