Philippine National Construction Corporation, Petitioner, vs. Court of Appeals, et. al.

FACTS: The case sparked by the petitioners refusal to pay the rentals as stipulated in the contract of lease which was executed sometime in November 1985. The term of the lease reads in part as follows: "commencing on the date of issuance of industrial clearance by the Ministry of Human Settlements" "monthly rate of Php 20,000.00 and shall be increased by five percent (5%) yearly" "shall be paid yearly in advance"

"Property shall be used by the Lessee as the site, grounds and premises of rock crushing plant and field office, sleeping quarters and canteen/mess hall. Furthermore, was granted to erect structures and improvements necessary for or incidental to the Lessee's purpose" "may be terminated by mutual agreement" The petitioner obtained a Temporary Use Permit for the proposed rock crushing project. The private respondent wrote the petitioner requesting payment of the first annual rental. In reply-letter, petitioner argued that payment of rental would commence on the date of issuance of an industrial clearance by the Ministry of Human Settlements, and not from the date of signing of the contract. It then expressed its intention to terminate the contract due to financial, as well as technical, difficulties. However, the private respondent refused to accede to petitioner's request for the pretermination of the lease contract. They insisted on the performance of the obligation and reiterated their demand for payment. The petitioner objected to the respondent's claim and argued that they are only obligated to pay Php 20,000.00 as rental payment for 1 month. The private responded filed a case to the Regional Trial Court against petitioner for specific performance with damages. After due hearing, the trial court rendered a decision ordering petitioner to pay private respondents the amount of Php 492,000.00 which represented the rentals for two years. The petitioner then appealed to the Court of Appeals alleging that the trial court erred in ordering it to pay the private respondent and denying it the right to be heard. The CA affirmed the trial courts decision and the denial of its motion to reconsideration, petitioner alleviated the case to the Supreme Court ascribing the same alleged errors and reiterating their arguments. ISSUE: 1. Whether or not the suspensive condition has been fulfilled and that the lease contract has become operative? 2. Whether or not the petitioner can invoke Article 1266 and the principle of rebus sic stantibus in the case at bar? 3. Whether or not the amount of Php 492,000.00 is excessive? RULING:

The petitioner's contentions were denied by the Supreme Court. First, the petitioner considered the Temporary Use Permit as "Industrial permit" as showed in the petitioner's letter to the private respondent and recognized its obligation to pay rentals counted from the date the permit was issued. It can be deduced that the suspensive condition-issuance of industrial clearance-has already been fulfilled and the lease contract has become operative. Second, the petitioner can not invoke 1266 and the principle of rebus sis stantibus. It is a fundamental rule that contracts, once perfected, bind both the contracting parties, and obligations arising therefrom have the force of law between the parties and should be complied with in good faith. However, the law recognizes exceptions to the principle of obligatory force of contracts. Article 1266 is one of the exceptions, which read: THE DEBTOR IN THE OBLIGATION TO DO SHALL BE RELEASED WHEN THE PRESTATION BECOME LEGALLY OR PHYSICALLY IMPOSSIBLE WITHOUT THE FAULT OF THE OBLIGOR. The petitioner cannot successfully take refuge in the said article, since it is applicable only in obligation to do and not on obligation to give. The obligation to pay rentals falls under obligation to give. The principle of rebus sic stantibus neither fits in with the facts of the case. Under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist, the contract also ceases to exist. In this case, petitioner wants the Court to believe that the abrupt change in political climate and its poor financial condition rendered the performance of the obligation impractical and inimical. However, anent petitioner alleged poor financial condition, the same will neither release the petitioner from the binding effect of the contract of lease. Mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation, nor does it constitute a defense to an action for specific performance.(Central Bank vs. CA) Non-materialization of purpose in entering the contract of lease. As a general principle, the motive of a particular purpose in entering into a contract does not affect the validity nor existence of the contract. Third, the private respondent unquestionably suffered pecuniary losses because of the inability to use the leased premises. Thus, in accordance with article 1659 of the Civil Code, they are entitled to indemnification for damages; and the award of Php492,000.00 is fair and just. Thus, the instant petition is DENIED and the decision of the CA is Affirmed in toto.

Osmena III vs. SSS Facts Osmena III and 4 other members of the Senate and SSS members seek for nullification of the following issuances of Social Security Commission 1. Res. No. 428, July 124, 2004- Swiss Challenge Method approved the sale of the entire equity share of SSS to Equitable PCI bank 2. Res. 485, August 11, 2004 pertains to the timetable and instruction to bidders SSS in order to liquefy its long term investments and diversify them into higher yielding and less volatile investments which includes its shareholdings in EPCIB (Reason: shares in question substantially declined in value and SSS could no longer afford to continue holding on them)In a purchase agreement it was agreed in that SSS will sell all its EPCIB shares to BDO COA and DOJ (in its opinion) approved the agreement Bidding was made subject to the right of BDO Capital to match the highest bid BDO turned out t be the highest bidder Petitioner alleged that BDO to buy EPCIB shares is inconsistent with the idea of public bidding BDO and EPCIB had a merger, all EPCIB shares were transferred to BDO IssueW/N in questioning the alleged resolution can still recover the shares and subject it to a proper bidding process Ruling No, petitioners can no longer recover the shares The obligation to give a determinate thing is extinguished if the object is lost without the fault of the debtor Under the Civil Code, a thing is considered lost when it perishes or disappears on such a way that it cannot be recovered. In the very real sense, the interplay of the ensuing factor: a) the BDO-EPCIB merger and b) the cancellation of subject shares and their replacement by totally new common shares of BDO had rendered the erstwhile 187.84 M EPCIB shares of SSS unrecoverable in the contemplation of Civil Code provision.