Civil Law 2- ObliCon- Security Bank & Trust Co. and Rosito C. Manhit vs. Court of Appeals and Ysmael Ferer

This case is with regard to Art 1182 of the NCC- Potestative Condition- Stipulation dependent upon the sole will of the debtor

Case of SECURITY BANK & TRUST COMPANY and ROSITO C. MANHIT vs COURT OF APPEALS and YSMAEL C. FERRER
G.R.No. 117009 11October1995

FACTS OF THE CASE:

SBTC and Manhit contracted Ferrer to construct in 200 days a building in consideration of 1,760,000.00. Ferrer was able to finish the construction of the building within the prescribed time, but incurred additional expenses of about 300,000.00 on top of the original cost due to drastic increases in construction materials. Ferrer made timely demands for payment of the increased cost, and 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 the claim for 200,000.00 but SBTC did not pay the amount, and instead denied any liability for the additional cost. Ferrer then filed a claim for breach of contract with damages in the RTC, which ruled in favor of Ferrer, Court of Appeals affirmed the decision.

ISSUES OF THE CASE:

Is SBTC liable for the increase in cost of the construction due to drastic increases in cost of material?

- Yes, since under Art 1182 of the NCC, a conditional obligation shall be void if its fulfillment depends upon the sole will of the debtor. Under Art IX of the building contract it allows for the adjustment of the contract price upon mutual agreement of the parties.
- It is the absence of this mutual agreement that the bank is using to support its contention that it is not liable for the increased cost, and in effect this is an obligation dependent on SBTC’s sole will, since its consent is required for the recovery of the increased cost to be allowed.
- This in effect allows SBTC to acquire the constructed building at a price that is far below its actual construction cost, and this constitutes unjust enrichment for SBTC at the expense of Ferrer. This is not allowed by law by virtue of Art 22 of NCC.

HELD:

WHEREFORE, with the above modification in respect of the amount of attorney's fees, the appealed decision of the Court of Appeals in CA G.R. CV No. 40450 is AFFIRMED.


Obligations and Contracts Terms:

Conditional Obligation- a condition wherein the execution of which is suspended by a condition which has not been accomplished, and subject to which it has been contracted.

Potestative Obligation- a condition whose fulfillment was completely within the power of the obligated party


I hope this helps.

Jeff David