PNCC vs. CA (GR No.

116896, May 5, 1997)

FACTS:
Petitioner PNCC and private respondents entered into a Lease Agreement on November 18, 1985
for a five (5)-year lease, commencing on the date of issuance of the industrial clearance by the
Ministry of Human Settlements to the petitioner. It was also stated in the Agreement that rental
shall be paid by the petitioner yearly, the first annual rent shall be in the amount of Two Hundred
Forty Thousand Pesos (Php 240,000.00). On January 7, 1986, upon obtaining of Temporary Use
Permit from the Ministry of Human Settlement by the petitioner, private respondents wrote a letter
requesting the petitioner to pay the first annual rental, they also emphasized that they had stopped
considering other proposals to lease in consideration to the existing agreement with the
petitioner. However, petitioner failed to fulfill its obligation and expressed its intention to terminate
the contract due to financial as well as technical difficulties. The petitioner also argued that it was
only obligated to pay the amount of Php 20,000.00 as payment for the one-month period of lease,
counted from January 7, 1986 (when the Permit was issued) to February 7, 1986. This prompted
the respondent to file an action against the petitioner for specific performance with damages
before the Regional Trial Court of Pasig. The trial court and the Court of Appeals favored the
respondents, hence this petition.

ISSUE:
Whether or not the petitioner is entitled to avail the benefit of Articles 1266 and 1267 of the New
Civil Code.

RULING:
No. Firstly, the petitioner cannot take refuge in Article 1266 since said article is only applicable to
obligations “to do”, and not to obligations “to give”. “To give” is a prestation which consists in the
delivery of a movable or an immovable thing in order to create a real right, or for the use of the
recipient, or for its simple possession, or in order to return it to its owner. The obligation to pay
rentals or deliver the thing in a contract of lease falls within the prestation “to give”.

Secondly, the principle rebus sic stantibus (a treaty or agreement remains valid only if the same
conditions prevailing at the time of contracting continue to exist at the time of performance) neither
fits in with the facts of this case. It was noted that the petitioner has entered into the Contract of
Lease with private respondents with open eyes of the deteriorating conditions of the country since
the assassination of the late Senator NinoyAquino.

The instant petition was denied.