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Different Kinds of Obligations - With a Period

Different Kinds of Obligations - With a Period



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Published by: Sui on Aug 10, 2008
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Facts:March 9,1936, PNB executed a contract to sell the properties to the plaintiff Jose Poncede Leon for the total of P26,300, payable in: P2,630 upon execution of the deed, and thebalance in ten annual amortizations due a year after the execution.1944, Japanese occupation, de Leon borrowed P216k in Jap military notes from Syjuco,promising to pay within one year from May 5,1948 in Phil. Tender, mortgaging the land DeLeon agreed to buy from the bank.May 6,1944 De Leon paid the bank the balance amounting to P23,670 in Jap militarynotes and, on the same date, the Bank executed a deed of absolute sale to him.`Latter part of 1944, the Americans had landed in the Phils., De Leon tendered payment of the principal and interest upto the date of maturity. The creditor refused to accept thepayment, so De Leon deposited the entire amount with the clerk of court. And after liberation he brought action against the creditor to compel him to accept the amount.Issues:WON the lower court erred in not giving validity to the consignation made by the plaintiff of the principal and interest of his 2 promissory notes? NoIn order for the consignation to be effective, one must follow requirements prescribed bylaw. The debtor must show that there was a debt due; that the consignation was becausethe creditor refused to accept payment, or incapacitated to do so, or several personsclaimed the payment(art.1176); that previous notice of consignation was given to theperson interested in the performance of the obligation(art. 1177); that the payment wasplaced at the disposal of the court, and that after the consignation, the person interested isnotified(art.1178).In this case, the payment of the debt that was refused existed and the filing of thecomplaint was considered sufficient notice, BUT the failure of the 2 other elementsrendered the consignation incapacitated.Even if it may be argued that the creditor has nothing to lose but everything to gain by theacceleration of payment of the obligation because the debtor has offered to pay all theinterests up to the date it will become due, but this argument loses force if we consider that the payment of interests is not the only reason why a creditor cannot be forced toaccept payment contrary to the stipulation. There are other reasons why this cannot bedone. One is that the creditor may want to keep his money invested than in his hands, or by fixing a period protects himself against sudden decline in the purchasing power of thecurrency loaned especially in fluctuating times.WON the lower court in reducing the principal and interest of said promissory notes totheir just proportions using as a pattern the Ballantyne schedule in affecting the reduction.YESThe terms are clear in this case because the plaintiff agreed not only not to pay theobligation within one year from May 5,1948, but also to pay peso for peso in the coin or currency of the government that at the time of payment it is the legal tender for public andprivate debts. This stipulation is permitted by law, and nothing is immoral or improper about it. It is not oppressive because it appears that the plaintiff used a great portion of hismoney to pay his obligations during the Jap occupation as shown by his settling hisaccount with PNB and other accounts of P100k. Therefore, the plaintiff has no other alternative than to pay the defendant his obligations peso for peso(present currency) asstipulated in the promissory notes. The decision of TC should be modified.WON the lower court in disregarding the defense of moratorium set up by the plaintiff against counterclaim of defendant Syjuco. YESThe defense was right because EO 25 is amended by EO 32 which suspended paymentof all obligations contracted before March 10,1945. Even if these have been modified by
RA 342 in th sense of limiting the ban on obligations contracted before the war tocreditors who have filed claims for reparation s with the Philippine War DamageCommission, leaving them open to obligations contracted during the Jap occupation. Asthe obligation in question has been contracted during the enemy occupation the same isstill covered by the moratorium orders.WON the lower court erred in not passing on the question of priority between themortgage claim of defendant Syjuco and that of the PNB on the same set of properties onthe ground that they are situated in the province different from that in which this action wasbrought. YESThe mortgage executed in favor of Syjuco is prior in point of time and in point of registration to that executed in favor of PNB, let alone the fact that when the later mortgage was executed. The bank must have known, as it was their ncuty to find out, thatthere was a warning in the reconstituted titles, that it were subject to whatever encumbrance may exist, which does not appear in the titles. The bank should have takenthe necessary precaution to inquire into the existence of any hidden transaction or encumbrance that might affect the property held in security. When the bank accepted thetitles as security offered by the plaintiff, it assumed the risk and the consequencesresulting.We declare that the mortgage claim of the defendant is entitled priority over that of PNB.DecisionThe judgment should be modified, ordering the plaintiff to pay Syjuco the sum of P216k,phil. Currency, value of the 2 promissory notes, with interest at the rate of 6% per annumfrom May 6,1949, until fully paid. All to be paid within 90 days from this final judgment. Themortgaged properties should be publicly auctioned , the proceeds applied to the paymentsof this judgment in accordance with law. Costs against the plaintiff.
Petitioner: Anita C. BuceRespondents:Court of Appeals, Sps. Bernardo & Araceli Tiongco, Sps. Dionisio &Lucila Tiongco and Jose Tiongco
Buce leased respondents’ 56-sq.meter land in Pandacan, Manila. Contract was for 15 yrs (from Jun 1, 1979 – June 1, 1994) subject to renewal for another 10yrs. under the same terms & conditions.
Buce constructed a building & paid required monthly rental of P200.
Respondents gradually increased rent reaching P400 in 1985. In July & Aug., 1991,Buce paid P1,000.00 as monthly rent.
Dec. 6, 1991: Respondents’ counsel wrote Buce informing her that effective Jan.1992 rent will be P1,576.58 as per the Rent Control Law. However, Buce continuedissuing checks for only P400 as monthly rental. Respondents refused to accept thesechecks.
Aug. 9, 1993: Buce filed complaint for specific performance w/prayer for consignation. She prayed that respondents be ordered to accept her payments & for them to respect the contract w/c was renewable for another 10 years at the rate of P200/month.
Respondents’ contentions:1.Buce already paid P1,000 monthly rent in July & Aug. 1991.2.RA 877 (Rent Control Law): rental payments should already beP1,576.58/month, thus their refusal to accept Buce’s checks were justified.3.Subject to renewal clause did not mean automatic renewal. There must be amutual agreement between the parties.
Respondents’ counsel wrote Buce reminding her that the contract has expired &demanding payment of rentals in arrears amounting to P33,000.00.
RTC:1.lease contract was automatically renewed as proven by the stipulations in thecontract allowing Buce to construct a building & by Buce’s filing of the complaintalmost one year before the expiration of the initial term of 15yrs.2.P400 monthly rent from June 1, 1990-June 1, 1994; P1,000.00 from June 1,1994-June 1, 1999 and P1,500.00 for the rest of the period from June 1, 2000-June 1, 2004. Continuous increase caused an inevitable novation of thecontract.
CA: MFR denied. Ordered Buce to vacate premises.1.Renewal clause unclear as to who may exercise the option.2.Construction of building & other improvements & fact of filing of complaint arenot proof of automatic renewal.3.Fernandez v. CA: w/o stipulation that option to renew the lease is solely for thebenefit of one party, renewal must be upon the agreement of all parties. Andsince respondents were not agreeable to an extension, lease ended on June 1,1994.4.Refusal to accept checks was justified. In paying P1,000 rent in July & Aug.1991, Buce was estopped from claiming that monthly rental is otherwise.
Issues & Ratio:1.WON the renewal of the lease contract was automatic. – NO.
Generally, the literal meaning of the stipulations shall control. But if it’s ambiguous,consider the true intention of the parties w/c can be determined from their subsequent/contemporaneous actions.
Stipulation in this case is unclear on whether renewal was automatic or merely anoption and who may exercise such or for whose benefit it was stipulated.
Renewal vs. Extension:a.Renewal: connotes death of the old contract & emergence of a new one.Creates an obligation to execute a new lease contract for the additional term.b.Extension: operates of its own force to create an additional term.
Nothing in the stipulations in the contract & the parties’ actuation shows that theyintended to automatically renew/extend the term of the contract. Improvements onthe property, filing of the complaint a year before the expiration of the originalcontract, and the respondents’ acceptance of the increased rentals are not indicativeof the intention of the parties regarding renewal.
Although the factual scenario in Fernandez v. CA was different, such may still beapplied: In a reciprocal contract like a lease, period must be deemed to have beenagreed upon for the benefit of 
both parties,
absent language showing that the termwas deliberately set for the benefit of only one party. Very specific language isnecessary to show an intent to grant a unilateral faculty to extend/renew a contract.
Fernandez v. CA & CC Art. 1196: when it’s not indicated in the contract as to whomay exercise the option to renew & as to who will benefit from such, it’s deemed tobe for the benefit of both parties. Thus, renewal may only take place upon the mutualagreement of the parties. Since respondents were not amenable to a renewal, theycan’t be compelled to execute a new contract when the old contract expired. Suchdecision can’t depend exclusively on free & uncontrolled choice of lessee.
2.WON ejectment was proper. – NO.
After contract expired w/o agreement for renewal, Buce became subject to ejectment.However, respondents didn’t include a prayer for the restoration of possession intheir complaint nor did they file an unlawful detainer suit. Ejectment was not an issueagreed upon by the parties, either since they limited the issue to the correctinterpretation of the contract. Nor was it raised on appeal. Thus, CA went beyond itsauthority in this aspect.
Petition partly granted. CA ruling w/c ordered Buce to vacate premises reversedw/o prejudice to filing of proper action.
J. M. Tuason & Co., Inc., owner of the Sta. Mesa Heights Subd., sold a portionthereof through Gregorio Araneta, Inc. (GAI), for the sum of P430,514, to Phil. Sugar Estates Dev’t Co., Ltd (PSEDC).
There stipulated in their contract of purchase & sale w/ mortgage:
that the buyer will build on the parcel of land the Sto Domingo church &convent; while
the seller for its part will construct streets on the NE & NW & SW sides of theland herein sold so that the latter will be a block surrounded by streets on all 4sides; & the street on the NE side shall be named Sto. Domingo Ave.
PSEDC finished the construction of the church & convent, but GAI, w/c beganconstructing the streets, is unable to finish the construction of the street in the NEside because a certain third party who has been physically occupying a middle partthereof, refused to vacate the same
Hence, PSEDC filed its complaint against J. M. Tuason & Co., Inc., & GAI in theCFI, seeking to compel the latter to comply w/ their obligation &/or to pay damagesin the event they failed or refused to perform said obligation.
Both defendants answered the complaint. GAI’s principal defense was that theaction was premature since its obligation to construct the streets in question wasw/o a definite period w/c needs to be fixed 1st by the court in a proper suit for thatpurpose before a complaint for specific performance will prosper.
Issues having been joined in trial, CFI (May 31, ’60) dismissed plaintiff's complaint,upholding defenses interposed by GAI
Plaintiff moved to reconsider & modify above decision, praying that court fix periodw/in w/c defendants will comply w/ their obligat’n
GAI opposed said motion. But CFI granted plaintiff's MFR & amending thedispositive portion of the decision of May 31, ‘60, 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"
GAI filed MFR but CFI denied. GAI appealed to the CA, contending that the relief granted, i.e., fixing of a period, was not justified by the pleadings & not supported bythe facts submitted at the trial of the case in court below & that the relief granted ineffect allowed a change of theory after the submission of the case for decision
CA upheld the CFI decision. Hence this petition for review by certiorari to the SC
WON CFI may fix a period in the same pleading by PSEDC
NO. When GAI pleaded in its answer that the contract w/ PSEDC gave GAI"reasonable time w/in w/c to comply with its obligation to construct & complete thestreets", what the answer put in issue was not whether the court should fix the timeof performance, but WON the parties agreed that the petitioner should havereasonable time to perform its part of the bargain.
If the contract so provided, then there was a period fixed, a "reasonable time"; & allthat the court should have done was to determine if that reasonable time hadalready elapsed when suit was filed. If it had passed, then the court should declarethat petitioner had breached the contract, as averred in the complaint, & fix theresulting 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 nocase can it be logically held that under the plea above quoted, court intervention tofix the period for performance was warranted, for Art. 1197 is precisely predicated onthe absence of any period fixed by the parties
Granting that the court should’ve found that no reasonable time/no period at all hadbeen fixed, still the complaint not having sought that the Court should set a period,the court couldn’t proceed to do so unless the complaint was first amended; for theorig. decision is clear that the complaint proceeded on the theory that the period for performance had elapsed already, that the contract had been breached & defendantwas already answerable in damages.
Granting further 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 theconclusion that the period should be set at 2 yrs after finality of the judgment. Art.1197 is clear that the period can not be set arbitrarily.
All that TC's amended decision says in this respect is that "the proven factsprecisely warrant the fixing of such a period", a statement manifestly insufficient toexplain how the 2 year period given to petitioner herein was arrived at.
Art. 1197, CC involves a 2-step process.
Court must 1st determine that "the obligation does not fix a period" (or that theperiod is made to depend upon the will of the debtor), "but from the nature & thecircumstances it can be inferred that a period was intended" (Art. 1197, pars.1&2)
Secondly, it must decide what period was "probably contemplated by theparties"
Ultimately, the Court can not fix a period merely because in its opinion it is or shouldbe reasonable, but must set the time that the parties are shown to have intended.
In this connection, contract shows that the parties were fully aware that the landdescribed therein was occupied by squatters, because the fact is expresslymentioned therein. As the parties must have known that they could not take the lawinto 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 beunder their control nor could the same be determined in advance. The parties musthave thus intended to defer the performance of the obligations under the contractuntil the squatters were duly evicted, as contended by the GAI
CA objected that it would render the date of performance indefinite. Yet, thecircumstances admit no other reasonable view; & this very indefiniteness is whatexplains why the agreement did not specify any exact periods or dates of performance.
Reversed; Time for the performance is fixed at the date that all the squatters onaffected areas are finally evicted therefrom.
CPU vs. CA
Iloilo, in 1939, Don Ramon Lopez by a deed of donation donated Lot No. 3174-B-1 of the subdivision plan Psd-1144, then a portion of Lot No. 3174-B, for which Transfer Certificate of Title No. T-3910A to CPU.
The deed of donation came with 3 annotations on the land:

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