G.R. No.

87047 October 31, 1990FRANCISCO LAO LIM

vs.
CA and BENITOVILLAVICENCIO DY
THE CASE:
CA having affirmed
in toto
on June 30, 1988 in CA-G.R.SP No. 13925, the decision of the RTC of Manila,Branch XLVI in Civil Case
No. 87-42719, entitled"Francisco Lao Lim vs. Benito Villavicencio Dy,"petitioner seeks the reversal of
such affirmance in theinstant petition.
FACTS:
The records show that Villavicencio entered into acontract of lease with petitioner for a period of three(3)
years, that is, from 1976 to 1979. After thestipulated term expired, Villavicencio refused tovacate the
premises, hence, petitioner filed anejectment suit against the former in the City Court of Manila, docketed
therein as Civil Case No. 051063-CV.The case was terminated by a judicially approvedcompromise
agreement of the parties providing inpart:

3. That the term of the lease shall be renewed every3years retroacting from October 1979 to
October1982; after which the abovenamed rental shall beraised automatically by 20% every three years
for aslong as defendant needed the premises and can meetand pay the said increases, the defendant to
givenotice of his intent to renew sixty (60) days before theexpiration of the term;

By reason of said compromise agreement the leasecontinued from 1979 to 1982, then from 1982 to1985.
On April 17, 1985, petitioner advisedVillavicencio that he would no longer renew thecontract effective
October, 1985.
However, on August 5, 1985, Villavicencio informedpetitioner in writing of his intention to renew
thecontract of lease for another term, commencingNovember, 1985 to October, 1988. In reply to
saidletter, petitioner advised Villavicencio that he did notagree to a renewal of the lease contract upon
itsexpiration in October, 1985.On January 15, 1986, because of Villavicencio's refusalto vacate the
premises, petitioner filed anotherejectment suit, this time with the Metropolitan TrialCourt of Manila. In its
decision of September 24,1987, said court dismissed the complaint on thegrounds that:(1)
the lease contract has not expired, being acontinuous one the period whereof dependedupon the lessee's
need for the premises and hisability to pay the rents; and(2)
the compromise agreement entered into in theaforesaid Civil Case No. 051063-CV constitutes
res judicata
to the case before it.Petitioner appealed to the RTC of Manila which, in itsdecision of January 28, 1988,
affirmed the decision of the lower court.CA affirmed RTC and held that:(1)
the stipulation in the compromise agreementwhich, in its formulation, allows the lessee tostay on the
premises as long as he needs it andcan pay rents is valid, being a resolutorycondition and, therefore,
beyond the ambit of Article 1308 of the Civil Code; and(2)
that a compromise has the effect of
res judicata
.
ISSUE:
Was the stipulation in the compromise agreementwhich allows the lessee to stay on the premises aslong
as he needs it and can pay rents is valid?
RULING:
No. The decision of respondent CA is REVERSED andSET ASIDE.
HELD:
The disputed stipulation "for as long as the defendantneeded the premises and can meet and pay
saidincreases" is a

purely potestative condition

becauseit leaves the effectivity and enjoyment of leaseholdrights to the sole and exclusive will of the
lessee.It is likewise a
suspensive condition
because therenewal of the lease, which gives rise to a new lease,depends upon said condition. It should
be noted thata renewal constitutes a new contract of leasealthough with the same terms and conditions
as thosein the expired lease.
RUSTAN V. LLUCH (1992)
G.R. No. 70789
FACTS OF THE CASE:
Sometime in 1966, petitioner Rustan established a pulp and paper mill in Baloi, Lanao del Norte. On
March 20, 1967, respondent Lluch, who is a holder of a forest products license, transmitted a letter to
petitioner Rustan for the supply of raw materials by the former to the latter. In response thereto, petitioner
Rustan proposed, among other things, in the letter-reply:
That the contract supply is not exclusive because Rustan shall have the option to buy from other
suppliers who are qualified and holder of appropriate government authority or license to sell and dispose
pulp wood.
That the BUYER shall have the right to stop delivery of the said raw materials by the seller covered by
this contract when supply of the same shall become sufficient until such time when need for said raw
materials shall have become necessary provided, however, that the SELLER is given sufficient notice.
In the installation of the plant facilities and during the test run of the pulp mill, the machinery line thereat
had major defects while deliveries of the raw materials piled up, which prompted the Japanese supplier of
the machinery to recommend the stoppage of the deliveries. The suppliers were informed to stop
deliveries and the letter of similar advice sent by petitioners to private respondents informing that the
supply of raw materials has become sufficient and petitioners will not need further delivery from
respondents. And the delivery will stop thirty (30) days from receipt of the letter.
ISSUE:
WHETHER THE SUSPENDED DELIVERY OF PULP WOOD MADE BY THE PETITIONER WAS
LAWFUL.
HELD:
No. Petioners decision to suspend taking delivery of pulp wood from the respondent Lluch, which was
promoted by serious and unforeseen defects in the mill, was not lawful exercise of its right under the
contract of sale. This would make the resumption of the contract purely dependent on the will of one
party --- the petioners, and they could always claim, as they did in the instant case, that they have more
than sufficient supply of pulp wood when in fact they have been accepting the same from other sources.

SECURITY BANK & TRUST CO. V. C.A. & YSMAELFERRER G.R. No. 117009 October 11, 1995
FACTS
Private respondent Ysmael C. Ferrer was contracted byherein petitioners SBTC and Rosito C. Manhit to
construct the building of SBTC in Davao City for the price of P1.7M. Thecontract provided that Ferrer
would finish the construction in200 working days. Respondent Ferrer was able to complete
theconstruction of the building within the contracted period but hewas compelled by a drastic increase in
the cost of constructionmaterials to incur eadditional xpenses of about P300k. Theadditional expenses
were made known to SBTC andSupervising Architect Rudy de la Rama early on. RespondentFerrer made
timely demands for payment of the increased cost.Said demands were supported by receipts, invoices,
payrolls andother documents proving the additional expenses.
SBTC and a representative of an architectural firmconsulted by SBTC, verified Ferrer's claims for
additional cost.A recommendation was then made to settle Ferrer's claim butonly for P200k. SBTC,
instead of paying the recommendedadditional amount, denied ever authorizing payment of anyamount
beyond the original contract price. SBTC likewisedenied any liability for the additional cost based on
Article IX of the building contract.
Ferrer then filed a complaint for breach of contract withdamages. RTC ruled for Ferrer and ordered SBTC
and Rosito C.Manhit to pay damages.
ISSUE
WON SBTC IS LIABLE FOR THE ADDITIONALEXPENSES?
HELD
YES. In the present case, petitioners' arguments to supportabsence of liability for the cost of construction
beyond the originalcontract price are not persuasive. Under Article IX of theconstruction contract,
petitioners would make the appropriateadjustment to the contract price in case the cost of
the projectincreases through no fault of the contractor (private respondent).Under Article 1182 of the Civil
Code,
a conditional obligationshall be void if its fulfillment depends upon the sole will of thedebtor
. In the present case, the mutual agreement, the absence of which petitioner bank relies upon to support
its non-liability for theincreased construction cost, is in effect a condition dependent on petitioner bank's
sole will, since private respondent would naturallyand logically give consent to such an agreement which
would allowhim recovery of the increased cost.Further, it cannot be denied that petitioner bank derived
benefitswhen private respondent completed the construction even at anincreased cost. Hence, to allow
petitioner bank to acquire theconstructed building at a price far below its actual construction costwould
undoubtedly constitute unjust enrichment for the bank to the prejudice of private respondent. Such unjust
enrichment, as previously discussed, is not allowed by law.

ROMERO vs. COURT OF APPEALS

G.R. No. 107207 November 23, 1995
Facts:
Romero, a civil engineer, was engaged in the business of production, manufacture and exportation of
perlite filter aids, permalite insulation and processed perlite ore. In 1988, he decided to put up a central
warehouse in Metro Manila.
Flores and his wife offered a parcel of land measuring 1,952 square meters. The lot was covered in a TCT
in the name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the property and,

except for the presence of squatters in the area, he found the place suitable for a central warehouse.
Flores called on petitioner with a proposal that should he advance the amount of P50,000.00 which could
be used in taking up an ejectment case against the squatters, private respondent would agree to sell the
property for only P800/square meter. Romero agreed. Later, a Deed of Conditional Sale was executed
between Flores and Ongsiong.
Purchase price = P1,561,600.00; Downpayment = P50K; Balance = to be paid 45 days after the removal
of all the squatters; upon full payment, Ongsiong shall execute deed of absolute sale in favour of Romero.
Ongsiong sought to return the P50,000.00 she received from petitioner since, she said, she could not get
rid of the squatters on the lot. She opted to rescind the sale in view of her failure to get rid of the
squatters. Regional Trial Court of Makati rendered decision holding that private respondent had no right to
rescind the contract since it was she who violated her obligation to eject the squatters from the subject
property and that petitioner, being the injured party, was the party who could, under Article 1191 of the
Civil Code, rescind the agreement.
Issue: WON there was a perfected contract of sale? YES
Held:
A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and
to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees.
(BILATERAL and RECIPROCAL CHARACTERISTIC OF SALE)
In determining the real character of the contract, the title given to it by the parties is not as much
significant as its substance. For example, a deed of sale, although denominated as a deed of conditional
sale, may be treated as absolute in nature, if title to the property sold is not reserved in the vendor or if
the vendor is not granted the right to unilaterally rescind the contract predicated on the fulfillment or nonfulfillment, as the case may be, of the prescribed condition.
From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. Under the agreement, private respondent is obligated to evict the
squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into
motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the
purchase price. Private respondents failure to remove the squatters from the property within the

stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that
condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner and
not to private respondent.
There was no potestative condition on the part of Ongsiong but a mixed condition dependent not on the
will of the vendor alone but also of third persons like the squatters and government agencies and
personnel concerned.