Civil Law 2- ObliCon- Francisco Lao Lim vs Court of Appeals and Benito Villavicencio Dy

Case of Francisco Lao Lim vs Court of Appeals and Benito Villavicencio Dy
G.R.No. 87047 31October1990

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


FACTS OF THE CASE:
Records show that Francisco Lim, entered into a contract of lease with Benito Dy for a period of 3 years, from 1976 to 1979. After the stipulated term expired the respondent refused to leave the premises, so Francisco Lim filed an ejectment suit against Benito Dy. This case was then taken over by a judicially approved compromise agreement which provides an automatic increase in rent of 20% every 3 years. On 1985 Dy, informed Lim of his intention to renew the lease up to 1988, Lim did not agree to the renewal.
In 1987 another ejectment suit was filed by Lim after the failure of Dy to vacate the premises. It was dismissed by the RTC and later affirmed by the CA for the following reasons: (1) the stipulation in the compromise agreement which allows the lessee (Benito Dy) to stay on the premises as long as he needs it and can pay rents is valid, being a resolutory condition, and therefore beyond the ambit of art 1308 of the NCC; and (2) the compromise agreement has the effect of res judicata.

ISSUES OF THE CASE:

Was the stipulation in the compromise agreement which allows the lessee to stay on the premises as long as he needs it and can pay rents is valid?

- No, since the stipulation “for as long as the defendant needed the premises and can meet and pay said increases” is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee.
- 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 between continuing payment of the rentals or not, completely depriving the owner of any say in the matter. Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and the lessee.

HELD:

The decision of the Court of Appeals is REVERSED AND SET ASIDE. Benito Dy is ordered to immediately vacate and return the possession of the premises and pay the monthly rentals due thereon in accordance with the compromise agreement until he shall have actually vacated the same. This Judgment is immediately executory.

Obligations and Contracts Terms:

• Potestative Condition- This can be found in Art 1182 of the NCC. A potestative condition speaks of fulfillment of an obligation rests solely upon the will of the debtor. An obligation which is subject to a suspensive potestative condition is non- demandable, hence it is void. If it is the debtor himself who determines the fulfillment of the condition, such an agreement produces no juridical effect that can be enforced, and thus null

I hope this helps.

Jeff David

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