Hilltop Market Fish Vendors' Association, Inc vs.

Yaranon
G.R. No. 188057, July 12, 2017

CARPIO, J.:

FACTS:

On 22 June 1974, petitioner Hilltop Market Fish Vendors' Association, Inc.,

represented by its president Gerardo Rillera, and respondent City of Baguio,
represented by its then Mayor Luis Lardizabal, entered into a Contract of Lease over
a lot owned by the City of Baguio located at the Hilltop Market, Baguio City. The
contract provided that the period of lease is 25 years, renewable for the same
period at the option of both parties, and the annual lease rental is ₱25,000, with the
first payment commencing upon the issuance by the City Engineer's Office of the
Certificate of full occupancy of the building to be constructed by Hilltop on the lot.
Before the Certificate is issued, the City of Baguio can continue collecting market fees
from the vendors who are allowed to occupy any portion of the building. At the
termination of the lease period, the City of Baguio will own the building without
payment or reimbursement for Hilltop's costs. Sometime in 1975, Hilltop constructed
the building, on the lot. Even though the City Engineer's Office did not issue a
Certificate, Hilltop's members occupied the building and conducted business in it. On
16 October 1980, the City Council of Baguio issued a Resolution rescinding the
contract of lease with Hilltop, for its continued failure to comply with its obligation
to complete the building. In two Resolutions, the City Council of Baguio reiterated its
resolution to rescind the contract and sought to undertake the completion of the
building. On 20 February 1990, then Mayor Jaime Bugnosen ordered the closure of
the two upper floors of the building based on the City Council's Resolution No. 24,
that the building failed to comply with the minimum sanitary standards under
Presidential Decree No. 856. In a Letter to the Building Official, City Administrator
Leonardo dela Cruz stated that Rillera and his officers would like to discuss the
possibility of completing the necessary requirements for the permit to occupy the
Rillera building. Subsequently, the City Engineer's Office issued its finding that the
two upper floors of the Rillera building were unsafe for occupancy. Thereafter, it
recommended to condemn the building. Sometime in 2003, then Mayor Bernardo
Vergara issued a notice to take over the building. On 28 February 2005, respondent
then Mayor Braulio Yaranon (Yaranon) issued an Administrative Order, ordering the
CBAO and Public Order and Safety Division to immediately close the building to have
it cleaned, sanitized and enclosed; to prevent illegal activities in it; and for its
completion and preparation for commercial use. Hilltop filed with the RTC a
Complaint with Very Urgent Application for Temporary Restraining Order and Writ of
Preliminary Injunction praying that the court issue an injunction against the
implementation of The Administrative Order and order the concerned office to issue
the Certificate to make the contract of lease effective. In their Answer, Yaranon and
respondent Galo Weygan alleged that the Certificate was not issued to Hilltop because
the building was not completed, and there were no provisions for electrical and
plumbing systems or facilities for conduct of regular business. In any case, they
argued that the issuance of the Certificate shall only signal the start of payment of
annual lease rental and not the effectivity of the contract. They further alleged that
even without the Certificate, Hilltop's members occupied the building and conducted
business in it; hence, Hilltop already waived the condition.

ISSUE:

Whether or not the contract of lease commenced

RULING

In a contract of lease, one of the parties binds himself to give to another the
enjoyment or use of a thing for a price certain, and for a period which may be
definite or indefinite. Being a consensual contract, a lease is perfected at the moment
there is a meeting of the minds upon the thing and the cause or consideration
which are to constitute the contract. Thereafter, the lessor is obliged to deliver the
thing which is the object of the contract in such a condition as to render it fit for
the use intended, and the lessee is obliged to use the thing leased as a diligent
father of a family, devoting it to the use stipulated or that which may be inferred
from the nature of the thing leased. In a contract of lease, the cause or essential
purpose is the use and enjoyment of the thing. The thing or subject matter of the
contract in this case was clearly identified and agreed upon as the lot where the
building would be constructed by Hilltop. The consideration were the annual lease
rental and the ownership of the building upon the termination of the lease period.
Considering that Hilltop and the City of Baguio agreed upon the essential elements of
the contract, the contract of lease had been perfected. From the moment that the
contract is perfected, the parties are bound to fulfill what they have expressly
stipulated. Thus, the City of Baguio gave the use and enjoyment of its lot to Hilltop.
Both the RTC and the CA found that upon the execution of the contract on 22 June
1974, Hilltop took possession of the lot and constructed the Rillera building on it.
Thereafter, Hilltop's members occupied the Rillera building and conducted business in
it up to the present. Hilltop is also estopped from claiming that the contract of lease
did not commence since it based its occupancy of the Rillera building on the contract
of lease. Since the contract of lease already commenced, Hilltop has been occupying
the Rillera building even after the termination of the lease period. The contract of
lease provides that the period of lease is 25 years and it is renewable for the same
period at the option of both parties. Based on the findings of the RTC that Hilltop
started occupying the lot in 1974 and 25 years have lapsed without the parties
renewing the contract, the contract of lease is already terminated. Thus, the City of
Baguio is justified in issuing AO No. 30, and in taking over the Rillera building being
its owner under the contract of lease. There is no basis in granting damages to Hilltop.
In a reciprocal contract like a lease, the period must be deemed to have been agreed
upon for the benefit of both parties, absent language showing that the term was
deliberately set for the benefit of the lessee or lessor alone. 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. Mutuality does not
obtain in such a contract of lease and no equality exists between the lessor and the
lessee since the life of the contract would be dictated solely by the lessee.
SALONTE v. COA
G.R. No.207348, August 19, 2014
CIVIL LAW

FACTS:
In 1989, the City of Mandaue (City) and F.F. Cruz and Co., Inc. (F.F. Cruz) entered into
a Contract of Reclamation which was estimated to be finished in six years. During the contract’s
duration, F.F. Cruz is allowed to make improvements in the area, free of rentals, which such
shall be turned over to the City after the construction is finished supported by a Memorandum of
Agreement (MOA). F.F. Cruz constructed houses and a canteen, among others. In 1997, eight
years after the contract was initiated, a road widening project was conducted by the Department
of Public Works and Highways (DPWH), with Samuel Darza as project director. The project
affected the improvements made by F.F. Cruz. Rowena Solante paid an amount of money,
approved by Darza, to F.F. Cruz as payment for the demolition of such improvements. Darza
brought to the attention the Office of the Ombudsman, Visayas, the irregularities conducted in
the implementation of the project, and such was referred to the Commission on Audit (COA).
COA released a report saying that the amount of money paid by DPWH is not for F.F. Cruz
because the latter is no longer the owner of the properties at the time of payment. F.F. Cruz,
Solante, and Darza were held liable for the transaction. F.F. Cruz appealed, and Solante filed
for a motion for reconsideration but such were jointly denied. F.F. Cruz appealed to COA
Central, while the letter-complaint of Darza was upgraded to an Ombudsman case and was
dismissed for lack of merit. COA ruled that ruling in favor of F.F. Cruz will make the government
pay for the cost of the demolished improvements and will defeat the intention of parties as
regards compensation due from the contractor for its use of subject land. COA denied the
motion for reconsideration by saying that despite the fact that the Project was not turned over to
the City, the contention that the ownership of the said improvements would not be acquired yet
by the City would put the entire contract at the mercy of F.F. Cruz, thus, negating the mutuality
of contracts.

ISSUES:
Whether or not the F.F. Cruz is to be paid for the cost of the demolished properties

RULING:
Yes. F.F. Cruz is to be paid for the cost of the demolished properties.
Article 1193 of the Civil Code provides that:
Obligations with a resolutory period take effect at once, but terminate upon arrival
of the day certain.
A day certain is understood to be that which must necessarily come, although it
may not be known when.
If the uncertainty consists in whether the day will come or not, the obligation is
conditional, and it shall be regulated by the rules of the preceding Section.

A plain reading of the Contract of Reclamation reveals that the six (6)-year period
provided for project completion, or, with like effect, termination of the contract was a mere
estimate and cannot be considered a period or a "day certain" in the context of the aforequoted
Art.1193. To be clear, par. 15 of the Contract of Reclamation states: "[T]he project is estimated
to be completed in six (6) years." As such, the lapse of six (6) years from the perfection of the
contract did not, by itself, make the obligation to finish the reclamation project demandable,
such as to put the obligor in a state of actionable delay for its inability to finish. The lapse of six
(6) years from the perfection of the subject reclamation contract could not have automatically
vested Mandaue City, under the MOA, with ownership of the structures.

The Court has held in J Plus Asia Development Corporation v. Utility Assurance
Corporation that, “In this jurisdiction, the following requisites must be present in order that the
debtor may be in default: (1) that the obligation be demandable and already liquidated;(2) that
the debtor delays performance; and (3) that the creditor requires the performance judicially or
extrajudicially.”

In the instant case, the records are bereft of any document whence to deduce that the
City of Mandaue exacted from F.F. Cruz the fulfilment of its obligation under the reclamation
contract. And to be sure, not one of the exceptions to the requisite demand under Art.1169 is
established, let alone asserted.
 FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK INC.,
Petitioners, vs.

SPOUSES CONRADO AND MARIA VICTORIA RONQUILLO, Respondents.

G.R. No. 185798 January 13, 2014

PONENTE: Perez

FACTS:

Petitioner Fil-Estate Properties, Inc. is the owner and developer of the Central
Park Place Tower while co-petitioner Fil-Estate Network, Inc. is its
authorized marketing agent. Respondent Spouses Conrado and Maria Victoria
Ronquillo purchased from petitioners an 82-square meter condominium unit for a pre-
selling contract price of P5,174,000.00. On 29 August 1997, respondents executed and
signed a Reservation Application Agreement wherein they deposited P200,000.00 as
reservation fee. As agreed upon, respondents paid the full downpayment of
P1,552,200.00 and had been paying the P63,363.33 monthly amortizations until
September 1998.

Upon learning that construction works had stopped, respondents likewise

stopped paying their monthly amortization. Claiming to have paid a total of
P2,198,949.96 to petitioners, respondents through two (2) successive letters, demanded
a full refund of their payment with interest. When their demands went unheeded,
respondents were constrained to file a Complaint for Refund and Damages before the
Housing and Land Use Regulatory Board (HLURB). Respondents prayed for
reimbursement/refund of P2,198,949.96 representing the total amortization payments,
P200,000.00 as and by way of moral damages, attorney’s fees and other litigation
expenses.

On 13 June 2002, the HLURB in favor of herein respondents.

The Arbiterconsidered petitioners’ failure to develop the condominium project as a
substantial breach of their obligation which entitles respondents to seek for rescission
with payment of damages. The Arbiter also stated that mere economic hardship is not
an excuse for contractual and legal delay.

ISSUES:

1. Whether or not the Asian financial crisis constitute a fortuitous event which would
justify delay by petitioners in the performance of their contractual obligation;
2. Assuming that petitioners are liable, whether or not 12% interest was correctlyimposed
on the judgment award

HELD:

FIRST ISSUE: NO

The Supreme Court held that the Asian financial crisis is not a fortuitous event
that would excuse petitioners from performing their contractual obligation.

The Court ruled that “we cannot generalize that the Asian financial crisis in
1997 was unforeseeable and beyond the control of a business corporation. It is
unfortunate that petitioner apparently met with considerable difficulty e.g. increase cost
of materials and labor, even before the scheduled commencement of its real estate
project as early as 1995. However, a real estate enterprise engaged in the pre-selling of
condominium units is concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the Philippine peso in the
foreign exchange market is an everyday occurrence, and fluctuations in currency
exchange rates happen everyday, thus, not an instance of caso fortuito.”

SECOND ISSUE: NO

The Court held that 6% is the proper legal interest rate.

The resulting modification of the award of legal interest is, also, in line with our
recent ruling in Nacar v. Gallery Frames, embodying the amendment introduced by the
Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799 which pegged
the interest rate at 6% regardless of the source of obligation.

FALLO:

WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision is

AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT
(6%) on the amount due computed from the time of respondents’ demand for refund on
8 October 1998.

GOLDEN VALLEY EXPLORATION, INC., vs. PINKIAN MINING COMPANY and

COPPER VALLEY, INC.

[G.R. No. 190080; June 11, 2014] Obligations and Contracts| Rescission| Reciprocal
Obligations|
FACTS:
PMC is the owner of various mining claims in Nueva Vizcaya. In 1987, PMC entered into an
Operating Agreement (OA) with GVEI, granting the latter “full……exploration, development
and mining of the [mining claims] x x x ,” for a period of 25 years. Later, PMC extra-judicially
rescinded the OA due to alleged multiple violations of GVEI of not paying its royalties. GVEI
through a letter, contested PMC’s extra-judicial rescission of the OA. PMC no longer responded
to GVEI’s letter and instead, it entered into a Memorandum of Agreement with CVI, whereby it
granted the right to “…..explore and develop the mining claims x x x for a period of 25 years.
ISSUE:
Whether the rescission is valid.
HELD:
YES. In reciprocal obligations, either party may rescind the contract upon the other’s substantial
breach of the obligation/s he had assumed thereunder. The basis therefor is Article 1191 of the
Civil Code which states as follows:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
As a general rule, the power to rescind an obligation must be invoked judicially and cannot be
exercised solely on a party’s own judgment that the other has committed a breach of the
obligation. This is so because rescission of a contract will not be permitted for a slight or casual
breach, but only for such substantial and fundamental violations as would defeat the very object
of the parties in making the agreement. As a well-established exception, however, an injured
party need not resort to court action in order to rescind a contract when the contract itself
provides that it may be revoked or cancelled upon violation of its terms and conditions.
As a well-established exception, however, an injured party need not resort to court action in
order to rescind a contract when the contract itself provides that it may be revoked or cancelled
upon violation of its terms and conditions. The Court therefore affirms PMC’s unilateral
rescission of the OA due to GVEI’s non-payment of royalties considering the parties’ express
stipulation in the OA that said agreement may be cancelled on such ground.