AGAPITO B. DUCUSIN V. C.A. & VIRGILIO S. BALIOLA G.R. No.

L-58286 May 16, 1983

FACTS: Petitioner Agapito Ducusin leased to private respondent, Virgilio S. Baliola married to
Lilia Baliola a one-door apartment unit. The contract of lease provides: The term of this contract
shall be in a month to month basis commencing on February 19,1975 until terminated by the
lessor on the ground that his children need the premises for their own use or residence or upon
any ground provided for in accordance with law.
The Baliola spouses occupied the apartment for almost 2 years when Ducusin sent a "Notice to
Terminate Lease Contract," terminating the lease and giving them until March 15, 1977 within
which to vacate the premises for the reason that his two children were getting married and will
need the apartment for their own use and residence. A second letter was thereafter sent by
Ducusin to respondents Baliolas making an inquiry on any action the latter had taken on the
previous notice to terminate the lease contract. Respondents made no reply to the "Notice to
Terminate Lease Contract".
So petitioners filed an action for ejectment against the Baliola spouses, alleging that having
constructed the apartment complex for the use and residence of his children (each to a unit) if
and when they decide to marry and live independently and that the apartment unit having been
allotted to his son, Agapito Ducusin, Jr., the said unit is now needed by Agapito, Jr. who is
getting married in the month of May, 1977 and that said Agapito, Jr. has decided to live
independently. The complaint for eviction further alleged that the lessees have violated the
terms of the contract by subleasing the premises; that the lessees have not used the premises
solely for residential purposes but have used the same as factory and/or manufacturing
premises for their commercial goods; and that they have neglected to undertake repairs of the
apartment and the premises according to their agreement.
The lessees denied the allegations of the lessor and claimed in their Answer that the ejectment
suit "is a well-planned scheme to rid the defendants and family out of their apartment, and to
circumvent the law prohibiting raising the rental of apartments and houses."
Court decided in favor of the lessor Ducusin on the ground that the "defendants' contract with
the plaintiff has already terminated with the notice of termination sent by the plaintiff to the
defendants on the ground that he needs the premises for his own children."
ISSUE: W/N THE LEASE CONTRACT WAS SUBJECT TO A RESOLUTORY CONDITION?
HELD: YES. We do not agree with the holding of the respondent court that the petitioners have
not proved by a preponderance of evidence the alleged need of the immediate members of his
family for the use of the leased premises. The contention of the petitioner that the contract of
lease in question is for a definite period, being on a month-to-month basis beginning February
19, 1975 and is, therefore, not covered by P.D. No. 20, is correct.
Period relates to "length of existence; duration" or even a "series of years, months or days in
which something is completed" Definite means "having distinct or certain limits; determinate in
extent or character; limited fixed." A definite period, therefore, refers to a portion of time certain
or ascertainable as to its beginning, duration and termination.
In one case, it was held: As to the duration and termination of the aforementioned contractual
relations, the parties used the phrase "on a month to month basis" in the Agreement with
reference to the length of time during which petitioner Rantael would have use and occupancy
of the leased premises. And month here should be construed, in like manner as in the

interpretation of laws pursuant to the provisions of Article 12 of the Civil Code of the Philippines,
there being no reason to deviate therefrom, as a period composed of thirty days. The
contractual relations between petitioner Rantael and respondent Llave ceased after the
expiration of the first thirty days reckoned from August 1, 1974 but continued for the next thirtyday period and expired after the last day thereof, repeating the same cycle for the succeeding
thirty-day periods, until the respondent Llave exercised her express prerogative under the
agreement to terminate the same. Xxx However, by express exception of P.D. No. 20, judicial
ejectment lies "when the lease is for a definite period" or when the fixed or definite period
agreed upon has expired. The lease in the case at bar having a definite period, it indubitably
follows that the exception, rather than the general rule, applies and, therefore, respondent
Llave's right to judicially eject petitioner Rantael from the premises may be duly enforced. This
has been the consistent administrative interpretation of the Office of the President.
As to the holding of the respondent court that petitioner Ducusin, Sr. "did not show that the onedoor apartment leased to the petitioners was the only place available for the use of his son,
Agapito Ducusin, Jr.," on the contrary, We find in the records evidence that out of the eight
doors apartment building belonging to the petitioner Ducusin Sr., three doors, now 31 years old,
became untenantable due to wear and tear and the remaining five doors were all occupied by
tenants; first door, 3319, is occupied by Mr. Coluso, 3319-A by the Baliola spouses, 3319-B by
Mr. & Mrs. Magsano, 3319-C by Mr. & Mrs. De los Santos, and 3319-D by Videz. From this
evidence may be deduced that there is no other place available for the use and residence of
petitioner's son, Agapito Ducusin, Jr. Assuming that Agapito Ducusin, Sr. informed his tenant
Virgilio Baliola that another apartment unit No. 3319, would soon be vacated, the alleged
vacancy is nearly speculative and there is no showing that it actually became vacant and
available.
OSCAR A. JACINTO V. ROGELIO KAPARAZ G.R. No. 81158 May 22, 1992
FACTS: Petitioners and private respondents entered into an agreement under which the private
respondents agreed to sell and convey to petitioners a lot located in Davao Oriental for a total
consideration of P1, 800. A down payment of P800 was paid upon execution of the Agreement.
The balance of P1, 000 was to be paid by petitioners on installment at the rate of P100 a month
to the DBP to be applied to private respondents' loan accounts.
Upon the execution of the agreement, petitioners paid the down payment of P800 and were
placed in possession of the portion described therein. As to the P1, 000 which was to be paid
directly to the DBP, petitioners claim that they had even made an excess payment of P100.
In view of the refusal of private respondents to execute the deed of sale, petitioners filed a
complaint for specific performance. Private respondents answered that the sale did not
materialize because of the failure of petitioners to fulfill their promise to make timely payments
on the stipulated price to the DBP; as a result of such failure, private respondents failed to
secure the release of the mortgage on the property.
ISSUE: W/N THERE WAS A VALID RESCISSION?
HELD: NO. ALTHOUGH THE AGREEMENT IS A CONTRACT OF SALE, TO WHICH NONPAYMENT OF THE PURCHASE PRICE IS A RESOLUTORY CONDITION, PRIVATE
RESPONDENTS FAILED TO FULFILL THE REQUIREMENTS OF ARTICLE 1592 TO EFFECT
RESCISSION.

Vital to the resolution of the controversy is the determination of the true nature of the questioned
agreement. Is it a contract of sale or a contract to sell? The two are not, of course, the same. In
the latter case, ownership is retained by the seller and is not to pass until full payment of the
price. Such payment is a positive suspensive condition the failure of which is not a breach,
casual or serious, but simply an event that prevents the obligation of the vendor to convey title
from acquiring binding force. In such a situation, to argue that there was only a casual breach is
to proceed from the assumption that the contract is one of absolute sale, where non-payment is
a resolutory question. Otherwise stated, as capsulized in Luzon Brokerage Co., Inc. vs.
Maritime Building Co., Inc., "there can be no rescission or resolution of an obligation as yet nonexistent, because the suspensive condition did not happen." On the other hand, since in a
contract of sale, the non-payment of the price is a resolutory condition, the remedy of the
seller under Article 1191 of the Civil Code is to exact fulfillment or to rescind the contract.
In respect, however, to the sale of immovable property, this Article must be read together with
Article 1592 of the same Code.
The agreement in the instant case has all the earmarks of a contract sale. The possession of
the portion sold was immediately delivered to the petitioners. They were granted the right to
enjoy all the improvements therein effective from the date of the execution of the agreement.
Private respondents unqualifiedly bound themselves to execute the final deed of sale "as soon
as the settlement or partition of the estate of the deceased Narcisa R. Kaparaz shall have been
consummated and effected, but not later than March 31, 1967" and only upon full payment of
the unpaid portion of the purchase price. The private respondents did not reserve unto
themselves the ownership of the property until full payment of the unpaid balance of P1, 000.
Finally, there is no stipulation giving the private respondents the right to unilaterally rescind the
contract the moment the vendee fails to pay within a fixed period. In reality, the agreement was
an absolute sale which allowed the petitioners to pay the remaining balance of the purchase
price in installment. Thus, it has been held that a deed of sale is absolute in nature although
denominated as a "Deed of Conditional Sale" where nowhere in the contract in question is a
proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full
payment of the purchase price, nor is there a stipulation giving the vendor the right to
unilaterally rescind the contract the moment the vendee fails to pay within a fixed period.
As stated earlier, in a contract of sale, the remedy of an unpaid seller is either specific
performance or rescission. The latter, with respect to the sale of immovables, is specifically
governed by Article 1592 of the Civil Code. In the case at bar, there was non-compliance with
the requirements prescribed in these provisions. It is not controverted that private respondents
had neither filed an action for specific performance nor demanded the rescission of the
agreement either judicially or by a notarial act before the filing of the complaint. It is only in their
Answer that they belatedly raised the defense of resolution of the contract pursuant to Article
1191 by reason of petitioners' breach of their obligation.
Even if the general law on resolution, Article 1191 of the Civil Code, is to be applied, Our
decision would still be for the petitioners. It is not denied that petitioners made 2 payments in the
sums of P200 and P300 at a time when what remained unsettled under the agreement was only
P400. There was then an excess payment of P100. These payments were made to the DBP
which applied them to an outstanding account of the private respondents. Private respondents
neither complained of the delay in these payments nor rejected their application to their account.
They were, undoubtedly, benefited by the application because it either satisfied their account or
correspondingly reduced it. The claim that the account to which it was applied was not the
account stipulated in the agreement is without merit. In the first place, the agreement fails to
disclose an express agreement that the monthly amortizations on the P1,000 unpaid balance of

the purchase price to be made to the DBP should be applied exclusively to the agricultural loan
indicated in the exordium of the agreement. The loan was mentioned only to lay the basis for
private respondents' need for the down payment. Second, to allow private respondents to reject
the payment of P400, plus the excess of P100 after they benefited therefrom, would be unjust.
Finally, the delay incurred by petitioners was but a casual or slight breach of the agreement,
which did not defeat the object of the parties in entering into the agreement. A mere casual
breach does not justify rescission. The prompt payment of the monthly amortizations of the
unpaid balance of P1,000 was not a condition precedent to the execution of the final deed of
sale. Besides, petitioners had already paid P1,400 of the total consideration of P1,800 within the
period stipulated. Moreover, they had in fact overpaid the private respondents by P100.
SECURITY BANK & TRUST CO. V. C.A. & YSMAEL FERRER G.R. No. 117009
October 11, 1995
FACTS: Private respondent Ysmael C. Ferrer was contracted by herein petitioners
SBTC and Rosito C. Manhit to construct the building of SBTC in Davao City for the
price of P1.7M. The contract provided that Ferrer would finish the construction in
200 working days. Respondent Ferrer was able to complete the
construction of the building within the contracted period but he was compelled by a
drastic increase in the cost of construction materials to incur additional expenses of
about P300k. The additional expenses were made known to SBTC and Supervising
Architect Rudy de la Rama early on. Respondent Ferrer made timely demands for
payment of the increased cost. Said demands were supported by receipts, invoices,
payrolls and other documents proving the additional expenses.
SBTC and a representative of an architectural firm consulted by SBTC, verified
Ferrer's claims for additional cost. A recommendation was then made to settle
Ferrer's claim but only for P200k. SBTC, instead of paying the recommended
additional amount, denied ever authorizing payment of any amount beyond the
original contract price. SBTC likewise denied any liability for the additional cost
based on Article IX of the building contract.
Ferrer then filed a complaint for breach of contract with damages. RTC ruled for
Ferrer and ordered SBTC and Rosito C. Manhit to pay damages.
ISSUE: W/N SBTC IS LIABLE FOR THE ADDITIONAL EXPENSES?
HELD: YES. In the present case, petitioners' arguments to support absence of
liability for the cost of construction beyond the original contract price are not
persuasive. Under Article IX of the construction contract, petitioners would make the
appropriate adjustment to the contract price in case the cost of the project
increases through no fault of the contractor (private respondent).
Under Article 1182 of the Civil Code, a conditional obligation shall be void if its
fulfillment depends upon the sole will of the debtor. In the present case, the
mutual agreement, the absence of which petitioner bank relies upon to support its
non-liability for the increased construction cost, is in effect a condition dependent
on petitioner bank's sole will, since private respondent would naturally and logically

give consent to such an agreement which would allow him recovery of the increased
cost.
Further, it cannot be denied that petitioner bank derived benefits when private
respondent completed the construction even at an increased cost. Hence, to allow
petitioner bank to acquire the constructed building at a price far below its actual
construction cost would undoubtedly constitute unjust enrichment for the bank to
the prejudice of private respondent. Such unjust enrichment, as previously
discussed, is not allowed by law.
RUSTAN PULP & PAPER MILLS, INC. V. I.A.C. & ILIGAN DIVERSIFIED
PROJECTS, INC. G.R. No. 70789 October 19, 1992
FACTS: Petitioner Rustan established a pulp and paper mill in Lanao del Norte, to
which Respondent Lluch, who is a holder of a forest products license, supplies wood
materials. The contract provides: 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. A complaint for contractual
breach was then filed.
ISSUE: W/N THE STOPPAGE OF DELIVERIES WAS PROPER?
HELD: NO. Insofar as the express discretion on the part of petitioners is concerned
regarding the right of stoppage, We feel that there is cogent basis for private
respondent's apprehension on the illusory resumption 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 redelivery when the need arises as determined likewise by petitioners. This is Our
simple understanding of the literal import of paragraph 7 of the obligation in
question. 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. It is, of course, a truism in
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 like what this Court said in Taylor vs. Uy Tieng Piao and Tan Liuan. But the
conclusion drawn from the Taylor case, which allowed a condition for unilateral
cancellation of the contract when the machinery to be installed on the factory did
not arrive in Manila, is certainly inappropriate for application to the case at hand
because the factual milieu in the legal tussle conveys that the proviso relates to the
birth of the undertaking and not to the fulfillment of an existing obligation.
Petitioners are of the impression that they acted 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 We 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.
Neither are We prepared to accept 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.
PACIFICA MILLARE V. HON. HAROLD M. HERNANDO G.R. No. L-55480 June 30, 1987
FACTS: A five-year Contract of Lease was executed between petitioner Pacifica Millare as
lessor and private respondent Elsa Co, married to Antonio Co, as lessee. Under the written
agreement, lessor-petitioner agreed to rent out to the lessee at a monthly rate of P350 the
"People's Restaurant." Paragraph 13 of the Contract of Lease reads as follows: 13. This
contract of lease is subject to the laws and regulations of the government; and that this
contract of lease may be renewed after a period of 5 years under the terms and conditions
as will be mutually agreed upon by the parties at the time of renewal.
According to the Co spouses, sometime during the last week of May 1980, the lessor
informed them that they could continue leasing the People's Restaurant so long as they were
amenable to paying increased rentals of P1,200 a month. In response, a counteroffer of P700
a month was made by the Co spouses. At this point, the lessor allegedly stated that the
amount of monthly rentals could be resolved at a later time since "the matter is simple
among us", which alleged remark was supposedly taken by the spouses Co to mean that the
Contract of Lease had been renewed, prompting them to continue occupying the subject
premises and to forego their search for a substitute place to rent. In contrast, the lessor
flatly denied ever having considered, much less offered, a renewal of the Contract of Lease.

Mrs. Millare then requested the Co spouses to vacate the leased premises as she had no
intention of renewing the Contract of Lease which had, in the meantime, already expired. In
reply, the Co spouses reiterated their unwillingness to pay the P 1,200 monthly rentals
supposedly sought by Mrs. Millare which they considered "highly excessive, oppressive and
contrary to existing laws". They also signified their intention to deposit the amount of rentals
in court, in view of Mrs. Millare's refusal to accept their counter-offer.
CO spouses then filed a complaint seeking renewal of the Contract of Lease at a rental rate
of P700/month and for a period of 10 years, and damages.
ISSUE: W/N THE CO SPOUSES MAY CLAIM RENEWAL OF THE CONTRACT
HELD: NO. The first paragraph of Article 1197 is clearly inapplicable, since the Contract of
Lease did in fact fix an original period of five years, which had expired. It is also clear from
paragraph 13 of the Contract of Lease that the parties reserved to themselves the faculty of
agreeing upon the period of the renewal contract. The second paragraph of Article 1197 is
equally clearly inapplicable since the duration of the renewal period was not left to the will of
the lessee alone, but rather to the will of both the lessor and the lessee. Most importantly,
Article 1197 applies only where a contract of lease clearly exists. Here, the contract was not
renewed at all, there was in fact no contract at all the period of which could have
been fixed.
Article 1670 of the Civil Code reads thus: If at the end of the contract the lessee should
continue enjoying the thing left for 15 days with the acquiescence of the lessor and unless a
notice to the contrary by either party has previously been given. It is understood that there
is an implied new lease, not for the period of the original contract but for the time
established in Articles 1682 and 1687. The ther terms of the original contract shall be
revived.
The respondents themselves, public and private, do not pretend that the continued
occupancy of the leased premises after the date of expiration of the contract, was with the
acquiescence of the lessor. Even if it be assumed that tacite reconduccion had occurred, the
implied new lease could not possibly have a period of 5 years, but rather would have been a
month-to-month lease since the rentals (under the original contract) were payable on a
monthly basis. At the latest, an implied new lease (had one arisen) would have expired as of
the end of July 1980 in view of the written demands served by the petitioner upon the
private respondents to vacate the previously leased premises.
It follows that the respondent judge's decision requiring renewal of the lease has no basis in
law or in fact. Save in the limited and exceptional situations envisaged in Articles ll97 and
1670 of the Civil Code, which do not obtain here, courts have no authority to prescribe the
terms and conditions of a contract for the parties. As pointed out by Justice J.B.L. Reyes in
Republic vs. PLDT: [P]arties cannot be coerced to enter into a contract where no agreement
is had between them as to the principal terms and conditions of the contract. Freedom to
stipulate such terms and conditions is of the essence of our contractual system, and by
express provision of the statute, a contract may be annulled if tainted by violence,
intimidation or undue influence.
Contractual terms and conditions created by a court for two parties are a contradiction in
terms. If they are imposed by a judge who draws upon his own private notions of what
morals, good customs, justice, equity and public policy" demand, the resulting "agreement"
cannot, by definition, be consensual or contractual in nature. It would also follow that such
coerced terms and conditions cannot be the law as between the parties themselves.
Contracts spring from the volition of the parties. That volition cannot be supplied by a judge
and a judge who pretends to do so, acts tyrannically, arbitrarily and in excess of his
jurisdiction.