G.R. No.
87047 raised automatically by 20% every three
October 31, 1990
FRANCISCO LAO LIM vs. CA and
BENITO VILLAVICENCIO DY
THE CASE:
CA having affirmed in toto on June 30,
1988 in CA-G.R. SP No. 13925, the
decision of the RTC of Manila, Branch XLVI
in Civil Case No. 87-42719, entitled
"Francisco Lao Lim vs. Benito Villavicencio
Dy," petitioner seeks the reversal of such
affirmance in the instant petition.
FACTS:
The records show that Villavicencio
entered into a contract of lease with
petitioner for a period of three (3) years,
that is, from 1976 to 1979. After the
stipulated term expired, Villavicencio
refused to vacate the premises, hence,
petitioner filed an ejectment suit against
the former in the City Court of Manila,
docketed therein as Civil Case No. 051063-
CV.
The case was terminated by a judicially
approved compromise agreement of the
parties providing in part:
3. That the term of the lease shall be
renewed every 3years retroacting from
October 1979 to October 1982; after
which the abovenamed rental shall be
years for as long as defendant needed the
premises and can meet and pay the said
increases, the defendant to give notice of
his intent to renew sixty (60) days before
the expiration of the term;
By reason of said compromise agreement
the lease continued from 1979 to 1982,
then from 1982 to 1985. On April 17,
1985, petitioner advised Villavicencio that
he would no longer renew the contract
effective October, 1985.
However, on August 5, 1985, Villavicencio
informed petitioner in writing of his
intention to renew the contract of lease for
another term, commencing November,
1985 to October, 1988. In reply to said
letter, petitioner advised Villavicencio that
he did not agree to a renewal of the lease
contract upon its expiration in October,
1985.
On January 15, 1986, because of
Villavicencio's refusal to vacate the
premises, petitioner filed another
ejectment suit, this time with the
Metropolitan Trial Court of Manila. In its
decision of September 24, 1987, said
court dismissed the complaint on the
grounds that:
1 the lease contract has not expired,
being a continuous one the period
whereof depended upon the lessee's
need for the premises and his ability
to pay the rents; and

2 the compromise agreement entered
into in the aforesaid Civil Case No.
051063-CV constitutes res judicata to
the case before it.
Petitioner appealed to the RTC of Manila
which, in its decision of January 28, 1988,
affirmed the decision of the lower court.
CA affirmed RTC and held that:
1 the stipulation in the compromise
agreement which, in its formulation,
allows the lessee to stay on the
premises as long as he needs it and
can pay rents is valid, being a
resolutory condition and, therefore,
beyond the ambit of Article 1308 of
the Civil Code; and
2 that a compromise has the effect
of res judicata.
ISSUE:
Was the stipulation in the compromise
agreement which allows the lessee to stay
on the premises as long as he needs it and
can pay rents is valid?
RULING:
No. The decision of respondent CA is
REVERSED and SET ASIDE.
HELD:
The disputed stipulation "for as long as the
defendant needed the premises and can
meet and pay said increases" is a purely
potestative condition because it leaves
the effectivity and enjoyment of leasehold
rights to the sole and exclusive will of the
lessee.
It is likewise a suspensive condition
because the renewal of the lease, which
gives rise to a new lease, depends upon
said condition. It should be noted that a
renewal constitutes a new contract of
lease although with the same terms and
conditions as those in the expired lease.
RUSTAN V. LLUCH (1992)
G.R. No. 70789
FACTS OF THE CASE:
Sometime in 1966, petitioner Rustan
established a pulp and paper mill in Baloi,
Lanao del Norte. On March 20, 1967,
respondent Lluch, who is a holder of a
forest products license, transmitted a
letter to petitioner Rustan for the supply of
raw materials by the former to the latter.
In response thereto, petitioner Rustan
proposed, among other things, in the
letter-reply:
That the contract supply is not exclusive
because Rustan shall have the option to
buy from other suppliers who are qualified
and holder of appropriate government
authority or license to sell and dispose
pulp wood.
That the BUYER shall have the right to
stop delivery of the said raw materials by
the seller covered by this contract when
supply of the same shall become sufficient
until such time when need for said raw
materials shall have become necessary
provided, however, that the SELLER is
given sufficient notice.
In the installation of the plant facilities and
during the test run of the pulp mill, the
machinery line thereat had major defects
while deliveries of the raw materials piled
up, which prompted the Japanese supplier
of the machinery to recommend the
stoppage of the deliveries. The suppliers
were informed to stop deliveries and the
letter of similar advice sent by petitioners
to private respondents informing that the
supply of raw materials has become
sufficient and petitioners will not need
further delivery from respondents. And the
delivery will stop thirty (30) days from
receipt of the letter.
ISSUE:
WHETHER THE SUSPENDED DELIVERY OF
PULP WOOD MADE BY THE PETITIONER
WAS LAWFUL.
HELD:
No. Petioners decision to suspend taking
delivery of pulp wood from the respondent
Lluch, which was promoted by serious and
unforeseen defects in the mill, was not
lawful exercise of its right under the
contract of sale. This would make the
resumption of the contract purely
dependent on the will of one party --- the
petioners, and they could always claim, as
they did in the instant case, that they
have more than sufficient supply of pulp
wood when in fact they have been
accepting the same from other sources.
Security bank vs CA
Facts: Ferrer was contracted by the SBTC
to construct a bldg in Davao. The contract
provided that it be finished within 200
working days, it was finished upon
stipulated time but additional expenses
were incurred amounting to 300k on top of
the original cost, these expenses were
made known to SBTC and timely demands
for the payment of the increased cost
were done by Ferrer to SBTC, the latter
only recommended that the verified cost is
200k. SBTC contend that in the contract,
should there be any increase in the
expenses, the owner shall equitably make
the appropriate adjustment on mutual
agreement of both parties. Ferrer filed for
damages and the trial court ruled in his
favor, the defendants were ordered to pay.
On appeal, CA affirmed the tcs decision.
Issue: WON SBTC is liable for damages
and payment of the additional expenses.
Held: CA decision AFFIRMED.
Ratio: Art. 22 states that, Every person
who through an act or performance by
another or any other means, acquires or
comes into possession of something at the
expense of the latter without just or legal
ground, shall return the same to him.
It is not denied that private respondent
incurred additional expenses in
constructing petitioner banks bldg due to
a drastic and unexpected in construction
cost. Hence, to allow petitioner bank to
acquire the constructed bldg at a price far
below its actual cost would undoubtedly
constitute unjust enrichment for the bank
to the prejudice of Ferrer, such cannot be
allowed by law.
Romero v. CA
Facts:
Private respondent entered into a
Conditional Deed of Sale with petitioner
over a parcel of land in Paranaque, the
latter advancing P50,000 for the eviction
of squatters therein. An ejectment suit
was then filed by the private respondent
against the squatters. Although
successful, private respondent sought the
return of the downpayment she received
because she could not get rid of the
squatters.
Issue:
May the vendor demand the rescission of
a contract for the sale of a parcel of land
for a cause traceable to his own failure to
have the squatters on the subject property
evicted within the contractually-stipulated
period?
Held:
A perfected contract of sale may either be
absolute or conditionaldepending on
whether the agreement is devoid of, or
subject to, any condition imposed on
the passing of title of the thing to be
conveyed or on the obligation of a party
thereto. When ownership is retained until
the fulfillment of a positive condition the
breach of the condition will simply prevent
the duty to convey title from acquiring
an obligatory force. If the condition is
imposed on anobligation of a party which
is not complied with, the other partymay
either refuse to proceed or waive said
condition. Where, of course, the condition
is imposed upon the perfection of the
contract itself, the failure of such condition
would prevent the juridical relation itself
from coming into existence.
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. The term
"condition" in the context of
aperfected contract of sale pertains, in
reality, to the compliance by one party of
an undertaking the fulfillment of which
would beckon, in turn, the demandability
of the reciprocal prestation of the other
party. The reciprocal obligations referred
to would normally be, in the case of
vendee, the payment of the agreed
purchase price and, in the case of the
vendor, the fulfillment of certain express
warranties (which, in the case at bench is
the timely eviction of the squatters on the
property).
It would be futile to challenge the
agreement here in question as not being a
duly perfected contract. 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. 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. Private respondent's 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.
In contracts of sale particularly, Article
1545 of the Civil Code allows the obligee
to choose between proceeding with the
agreement or waiving the performance of
the condition. Here, evidently, petitioner
has waived the performance of the
condition imposed on private respondent
to free the property from squatters.
The right of resolution of a party to an
obligation is predicated on a breach of
faith by the other party that violates the
reciprocity between them. It is private
respondent who has failed in her
obligation under the contract. Petitioner
did not breach the agreement. He has
agreed, in fact, to shoulder the expenses
of the execution of the judgment in the
ejectment case and to make
arrangements with the sheriff to effect
such execution.