wherein the parties agreed that the lessee could stay on the leased
Naga Telephone Co., Inc. (NATELCO) v CA
Types of conditions: as to cause: casual
Doctrine: The contract is subject to mixed conditions, that is, they
depend partly on the will of the debtor and partly on chance, hazard or
the will of a third person, which do not invalidate the subject provision.
Facts: On November 1, 1977, the parties entered into a contract for the
use by petitioners in the operation of its telephone service the electric
light posts of private respondent in Naga City. In consideration therefor,
petitioners agreed to install, free of charge, 10 telephone connections for
the use by private respondent in several places. Said contract also
provided: (a) That the term or period of this contract shall be as long as
the party of the first part has need for the electric light posts of the party
of the second part it being understood that this contract shall terminate
when for any reason whatsoever, the party of the second part is forced
to stop, abandoned [sic] its operation as a public service and it becomes
necessary to remove the electric lightpost;
After the contract had been enforced for over 10 years, private
respondent filed on January 2, 1989 with the RTC against petitioners for
reformation of the contract with damages, on the ground, among others,
that it is too one-sided in favor of petitioners.
RTC ruled in favor of private respondent. While the contract appeared
to be fair to both parties when it was entered into, it had become
disadvantageous and unfair to private respondent because of
subsequent events and conditions.
CA held that the subject stipulation is invalid for being purely potestative
on the part of petitioner as it leaves the continued effectivity of the
agreement to the latter's sole and exclusive will as long as private
respondent is in operation. A similar provision in a contract of lease
premises "for as long as the defendant needed the premises and can
meet and pay said increases" was held by SC as invalid for being "a
purely potestative condition because it leaves the effectivity and
enjoyment of leasehold rights to the sole and exclusive will of the lessee."
Further held SC: The continuance, effectivity and fulfillment of a
contract of lease cannot be made to depend exclusively upon the free and
uncontrolled choice of the lessee between continuing the payment of the
rentals or not, completely depriving the owner of any say in the matter.
Mutuality does not obtain in such a contract of lease of no equality exists
between the lessor and the lessee since the life of the contract is dictated
solely by the lessee. According to CA, the same can also be said of the
agreement. There is no mutuality and equality between them under the
subject provision since the life and continuity of said agreement is made
to depend as long as petitioner needs private respondents electric posts.
Issue: Whether or not the contract was subject to a potestative
condition that is void.
Ruling: No. Petitioners allege that there is nothing purely potestative
about the prestations of either party because petitioner's permission for
free use of telephones is not made to depend purely on their will, neither
is private respondent's permission for free use of its posts dependent
purely on its will.
Petitioners' allegations must be upheld in this regard. A potestative
condition is a condition, the fulfillment of which depends upon the sole
will of the debtor, in which case, the conditional obligation is void. Based
on this definition, respondent court's finding that the provision in the
contract is a potestative condition, is correct. However, it must have
overlooked the other conditions in the same provision, to wit:
. . . it being understood that this contract shall terminate when for any
reason whatsoever, the party of the second part (private respondent) is
forced to stop, abandoned (sic) its operation as a public service and it
becomes necessary to remove the electric light post (sic);
which are casual conditions since they depend on chance, hazard, or the
will of a third person. In sum, the contract is subject to mixed
conditions, that is, they depend partly on the will of the debtor and partly
on chance, hazard or the will of a third person, which do not invalidate
the aforementioned provision.
Osmena v Rama (1909)
14 Phil 99 (1909)
TOPIC: Types of Conditions; As to cause or Origin; mixed
(PS: this is the case itself, maikli na sya to digest)
It appears from the record that upon the 15th day of November, 1890,
the defendant herein executed and delivered to Victoriano Osmea the
following contract.
"EXHIBIT A.
P200.00.
"CEBU, November 15, 1890.
"I, Doa Cenona Rama, a resident of this city, and of legal age, have
received from Don Victoriano Osmea the sum of two hundred pesos in
cash which I will pay in sugar in the month of January or February of the
coming year, at the price ruling on the day of delivering the sugar into
his warehouses, and I will pay him interest at the rate of half a cuartillo
per month on each peso, beginning on this date until the day of the
settlement; and if I can not pay in full, a balance shall be struck, showing
the amount outstanding at the end of each June, including interest, and
such balance as may be outstanding against me shall be considered as
capital which I will always pay in sugar, together with the interest
mentioned above. I further promise that I will sell to the said Seor
Osmea all the sugar that I may harvest, and as a guarantee, pledge as
security all of my present and future property, and as special security the
house with tile roof and ground floor of stone in which I live in Pagina;
in proof whereof, I sign this document, and he shall be entitled to make
claim against me at the expiration of the term stated in this document.
(Signed) "CENONA RAMA.
"Witnesses:
"FAUSTO PEALOSA.
"FRANCISCO MEDALLE."
On the 27th day of October, 1891, the defendant executed and delivered
to the said Victoriano Osmea the following contract:
"EXHIBIT B.
"CEBU, October 27, 1891.
"On this date I have asked for a further loan and have received from Don
Victoriano Osmea the sum of seventy pesos in cash, fifty pesos of which
I have loaned to Don Evaristo Peares, which we will pay in sugar in the
month of January of the coming year according to the former
conditions.
(Signed) "CENONA RAMA.
"FROM Don Evaristo Peares P50
"Doa Cenona Rama 20
____
P70
"Received Evaristo Peares."
Some time after the execution and delivery of the above contracts, the
said Victoriano Osmea died. In the settlement and division of the
property of his estate the above contracts became the property of one of
his heirs, Agustina Rafols. Later, the date does not appear, the said
Agustina Rafols ceded to the present plaintiff all of her right and interest
in said contracts.
On the 15th day of March, 1902, the plaintiff presented the contracts to
the defendant for payment and she acknowledged her responsibility
upon said contracts by an indorsement upon them in the following
language:jgc:chanrobles.com.ph
"EXHIBIT C.
"CEBU, March 15, 1902.
"On this date I hereby promise, in the presence of two witnesses, that, if
the house of strong materials in which I live in Pagina is sold, I will pay
my indebtedness to Don Tomas Osmea as set forth in this document.
(Signed) "CENONA RAMA."
The defendant not having paid the amount due on said contracts; the
plaintiff, upon the 26th day of June, 1906, commenced the present
action in the Court of First Instance of the Province of Cebu. The
complaint filed in said cause alleged the execution and delivery of the
above contracts, the demand for payment, and the failure to pay on the
part of the defendant, and the prayer for a judgment for the amount due
on the said contracts. The defendant answered by filing a general denial
and setting up the special defense of prescription.
The case was finally brought on to trial in the Court of First Instance,
and the only witness produced during the trial was the plaintiff himself.
The defendant did not offer any proof whatever in the lower court.
After hearing the evidence adduced during the trial, the lower court
rendered a judgment in favor of the plaintiff and against the defendant
for the sum of P200 with interest at the rate of 18 3/4 per cent per
annum, from the 15th day of November, 1890, and for the sum of P20,
with interest at the rate of 18 3/4 per cent per annum, from the 27th day
of October, 1891, until the said sums were paid. From this judgment the
defendant appealed.
The lower court found that P50 of the P70 mentioned in Exhibit B had
not been borrowed by the defendant, but by one Evaristo Peares;
therefore the defendant had no responsibility for the payment of the said
P50.
The only questions raised by the appellant were questions of fact. The
appellant alleges that the proof adduced during the trial of the cause was
not sufficient to support the findings of the lower court. It was suggested
during the discussion of the case in this court that, in the
acknowledgment above quoted of the indebtedness made by the
defendant, she imposed the condition that she would pay the obligation
if she sold her house. If that statement found in her acknowledgment of
the indebtedness should be regarded as a condition, it was a condition
which depended upon her exclusive will, and is, therefore, void. (Art.
1115, Civil Code.) The acknowledgment, therefore, was an absolute
acknowledgment of the obligation and was sufficient to prevent the
statute of limitation from barring the action upon the original contract.
We are satisfied, from all of the evidence adduced during the trial, that
the judgment of the lower court should be affirmed. So ordered.
Smith, Bell & Co. v Sotelo Matti (1992)
Topic: Kinds of Obligation; According to Demandability;
Conditional Obligations; As to cause or origin; Mixed
Doctrine: 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.
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 SanFrancisco in the month of September 1918 or
as soon as possible, and (3) two electric motors with approximate
delivery within ninety days. This is not 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.
Rustan Pulp v IAC (1992)
214 SCRA 665 (1992)
Doctrine: A condition which is both potestative (or facultative) and
resolutory may be valid, even though the saving clause is left to the will
of the obligor.
Facts: Petitioner Rustan established a pulp and paper mill in Baloi,
Lano del Norte. Respondent Lluch, who is a holder of a forest products
license, transmitted a letter to petitioner Rustan for the supply of raw
materials by the former to the latter. In response thereto, petitioner
Rustan proposed, among other things, in the letter-reply:
o That the contract to supply is not exclusive because Rustan
shall have the option to buy from other suppliers who are
qualified and holder of appropriate government authority
or license to sell and dispose pulp wood.
These prefatory business proposals culminated in the execution, during
the month of April, 1968, of a contract of sale whereby Romeo A. Lluch
agreed to sell, and Rustan Pulp and Paper Mill, Inc. undertook to pay the
price of P30.00 per cubic meter of pulp wood raw materials to be
delivered at the buyer's plant in Baloi, Lanao del Norte. Of pertinent
significance to the issue at hand are the following stipulations in the
bilateral undertaking:
o That BUYER shall have the option to buy from other
SELLERS who are equally qualified and holders of
appropriate government authority or license to sell or
dispose, that BUYER shall not buy from any other seller
whose pulp woods being sold shall have been established
to have emanated from the SELLER'S lumber and/or
firewood concession
o And that SELLER has the priority to supply the
pulp wood materials requirement of the BUYER;
o That the BUYER shall have the right to stop delivery of the
said raw materials by the seller covered by this contract
when supply of the same shall become sufficient until such
time when need for said raw materials shall have become
necessarily provided, however, that the SELLER is given
sufficient notice.
In the installation of the plant facilities, the technical staff of Rustan
Pulp and Paper Mills, Inc. recommended the acceptance of deliveries
from other suppliers of the pulp wood materials for which the
corresponding deliveries were made. But during the test run of the pulp
mill, the machinery line thereat had major defects while deliveries of the
raw materials piled up, which prompted the Japanese supplier of the
machinery to recommend the stoppage of the deliveries. The suppliers
were informed to stop deliveries and the letter of similar advice sent by
petitioners to private respondents.
Private respondent Romeo Lluch sought to clarify the tenor of the letter
as to whether stoppage of delivery or termination of the contract of sale
was intended, but the query was not answered by petitioners. This
alleged ambiguity notwithstanding, Lluch and the other suppliers
resumed deliveries after the series of talks between Romeo S. Vergara
and Romeo Lluch.
On January 23, 1969, the complaint for contractual breach was filed
which, but was dismissed. Respondent Court found it ironic that
petitioners had to exercise the prerogative regarding the stoppage of
deliveries via the letter addressed to Iligan Diversified Project, Inc. on
September 30, 1968 because petitioners never really stopped accepting
deliveries from private respondents until December 23, 1968.
Issue: Whether or not the petitioner can validly stop accepting
deliveries from private respondents.
Ruling: Insofar as the express discretion on the part of petitioners is
concerned regarding the right of stoppage, the court ruled that there is
clear basis for private respondent's concern on the deceptive
continuation of deliveries inasmuch as the prerogative suggests a
condition solely dependent upon the will of petitioners.
Petitioners can stop delivery of pulp wood from private respondents if
the supply at the plant is sufficient as ascertained by petitioners, subject
to re-delivery when the need arises as determined likewise by
petitioners. Legal jurisprudence that a condition which is both
potestative (or facultative) and resolutory may be valid, even though the
saving clause is left to the will of the obligor. However, it cannot be
applied in this case because the petitioners continue to accept deliveries
from other sources.
According to the court, a purely potestative imposition of this
character must be obliterated from the face of the contract
without affecting the rest of the stipulations considering that
the condition relates to the fulfillment of an already existing
obligation and not to its inception. However, the petitioners are of
the impression that the letter dated September 30, 1968 sent to private
respondents is well within the right of stoppage guaranteed to them by
paragraph 7 of the contract of sale which was construed by petitioners to
be a temporary suspension of deliveries. There is no doubt that the
contract speaks loudly about petitioners' prerogative but what
diminishes the legal efficacy of such right is the condition attached to it
which, as aforesaid, is dependent exclusively on their will for which
reason, We have no alternative but to treat the controversial stipulation
as inoperative (Article 1306, New Civil Code). It is for this same reason
that the court are not inclined to follow the interpretation of petitioners
that the suspension of delivery was merely temporary since the nature
of the suspension itself is again conditioned upon petitioner's
determination of the sufficiency of supplies at the plant.
The court also dismissed petitioners' exculpation grounded on
frustration of the commercial object under Article 1267 of the New Civil
Code, because petitioners continued accepting deliveries from the
suppliers. This conduct will estop petitioners from claiming that the
breakdown of the machinery line was an extraordinary obstacle to their
compliance to the prestation. It was indeed incongruous for petitioners
to have sent the letters calling for suspension and yet, they in effect
disregarded their own advice by accepting the deliveries from the
suppliers. The demeanor of petitioners along this line was sought to be
justified as an act of generous accommodation, which entailed greater
loss to them and "was not motivated by the usual businessman's
obsession with profit" (Page 34, Petition; Page 40, Rollo). Altruism may
be a noble gesture but petitioners' stance in this respect hardly inspires
belief for such an excuse is inconsistent with a normal business
enterprise which takes ordinary care of its concern in cutting down on
expenses (Section 3, (d), Rule 131, Revised Rules of Court). Knowing
fully well that they will encounter difficulty in producing output because
of the defective machinery line, petitioners opted to open the plant to
greater loss, thus compounding the costs by accepting additional supply
to the stockpile. Verily, the petitioner's action when they acknowledged
that "if the plant could not be operated on a commercial scale, it would
then be illogical for defendant Rustan to continue accepting deliveries of
raw materials."
Romero v CA (1995)
Vitug, J.
Re: mixed condition
DOCTRINE: Mixed condition is dependent not on the will of the
vendor alone but also of third persons like the squatters and
government agencies and personnel concerned.
FACTS: Romero, a civil engineer, was engaged in the business of
production, manufacture and exportation of perlite filter aids, permalite
insulation and processed perlite ore. In 1988, he decided to put up a
central warehouse in Metro Manila. Flores and his wife offered a parcel
of land measuring 1,952 square meters. The lot was covered in a TCT in
the name of private respondent Enriqueta Chua vda. de Ongsiong.
Petitioner visited the property and, except for the presence of squatters
in the area, he found the place suitable for a central warehouse. Flores
called on petitioner with a proposal that should he advance the amount
of P50,000.00 which could be used in taking up an ejectment case
against the squatters, private respondent would agree to sell the
property for only P800/square meter. Romero agreed.
Later, a "Deed of Conditional Sale" was executed between Flores and
Ongsiong. Purchase price = P1,561,600.00; Down payment = P50K;
Balance = to be paid 45 days after the removal of all the squatters; upon
full payment, Ongsiong shall execute deed of absolute sale in favor of
Romero.
Ongsiong sought to return the P50,000.00 she received from petitioner
since, she said, she could not "get rid of the squatters" on the lot. She
opted to rescind the sale in view of her failure to get rid of the squatters.
Regional Trial Court of Makati rendered decision holding that private
respondent had no right to rescind the contract since it was she who
"violated her obligation to eject the squatters from the subject property"
and that petitioner, being the injured party, was the party who could,
under Article 1191 of the Civil Code, rescind the agreement.
ISSUE: Is there a perfected contract of sale?
HELD: YES. A sale is at once perfected when a person (the seller)
obligates himself, for a price certain, to deliver and to transfer ownership
of a specified thing or right to another (the buyer) over which the latter
agrees. (BILATERAL and RECIPROCAL CHARACTERISTIC OF SALE).
In determining the real character of the contract, the title given to it by
the parties is not as much significant as its substance. For example, a
deed of sale, although denominated as a deed of conditional sale, may
be treated as absolute in nature, if title to the property sold is not
reserved in the vendor or if the vendor is not granted the right to
unilaterally rescind the contract predicated on the fulfillment or non-
fulfillment, as the case may be, of the prescribed condition. From the
moment the contract is perfected, the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with
good faith, usage and law. Under the agreement, private respondent is
obligated to evict the squatters on the property. The ejectment of the
squatters is a condition the operative act of which sets into motion the
period of compliance by petitioner of his own obligation, i .e to pay the
balance of the purchase price. Private respondents failure "to remove
the squatters from the property" within the stipulated period gives
petitioner the right to either refuse to proceed with the agreement or
waive that condition in consonance with Article 1545 of the Civil Code.
This option clearly belongs to petitioner and not to private respondent.
There was no potestative condition on the part of Ongsiong but a
"mixed" condition "dependent not on the will of the vendor alone but
also of third persons like the squatters and government agencies and
personnel concerned."
Roman Catholic Archbishop v CA
Types of conditions: As to possibility possible and
impossible
Doctrine: The prohibition in the deed of donation against the
alienation of the property for 100 years, being an unreasonable
emasculation and denial of an integral attribute of ownership, should
be declared as an illegal or impossible condition within the
contemplation of Article 727. Thus, as stated in said statutory
provision, such condition shall be considered as not imposed.
Facts: On November 29, 1984, private respondents filed a complaint for
nullification of deed of donation, rescission of contract and
reconveyance of real property with damages against petitioners
Florencio and Soledad Ignao and the Roman Catholic Bishop of Imus,
Cavite, together with the Roman Catholic Archbishop of Manila, before
the RTC. Private respondents alleged that on August 23, 1930, the
spouses Eusebio de Castro and Martina Rieta executed a deed of
donation in favor of Roman Catholic Archbishop of Manila covering a
parcel of land. The deed of donation provides that the donee shall not
dispose or sell the property within 100 years from the execution of the
deed of donation, otherwise a violation of such condition would render
ipso facto null and void the deed of donation and the property would
revert to the estate of the donors. On June 30, 1980, while still within
the prohibitive period to dispose of the property, petitioner Roman
Catholic Bishop of Imus executed a deed of absolute sale of the property
in favor of petitioners Ignao.
It is the contention of petitioners that the cause of action of private
respondents has already prescribed, invoking Article 764 of the Civil
Code which provides that "(t)he donation shall be revoked at the
instance of the donor, when the donee fails to comply with any of the
conditions which the former imposed upon the latter," and that "(t)his
action shall prescribe after four years from the non-compliance with the
condition, may be transmitted to the heirs of the donor, and may be
exercised against the donee's heirs.
Issue: Whether or not the condition that the property donated should
not be sold within a period of 100 years from the date of execution of the
deed of donation is valid.
Ruling: No. Said condition constitutes an undue restriction on the
rights arising from ownership of petitioners and is, therefore, contrary
to public policy.
Donation, as a mode of acquiring ownership, results in an effective
transfer of title over the property from the donor to the donee. Once a
donation is accepted, the donee becomes the absolute owner of the
property donated. Although the donor may impose certain conditions in
the deed of donation, the same must not be contrary to law, morals, good
customs, public order and public policy. The condition imposed in the
deed of donation constitutes a patently unreasonable and undue
restriction on the right of the donee to dispose of the property donated,
which right is an indispensable attribute of ownership. Such a
prohibition against alienation, in order to be valid, must not be
perpetual or for an unreasonable period of time.
Certain provisions of the Civil Code illustrative of the aforesaid policy
may be considered applicable by analogy. Under the third paragraph of
Article 494, a donor or testator may prohibit partition for a period which
shall not exceed 20 years. Article 870 declares that the dispositions of
the testator declaring all or part of the estate inalienable for more than
20 years are void.
It is significant that the provisions therein regarding a testator also
necessarily involve, in the main, the devolution of property by gratuitous
title hence, as is generally the case of donations, being an act of liberality,
the imposition of an unreasonable period of prohibition to alienate the
property should be deemed anathema to the basic and actual intent of
either the donor or testator. For that reason, the regulatory arm of the
law is or must be interposed to prevent an unreasonable departure from
the normative policy expressed in Articles 494 and 870 of the Code.
The prohibition in the deed of donation against the alienation of the
property for an entire century, being an unreasonable emasculation and
denial of an integral attribute of ownership, should be declared as an
illegal or impossible condition within the contemplation of Article 727.
Consequently, as specifically stated in said statutory provision, such
condition shall be considered as not imposed. No reliance may
accordingly be placed on said prohibitory paragraph in the deed of
donation. The net result is that, absent said proscription, the deed of sale
supposedly constitutive of the cause of action for the nullification of the
deed of donation is not in truth violative of the latter hence, for lack of
cause of action, the case for private respondents must fail.
Araneta v Phil. Sugar Estates Development Co. (1967)
20 SCRA 330 (1967)
TOPIC: Obligations with a term. Types of period/term; as to
source
Doctrine: 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
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.
Issue: Whether or not there is a period fixed?
Held: Yes
Ratio: 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,
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?

Was it within the powers of the lower court to set the performance of the The Court of Appeals objected to this conclusion that it would render the
obligation in two years time? date of performance indefinite. Yet, the circumstances admit no other
reasonable view; and this very indefiniteness is what explains why the
NO. Even on the assumption that the court should have found that no agreement did not specify any exact periods or dates of performance.
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