G.R. No.

188057 July 12, 2017

Hilltop Market Fish Vendor’s Association, Inc., petitioner, vs. Hon. Braulio Yaranon, City Mayor, Baguio
City, Hon. Galo Weygan, City Councilor and Chairman Anti-Vice Coordinating Task Force, and the City
Government of Baguio, respondents.

Carpio, J.

Hilltop Market Fish Vendor’s Association, Inc., sought to prevent City of Baguio from closing the
leased property on the ground that the lease period had not yet commenced there being no perfected
lease contract.

FACTS:

Hilltop and City of Baguio entered into a Contract of Lease over a lot owned by the City of Baguio,
which provided the lease period of 25 years, renewable for the same period at the option of both parties,
and the annual rental of P25,000, with the first payment commencing upon the issuance by the City
Engineer’s Office of the Certificate of Full Occupancy of the building constructed by Hilltop on the lot,
which its ownership shall transfer to the City of Baguio at the termination of the lease period.

In 1975, Hilltop constructed the Rillera Building and its members occupied it and conducted
business in it, even though the City Engineer’s Office did not issue a Certificate. On October 16, 1980, the
City Council of Baguio issued resolutions rescinding the contract of lease with Hilltop for its continued
failure to comply with its obligation to complete the Rillera Building. Few floor levels were closed for
failure to comply with the minimum safety standards, and the entire building, on February 28, 2005, for
its completion and sanitation thereby preparing it for commercial use.

On March 7, 2005, Hilltop asked the lower courts to prevent it and order the City Engineer’s Office
to issue the Certificate to make the Contract of Lease effective. City of Baguio 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.

ISSUE:

Is the contract of lease entered into by the parties already perfected, and, thus, the period of
lease has begun?

DOCTRINE:

A consensual contract is perfected at the moment there is meeting of the minds. Noncompliance
of the condition imposed on the performance of the contract does not result in failure of the contract,
but rather only gives the other party to proceed or waive.

RULING:

Being a consensual contract, a lease is perfected at the moment there is meeting of the minds
upon the thing and the cause or consideration, from which point the parties are bound to fulfill what they
expressly stipulated. Article 1654 of the Civil Code provides that the lessor is obliged to deliver the thing
in such a condition as to render it fit for the use intended, and the lesses, per Article 1657, is obliged to
use the thing leased as a diligent father of the family.

The subject matter of the contract is the lot where the Rillera building would be constructed. The
consideration were the annual lease rental and the ownership of the building upon the termination of the
lease period. Considering the parties agreed upon these essential elements of the contract, the contract
had been perfected, from which point the parties are bound to fulfil what they expressly stipulated.

Further, Hilltop is estopped from claiming that the period of the lease has not yet begun. Article
1653 of the Civil Code provides that the provisions governing warranty, contained in the Tile of Sales, shall
be applicable to the contract of lease, which as Article 1545, in turn, provides that where the obligation
of either party is subject to any condition which is not performed such party may refuse to proceed or
may waive performance of the condition.

Hilltop failed to distinguish between a condition imposed upon the perfection of the contract and
a condition imposed on the performance of the obligation. Failure to comply with the first condition
results in failure of the contract, while the second condition only gives the other party to either to refuse
to proceed or to waive the condition. Here, the issuance of the Certificate was not a suspensive condition
which determines the perfection of the contract or its effectivity, but rather only a condition that will
make Hilltop start paying the annual lease rental to the City of Baguio. However, by Hilltop’s continued
silence, it has agreed that the issuance of the Certificate was not a condition to the perfection of the lease
contract, notwithstanding its non-issuance was due to Hilltop’s fault for not completing the building.

Hence, the petition is dismissed.