LACHICA vs. ARANETA [1949] PONCE DE LEON vs.

SYJUCO [1951]
Facts:
March 9,1936, PNB executed a contract to sell the properties to the plaintiff Jose Ponce
de Leon for the total of P26,300, payable in: P2,630 upon execution of the deed, and the
balance 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 De
Leon agreed to buy from the bank.
May 6,1944 De Leon paid the bank the balance amounting to P23,670 in Jap military
notes 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 the
payment, 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? No
In order for the consignation to be effective, one must follow requirements prescribed by
law. The debtor must show that there was a debt due; that the consignation was because
the creditor refused to accept payment, or incapacitated to do so, or several persons
claimed the payment(art.1176); that previous notice of consignation was given to the
person interested in the performance of the obligation(art. 1177); that the payment was
placed at the disposal of the court, and that after the consignation, the person interested is
notified(art.1178).
In this case, the payment of the debt that was refused existed and the filing of the
complaint was considered sufficient notice, BUT the failure of the 2 other elements
rendered the consignation incapacitated.
Even if it may be argued that the creditor has nothing to lose but everything to gain by the
acceleration of payment of the obligation because the debtor has offered to pay all the
interests 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 to
accept payment contrary to the stipulation. There are other reasons why this cannot be
done. 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 the
currency loaned especially in fluctuating times.

WON the lower court in reducing the principal and interest of said promissory notes to
their just proportions using as a pattern the Ballantyne schedule in affecting the reduction.
YES
The terms are clear in this case because the plaintiff agreed not only not to pay the
obligation 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 and
private 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 his
money to pay his obligations during the Jap occupation as shown by his settling his
account 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) as
stipulated 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. YES
The defense was right because EO 25 is amended by EO 32 which suspended payment
of 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 to
creditors who have filed claims for reparation s with the Philippine War Damage
Commission, leaving them open to obligations contracted during the Jap occupation. As
the obligation in question has been contracted during the enemy occupation the same is
still covered by the moratorium orders.
WON the lower court erred in not passing on the question of priority between the
mortgage claim of defendant Syjuco and that of the PNB on the same set of properties on
the ground that they are situated in the province different from that in which this action was
brought. YES
The 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, that
there 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 taken
the 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 the
titles as security offered by the plaintiff, it assumed the risk and the consequences
resulting.
We declare that the mortgage claim of the defendant is entitled priority over that of PNB.
Decision
The 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 annum
from May 6,1949, until fully paid. All to be paid within 90 days from this final judgment. The
mortgaged properties should be publicly auctioned , the proceeds applied to the payments
of this judgment in accordance with law. Costs against the plaintiff.
BUCE vs. COURT OF APPEALS [2000]
Petitioner: Anita C. Buce
Respondents: Court of Appeals, Sps. Bernardo & Araceli Tiongco, Sps. Dionisio &
Lucila Tiongco and Jose Tiongco
Facts:
 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 continued
issuing checks for only P400 as monthly rental. Respondents refused to accept these
checks.
 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 be
P1,576.58/month, thus their refusal to accept Buce’s checks were justified.
3. Subject to renewal clause did not mean automatic renewal. There must be a
mutual 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 the
contract allowing Buce to construct a building & by Buce’s filing of the complaint
almost 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 the
contract.
 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 are
not proof of automatic renewal.
3. Fernandez v. CA: w/o stipulation that option to renew the lease is solely for the
benefit of one party, renewal must be upon the agreement of all parties. And
since 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 an
option 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 they
intended to automatically renew/extend the term of the contract. Improvements on
the property, filing of the complaint a year before the expiration of the original
contract, and the respondents’ acceptance of the increased rentals are not indicative
of the intention of the parties regarding renewal.
 Although the factual scenario in Fernandez v. CA was different, such may still be
applied: In a reciprocal contract like a lease, period must be deemed to have been
agreed upon for the benefit of both parties, absent language showing that the term
was deliberately set for the benefit of only one party. Very specific language is
necessary 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 who
may exercise the option to renew & as to who will benefit from such, it’s deemed to
be for the benefit of both parties. Thus, renewal may only take place upon the mutual
agreement of the parties. Since respondents were not amenable to a renewal, they
can’t be compelled to execute a new contract when the old contract expired. Such
decision 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 in
their complaint nor did they file an unlawful detainer suit. Ejectment was not an issue
agreed upon by the parties, either since they limited the issue to the correct
interpretation of the contract. Nor was it raised on appeal. Thus, CA went beyond its
authority in this aspect.
Holding: Petition partly granted. CA ruling w/c ordered Buce to vacate premises reversed
w/o prejudice to filing of proper action.
ARANETA vs. PHILIPPINE SUGAR ESTATE DEVELOPMENT [1967]
 J. M. Tuason & Co., Inc., owner of the Sta. Mesa Heights Subd., sold a portion
thereof 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:
o that the buyer will build on the parcel of land the Sto Domingo church &
convent; while
o the seller for its part will construct streets on the NE & NW & SW sides of the
land herein sold so that the latter will be a block surrounded by streets on all 4
sides; & the street on the NE side shall be named Sto. Domingo Ave.
 PSEDC finished the construction of the church & convent, but GAI, w/c began
constructing the streets, is unable to finish the construction of the street in the NE
side because a certain third party who has been physically occupying a middle part
thereof, refused to vacate the same
 Hence, PSEDC filed its complaint against J. M. Tuason & Co., Inc., & GAI in the
CFI, seeking to compel the latter to comply w/ their obligation &/or to pay damages
in the event they failed or refused to perform said obligation.
 Both defendants answered the complaint. GAI’s principal defense was that the
action was premature since its obligation to construct the streets in question was
w/o a definite period w/c needs to be fixed 1st by the court in a proper suit for that
purpose 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 period
w/in w/c defendants will comply w/ their obligat’n
 GAI opposed said motion. But CFI granted plaintiff's MFR & amending the
dispositive 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 by
the facts submitted at the trial of the case in court below & that the relief granted in
effect 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 the
streets", what the answer put in issue was not whether the court should fix the time
of performance, but WON 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"; & 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, & 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, court intervention to
fix the period for performance was warranted, for Art. 1197 is precisely predicated on
the absence of any period fixed by the parties
 Granting that the court should’ve found that no reasonable time/no period at all had
been 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 the
orig. decision is clear that the complaint proceeded on the theory that the period for
performance had elapsed already, that the contract had been breached & defendant
was 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 the
conclusion 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 facts
precisely warrant the fixing of such a period", a statement manifestly insufficient to
explain how the 2 year period given to petitioner herein was arrived at.
 Art. 1197, CC involves a 2-step process.
o Court must 1st 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 & the
circumstances it can be inferred that a period was intended" (Art. 1197, pars.
1&2)
o Secondly, it must decide what period was "probably contemplated by the
parties"
 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.
 In this connection, contract shows that the parties were fully aware that the land
described therein was occupied by squatters, because the fact is expressly
mentioned therein. 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 parties must
have thus intended to defer the performance of the obligations under the contract
until the squatters were duly evicted, as contended by the GAI
 CA objected that it would render the date of performance indefinite. Yet, the
circumstances admit no other reasonable view; & this very indefiniteness is what
explains why the agreement did not specify any exact periods or dates of
performance.
Holding: Reversed; Time for the performance is fixed at the date that all the squatters on
affected areas are finally evicted therefrom.
CPU vs. CA
Facts
• 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:
 1. should be used for a medical college with all its buildings as part of the  And yet, Art. 11971 can’t be applied because the courts think that 50 years was
curriculum; enough time for them to fulfill the conditions. CPU has slept on its obligations.
2. shouldn’t be sold, transferred, conveyed to any third party, or encumbered.  What applies is Art. 1191, when an obligor can’t comply with what is expected
3. should be called "RAMON LOPEZ CAMPUS” and it be written in a cornerstone. of him, the obligee may seek rescission unless the court fixes a period for a
Any net income from the land or its parks shall be in a fund to be known as the just cause. In this case, there is no just cause, to fix a period would be mere
"RAMON LOPEZ CAMPUS FUND" used for improvements of the campus and technicality and would only result to a multiplication of suits.
its building/s.
 After 50 years(May 31,1989), the heirs of the donor, filed a suit, asking for annulment Then the court said that since this is a gratuitous donation(contradiction, see dissent) the
of donation, reconveyance and damages against CPU alleging that since 1939 the court affirms the decision of the RTC and modifies that of the CA, CPU is ordered to
donee allegedly didn’t comply with the conditions, and tried to exchange the land for reconvey the property to the heirs.
another land owned by the Nat’l Housing Authority.
 CPU answered that it didn’t try to use or exchange the land contrary to the Davide, J. dissenting
conditions, and any action after 50 years has already prescribed.  He agrees its an onerous obligation, but he sees the contradiction when the ponente
 RTC held that CPU failed to comply with the conditions so the donation is declared called it a gratuitous donation in the end.
null and void. The land is ordered to be reconveyed.
 CA affirmed that the conditions were resolutory(breach terminates rights making the
 He makes a distinction between “conditions” on the laws of obligation and donation
as different(Tolentino). The conditions spoken does not refer to uncertain events on
donations revocable) but declared that the conditions didn’t have time limits so the
which the birth or extinguishment of a juridical relation as with conditional obligations.
case is remanded for time determination.
What we have in this case is modal condition, which requires a prestation. The
 SO, CPU petitioned the supreme court alleging that the CA erred the certificate title
conditions Don Ramon made, are actually obligations. They are not resolutory
to be onerous obligation, and resolutory condition, that prescription does not deserve
because the moment the obligations are fulfilled, the rights are not
disquisition and remanding to the RTC the determination of time to fulfill the medical
extinguished(in fact strengthened).
college condition.
 The Parks(footnote in the original case) case do not apply here. Instead what applies
Issues
is the Barretto v City of Manila. Where the court said in cases where there is no fixed
WON the obligation was onerous. YES
period for the conditions, Art. 1197 applies. Don Ramon wouldn’t have intended for
 Clearly, the annotations in the deed of donation from Don Ramon, proves that he
his land to be idle.
imposes these obligations. Therefore, these obligations are onerous
 He also points out that Osmena v Rama doesn’t apply here because in that case it is
considerations(one executed for a valuable consideration which is considered to be
the debtor who made the promise to do, that’s why time was in his will to comply. So
en equivalent of the donation itself).
here applying Parks and De Luna v Abrigo, even actions for revocation of donations
 Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights,
prescribe too. And the Art.1144 applies that the prescription of an action upon a
as well as the extinguishment or loss of those already acquired, shall depend upon
written contract which is what a deed of an onerous donation is, is 10 years from the
the happening of the event which constitutes the condition.
time the cause of action accrues. And the time must be determined by the courts by
 Thus, when a person donates land to another on the condition that the latter would virtue of Art. 1197.
build upon the land a school, the condition imposed was not a condition precedent or
a suspensive condition but a resolutory one. Only after the donee didn’t fulfill the
conditions will the rights be revoked. which brings us to the prescription

WON there is prescription. NO

 The time from which the cause of action accrued for the revocation of the donation
and recovery of the property donated cannot be specifically determined in the instant
case. There being no stipulations in the deed, the time for the fulfillment of the
conditions lay in the will of the donee and prevented the statute of limitations to affect
in this case.
 And to compute for the time from which the cause of action accrued, it begins with
the expiration of a reasonable period and opportunity for petitioner to fulfill what has
been charged upon it by the donor.
 And in this case, no exact time can really be surely stipulated in the deed,
considering the laws on construction, educational institutions etc. beyond the control
of the donee.
1
Thus, when the obligation does not fix a period but from its nature and circumstances it can be inferred that a
period was intended, the general rule provided in Art. 1197 of the Civil Code applies, which provides that the
courts may fix the duration thereof because the fulfillment of the obligation itself cannot be demanded until after
the court has fixed the period for compliance.