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GR. No. L-29131

AUGUST 27, 1969

On November 14, 1955, the Court of First Instance of Manila rendered judgment, in Civil
Case No. 20520, entitled "Price Stabilization Corporation vs. Miguel D. Tecson and Alto Surety
and Insurance Co., Inc. On December 21, 1965, the National Marketing Corporation, as successor
to all the properties, assets, rights, and choses in action of the Price Stabilization Corporation, as
plaintiff in that case and judgment creditor therein, filed, with the same court, a complaint, against
the same defendants, for the revival of the judgment rendered in said case. Defendant Miguel D.
Tecson moved to dismiss said complaint, upon the ground of lack of jurisdiction over the subject
matter thereof and prescription of action.

Whether or not a calendar year should be used as a basis of computation for a period in
terms of obligations.

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

GR No. L-3784
OCTOBER 17, 1952

The complaint avers that plaintiff and defendant are co-owners of said property, the former
being the owner of one-third interest and the latter of the remaining two-thirds. The division is
asked because plaintiff and defendant are unable to agree upon the management of the property
and upon the partition thereof. Defendant claims that on September 22, 1943, it sold to plaintiff
one-third of the property in litigation subject to the express condition that should either vendor or
vendee decide to sell his or its undivided share, the party selling would grant to the other party first
an irrevocable option to purchase the same at the seller’s price. It avers that in January 1946,
plaintiff fixed the sum of P200,000 as the price of said share and offered to sell it to defendant,
which offer was accepted, and for the payment of said price plaintiff gave defendant a period of
time which, including the extensions granted, would expire on May 31, 1947. Defendant claims
that, in spite of its acceptance of the offer, plaintiff refused to accept the payment of the price, and
for this refusal defendant suffered damages in the amount of P100,000. Plaintiff replied that the
transaction referred to by defendant relative to the property in litigation is not supported by any
note or memorandum subscribed by the parties, as in fact no such note or memorandum has been
made evidencing the transaction.

Whether or not there is an obligation arising from the refusal of plaintiff to sell the Crystal
Arcade property to defendant due to the alleged none existence of the note or memorandum
validating the transaction.

There is no obligation on the part of plaintiff to sell the disputed property to defendant
because even if there was the existence of the contract to sell and supported by exhibits 3 and 4,
since the latter were not stipulated in the contract, such terms under the exhibits could not be
enforced against the seller, who sold the property to a foreign corporation for need of money and
failure of defendant to raise the agreed purchase money within the period stated in exhibit 4.
According to the Supreme Court, “viewing in this light the clause on which defendant relies for
the enforcement of its right to buy the property, it would seem that it is not a term, but a condition.
Considering the first alternative, that is, until defendant shall have obtained a loan from the
National City Bank of New York, it is clear that the granting of such loan is not definite and cannot
be held to come within the terms "day certain" provided for in the Civil Code, for it may or it may
not happen. As a matter of fact, the loan did not materialize. And if we consider that the period
given was until such time as defendant could raise money from other sources, we also find it to be
indefinite and contingent, and so it is also a condition and not a term within the meaning of the
law. In any event, it is apparent that the fulfilment of the condition contained in this second
alternative is made to depend upon defendant’s exclusive will, and viewed in this light, we are of
the opinion that plaintiff’s obligation to sell did not arise, for, under article 1115 of the old Civil
Code, "when the fulfilment of the condition depends upon the exclusive will of the debtor the
conditional obligation shall be void.

GR No. L-30736
APRIL 14, 1975
On May 9, 1960, petitioner Lirag Textile Mills, Inc. wrote a letter to private respondent
Alcantara advising him that, effective May 11, 1960, his temporary designation as Technical
Assistant to the Administrative Officer was made permanent. That private defendant’s tenure of
employment, per petitioner Lirag Textile Mills, Inc.'s above letter of May 9, 1960 was to be 'for
an indefinite period, unless sooner terminated by reason of voluntary resignation or by virtue of a
valid cause or causes'. However, on July 22, 1961, petitioner wrote private respondent a letter
advising him that because the company 'has suffered some serious reverses, both in terms of
pecuniary loss and in market opportunities,' the company was terminating his services and
effecting his separation from petitioner corporation effective at the close of working hours of
August 22, 1961.

Whether or not petitioner is liable to defendant for damages for breach of contract.

Petitioner, as debtor, is liable to pay damages to defendant for terminating the latter without
just cause, as a result of a favorable decision arising from the action for damages filed by defendant
against petitioner, being the source of obligation. Further, for dismissing defendant without just
cause from a position whose term, as deemed by petitioner, is 'for an indefinite period, unless
sooner terminated by reason of voluntary resignation or by virtue of a valid cause or causes'. As
explained by the Supreme Court, a "period" has been defined "as a space of time which has an
influence on obligation as a result of a juridical act, and either suspends their demandableness or
produces their extinguishment." Obligations with a period are those whose consequences are
subjected in one way or another to the expiration of said period or term. Art. 1193 of the Civil
Code, provides, among others, that "obligations with a resolutory period take effect at once, but
terminate upon arrival of the day certain. A day certain is understood to be that which must
necessarily come, although it may not be known when". In the light of the foregoing provisions
We have no doubt that the "indefinite period" of employment expressly agreed upon by and
between the parties in this case is really a resolutory period because the employment is bound to
terminate on a future "day certain" such as the employee's resignation or employer's termination
of employment upon a valid cause or causes, like death of the employee or termination of
employer's corporate existence, although it may not be known when.

GR No. L-6515
OCTOBER 18, 1954

On June 24, 1950, defendant Rita L. Ponce, wife of Domingo, executed in favor of
petitioner corporation a deed of mortgage over a parcel of land including the improvements
thereon, situated in Manila, to secure the payment of a loan of P5,000 granted to her by said
corporation, payable within six years with interest at 12 per cent per annum. On March 10, 1951,
Rita L. Ponce with the consent of her husband Domingo executed another mortgage deed, whereby
the loan was increased from P5,000 to P6,190. Rita and Domingo presented the two mortgage
deeds for registration in the office of the register of deeds, but the said register after going over the
papers noted defects and deficiencies and advised Rita and Domingo to cure the defects and furnish
the necessary data. Instead of complying with the suggestion and requirements, the two withdrew
the two mortgage deeds and then mortgaged the same parcel of land in favor of the Rehabilitation
Finance Corporation (RFC) to secure a loan.

Whether or not the failure of the defendants to register the mortgages in the Register of
Deeds as forms of security gives rise to an obligation.

The trial court held that under article 1198 of the new Civil Code, the debtor lost the benefit
of the period by reason of her failure to give the security in the form of the two deeds of mortgage
and register them, including the defendants' act in withdrawing said two deeds from the office of
the register of deeds and then mortgaging the same property in favor of the RFC; and so the
obligation became pure and without any condition and consequently, the loan became due and
immediately demandable. On this, the SC agreed with the trial Court.

G.R. NO. L-6648
JULY 25, 1955

Petitioners Victorias Planters Association, Inc. and North Negros Planters
Association, Inc. are non-stock corporations duly established and existing under and by virtue of
the laws of the Philippines, and were organized by, and are composed of, sugar cane planters in
the districts of Victorias, Manapla and Cadiz, respectively, having been established principally as
the representative entities of the numerous sugar cane planters in said districts whose sugar cane
productions are milled by the respondent corporation. Respondent Victoria’s Milling Co., Inc. is a
corporation likewise duly organized and established under and by virtue of the laws of the
Philippines. From the year 1917 to 1934, the sugar cane planters pertaining to the districts of
Manapla and Cadiz, Negros Occidental, executed identical milling contracts, setting forth the
terms and conditions under which the sugar central "North Negros Sugar Co. Inc." would mill the
sugar produced by the sugar cane planters of the Manapla and Cadiz districts. The parties cannot
stipulate as to the milling contracts executed by the planters by Victoria’s, Negros Occidental,
other than as follows; a number of them executed such milling contracts with the North Negros
Sugar Co., Inc., while a number of them executed milling contracts with the Victoria’s Milling
Co., Inc., which was likewise organized by Miguel J. Ossorio and which had constructed another
Central at Victoria’s, Negros Occidental.
Subsequent moliendas or millings took place every successive crop year thereafter, except
the 6-year period, comprising 4 years of the last World War II and 2 years of post-war
reconstruction of respondent's central at Victoria’s, Negros Occidental. after the liberation, the
North Negros Sugar Co., Inc. did not reconstruct its destroyed central at Manapla, Negros
Occidental, and in 1946, it advised the North Negros Planters Association, Inc. that it had made
arrangements with the respondent Victoria’s Milling Co., Inc. for said respondent corporation to
mill the sugar cane produced by the planters of Manapla and Cadiz holding milling contracts with
it. Thus, after the war, all the sugar cane produced by the planters of petitioner associations, in
Manapla, Cadiz, as well as in Victoria’s, who held milling contracts, were milled in only one
central, that of the respondent corporation at Victoria’s. Beginning with the year 1948, and in the
following years, when the planters-members of the North Negros Planters Association, Inc.
considered that the stipulated 30-year period of their milling contracts executed in the year 1918
had already expired and terminated in the crop year 1947-1948, and the planters-members of the
Victoria’s Planters Association, Inc. likewise considered the stipulated 30-year period of their
milling contracts, as having likewise expired and terminated in the crop year 1948-1949.

Whether or not the petitioners are still obligated to follow the stipulated milling contract
(1917-1934) with the respondents, which includes the fortuitous event of 4 years of 2nd World War
and subsequent 2 years of reconstruction as extension of the milling contract.
Petitioners have no more obligation to respondent in terms of the milling contract because
of the fact that the contracts make reference to "first milling" does not make the period of thirty
years one of thirty milling years. The term "first milling" used in the contracts under consideration
was for the purpose of reckoning the thirty-year period stipulated therein. Even if the thirty-year
period provided for in the contracts be construed as milling years, the deduction or extension of
six years would not be justified. Even if there was a stipulation in the contracts concerning milled
sugar during a fortuitous event, the contract shall be deemed suspended during that period only. It
does not mean that the happening of any of those events stops the running of the period agreed
upon. It only relieves the parties from the fulfillment of their respective obligations during that
time — the planters from delivering sugar cane and the central from milling it. In order that the
central, the herein appellant, may be entitled to demand from the other parties the fulfillment of
their part in the contracts, the latter must have been able to perform it but failed or refused to do
so and not when they were prevented by force majeure such as war. To require the planters to
deliver the sugar cane which they failed to deliver during the four years of the Japanese occupation
and the two years after liberation when the mill was being rebuilt is to demand from the obligors
the fulfillment of an obligation which was impossible of performance at the time it became due.
Nemo tenetur ad impossibilia. The obligee not being entitled to demand from the obligors the
performance of the latters' part of the contracts under those circumstances cannot later on demand
its fulfillment.

G.R. NO. 113626
SEPTEMBER 27, 2002

On February 1, 1985, 2 separate contracts of lease were entered between petitioner-lessor
and respondents-lessees regarding the rooms the respondents are respectively renting at an
apartment building owned by petitioner. Respondent-lessee Tan Te’s monthly rent, according to
the contract, is Php 847.00 plus 20% yearly interest, while Co-Teng’s rent was Php 910.00 plus
20% yearly interest. On January 2, 1990, petitioner wrote the respondents, informing them of the
plan of increasing the monthly rent to Php 3,500.00 starting February 1, 1990. Respondent-lessees
opposed the increase, and the petitioner later on demanded the latter to vacate and to pay Php
7,000.00 February-March payments. Respondent-lessees filed a consignation case at Manila
MTCC Branch 16. 6 months later, petitioner filed an ejectment suit against the respondent-lessees
at the Manila MTCC Branch 20. The trial court dismissed the suit, but was overturned by the RTC,
which, in turn, was overturned by the CA.

Whether or not the stipulated indefinite period in the contract period is interminable to the
A period is a future and certain event upon the arrival of which the obligation subject to it
either arises or is extinguished. Potestative period is a condtion suspensive in nature and which
depends upon the sole will of one of the contracting parties (Art. 1182). On the other hand,
resolutory condition is the happening of which extinguishes the obligation. Potestative period is
discretionary in nature in which, it is addressed to the court’s sound judgement and is controlled
by equitable considerations. If the condition is resolutory in nature, the obligation is valid although
its fulfillment depends upon the sole will of the debtor. The fulfillment of the condition merely
causes the extinguishment or loss of rights already acquired (Art. 1181) Thus, the lease contract
between petitioner and respondents is with a period subject to a resolutory condition. The wording
of the agreement is unequivocal: The lease period xxx shall continue for an indefinite period
provided the lessee is up-to-date in the payment of his monthly rentals. The condition imposed in
order that the contract shall remain effective is that the lessee is up-to-date in his monthly
payments. It is undisputed that the lessees Gutierrez and Co Tong religiously paid their rent at the
increasing rate of 20% annually. The agreement between the lessor and the lessees are therefore
still subsisting, with the original terms and conditions agreed upon, when the petitioner unilaterally
increased the rental payment to more than 20% or P3,500.00 a month.

The fact that such option is binding only on the lessor and can be exercised only by the
lessee does not render it void for lack of mutuality. After all, the lessor is free to give or not to give
the option to the lessee. And while the lessee has a right to elect whether to continue with the lease
or not, once he exercises his option to continue and the lessor accepts, both parties are thereafter
bound by the new lease agreement. Their rights and obligations become mutually fixed, and the
lessee is entitled to retain possession of the property for the duration of the new lease, and the
lessor may hold him liable for the rent therefor. The lessee cannot thereafter escape liability even
if he should subsequently decide to abandon the premises. Mutuality obtains in such a contract and
equality exists between the lessor and the lessee since they remain with the same faculties in
respect to fulfillment.

G.R. NO. L-22962
SEPTEMBER 28, 1972

Defendant was a distributor of lumber belonging to Mr. Miller who was the agent of the
Insular Lumber Company in Cebu City. Defendant being a friend and former classmate of plaintiff
used to borrow from the latter certain amounts from time to time. On one occasion with some
pressing obligation to settle with Mr. Miller, defendant borrowed from plaintiff a large sum of
money for which he mortgaged his land and house in Cebu City. Mr. Miller filed civil action
against the defendant and attached his properties including those mortgaged to plaintiff, inasmuch
as the deed of mortgage in favor of plaintiff could not be registered because not properly drawn
up. Plaintiff then pressed the defendant for settlement of his obligation, but defendant instead
offered to execute a document promising to pay his indebtedness even after the lapse of ten years.
Liquidation was made and defendant was found to be indebted to plaintiff in the sum of P7,220.00,
for which defendant signed a promissory note therefor on November 29, 1933 with interest at the
rate of 12% per annum, agreeing to pay 'as soon as I have money'. The note further stipulated that
defendant 'hereby relinquish, renounce, or otherwise waive my rights to the prescriptions
established by our Code of Civil Procedure for the collection or recovery of the above sum of
P7,220.00. ... at any time even after the lapse of ten years from the date of this instrument'.

Whether or not the petitioners could stil collect the debt from the respondents even after
the lapse of the 10 year period as stipulated in the promissory note.
It is a fundamental principle in the interpretation of contracts that while ordinarily the literal
sense of the words employed is to be followed, such is not the case where they "appear to be
contrary to the evident intention of the contracting parties," which "intention shall prevail." in
Nielson and Company v. Lepanto Consolidated Mining Company, this Court, with Justice
Zaldivar, went on to state: "This is the basic rule in the interpretation of contracts because all other
rules are but ancillary to the ascertainment of the meaning intended by the parties. And once this
intention has been ascertained it becomes an integral part of the contract as though it had been
originally expressed therein in unequivocal terms. " While not directly in point, what was said by
Justice Labrador in Tumaneng v. Abad is relevant: "There is no question that the terms of the
contract are not clear on the period of redemption. But the intent of the parties thereto is the law
between them, and it must be ascertained and enforced." Nor is it to be forgotten, following what
was first announced in Velasquez v. Teodoro that "previous, simultaneous and subsequent acts of
the parties are properly cognizable indicia of their true intention." There is another fundamental

rule in the interpretation of contracts specifically referred to in Kasilag v. Rodriguez, as "not less
important" than other principles which "is to the effect that the terms, clauses and conditions
contrary to law, morals and public order should be separated from the valid and legal contract
when such separation can be made because they are independent of the valid contract which
expresses the will of the contracting parties. x x x
From the joint record on appeal, it is undoubted that the complaint was filed on January 7,
1953. If the first ten-year period was to be excluded, the creditor had until November 29, 1953 to
start judicial proceedings. After deducting the first ten-year period which expired on November
29, 1943, there was the additional period of still another ten years. Nor could there be any legal
objection to the complaint by the creditor Borromeo of January 7, 1953 embodying not merely the
fixing of the period within which the debtor Villamor was to pay but likewise the collection of the
amount that until then was not paid. As was clearly set forth in Tiglao v. The Manila Railroad
Company: There is something to defendant's contention that in previous cases this Court has held
that the duration of the term should be fixed in a separate action for that express purpose. But we
think the lower court has given good reasons for not adhering to technicalities in its desire to do
substantial justice.

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G.R. NO. 43429
OCTOBER 24, 1938

This plaintiff filed a suit to recover from the defendant the amount of two promissory notes,
both stating respondent’s promise to “pay as soon as possible.” In his answer the respondent
interposed the special defenses that the complaint is uncertain inasmuch as it does not specify
when the indebtedness was incurred or when it was demandable, and that, granting that the plaintiff
has any cause of action, the same has prescribed in accordance with law. The trial court held that
the action for recovery of the amount of the two promissory notes has not prescribed in accordance
with Article 1128 of the Civil Code.
Whether or not the action to ask the Court to fix the date of the demandability of the two
promissory notes is still applicable under Article 1128 of the Civil Code.
The two promissory notes are governed by article 1128 of the Civil Code because under
the terms thereof the plaintiff intended to grant the defendant a period within which to pay his
debts. As the promissory notes do not fix this period, it is for the court to fix the same. The action
to ask the court to fix the period has already prescribed in accordance with section 43 (1) of the
Code of Civil Procedure. This period of prescription is ten years, which has already elapsed from
the execution of the promissory notes until the filing of the action on June 1, 1934. The action
which should be brought in accordance with article 1128 is different from the action for the
recovery of the amount of the notes, although the effects of both are the same, being, like other
civil actions, subject to the rules of prescription.

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G.R. NO. 144435
FEBRUARY 6, 2007

On July 20, 1981, petitioner Guillermina Baluyut (Baluyut), loaned from the spouses
Poblete the sum of P850, 000.00. Baluyut signed, on even date, a promissory note for the amount
borrowed. Under the promissory note, the loan shall mature in one month. To secure the payment
of her obligation, she conveyed to the Poblete spouses, by way of a real estate mortgage contract,
a house and lot she owns, covered by Transfer Certificate of Title (TCT) No. 137129, located at
Barrio Mapuntod, Mandaluyong. When she failed to pay, The Poblete spouses subsequently
decided to extrajudicially foreclose the real estate mortgage. Baluyut failed to redeem the subject
property within the period required by law prompting Eulogio Poblete to execute an Affidavit of
Consolidation of Title. However, Baluyut remained in possession of the subject property and
refused to vacate the same. The heirs then filed an action for writ of possession. The trial court
later issued an order granting the writ of possession. However, before Eulogio and the heirs of
Salud could take possession of the property, Baluyut filed an action for annulment of mortgage,
extrajudicial foreclosure and sale of the subject property, as well as cancellation of the title issued
in the name of Eulogio and the heirs of Salud, plus damages.

Whether or not the debt matured even without the necessity of demand and even if there is
conflict of the date of maturity.

Even if petitioner had properly raised the issue regarding the real date of maturity of the
loan, it is a long-held cardinal rule that when the terms of an agreement are reduced to writing, it
is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted
other than the contents of the agreement itself. In the present case, the promissory note and the real
estate mortgage are the law between petitioner and private respondents. It is not disputed that under
the Promissory Note dated July 20, 1981, the loan shall mature in one month from date of the said
Promissory Note.

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G.R. NO. 163763
NOVEMBER 10, 2006

Malayan Realty, Inc., is the owner of an apartment unit known as 3013 Interior No. 90,
located at Nagtahan Street, Sampaloc, Manila. In 1958, Malayan entered into a verbal lease
contract with Uy Han Yong over the property at a monthly rental of P262.00. The monthly rental
was increased yearly starting 1989, and by 2001, the monthly rental was P4,671.65. On July 17,
2001, Malayan sent Uy a written notice informing him that the lease contract would no longer be
renewed or extended upon its expiration on August 31, 2001, and asking him to vacate and turn
over the possession of the property within five days from August 31, 2001, or on September 5,
2001. Despite Uys receipt of the notice on June 18, 2001, he refused to vacate the property,
prompting Malayan to file before the Metropolitan Trial Court (MeTC) of Manila a complaint for
The trial court, noting that there was no showing that the lease contract was on a monthly
basis and that it was for a definite period, given that Uy has been occupying the leased property
continuously for more than 40 years, held that Uy could not be ejected on the ground of termination
of the contract. It accordingly dismissed Malayans complaint.

Whether or not the lease is to be month to month if there is no date stipulated in the contract.

If the period of a lease contract has not been specified by the parties, it is understood to be
from month to month, if the rent agreed upon is monthly. The lease contract thus expires at the
end of each month, unless prior thereto, the extension of said term has been sought by appropriate
action and judgment is eventually rendered therein granting the relief. In the case at bar, the lease
period was not agreed upon by the parties. Rental was paid monthly, and respondent has been
occupying the premises since 1958. As earlier stated, a written notice was served upon respondent
on January 17, 2001 terminating the lease effective August 31, 2001. As respondent was notified
of the expiration of the lease, effectively his right to stay in the premises had come to an end on
August 31, 2001.
The 2nd paragraph of Article 1687 provides, however, that in the event that the lessee has
occupied the leased premises for over a year, the courts may fix a longer term for the lease. The
power of the courts to establish a grace period is potestative or discretionary, depending on the
particular circumstances of the case. Thus, a longer term may be granted where equities come into
play, and may be denied where none appears, always with due deference to the parties freedom to
contract. Where a petitioner has been deprived of its possession over the leased premises for so
long a time, and it is shown that, indeed, the respondent was the recipient of substantial benefits

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while the petitioner was unable to have the full use and enjoyment of a considerable portion of its
property, such militates against further deprivation by fixing a period of extension.

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G.R. NO. 159828
APRIL 19, 2006

On 30 June 1998, the CBA for the years 1995-1998 executed between petitioner union and
private respondent company expired. As the duly certified collective bargaining agent for the rank-
and-file employees of private respondent’s Manila and Antipolo plants, petitioner submitted its
demands to the company for another round of collective bargaining negotiations. However, said
negotiations came to a gridlock as the parties failed to reach a mutually acceptable agreement with
respect to certain economic and non-economic issues. Thereafter, petitioner filed a notice of strike
on 11 November 1998 with the National Conciliation and Mediation Board (NCMB), National
Capital Region. Several conciliation conferences were conducted but to no avail as the parties
failed to reach a settlement. Thereafter, petitioner held the strike in private respondent’s Manila
and Antipolo plants. Subsequently, both parties came to an agreement settling the labor dispute.
Pursuant to the provisions of the MOA, both parties identified 64 vacant regular positions
that may be occupied by the existing casual, contractual or agency employees who have been in
the company for more than one year. Petitioner demanded the payment of salary and other benefits
to the newly regularized employees retroactive to 1 December 1998, in accord with the MOA.
However, the private respondent refused to yield to the said demands contending that the date of
effectivity of the regularization of said employees were 1 May 1999 and 1 October 1999. Thus, on
5 November 1999, petitioner filed a complaint before the NLRC for the alleged violations of the
subject MOA by the private respondent.




Indeed, there was "more than substantial compliance" with the law in that case because, in addition
to the advance written notice required under Art. 284 (now Art. 283) of the Labor Code, the
employees were paid for five days, from September 1 to 5, 1993, even if they rendered no service
for the period. x x x Had private respondent given a written notice to the petitioner on October 1,
1991, at the latest, that effective October 31, 1991 his employment would cease although from
October 1 he would no longer be required to work, there would be basis for private respondent’s
boast that ‘[p]ayment of this salary even [if he is] no longer working is effective notice and is much

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better than 30 days formal notice but working until the end of the 30 days period." This is not the
case here, however. What happened here was that on October 11, 1991, petitioner was given a
memorandum terminating his employment effective on the same day on the ground of
retrenchment (actually redundancy).
In the instant case, the employees were served notice on 9 December 1999 that their employment
were being severed effective 1 March 2000; however they were no longer required to report for
work but they will continue to receive their salary up to 29 February 2000. Therefore, as enunciated
in the ruling in Serrano v. NLRC, said act of private respondent constitutes substantial compliance
with the notice requirement of the Labor Code.

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G.R. NO. 153004
NOVEMBER 5, 2004

Ernesto V. Santos and Santos Ventura Hocorma Foundation, Inc. (SVHFI) were the
plaintiff and defendant, respectively, in several civil cases filed in different courts in the
Philippines. On October 26, 1990, the parties executed a Compromise Agreement which amicably
ended all their pending litigations. Respondent Santos moved for the dismissal of the aforesaid
civil cases. He also caused the lifting of the notices of lis pendens on the real properties involved.
For its part, petitioner SVHFI, paid P1.5 million to respondent Santos, leaving a balance of P13
million. Subsequently, petitioner SVHFI sold to Development Exchange Livelihood Corporation
two real properties, which were previously subjects of lis pendens. Discovering the disposition
made by the petitioner, respondent Santos sent a letter to the petitioner demanding the payment of
the remaining P13 million, which was ignored by the latter. Meanwhile, on September 30, 1991,
the Regional Trial Court of Makati City, Branch 62, issued a Decision approving the compromise
On October 28, 1992, respondent Santos sent another letter to petitioner inquiring when it
would pay the balance of P13 million. There was no response from petitioner. Consequently,
respondent Santos applied with the Regional Trial Court of Makati City, Branch 62, for the
issuance of a writ of execution of its compromise judgment. The Sheriff levied on the real
properties of petitioner, which were formerly subjects of the lis pendens. Petitioner, however, filed
numerous motions to block the enforcement of the said writ.

Whether or not respondent is obliged to petition the court to fix the due date of the

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid
a litigation or put an end to one already commenced. It is an agreement between two or more
persons, who, for preventing or putting an end to a lawsuit, adjust their difficulties by mutual
consent in the manner which they agree on, and which everyone of them prefers in the hope of
gaining, balanced by the danger of losing. The general rule is that a compromise has upon the
parties the effect and authority of res judicata, with respect to the matter definitely stated therein,
or which by implication from its terms should be deemed to have been included therein. This holds
true even if the agreement has not been judicially approved.
In accordance with the compromise agreement, the respondents asked for the dismissal of
the pending civil cases. The petitioner, on the other hand, paid the initial P1.5 million upon the

17 | P a g e
execution of the agreement. This act of the petitioner showed that it acknowledges that the
agreement was immediately executory and enforceable upon its execution. The two-year period
must be counted from October 26, 1990, the date of execution of the compromise agreement, and
not on the judicial approval of the compromise agreement on September 30, 1991. When
respondents wrote a demand letter to petitioner on October 28, 1992, the obligation was already
due and demandable. When the petitioner failed to pay its due obligation after the demand was
made, it incurred delay. In order for the debtor to be in default, it is necessary that the following
requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the
debtor delays performance; and (3) that the creditor requires the performance judicially or
In the case at bar, the obligation was already due and demandable after the lapse of the
two-year period from the execution of the contract. The two-year period ended on October 26,
1992. When the respondents gave a demand letter on October 28, 1992, to the petitioner, the
obligation was already due and demandable. Furthermore, the obligation is liquidated because the
debtor knows precisely how much he is to pay and when he is to pay it. The second requisite is
also present. Petitioner delayed in the performance. It was able to fully settle its outstanding
balance only on February 8, 1995, which is more than two years after the extra-judicial demand.
Moreover, it filed several motions and elevated adverse resolutions to the appellate court to hinder
the execution of a final and executory judgment, and further delay the fulfillment of its obligation.
Third, the demand letter sent to the petitioner on October 28, 1992, was in accordance with an
extra-judicial demand contemplated by law.

18 | P a g e
G.R. NO. 146658
OCTOBER 28, 2002
Petitioner Atty. Manuel D. Melotindos, was the lessee of the ground floor of a house at No.
577 Julio Nakpil Street in Malate, Manila. He had been renting the place since 1953 on a month-
to-month basis from its owner, respondent Melecio Tobias, who was then residing in Canada.
Sometime in the last quarter of 1995, owing to his sickly mother who needed constant medical
attention and filial care, respondent demanded from petitioner either to pay an increased rate of
monthly rentals or else to vacate the place so he and his mother could use the house during her
regular medical check-up in Manila. For two (2) years nothing came out of the demand to vacate,
hence, in 1997 respondent insisted upon raising the rental fee once again. Respondent asked
petitioner to restore the premises to him for some essential repairs of its dilapidated structure. This
time he did not offer petitioner anymore the option to pay higher rentals. The renovation of the
house was commenced but had to stop midway because petitioner refused to vacate the portion he
was occupying and worse he neglected to pay for the lease for four (4) months from May to August
1998. Hence for the second time, or on 19 October 1998, respondent demanded the payment of
the rental arrears as well as the restoration of the house to him. On 3 February 1999, since petitioner
was insisting on keeping possession of the house but did not pay the rental for January 1999,
although he had settled the arrears of four (4) months, respondent was compelled to file a complaint
for ejectment.

Whether or not petitioner is entitled to extension of lease under Article 1687 of the Civil

It bears stressing that Art. 1687 does not grant a lessee an absolute right to an extension of
the lease term but merely gives the courts the discretion to allow additional time for the lessee to
prepare for his eventual ejection. In the instant case we agree with the courts a quo that petitioner's
old age and length of his occupancy of the house alone are not just grounds for granting the
extension of lease because these circumstances by themselves do not give him the equitable right
to insist upon staying on the premises as long as he could pay the rentals. The record plainly
illustrates, for example, that he made no substantial or additional improvements on the house
which could have hampered his transfer to another residence. We also concur with the observation
of the Court of Appeals that petitioner had been effectively granted an extension of five (5) years
when respondent did not assiduously pursue the several demands made in 1995 and 1996 for him
to return possession of the leased premises until the ejectment complaint was filed in 1999, and
significantly we add that he was evicted from the premises in accordance with the MeTC Decision
only in 2002. That period of delay is more than enough.

19 | P a g e
G.R. NO. 142378
MARCH 7, 2002

Petitioner alleged that respondents Huang Chao Chun and Yang Tung Fa violated their
amended lease contract over a 1,112 square meter lot it owns, designated as Lot No. 1-A-1, when
they did not pay the monthly rentals thereon in the total amount of P4,322,900.00. It also alleged
that the amended lease contract already expired on September 16, 1996 but respondents refused to
surrender possession thereof plus the improvements made thereon, and pay the rental arrearages
despite repeated demands. Respondent were joined by the Tsai Chun International Resources Inc.
in their answer to the Complaint, wherein they alleged that the actual lessee over Lot No. 1-A-1 is
the corporation.

Whether or not the Court has the power to extend the term of lease, even after expiration.

In general, the power of the courts to fix a longer term for a lease is discretionary. Such
power is to be exercised only in accordance with the particular circumstances of a case: a longer
term to be granted where equities demanding extension come into play; to be denied where none
appear -- always with due deference to the parties' freedom to contract.10 Thus, courts are not
bound to extend the lease. Article 1675 of the Civil Code excludes cases falling under Article 1673
from those under Article 1687. Article 1673 provides among others, that the lessor may judicially
eject the lessee upon the expiration of "the period agreed upon or that which is fixed for the
duration of the leases." Where no period has been fixed by the parties, the courts, pursuant to
Article 1687, have the potestative authority to set a longer period of lease.
Furthermore, the extension of a lease contract must be made before the term of the
agreement expires, not after. Upon the lapse of the stipulated period, courts cannot belatedly extend
or make a new lease for the parties, even on the basis of equity. Because the Lease Contract ended
on September 15, 1996, without the parties reaching any agreement for renewal, respondents can
be ejected from the premises.

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G.R. NO. L-48494
FEBRUARY 5, 1990
Brent School, Inc. hired Doroteo R. Alegre as an athletic director with a yearly
compensation of P20,000.00. The contract fixed a specific term for its existence, five (5) years,
i.e., from July 18, 1971, the date of execution of the agreement, to July 17, 1976. Some three
months before the expiration of the stipulated period, or more precisely on April 20,1976, Alegre
was given a copy of the report filed by Brent School with the Department of Labor advising of the
termination of his services effective on July 16, 1976. The stated ground for the termination was
"completion of contract, expiration of the definite period of employment." However, at the
investigation conducted by a Labor Conciliator of said report of termination of his services, Alegre
protested the announced termination of his employment. He argued that although his contract did
stipulate that the same would terminate on July 17, 1976, since his services were necessary and
desirable in the usual business of his employer, and his employment had lasted for five years, he
had acquired the status of a regular employee and could not be removed except for valid cause.

Whether or not the respondent’s termination was valid.

The Civil Code of the Philippines, which was approved on June 18, 1949 and became
effective on August 30,1950, itself deals with obligations with a period in section 2, Chapter 3,
Title I, Book IV; and with contracts of labor and for a piece of work, in Sections 2 and 3, Chapter
3, Title VIII, respectively, of Book IV. No prohibition against term-or fixed-period employment
is contained in any of its articles or is otherwise deducible therefrom. The term — period has a
definite and settled signification. It means, "Length of existence; duration. A point of time marking
a termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. A series
of years, months or days in which something is completed. A time of definite length. . . . the period
from one fixed date to another fixed date . . ." It connotes a "space of time which has an influence
on an obligation as a result of a juridical act, and either suspends its demandableness or produces
its extinguishment."
The Civil Code recognizes the validity and propriety of contracts and obligations with a
fixed or definite period, and imposes no restraints on the freedom of the parties to fix the duration
of a contract, whatever its object, be it specie, goods or services, except the general admonition
against stipulations contrary to law, morals, good customs, public order or public policy. Under
the Civil Code, therefore, and as a general proposition, fixed-term employment contracts are not
limited, as they are under the present Labor Code, to those by nature seasonal or for specific
projects with pre-determined dates of completion; they also include those to which the parties by
free choice have assigned a specific date of termination.

21 | P a g e
G.R. NO. L-34338
NOVEMBER 21, 1984

Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa. 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. 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.

Whether or not the receipt obliges the petitioner to pay the proceeds of the tobacco to the

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.

22 | P a g e
G.R. NO. L-45656
MAY 5, 1989

On April 15, 1955, herein private respondents Joseph and Eleanor Hart discovered an area
consisting of 480 hectares of tidewater land in Tambac Gulf of Lingayen which had great potential
for the cultivation of fish and saltmaking. They organized Insular Farms Inc., applied for and, after
eleven months, obtained a lease from the Department of Agriculture for a period of 25 years,
renewable for another 25 years. Due to financial difficulties, Insular Farms Inc. borrowed P
250,000.00 from Pacific Banking Corporation sometime in July of 1956. On July 31, 1956 Insular
Farms Inc. executed a Promissory Note of P 250,000.00 to the bank payable in five equal annual
installments, the first installment payable on or before July 1957. Said note provided that upon
default in the payment of any installment when due, all other installments shall become due and
payable. Unfortunately, the business floundered and while attempts were made to take in other
partners, these proved unsuccessful. Nevertheless, petitioner Pacific Banking Corporation and its
then Executive Vice President, petitioner Chester Babst, did not demand payment for the initial
July 1957 installment nor of the entire obligation. On March 7, 1958, Hart received notice that the
pledged shares of stocks of Insular Farms Inc. would be sold at public auction on March 10, 1958
to satisfy Insular Farms' obligation.

Whether or not the respondents are not entitlement to an extension of the term for payment
of obligation.


In case the period of extension is not precise, the provisions of Article 1197 of the Civil
Code should apply. In this case, there was an agreement to extend the payment of the loan,
including the first installment thereon which was due on or before July 1957. The pledge executed
as collateral security on February 9, 1958 no longer contained the provision on an installment of
P 50,000.00 due on or before July 1957. This can mean no other thing than that the time of payment
of the said installment of P 50,000.00 was extended. It is settled that bills and notes may be varied
by subsequent agreement. Thus, conditions may be introduced and arrangements made changing
the terms of payment (10 CJS 758). The agreement for extension of the parties is clearly indicated
and may be inferred from the acts and declarations of the parties, as testified to in court. The pledge
constituted on February 19, 1958 on the shares of stocks of Insular Farms, Inc. was sufficient
consideration for the extension, considering that this pledge was the additional collateral required
by Pacific Banking in addition to the continuing guarantee of Clarkin.

23 | P a g e
G.R. NO. L-12611
AUGUST 7, 1918

Rev. Anastasio Cruz incurred a P2,730.50 loan from Marcela Mariño, wife of Felipe
Agoncillo. Cruz however died. Later, in February 1904, the heirs of Cruz, namely: Jose Alano,
Anastasio Alano (for his children), and Florencio Alano executed a document whereby they
promised to pay Marcela the said debt. The debt is scheduled to mature the next year. In 1912,
Anastasio Alano died intestate. On April 27, 1916, at the instance of the plaintiff, Da. Marcela
Mariño, and upon the statement, made on her behalf, that she was a creditor of the deceased and
that her claim was secured by mortgage upon real estate belonging to the said deceased, the court
reopened the intestate proceeding, and appointed one Javier to be administrator of the estate. On
March 17, 1916, the plaintiffs sued Javier, as administrator of the estate of Anastasio Alano and
against Florencio Alano and Jose Alano personally.

Whether or not the respondents have the right to choose the mode of payment to the
petitioner spouses.


The agreement to convey the house and lot at an appraised valuation in the event of failure
to pay the debt in money a t its maturity is, however, in our opinion, perfectly valid. It is simply
an undertaking that if the debt is not paid in money, it will be paid in another way. As we read the
contract, the agreement is not open to the objection that the stipulation is a pacto comisorio. It is
not an attempt to permit the creditor to declare a forfeiture of the security upon the failure of the
debtor to pay the debt at maturity. It is simply provided that if the debt is not paid in money it shall
be paid in another specific was by the transfer of property at a valuation. Of course, such an
agreement, unrecorded, creates no right in rem; but as between the parties it is perfectly valid, and
specific performance of its terms may be enforced, unless prevented by the creation of superior
rights in favor of third persons. The contract now under consideration is not susceptible of the
interpretation that the title to the house and lot in question was to be transferred to the creditor ipso
facto upon the mere failure of the debtors to pay the debt at its maturity. The obligations assumed
by the debtors were alternative, and they had the right to elect which they would perform (Civil
Code, art. 1132). The conduct of the parties (Civil Code, art. 1782) shows that it was not their
understanding that the right to discharge the obligation by the payment of money was lost to the
debtors by their failure to pay the debt at its maturity. The plaintiff accepted a partial payment
from Anastasio Alano in 1908, several years after the debt matured. The prayer of the complaint
is that the defendants be required to execute a conveyance of the house and lot, after its appraisal,
"unless the defendants pay the plaintiff the debt which is the subject of this action."

24 | P a g e
It is quite clear, therefore, that under the terms of the contract, as we read it, and as the
parties themselves have interpreted it, the liability of the defendants as to the conveyance of the
house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt in
money. It must follow, therefore, that if the action to recover the debt has prescribed, the action to
compel a conveyance of the house and lot is likewise barred, as the agreement to make such
conveyance was not an independent principal undertaking, but merely a subsidiary alternative pact
relating to the method by which the debt might be paid.

25 | P a g e
G.R. NO. L-12611
DECEMBER 2, 1924


A building of the plaintiff was insured against fire by the defendant in the sum of P30,000,
as well as the goods and merchandise therein contained in the sum of P15,000. The house and
merchandise insured were burnt early in the morning of February 28, 1923, while the policies
issued by the defendant in favor of the plaintiff were in force. The appellant contends that under
clause 14 of the conditions of the policies, it may rebuild the house burnt, and although the house
may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by


Whether or not the respondent has the option to choose in indemnifying petitioner.


It must be noted that in alternative obligations, the debtor, the insurance company in this
case, must notify the creditor of his election, stating which of the two prestations he is disposed to
fulfill, in accordance with article 1133 of the Civil Code. The object of this notice is to give the
creditor, that is, the plaintiff in the instant case, opportunity to express his consent, or to impugn
the election made by the debtor, and only after said notice shall the election take legal effect when
consented by the creditor, or if impugned by the latter, when declared proper by a competent court.
In the instance case, the record shows that the appellant company did not give a formal notice of
its election to rebuild, and while the witnesses, Cedrun and Cacho, speak of the proposed
reconstruction of the house destroyed, yet the plaintiff did not give his assent to the proposition,
for the reason that the new house would be smaller and of materials of lower kind than those
employed in the construction of the house destroyed.

26 | P a g e
G.R. NO. L-3435
APRIL 28, 1951

On June 3, 1944, plaintiffs filed a complaint against the original defendant William J. B.
Burke, alleging defendant's unjustified refusal to accept payment in discharge of a mortgage
indebtedness in his favor. Defendant's answer is that plaintiffs have no cause of action for the
reason that at the instance of plaintiff Clara Tambunting de Legarda an agreement was had on May
26, 1944, whereunder defendant condoned the interests due and to become due on the mortgage
indebtedness till the termination of the war, in consideration of the undertaking of said plaintiff
(with the consent of her husband Vicente L. Legarda, the other plaintiff) to pay her obligation to
defendant upon such termination of the war; and that the war then had not yet terminated.
Defendant, on or about January 14, 1945, presented a motion to set aside the foregoing decision
and for a new trial. Before this court could act on this motion, liberation came.
On October 23, 1945, petition was filed on behalf of plaintiffs for the reconstitution of the
record of this case. Defendant filed a supplemental answer alleging that the payment by way of
consignation in Japanese military notes made by plaintiff Clara Tambunting de Legarda in
satisfaction of the mortgage obligation in question, which was originally contracted on the 17th of
February, 1926, was null and void, and did not discharge the said obligation; and that, as plaintiffs
well knew, defendant did not plead the foregoing facts in his original answer because had he done
so "he and his attorneys would have been taken by the Japanese military police to Fort Santiago
where they would have been tortured and most probably killed. On March 31, 1949, a motion was
filed on behalf of defendant. It prayed for the substitution of Victoria Desbarats Miailhe as party
defendant for the reason that William J. B. Burke died in the City of Manila on July 23, 1946, and
his claim against plaintiffs was adjudicated to the said Victoria Debarats Miailhe as heir of the said
William J. B. Burke.

Whether or not the respondent has the choice of accepting Japanese Military Notes as
payment for petitioner’s indebtedness.


As we have stated before, the option to demand payment of the indebtedness has to be
exercised upon maturity of the obligation, which is February 17, 1943. On this date, the only
currency available is the Philippine currency, or the Japanese Military notes, because all other
currencies, including the English, were outlawed by a proclamation issued by the Japanese

27 | P a g e
Imperial Commander on January 3, 1942. This means that the right of election ceased to exist on
that date because it had become legally impossible. And this is so because in alternative obligations
there is no right to choose undertakings that are impossible or illegal (Civil Code, art. 1132, par.
2). In other words, the obligation on the part of the debtor to pay the mortgage indebtedness has
since then ceased to be alternative. (Articles 1134 & 1136(1) of the Civil Code.) It appears,
therefore, that the tender of payment made by the plaintiff in Japanese Military notes was a valid
tender because it was the only currency permissible at the time, and the same was made in
accordance with the agreement because payment in Japanese Military notes during the occupation
is tantamount to payment in the Philippine currency.

28 | P a g e
G.R. NO. 32226
DECEMBER 29, 1930

Petitioner sued the defendants in order to recover the sum of P9,377.50, being the alleged
proceeds of some 1,860 coconut trees which, prior to July 31, 1926, had been applied to the benefit
of said defendants. Also, petitioner sought to recover from the defendants the sum of P43,000, as
the alleged value of the proceeds of the lands involved in the receivership in the case of Martinez
v. Graño, G. R. No. 27685, to which the plaintiff supposes himself to be entitled, but which have
gone, so he claims, to the benefit of the defendants in said receivership. Lastly, petitioner sought
to recover the sum of P10,000 from the defendants as damages resulting from their improper
meddling in the administration of the receivership property.

Whether or not petitioner is estopped from changing his choice of accepting a parcel of
land from defendants.

The defendants undertook to cause to be conveyed to the plaintiff a parcel of land
containing one thousand coconut trees belonging to certain heirs who were not yet of age, or in
lieu thereof, if the plaintiff should prefer, to convey to him other land of equal value belonging to
the defendants. The plaintiff thereafter elected to take the parcel first indicated, and in subsequent
litigation between the parties over a different matter it was taken for granted that this parcel would
go to the plaintiff. Thus, the plaintiff was bound by his election and that he could not now reject
said parcel and elect to take other land under the alternative conceded in the contract. Inasmuch
also as the defendants had not yet procured title to be made to the plaintiff, a term was fixed within
which they might cause such title to be transferred to the plaintiff, failing in which they should
become liable in damages to the plaintiff for the value of the parcel which he had elected to take.
An election once made is binding on the person who makes it, and he will not thereafter be
permitted to renounce his choice and take an alternative which was at first open to him.

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