Tuesday, February 21, 2012

Araneta vs. Philippine Sugar Estates Development Co., Ltd. [G.R. No. L-22558, May 31, 1967]

Facts: J. M. Tuason & Co., Inc. is the owner of a land, known as the Sta. Mesa Heights Subdivision, and covered by a Torrens title in its name. On July 1950, through Gregorio Araneta, Inc, JM, sod a portion thereof to herein respondent to Philippine Sugar Estates Development Co., Ltd. The parties stipulated, among in the contract of purchase and sale with mortgage, that the buyer will — build on the said parcel land the Sto. Domingo Church and Convent. While the seller for its part will — construct streets on the NE and NW and SW sides of the land herein 

Respondent was able to finish his obligation. However, herein petitioner was unable to finish the construction of the NE side because a third-party physically occupies the middle part thereof, refused to vacate the same; hence Respondent filed a complaint against petitioner seeking to compel Araneta to comply with the obligation, and/or to pay damages in the event they failed or refused to perform said obligation. 

Defendants in said complaint argued that the action was premature since the obligation to construct the streets in question was without a definite period which needs to be fixed first by the court in a proper suit. The lower court dismissed the plaintiff’s complaint. Motion to reconsider was prayed, and that the court fix a period within which petitioner in said case can comply in the construction of the streets. 

The Lower Court issued a order granting the motion for reconsideration and amended its previous decision, prompting defendant Araneta to reconsider but this was denied thus appealing in the Court of Appeals. The Appellate Court declared the fixing of the period was within the pleadings and affirmed the Lower Court’s decision, hence this petition for Certiorari. 

Issue: Whether or not the fixing of the period of the Lower Court was valid and justified base on the pleadings, the facts of the case, pursuant to Article 1197

Held: NO, there was no justification in law for the setting of the performance at any other time than that of the eviction of the squatters occupying the land in question. And the Trial Court and The Appellate Court were found to have committed a reversible error. Decision appealed is reversed and the time for the performance of the obligation is fixed at the date that all the squatters on affected areas are finally evicted from the area. 

The fixing of a period by the courts under Article 1197 of the Civil Code of the Philippines is sought to be justified on the basis that petitioner (defendant below) placed the absence of a period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with its obligation to construct and complete the streets" was found legally untenable. 

Neither of the courts below seems to have noticed that, on the hypothesis stated, what the answer put in issue was not whether the court should fix the time of performance, but whether or not the parties agreed that the petitioner should have reasonable time to perform its part of the bargain. 

If the contract so provided, then there was a period fixed, a "reasonable time;" and all that the court should have done was to determine if that reasonable time had already elapsed when suit was filed if it had passed, then the court should declare that petitioner had breached the contract, as averred in the complaint, and fix the resulting damages. 

On the other hand, if the reasonable time had not yet elapsed, the court perforce was bound to dismiss the action for being premature. But in no case can it be logically held that under the plea above quoted, the intervention of the court to fix the period for performance was warranted, for Article 1197 is precisely predicated on the absence of any period fixed by the parties. 

Even on the assumption that the court should have found that no reasonable time or no period at all had been fixed (and the trial court's amended decision nowhere declared any such fact) still, the complaint not having sought that the Court should set a period, the court could not proceed to do so unless the complaint in as first amended; for the original decision is clear that the complaint proceeded on the theory that the period for performance had already elapsed, that the contract had been breached and defendant was already answerable in damages. 

Granting, however, that it lay within the Court's power to fix the period of performance, still the amended decision is defective in that no basis is stated to support the conclusion that the period should be set at two years after finality of the judgment. The list paragraph of Article 1197 is clear that the period cannot be set arbitrarily. The law expressly prescribes that — “the Court shall determine such period as may under the circumstances been probably contemplated by the parties.” 

Article 1197 of the Civil Code involves a two-step process. The Court must first determine that "the obligation does not fix a period" (or that the period is made to depend upon the will of the debtor)," but from the nature and the circumstances it can be inferred that a period was intended". Once settled, the Court must proceed to the second step, and decide what period was "probably contemplated by the parties" So that the Court cannot fix a period merely because in its opinion it is or should be reasonable, but must set the time that the parties are shown to have intended. As the record stands, the trial Court appears to have pulled the two-year period set in its decision out of thin air, since no circumstances are mentioned to support it. Plainly, this is not warranted by the Civil Code. 

In this connection, the contract shows that the parties were fully aware that the land described therein was occupied by squatters, because the fact is expressly mentioned therein. The conclusion is thus forced that the parties must have intended to defer the performance of the obligations under the contract until the squatters were duly evicted, as contended by the petitioner Gregorio Araneta, Inc.

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