VILLAROEL vs ESTRADA G.R. No.

47362 December 19, 1940

FACTS:

On May 9, 1912, Alejandro Callao, mother of Juan Villaroel, obtained a loan of P1,000 from
spouses Mariano Estrada and Severina payable after seven years.

Alejandra died, leaving Juan Villaroel as sole heir, Spouses Mariano Estrada and Severina also
died, leaving Bernardino Estrada as sole heir.

On August 9, 1930, Juan Villaroel signed a document in which he declared to pay the debt of his
deceased mother in the amount of P1,000 with legal interest of 12% per annum.

The Court of First Instance of Laguna ordered Juan Villaroel to pay the amount of P1,000 with an
interest of 12% per annum since August 9, 1930 until full payment

Villaroel appealed.

ISSUE: Whether or not the right to prescription may be waived or renounced.

HELD: Yes, right to prescription may be waived or renounced. As a general rule, when a debt has
already prescribed, it cannot be imposed by the creditor. However, a new contract which
recognizes and assumes the prescribed debt is an exception, for it would be valid and enforceable.
Hence, a person who acknowledges the correctness of the debt and promises to pay it despite
knowing that the debt has already prescribed, such as the case at bar, waived the benefit of the
prescription.
Issue/s:
1.WON Villaroel should pay the amount despite the prescription of the original debt
2.WON Villaroel can recover the demanded amount since the debt has
alreadyprescribed

Held/Rationale:
1.Yes. The present action is based on the obligation that Villaroel contracted in August9, 1930 and
not original obligation which his mother contracted back in 1912. Being the sole heir of
the indebted one with rights over her inheritance, the debt contracted by his mother legally,
although no longer effective by prescription, is now a
moral obligation.
a.Moral obligation and natural obligation are used interchangeably.
2.No. The case is expressly covered under
Art. 1424 of the Civil Code which states that when a right to sue upon a civil obligation has
lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot
recover what he has delivered or the value of the service he has rendered.
ANSAY VS NATIONAL DEVELOPMENT COMPANY G.R No. L-13667 April 29,
1960

FACTS:

On July 25, 1956, Primitivo Ansay et al filed against the Board of Directors of the National
Development Company in the Court of First Instance of Manila a complaint praying for a 20%
Christmas bonus for the years 1954 and 1955.

Appellants contend that there exists a cause of action in their complaint because their claim rests
on moral grounds or what in brief is defined by law as a natural obligation.

ISSUE: Whether or not the Christmas bonus is demandable.

HELD: No, it is not demandable. Appellants admit that appellees are not under legal obligation
to give such claimed bonus and such grant only arises from a moral obligation or natural
obligation. However, natural obligation is only enforceable with the presence of the element of
voluntary fulfillment by the obligor. In the case at bar, there has been no voluntary performance
on the part of the appellees. Hence, the bonus is not demandable.
 DBP VS CONFESOR G.R. No. 48889 May 11, 1988

FACTS:

On February 10, 1940, spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural
loan from Agricultural and Industrial Bank, now Development Bank of the Philippines, in the
sum of P2,000, as evidenced by a promissory note of said date whereby they bound themselves
jointly and severally to pay the amount in ten equal yearly amortizations.

As the obligation remained unpaid even after the lapse if the ten-year period, Confesor, who was
then a member of the Congress of the Philippines, executed a second promissory note on April
11, 1961, expressly acknowledging the said loan and promising to pay the same on or before June
15, 1961.

The spouses still failed to pay the obligation on the specified date. As a result, the DBP filed a
complaint on September 11, 1970 in the City Court of Iloilo City. The city court ordered payment
from spouses. The CFI of Iloilo reversed the decision. Hence, this petition.

ISSUE: Whether or not a promissory which was executed in consideration of a previous

promissory note which has already been barred by prescription is valid.

HELD: Yes, the second promissory note is valid because the said promissory note is not a mere
acknowledgement of the debt that has prescribed already. Rather, it is a new promise to pay the
debt. A new promise is a new cause of action. Although a debt barred by prescription is
enforceable, a new contract recognizing and assuming the prescribed debt would be valid and
enforceable.

ISSUE:
W/N prescription had barred the complaint.

HELD:
No. Prescription was renounced when Confessor signed the second promissory note.
The right to prescription may be waived or renounced. Prescription is deemed to have been
tacitly renounced when the renunciation results from acts which imply the abandonment of the
right acquired.
The Court ruled that when a debt is already barred by prescription, it cannot be enforced by
the creditor. But a new contract recognizing and assuming the prescribed debt would be valid and
enforceable.
The statutory limitation bars the remedy but does not discharge the debt. A new express
promise to pay a debt barred ... will take the case from the operation of the statute of limitations
as this proceeds upon the ground that as a statutory limitation merely bars the remedy and does
not discharge the debt, there is something more than a mere moral obligation to support a
promise, to wit a pre-existing debt which is a sufficient consideration for the new the new
promise; upon this sufficient consideration constitutes, in fact, a new cause of action.
CRUZ vs TUASON & CO. G.R. No. L-23749 April 29, 1977

FACTS:

As requested by the Deudors, the family of Telesforo Deudor who laid claim in question on the
strength of an informacion posesoria, Cruz made permanent improvements on the said land
having an area of more or less 20 quinones.

The improvements were valued at P30,400 and for which he incurred expenses amounting to
P7,781.74

In 1952, Tuason & Co. availed of Cruz services as an intermediary with the Deudors, to work for
the amicable settlement in a civil case. The said case involved 50 quiones of land, of which the 20
quiones of land mentioned formed part.

A compromise agreement between the Deudors and Tuason & Co. was entered into on 1963
which was approved by court.

Cruz alleged that Tuason & Co. promised to convey him the 3,000 sq. meters of land occupied by
him which was part of the 20 quiones of land within 10 years from the date of signing of the
compromise agreement between the Deudors and the latter as consideration of his services. The
said land was not conveyed to him by Tuason & Co.

Cruz further alleged that Tuason & Co. was unjustly enriched at his expense since they enjoyed
the benefits of the improvements he made on the land acquired by the latter.

The trial court dismissed the case on the ground that there was no cause of action. Hence, this
appeal.

ISSUE: Whether or not a presumed quasi-contract be emerged as against one part when the
subject matter thereof is already covered by a contract with another party.

HELD: From the very language of this provision, it is obvious that a presumed qauasi-contract
cannot emerge as against one party when the subject mater thereof is already covered by an
existing contract with another party. Predicated on the principle that no one should be allowed to
unjustly enrich himself at the expense of another, Article 2124 creates the legal fiction of a quasi-
contract precisely because of the absence of any actual agreement between the parties concerned.
Corollarily, if the one who claims having enriched somebody has done so pursuant to a contract
with a third party, his cause of action should be against the latter, who in turn may, if there is any
ground therefor, seek relief against the party benefited. It is essential that the act by which the
defendant is benefited must have been voluntary and unilateral on the part of the plaintiff. As one
distinguished civilian puts it, "The act is voluntary. because the actor in quasi-contracts is not
bound by any pre-existing obligation to act. It is unilateral, because it arises from the sole will of
the actor who is not previously bound by any reciprocal or bilateral agreement. The reason why
the law creates a juridical relations and imposes certain obligation is to prevent a situation where
a person is able to benefit or take advantage of such lawful, voluntary and unilateral acts at the
expense of said actor." In the case at bar, since appellant has a clearer and more direct recourse
against the Deudors with whom he had entered into an agreement regarding the improvements
and expenditures made by him on the land of appellees. It Cannot be said, in the sense
contemplated in Article 2142, that appellees have been enriched at the expense of appellant.
GUTIERREZ HERMANOS vs ORENSE G.R. No. 9188 December 4, 1914

FACTS:

On and before Februaru 14, 1907, Engracio Orense had been the owner of a parcel of land in
Guinobatan, Albay.

On February 14, 1907, Jose Duran, a nephew of Orense, sold the property for P1,500 to Gutierrez
Hermanos, with Orenses knowledge and consent, executed before a notary a public instrument.
The said public instrument contained a provision giving Duran the right to repurchase it for the
same price within a period of four years from the date of the said instrument.

Orense continued occupying the land by virtue of a contract of lease.

After the lapse of four years, Gutierrez asked Orense to deliver the property to the company and
to pay rentals for the use of the property.

Orense refused to do so. He claimed that the sale was void because it was done without his
authority and that he did not authorize his nephew to enter into such contract.

During trial, Orense was presented as witness of the defense. He states that the sale was done
with his knowledge and consent. Because of such testimony, it was ascertained that he did give
his nephew, Duran, authority to convey the land. Duran was acquitted of criminal charges and the
company demanded that Orense execute the proper deed of conveyance of the property.

ISSUE: Whether or not Orense is bound by Durans act of selling the formers property

HELD: Yes. It was proven during trial that he gave his consent to the sale. Such act of Orense
impliedly conferred to Duran the power of agency. The principal must therefore fulfill all the
obligations contracted by the agent, who acted within the scope of his jurisdiction.
Adille vs CA G.R. No. L-44546 January 29, 1988

FACTS:

The property in dispute was originally owned by Felisa Alzul who got married twice. Her child in
the first marriage was petitioner Rustico Adile and her children in the second marriage were
respondents Emetria Asejo et al.

During her lifetime, Felisa Alzul sodl the property in pacto de retro with a three-year repurchase
period.

Felisa died before she could repurchase the property.

During the redemption period, Rustico Adille repurchased the property by himself alone at his
own expense, and after that, he executed a deed of extra-judicial partition representing himself to
be the only heir and child of his mother Felisa. Consequently, he was able to secure title in his
name alone.

His half-siblings, herein respondents, filed a case for partition and accounting claiming that
Rustico was only a trustee on an implied trust when he redeemed the property, and thus, he
cannot claim exclusive ownership of the entire property.

ISSUE:
Whether or not a co-owner may acquire exclusive ownership over the property held in common.
Whether or nor Rustico had constituted himself a negotiorum gestor

HELD: No. The right to repurchase may be exercised by a co-owner with respect to his share
alone. Although Rustico Adille redeemed the property in its entirety, shouldering the expenses did
not make him the owner of all of it.

Yes. The petitioner, in taking over the property, did so on behalf of his co-heirs, in which event,
he had constituted himself a negotiorum gestor under Art 2144 of the Civil Code, or for his
exclusive benefit, in which case, he is guilty of fraud, and must act as trustee, the respondents
being the beneficiaries, pursuant to Art 1456.
ANDRES VS MANTRUST G.R. NO. 82670 SEPTEMBER 15, 1989

FACTS:

Andres, using the business name Irenes Wearing Apparel was engaged in the manufacture of
ladies garments, childrens wear, mens apparel and linens for local and foreign buyers. Among its
foreign buyers was Facts of the United States.

Sometime in August 1980, Facts instructed the First National State Bank (FNSB) of New Jersey
to transfer $10,000 to Irenes Wearing Apparel via Philippine National Bank (PNB) Sta. Cruz,
Manila branch. FNSB instructed Manufacturers Hanover and Trust Corporation (Mantrust) to
effect the transfer by charging the amount to the account of FNSB with private respondent.

After Mantrust effected the transfer, the payment was not effected immediately because the payee
designated in the telex was only Wearing Apparel. Private respondent sent PNB another telex
stating that the payment was to be made to Irenes Wearing Apparel.

On August 28, 1980, petitioner received the remittance of $10,000.

After learning about the delay, Facets informed FNSB about the situation. Facts, unaware that
petitioner had already received the remittance, informed private respondent and amended its
instruction y asking it to effect the payment to Philippine Commercial and Industrial Bank (PCIB)
instead of PNB.

Private respondent, also unaware that petitioner had already received the remittance, instructed
PCIB to pay $10,000 to petitioner. Hence, petitioner received another $10,000 which was charged
again to the account of Facets with FNSB.

FNSB discovered that private respondent had made a duplication of remittance. Private
respondent asked petitioner to return the second remittance of $10,000 but the latter refused to do
so contending that the doctrine of solution indebiti does not apply because there was negligence
on the part of the respondents and that they were not unjustly enriched since Facets still has a
balance of $49,324.

ISSUE: Whether or not the private respondent has the right to recover the second $10,000
remittance it had delivered to petitioner

HELD: Yes. Art 2154 of the New Civil Code is applicable. For this article to apply, the following
requisites must concur: 1) that he who paid was not under obligation to do so; and 2) that
payment was made by reason of an essential mistake of fact.

There was a mistake, not negligence, in the second remittance. It was evident by the fact that both
remittances have the same reference invoice number.
PUYAT & SONS INC vs CITY OF MANILA G.R. No. L-17447 April 30, 1963

FACTS:

Plaintiff Gonzalo Puyat & Sons Inc is engaged in the business of manufacturing and selling all
kinds of furniture.

Acting pursuant to an ordinance, the defendant City Treasurer of Manila assessed from plaintiff
retail dealers tax the sales of furniture manufactured and sold by it and its factory site.

All assessments were paid by plaintiff without protest in the erroneous belief that it was liable
thereof not knowing that pursuant to an ordinance, it is exempt from the payment of taxes being a
manufacturer of various kinds of furniture.

After learning about the ordinance, plaintiff filed with defendant City Treasurer of Manila a
formal request for refund of the retail dealers taxes unduly paid.

The City Treasurer, however, denied the said request for refund.

ISSUE: Whether or not the defendant is obliged to refund the amount which the plaintiff paid

HELD: Yes. The plaintiff was actually exempted from paying the tax assessed, hence, it was
clearly an error or mistake which makes it fall under Art 2154 of solution indebiti. Art 2154
provides that if something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises.

Alongside with this, Art 2156 is also applicable which states that if the payer was in doubt
whether the debt was due, he may recover if he proves that it was not due. Plaintiff had duly
proved that taxes were not lawfully due. Therefore, there is no doubt that the provisions of
solution indebiti apply in this case.
SAGRADA ORDEN VS NACOCO G.R. NO. L-3756 JUNE 30, 1952

FACTS:

The land in question belongs to plaintiff Sagrada Orden in whose name the title was registered
before the war

On January 4, 1943, during the Japanese military occupation, the land was acquired by a Japanese
corporation by the name of Taiwan Tekkosho

After liberation on April 4, 1946, the Alien Property Custodian of the United States of America
took possession, control, and custody of the property pursuant to the Trading with the Enemy Act

The property was occupied by the Copra Export Management Company under a custodian
agreement with US Alien Property Custodian. When it vacated the property, it was occupied by
defendant National Coconut Corporation

The plaintiff made claim to the said property before the Alien Property Custodian. Alien Property
Custodian denied such claim

It bought an action in court which resulted to the cancellation of the title issued in the name of
Taiwan Tekkosho which was executed under threats, duress, and intimidation; reissuance of the
title in favor of the plaintiff; cancellation of the claims, rights, title, interest of the Alien property
Custodian; and occupant National Coconut Corporations ejection from the property. A right was
also vested to the plaintiff to recover from the defendants rentals for its occupation of the land
from the date it vacated.

Defendant contests the rental claims on the defense that it occupied the property in good faith and
under no obligation to pay rentals.

ISSUE: Whether or not the defendant is obliged to pay rentals to the plaintiff

HELD: No. Nacoco is not liable to pay rentals prior the judgment. If defendant-appellant is liable
at all, its obligations, must arise from any of the four sources of obligations, namley, law, contract
or quasi-contract, crime, or negligence. (Article 1089, Spanish Civil Code.) Defendant-appellant
is not guilty of any offense at all, because it entered the premises and occupied it with the
permission of the entity which had the legal control and administration thereof, the Allien
Property Administration. Neither was there any negligence on its part.

FACTS:
- On Jan 4, 1942, during the Japanese occupation, Taiwan Tekkosho (Japanese corporation)
acquired the plaintiffs property (land with warehouse in Pandacan, Manila) for Php140K
- On April 4, 1946, after the liberation, the US took control and custody of the aforementioned
enemys land under Sect 12 of the Trading with the Enemy Act
- In the same year, the Copra Export Management Company occupied the property under
custodianship agreement with the United States Alien Property Custodian
- In August 1946, when the Copra Export Management Co. vacated the property, the National
Coconut Corporation (NACOCO), the defendant, occupied it next
- Sagrada Orden (plaintiff) files claims on the property with the Court of First Instance of Manila
and against the Philippine Alien Property Administrator
- Plaintiff petitions that the sale of the property to Taiwan Tekkosho should be declared null and
void as it was executed under duress, that the interest of the Alien Property Custodian be
cancelled, and that NACOCO be given until February 28, 1949 to recover its equipment form the
property and vacate the premise
- The Republic of the Philippines is allowed to intervene
- CFI: the defendant (Philippine Alien Property Administrator) and the intervenor (RP) are
released from any liability but the plaintiff may reserve the right to recover from NACOCO
reasonable rentals for the use and occupation of the premises
- The sale of the property to the Taiwan Takkesho was declared void and the plaintiff was given
the right to recover Php3,000/month as reasonable rental from August 1946 (date when
NACOCO occupied property) to the date NACOCO vacates the premises
- the judgment is appealed to the SC

Legal Issues
1. WON the defendant is liable to pay rent for occupying the property in question

Judgment
1. The CFIs decision that the defendant should pay rent from August 1946 to February 28, 1949
was reversed, costs against the plaintiff

Ratio
Obligations can only arise from four sources: law, contracts or quasi-contracts, crime, or
negligence (Art 1089, Spanish Civil Code).

There were no laws or an express agreement between the defendant or the Alien Property
Custodian with the plaintiff regarding payment of rent. The property was acquired by the Alien
Property Administrator through law (Trading with the Enemy Act) on the seizure of alien
property and not as a successor to the interests of the latter. There was no contract of rental b/w
them and Taiwan Takkesho. NACOCO entered possession of the property from the Alien
Property Custodian without any expectation of liability for its use. NACOCO did not commit any
negligence or offense, and there was no contract, implied or otherwise, entered into, that can be
used as basis for claiming rent on the property before the plaintiff obtained the judgment
annulling the sale to Taiwan Takkesho. The plaintiff has no right to claim rent from NACOCO.

Important Notes
Article 1157 of the New Civil Code states that there are 5 sources of obligations: laws, contracts,
quasi-contracts, felonies (acts or omissions punished by law), and quasi-delicts.
 PEOPLES CAR VS COMMANDO SECURITY G.R. L-36840 MAY 22, 1973

FACTS:

Peoples Car entered into a contract with Commando Security to safeguard and protect the
business premises of the plaintiff from theft, pilferage, robbery, vandalism, and all other unlawful
acts of any person/s prejudicial to the interest of the plaintiff.

On April 5, 1970, around 1:00am, defendants security guard on duty at plaintiffs premises,
without any authority, consent, approval, or orders of the plaintiff and/or defendant brought out
the compound of the plaintiff a car belonging to its customer and drove said car to a place or
places unknown, abandoning his post and while driving the car lost control of it causing it to fall
into a ditch.

As a result, the car of plaintiffs customer, which had been left with plaintiff for servicing and
maintenance, suffered extensive damage besides the car rental value for a car that plaintiff had to
rent and make available to its customer, Joseph Luy, to enable him to pursue his business and
occupation.

Plaintiff instituted a claim against defendant for the actual damages it incurred due to the
unlawful act of defendants personnel citing paragraph 5 of the contract wherein defendant
accepts sole responsibility for the acts done during their watch hours.

Defendant claimed that they may be liable but its liability is limited under paragraph 4 of the
contract which provides that its liability shall not exceed P1,000 per guard post for loss or
damage through the negligence of its guards during the watch hours provided that it is reported
within 24 hours of the incident.

ISSUE: Whether or not the defendant is obliged to indemnify the plaintiff for the entire costs as
result of the incident

HELD: Yes. Plaintiff was in law liable to its customer for the damages caused the customers car,
which had been entrusted into its custody. Plaintiff therefore was in law justified in making good
such damages and relying in turn on defendant to honor its contract and indemnify it for such
undisputed damages, which had been caused directly by the unlawful and wrongful acts of
defendants security guard in breach of their contract.

Plaintiff in law could not tell its customer that under the Guard Service Contract it was not liable
for the damage but the defendant since the customer could not hold defendant to account for the
damages as he had no privity of contract with defendant.
CANGCO VS MANILA RAILROAD COMPANY G.R. L-12191 OCTOBER 14,
1918

FACTS:

On January 20, 1915, Jose Cangco was riding the train of Manila Railroad Company where he
was an employee. As the train drew near to his destination, he arose from his seat. When he was
about to alight from the train, Cangco accidentally stepped on a sack of watermelons which he
failed to notice because it was already 7:00pm and it was dim when it happened. As a result, he
slipped and fell violently on the platform. His right arm was badly crushed and lacerated which
was eventually amputated.

Cangco sued Manila Railroad Company on the ground of negligence of its employees placing the
sacks of melons upon the platform and in leaving them so placed as to be a menace to the security
of passenger alighting from the companys trains.

The companys defense was that granting that its employees were negligent in placing an
obstruction upon the platform, the direct and proximate cause of the injury suffered by plaintiff
was his own contributing negligence.

ISSUE: Whether or not there was a contributing negligence on the part of the plaintiff.

HELD: In determining the question of contributory negligence in performing such act that is to
say, whether the passenger acted prudently or recklessly the age, sex, and physical condition of
the passenger are circumstances necessarily affecting the safety of the passenger, and should be
considered.

The place was perfectly familiar to the plaintiff as it was his daily custom to get on and off the
train at the station. There could, therefore, be no uncertainty in his mind with regard either to the
length of the step which he was required to take or the character of the platform where he was
alighting. The Supreme Courts conclusion was that the conduct of the plaintiff in undertaking to
alight while the train was yet slightly under way was not characterized by imprudence and that
therefore he was not guilty of contributory negligence.
GUTIERREZ VS GUTIERREZ G.R. NO. 34840 SEPTEMBER 23, 1931

FACTS:

On February 2, 1930, a passenger truck and an automobile of private ownership collided while
attempting to pass each other on a bridge. The truck was driven by the chauffeur Abelardo
Velasco, and was owned by saturnine Cortez. The automobile was being operated by Bonifacio
Gutierrez, a lad 18 years of age, and was owned by Bonifacios father and mother, Mr. and Mrs.
Manuel Gutierrez. At the time of the collision, the father was not in the car, but the mother,
together with several other members of the Gutierrez family were accommodated therein.

The collision between the bus and the automobile resulted in Narciso Gutierrez suffering a
fractured right leg which required medical attendance for a considerable period of time.

ISSUE: Whether or not both the driver of the truck and automobile are liable for damages and
indemnification due to their negligence. What are the legal obligations of the defendants?

HELD: Bonifacio Gutierrezs obligation arises from culpa aquiliana. On the other hand,
Saturnino Cortezs and his chauffeur Abelardo Velascos obligation rise from culpa contractual.

The youth Bonifacio was na incompetent chauffeur, that he was driving at an excessive rate of
speed, and that, on approaching the bridge and the truck, he lost his head and so contributed by
his negligence to the accident. The guaranty given by the father at the time the son was granted a
license to operate motor vehicles made the father responsible for the acts of his son. Based on
these facts, pursuant to the provisions of Art. 1903 of the Civil Code, the father alone and not the
minor or the mother would be liable for the damages caused by the minor.

The liability of Saturnino Cortez, the owner of the truck, and his chauffeur Abelardo Velasco rests
on a different basis, namely, that of contract.
HONG KONG AND SHANGHAI BANK VS SPS. BROQUEZA

G.R. No. 178610 November 17, 2010

Facts: Petitioners Gerong and [Editha] Broqueza are employees of Hongkong and Shanghai
Banking Corporation (HSBC). They are also members of respondent Hongkong Shanghai
Banking Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP, plaintiff below). The HSBCL-
SRP is a retirement plan established by HSBC through its Board of Trustees for the benefit of the
employees.On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the amount of
Php175,000.00. On December 12, 1991, she again applied and was granted an appliance loan
inthe amount of Php24,000.00. On the other hand, petitioner Gerong applied and was granted an
emergency loan in the amount of Php35,780.00 on June 2, 1993. These loans are paid through
automatic salary deduction. Meanwhile [in 1993], a labor dispute arose between HSBC and its
employees. Majority of HSBCs employees were terminated, among whom are petitioners Editha
Broqueza and Fe Gerong. The employees then filed an illegal dismissal case before the National
Labor Relations Commission (NLRC) against HSBC. Because of their dismissal, petitioners were
not able to pay the monthly amortizations of their respective loans. Thus, respondent HSBCL-
SRP considered the accounts of petitioners delinquent. Demands to pay the respective obligations
were made upon petitioners, but they failed to pay.
HSBCL-SRP, acting through its Board of Trustees and represented by Alejandro L. Custodio,filed
Civil Case No. 52400 against the spouses Broqueza on 31 July 1996. On 19 September
1996,HSBCL-SRP filed Civil Case No. 52911 against Gerong. Both suits were civil actions for
recovery and collection of sums of money.

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

Held:
The petition is meritorious. The court agreed with the rulings of the MeTC and the RTC. Inruling,
the first paragraph of Article 1179 of the Civil Code was applied:
Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event,
or upon a past event unknown to the parties, is demandable at once. The court affirmed the
findings of the MeTC and the RTC that there is no date of payment indicated in the Promissory
Notes. The RTC is correct in ruling that since the Promissory Notes do not contain a period,
HSBCL-SRP has the right to demand immediate payment. Article 1179of the Civil Code applies.
The spouses Broquezas obligation to pay HSBCL-SRP is a pure obligation. The fact that
HSBCL-SRP was content with the prior monthly check-off from Editha Broquezas salary is of
no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a
demand to enforce a pure obligation.In their Answer, the spouses Broqueza admitted that prior to
Editha Broquezas dismissal from HSBC in December 1993, she religiously paid the loan
amortizations, which HSBC collected through payroll check-off.
A definite amount is paid to HSBCL-SRP on a specific date. Editha Broqueza authorized
HSBCL-SRP to make deductions from her payroll until her loans are fully paid. Editha Broqueza,
however, defaulted in her monthly loan payment due to her dismissal. Despite the spouses
Broquezas protestations, the payroll deduction is merely a convenient mode of payment and not
the sole source of payment for the loans. HSBCL-SRP never agreed that the loans will be paid
only through salary deductions. Neither did HSBCL-SRP agree that if Editha Broqueza ceases to
be an employee of HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP can
immediately demand payment of the loans at anytime because the obligation to pay has no
period. Moreover, the spouses Broqueza have already incurred in default in paying the monthly
installments. Finally, the enforcement of a loan agreement involves debtor-creditor relations
founded on contract and does not in any way concern employee relations. As such it should be
enforced through a separate civil action in the regular courts and not before the Labor Arbiter.
The petition is granted. The Decision of the Court of Appeals was reversed and set aside. The
decisions of the Regional Trial Court of Makati, as well as the decision of the Metropolitan Trial
Court of Makati City against the spouses Bienvenido and Editha Broqueza, were affirmed.
PAY VS. PALANCA 57 SCRA 618

FACTS

The promissory note indicated payment upon demand. Petitioner relied on this to mean that
prescription would not lie unless there is demand from them. The petition was filed fifteen years
after its issuance.

ISSUE

Whether or not a promissory note to be paid upon demand is immediately due and demandable.

RULING

YES. Every obligation whose performance does not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is demandable at once (Art. 1179 of the New Civil
Code). The obligation being due and demandable in this case, it would appear that the filing of
the suit after fifteen years was much too late.
Smith, Bell & Co. v Sotelo Matti (1992)

FACTS
Plaintiff Smith, Bell & Co and the defendant Mr. Vicente Sotel entered into a contract. Plaintiff
has to deliver (1) two steel tanks shipped from New York to Manila within three or four
months, (2) two expellers shipped from San Francisco in the month of September 1918 or as
soon as possible, and (3) two electric motors with approximate delivery within ninety days.
This isnot guaranteed.

The tanks arrived at Manila on 27 April 1919; the expellers on 26 October 1918; and the motors
on 27 February 1919. Upon notification from plaintiff, defendant refused to receive any of the
goods or to pay for their price. Plaintiff alleged that the expellers and motors were in good
condition. Plaintiff filed a complaint against the defendant. The defendant, Mr Sotelo and
intervenor, Manila Oil Refining and By-Products Co., Inc., denied the plaintiffs allegations. They
allege that due to plaintiffs delay in the delivery of goods, the intervenor suffered damages. The
lower court absolved the defendants from the complaint insofar as the tanks and the electric
motors were concerned, but rendered judgment against them ordering them to receive expellers
and pay the sum of P50,000, with legal interest and cost. Both parties appealed to the Court.

ISSUE: What period was fixed for the delivery of the goods? Did the plaintiff incur delay in the delivery of goods?

HELD
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays cause by fires, riots on land or on the sea, strikes or
other causes known as force majeure entirely beyond the control of the sellers or their
representatives.

Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the
goods. xxx. From the record it appears that thee contracts were executed at the time of the world
war when there existed rigid restrictions on the export from the united States xxx; hence clauses
were inserted in the contracts, regarding Government regulations, railroading embargoes, lack
of vessel space, the exigencies of the requirements of the United States Government xxx. At the
time of the execution of the contracts, the parties were not unmindful of the contingency of the
United States Government not allowing the export of the goods xxx. We cannot but conclude that
the term which parties attempted to fix is so uncertain that once cannot tell just whether, as a
matter of fact, those articles could be brought to manila or not.

The obligation must be regarded as conditional.

The delivery was subject to a condition the fulfillment of which depended not only upon the
effort of the plaintiff, but upon the will of third persons who could in no way be compelled to
fulfill the condition. It is sufficiently proven in the record that the plaintiff has made all the efforts
it could possibly be expected to make under the circumstances, to bring the goods in question to
Manila, as soon as possible. Xxx it is obvious that the plaintiff has complied with its
obligation.

When the time of delivery is not fixed in the contract, time is regarded unessential. In such cases,
the delivery must be made within a reasonable time. Xxx Reasonable time for the delivery of the
goods by the seller is to be determined by circumstances attending the particular transactions.
Whether of not the delivery of the machinery in litigation was offered to the defendant
within a reasonable time, is a question to be determined by the court. Xxx The plaintiff has
not been guilty of any delay in the fulfillment of its obligation
SINGSON ENCARNACION VS. BALDOMAR 77 PHIL 470

FACTS:
Vicente Singson Encarnacion leased his house to Jacinta Baldomar and her son, Lefrando
Fernando upon a month-to-month basis. After Manila was liberated in the last war, Singson
Encarnacio notified Baldomar and her son Fernando to vacate the house because he needed it for
his office as a result of the destruction of the building where he had his office before. Despite the
demand, the Baldomar and Fernando continued their occupancy.

The defense of Baldomar and Fernando was that the contract with Singson Encarnacion
authorized them to continue occupancy indefinitely while they should faithfully fulfill their
obligation with respect to payment of rentals. Singson Encarnacion contended that the lease had
always and since the beginning been upon a month-to-month basis.

ISSUE:
Was it tenable for Singson Encarnacion to discontinue the lease of Baldomar and her son?

RULING:
The continuance and fulfillment of the contract of lease cannot be made to depend solely and
exclusively upon the free and uncontrolled choice of the lessees between continuing paying the
rentals or not, completely depriving the owner of all say in the matter. The defense of Baldomar
and Fernando would leave to the sole and exclusive will of one of the contracting parties the
validity and fulfillment of the contract of lease, within the meaning of Article 1256 of the Civil
Code. For if this were allowed, so long as the lessee elected to continue the lease by continuing
the payment of the rentals the owner would never be able to discontinue the lease; conversely,
although the owner should desire the lease to continue, the lessee could effectively thwart his
purpose if he should prefer to terminate the contract by the simple expedient of stopping
payment of the rentals.

ELEIZEGUI VS MANILA LAWN TENNIS CLUB

G.R. 967

FACTS:

This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will
of the lessee. By the contract of lease the lessee is expressly authorized to make improvements
upon the land, by erecting buildings of both permanent and temporary character, by making fills,
laying pipes, and making such other improvements as might be considered desirable for the
comfort and amusement of the members.

With respect to the term of the lease the present question has arisen. In its decision three theories
have been presented: One which makes the duration depend upon the will of the lessor, who,
upon one month's notice given to the lessee, may terminate the lease so stipulated; another which,
on the contrary, makes it dependent upon the will of the lessee, as stipulated; and the third, in
accordance with which the right is reversed to the courts to fix the duration of the term.

The first theory is that which has prevailed in the judgment below, as appears from the language
in which the basis of the decision is expressed: "The court is of the opinion that the contract of
lease was terminated by the notice given by the plaintiff on August 28 of last year . . . ." And such
is the theory maintained by the plaintiffs, which expressly rests upon article 1581 of the Civil
Code, the law which was in force at the time the contract was entered into (January 25, 1890).
The judge, in giving to this notice the effect of terminating the lease, undoubtedly considers that it
is governed by the article relied upon by the plaintiffs, which is of the following tenor: "When the
term has not been fixed for the lease, it is understood to be for years when an annual rental has
been fixed, for months when the rent is monthly. . . ." The second clause of the contract provides
as follows: "The rent of the said land is fixed at 25 pesos per month."

ISSUE:
Was there a conventional term, a duration, agreed upon in the contract in question?

RULING:
Yes. The obligations which, with the force of law, the lessors assumed by the contract entered
into, so far as pertaining to the issues, are the following: "First. . . . They lease the above-
described land to Mr. Williamson, who takes it on lease . . . for all the time the members of the
said club may desire to use it . . . Third. . . . the owners of the land undertake to maintain the club
as tenant as long as the latter shall see fit, without altering in the slightest degree the conditions of
this contract, even though the estate be sold."

In view of these clauses, it can not be said that there is no stipulation with respect to the duration
of the lease, or that, notwithstanding these clauses, article 1581, in connection with article 1569,
can be applied. If this were so, it would be necessary to hold that the lessors spoke in vain that
their words are to be disregarded a claim which can not be advanced by the plaintiffs nor upheld
by any court without citing the law which detracts all legal force from such words or despoils
them of their literal sense.

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA

SANTOS Y CANON FAUSTINO,deceased, plaintiff-appellant, vs.
LUI SHE in her own behalf and as administratrix of the intestate estate ofWong
Heng, deceased, defendant-appellant.
CASTRO,J. ; September 12, 1967

FACTS:
1. Justina Santos y Canon Faustino (aka Lola Jmy nickname not the cases :P) and her sister
Lorenza were the owners in common of a piece of land in Manila. (They are 2 very rich old maid
doas.) In it are 2 residential houses with entrance on Florentino Torres street and the Hen Wah
Restaurant with entrance on Rizal Avenue.
2. The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the
restaurant. Wong had been a long-time lessee of a portion of the property, having a monthly rental
of P2, 620.
3. September 22, 1957: Lola J became the owner of the entire property as Lorenza died with no
other heir. At that time, she was already 90 years old, blind, crippled and an invalid, she was left
with no other relative to live with, but she was taken cared of by Wong. (BONUS INFO: Lola had
17 dogs and 8maids naman with her. :P)
4. November 15, 1957: Lola J executed a contract of lease in favour of Wong for the "grateful
acknowledgment of the personal services of the Lessee to her," (Note: Wong was the one who
managed her affairs like checking Lola JS account to pay for the maids and pay for dog food.
His 4 kids also frequently visited her. She also believed that Wong saved her and Lorenza from
the fire after the liberation of Manila but a witness said they were actually saved by 2 other guys.)
5. This contract covering the portion was then already leased to him and another portion fronting
Florentino Torres street. The lease was for 50 years, although the lessee was given the right to
withdraw at any time from the agreement; the monthly rental was P3, 120. 10 days later
(November 25), the contract was amended so as to make it cover the entire property, including the
portion on which the house of Justina Santos stood, at an additional monthly rental of P360.
6. December 21: she executed contract giving Wong the option to buy the leased premises
for P120K payable within 10 years at a monthly installment of P1K. The option was conditioned
on his obtaining Philippine citizenship, a petition for which was then pending in the CFI Rizal.
7. November 18, 1958: she executed 2 other contracts, one extending the term of the lease to 99
years, and another fixing the term of the option at 50 years. Both contracts are written in Tagalog.
In 2 wills executed on August 24 and 29, 1959, she bade her legatees to respect the contracts she
had entered into with Wong, but in a codicil of a later date (November 4, 1959) she appears to
have a change of heart. Claiming that the various contracts were made by her because of
machinations and inducements practised by him, she now directed her executor to secure the
annulment of the contracts.
8. Both parties however died, Wong Heng on October 21, 1962 and Lola J on December 28,
1964. Wong was substituted by his wife, Lui She, the other defendant in this case, While
Lola J was substituted bythe Philippine Banking Corporation (PBC). Lola J maintained
now reiterated by the PBC that the lease contract should have been annulled along
with the four other contracts because it lacks mutuality, among others
9. Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this
agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which
provides that "the contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them.
10. RTC: Contracts are null and void except for the Nov. 15, 1957 lease contract.

11. Pets arguments:

1) The contracts were obtained by Wong through fraud, misrepresentation, inequitable
conduct, undue influence and abuse of confidence and trust and by taking advantage of
the helplessness of the plaintiff were made to circumvent the consti. Prohibition re: aliens
acquiring lands in the Phil and also of the Phil. Naturalization laws (Note: there was a
time Lola J wanted to adopt Wong to speed up the process.)
2) lease contract should also be annulled because it lacks mutuality; because it included a
portion which, at the times, was in custodial legis because the contract was obtained in
violation of the fiduciary relations of the parties, and that the contract was absolutely
simulated (undue influence, etc.)
12. Respondents arguments:
Lola Js trust wasnt taken advantage of in order to secure the execution of the contracts.
Still, he admitted that he did enjoy her trust and confidence proof of which are the sums
of P3K that she entrusted to him for safekeeping and P22K that was deposited in their
joint account that she head with one of her maids.

ISSUES/ HELD:
(Note: all of these refer to void contracts but the commentary expounds on the alien issue since it was this that made
the contract trulyVOID.)
1. WON the contracts are void for trying to circumvent Philippine Constitution against alienation
of property to foreigners? YES.

The contract of lease cannot be sustained. Yes, a lease to an alien for a reasonable period is valid,
so was an option giving an alien the right to buy real property on condition that he is granted
Philippine citizenship. But if an alien was given not only a lease of, but also an option to buy, a
piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his
property, this to last for 50 years, then it became clear that the arrangement was a virtual
transfer of ownership whereby the owner divested himself in stages notonly of the right to
enjoy the land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to
dispose of it (jus disponendi) rights the sum total of which make up ownership. It was just
as if today the possession is transferred, tomorrow, the use, the next day, the disposition, and so
on, until ultimately all the rights of which ownership is made up are consolidated in an alien. And
yet this was just exactly what the parties in this case did within this pace of one year, with the
result that Lola J's ownership of her property was reduced to a hollow concept.

2. WON the insertion in the contract of a resolutory condition (lessee may at any time withdraw
from the agreement), valid? YES.

In the early case of Taylor vs. Uy Tiong Piao, the SC said:Art.1256 [now art. 1308] of the Civil
Code in our opinion creates no impediment to the insertion in a contract for personal service of a
resolutory condition permitting the cancellation of the contract by one of the parties. Such a
stipulation, as can be readily seen, does not make either the validity or the fulfillment of the
contract dependent upon the will of the party to whom is conceded the privilege of cancellation;
for where the contracting parties have agreed that such option shall exist, the exercise of the
option is as much in the fulfillment of the contract as any other act which may have been the
subject of agreement. Indeed, the cancellation of a contract in accordance with conditions
agreed upon beforehand is fulfillment. Also, here, the right of Wong to terminate the contract
depends on the terms stipulated so its not really based on his sole will. At any rate, even if no
term had been fixed in the agreement, this case would at most justifythe fixing of a period but not
the annulment of the contract.

3. WON the contract is void because the property cannot be leased for being in custodio legis?
NO.

Lola J was already the owner of the property and not Lorenza so she can lease the property to
whoever she wants.

4. WON the contracts are void for violating the fiduciary relationship? NO.

Wong was never an agent of Lola J even if they were super close. Atty. Yumol, (counsel for Lola
J), admitted that Lola Js close fellow Lola friend and maid were always by her side and they
could have testified to whatever undue influence but they were not presented as witnesses. And
besides, Lola J was firm in her decision in signing the contract because she believes Wong saved
her life.

5. WON Lola Js consent was valid? YES.

She was well-informed by her lawyer about the possible dangers of the contract and she still gave
her consent voluntarily.
DISPOSITION:
The contracts in question are annulled and set aside; the land subject-matter of the contracts was ordered returned to
theestate of Justina Santos as represented by the Philippine Banking Corporation.

Lim vs. People, 133 SCRA 333 , No. L-34338, November 21, 1984
G.R. No. L-34338 November 21, 1984

LOURDES VALERIO LIM, petitioner,

vs.
PEOPLE OF THE PHILIPPINES, respondent.

RELOVA, J.:

Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and was sentenced "to
suffer an imprisonment of four (4) months and one (1) day as minimum to two (2) years and four
(4) months as maximum, to indemnify the offended party in the amount of P559.50, with
subsidize imprisonment in case of insolvency, and to pay the costs." (p. 14, Rollo)
From this judgment, appeal was taken to the then Court of Appeals which affirmed the decision
of the lower court but modified the penalty imposed by sentencing her "to suffer an indeterminate
penalty of one (1) month and one (1) day of arresto mayor as minimum to one (1) year and one
(1) day of prision correccional as maximum, to indemnify the complainant in the amount of
P550.50 without subsidiary imprisonment, and to pay the costs of suit." (p. 24, Rollo)
The question involved in this case is whether the receipt, Exhibit "A", is a contract of agency to
sell or a contract of sale of the subject tobacco between petitioner and the complainant, Maria de
Guzman Vda. de Ayroso, thereby precluding criminal liability of petitioner for the crime charged.

The findings of facts of the appellate court are as follows: (FACTS)

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

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

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

In this petition for review by certiorari, Lourdes Valerio Lim poses the following questions of
law, to wit: (ISSUES)
1. Whether or not the Honorable Court of Appeals was legally right in holding that the foregoing
document (Exhibit "A") "fixed a period" and "the obligation was therefore, immediately
demandable as soon as the tobacco was sold" (Decision, p. 6) as against the theory of the
petitioner that the obligation does not fix a period, but from its nature and the circumstances it
can be inferred that a period was intended in which case the only action that can be maintained is
a petition to ask the court to fix the duration thereof;
2. Whether or not the Honorable Court of Appeals was legally right in holding that "Art. 1197 of
the New Civil Code does not apply" as against the alternative theory of the petitioner that the
fore. going receipt (Exhibit "A") gives rise to an obligation wherein the duration of the period
depends upon the will of the debtor in which case the only action that can be maintained is a
petition to ask the court to fix the duration of the period; and
3. Whether or not the honorable Court of Appeals was legally right in holding that the foregoing
receipt is a contract of agency to sell as against the theory of the petitioner that it is a contract of
sale. (pp. 3-4, Rollo)

(HELD)
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be
turned over to the complainant as soon as the same was sold, or, that the obligation was
immediately demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New
Civil Code, which provides that the courts may fix the duration of the obligation if it does not fix
a period, does not apply.

Anent the argument that petitioner was not an agent because Exhibit "A" does not say that she
would be paid the commission if the goods were sold, the Court of Appeals correctly resolved the
matter as follows:
... Aside from the fact that Maria Ayroso testified that the appellant asked her to be her
agent in selling Ayroso's tobacco, the appellant herself admitted that there was an
agreement that upon the sale of the tobacco she would be given something. The appellant
is a businesswoman, and it is unbelievable that she would go to the extent of going to
Ayroso's house and take the tobacco with a jeep which she had brought if she did not
intend to make a profit out of the transaction. Certainly, if she was doing a favor to Maria
Ayroso and it was Ayroso who had requested her to sell her tobacco, it would not have
been the appellant who would have gone to the house of Ayroso, but it would have been
Ayroso who would have gone to the house of the appellant and deliver the tobacco to the
appellant. (p. 19, Rollo)

The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be
given to complainant as soon as it was sold, strongly negates transfer of ownership of the goods
to the petitioner. The agreement (Exhibit "A') constituted her as an agent with the obligation to
return the tobacco if the same was not sold.

ACCORDINGLY, the petition for review on certiorari is dismissed for lack of merit. With
costs.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr. and De la Fuente, JJ., concur. .
ARANETA VS PHIL. SUGAR ESTATES DEVELOPMENT CO. 20 SCRA 330

FACTS:
J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, and on July 28,
1950, [through Gregorio Araneta, Inc.] sold a portion thereof to Philippine Sugar Estates
Development Co., Ltd. The parties stipulated, among in the contract of purchase and sale with
mortgage, that the buyer will build on the said parcel land the Sto. Domingo Church and Convent
while the seller for its part will construct streets.

But the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable to finish the
construction of the street in the Northeast side because a certain third-party, by the name of
Manuel Abundo, who has been physically occupying a middle part thereof, refused to vacate the
same;

Both buyer and seller know of the presence of squatters that may hamper the construction of the
streets by the seller.

On May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its complaint against J. M.
Tuason & Co., Inc., and instance, seeking to compel the latter to comply with their obligation, as
stipulated in the above-mentioned deed of sale, and/or to pay damages in the event they failed or
refused to perform said obligation.

The lower court and the appellate court ruled in favor of Phil. Sugar estates, and gave 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".

Gregorio Araneta, Inc. resorted to a petition for review by certiorari to this Court.

ISSUES:
Was there a period fixed?

RULING:
Yes. The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines
is sought to be justified on the basis that petitioner (defendant below) placed the absence of a
period in issue by pleading in its answer that the contract with respondent Philippine Sugar
Estates Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within
which to comply with its obligation to construct and complete the streets."

If the contract so provided, then there was a period fixed, a "reasonable time;" and all that the
court should have done was to determine if that reasonable time had already elapsed when suit
was filed if it had passed, then the court should declare that petitioner had breached the contract,

Was it within the powers of the lower court to set the performance of the obligation in two years
time?

NO. Even on the assumption that the court should have found that no reasonable time or no
period at all had been fixed (and the trial court's amended decision nowhere declared any such
fact) still, the complaint not having sought that the Court should set a period, the court could
not proceed to do so unless the complaint included it as first amended;

Granting, however, that it lay within the Court's power to fix the period of performance, still the
amended decision is defective in that no basis is stated to support the conclusion that the period
should be set at two years after finality of the judgment. The list paragraph of Article 1197
is clear that the period cannot be set arbitrarily. The law expressly prescribes that the Court shall
determine such period as may under the circumstances been probably contemplated by the
parties.

It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court
must first determine that "the obligation does not fix a period" (or that the period is made to
depend upon the will of the debtor)," but from the nature and the circumstances it can be inferred
that a period was intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the Court
must then proceed to the second step, and decide what period was "probably contemplated by the
parties" (Do., par. 3). So that, ultimately, the Court can not fix a period merely because in its
opinion it is or should be reasonable, but must set the time that the parties are shown to have
intended. As the record stands, the trial Court appears to have pulled the two-year period set in its
decision out of thin air, since no circumstances are mentioned to support it. Plainly, this is not
warranted by the Civil Code.

Does reasonable time mean that the date of performance would be indefinite?
The Court of Appeals objected to this conclusion that it would render the date of performance
indefinite. Yet, the circumstances admit no other reasonable view; and this very indefiniteness is
what explains why the agreement did not specify any exact periods or dates of performance.