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2nd Case Digests

The document discusses two court cases related to contractual obligations and fixing periods of performance. The first case involved a land sale contract that already stipulated performance within a 'reasonable time' so the court could not arbitrarily set a new period. The second case involved payment of salary differentials, where the court ruled it could set a one-year period for payment since the contract left the duration to the debtor's discretion.

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9 views

2nd Case Digests

The document discusses two court cases related to contractual obligations and fixing periods of performance. The first case involved a land sale contract that already stipulated performance within a 'reasonable time' so the court could not arbitrarily set a new period. The second case involved payment of salary differentials, where the court ruled it could set a one-year period for payment since the contract left the duration to the debtor's discretion.

Uploaded by

attytheresejimenez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Gregorio Araneta, Inc. vs. Philippine Sugar Estates Development Co., Ltd.

G.R. No. L-22558


May 31, 1967

Facts:
Gregorio Araneta, Inc. and Philippine Sugar Estates Development Co., Ltd. were involved in a contract dispute. The
dispute arose over the construction of a church and streets on a portion of land sold by J.M. Tuason & Co.,
Inc. to Philippine Sugar Estates Development Co., Ltd. The contract stipulated that the buyer would build the
church and the seller would construct the streets. However, the seller was unable to complete the construction
of one of the streets due to a squatter named Manuel Abundo refusing to vacate the area. Philippine Sugar
Estates Development Co., Ltd. filed a complaint against J.M. Tuason & Co., Inc. and Gregorio Araneta, Inc. in the
Court of First Instance of Manila. The complaint sought to compel the defendants to comply with their obligations
or pay damages. The lower court initially dismissed the plaintiff's complaint, upholding the defendant's
defense of prematurity. The plaintiff filed a motion for reconsideration, requesting the court to fix a period
for the defendant to comply with its obligation. The court granted the motion and amended its decision,
giving the defendant two years to comply with the obligation. The defendant appealed to the Court of Appeals,
arguing that the relief granted was not justified by the pleadings and evidence presented at the trial. The Court of
Appeals affirmed the lower court's decision, stating that the fixing of a period was within the pleadings and
there was no change of theory after the submission of the case for decision. The defendant filed a petition for
review by certiorari to the Supreme Court.

Issue:
Whether or not the court has the authority to fix a period for performance under a contract that establishes a
"reasonable time" for completion?

Ruling:
No. The Supreme Court agreed with the defendant's argument that the decision of the Court of Appeals was legally
untenable, and reversed the decision of the CA. The Supreme Court explained that the intervention of the court to fix
the period for performance was not warranted because the contract already provided a "reasonable time" for the
defendant to comply with its obligation. If the contract provided a "reasonable time" for performance, then a period
was already fixed. The court's role should have been to determine if that reasonable time had already elapsed
when the suit was filed. If the reasonable time had passed, the court should have declared that the defendant
had breached the contract and fixed the resulting damages. If the reasonable time had not yet elapsed, the
court should have dismissed the action as premature. It was not logical for the court to intervene and fix the
period for performance when the contract already established a reasonable time. The trial court had arbitrarily set
the two-year period without sufficient explanation. Furthermore, the court's decision was based on Article 1197
of the Civil Code. Article 1197 states that if the obligation does not fix a period but it can be inferred from the
nature and circumstances that a period was intended, the court must determine what period was probably
contemplated by the parties. The period cannot be set arbitrarily and must be based on the intention of the
parties. In this case, the contract did not specify an exact period for performance because the parties were aware that
the land was occupied by squatters and the duration of the eviction process was uncertain. Therefore, t he court held
that the performance of the obligations should be deferred/delayed until the squatters were evicted, and the
date of performance should be set at the time of their eviction. The court reversed the decision of the lower
courts and fixed the performance period accordingly.

Tiglao vs. Manila Railroad Co.


G.R. No. L-7900
Jan 12, 1956
Facts:
The case involves 35 retired employees of the Manila Railroad Company who filed a lawsuit in
October 1952 to recover the balance of salary differentials owed to them. The employees based their
claim on a memorandum of agreement signed in October 1948, which stated that the employees
would receive their present salaries and any wage differentials when funds for the purpose are
available. The employees retired in January 1951 and have already received some salary
differentials, a total of P9,906.05 for the period from July 1, 1948, to January 31, 1949, but there
was still a balance of P7,275 remaining unpaid due to the exhaustion of the allocated funds
appropriated for this purpose. The defendant does not dispute the existence of the agreement but
argues that payment of salary differentials after the exhaustion of the appropriated funds is subject
to the condition that "funds for the purpose are available." The defendant claims that no funds are
available because it is losing in its business and has presented evidence of its accounting
department's summary statements showing losses during the fiscal year ending June 30, 1953, and
the following month of July. The court notes that the agreement does not specify that the salary
differentials should be paid only from surplus profits. The agreement states that the standardized salaries,
including the resulting salary differentials, are to be carried in all subsequent budgets of the company.
The court argues that the availability of funds for a particular purpose in a going concern does not solely
depend on the cash position of the company but also on the judgment of its board of directors in
prioritizing expenditures. If the defendant was able to raise or appropriate funds for other obligations
despite losses, it could have done the same for its debt to the plaintiffs, which is owed to the poor.
Issue:
Whether the duration of the term for payment of the salary differentials should be fixed by the courts?
Ruling:
Yes. The court ruled in favor of the plaintiffs and held that the duration of the term for payment of the
salary differentials could be fixed by the courts. The court based its decision on Article 1128 of the old
Civil Code (Article 1197 of the new Civil Code), which allows the courts to fix the duration of a term
if it has been left to the will of the debtor. The court considered the obligation to pay the salary
differentials as one with a term left to the will of the debtor, as it depended on the judgment of the
defendant's board of directors. The court also emphasized the importance of doing substantial
justice and avoiding unnecessary delays in the case. The court acknowledges that previous cases
have required a separate action to fix the duration of the term, but in this case, such a separate
action would be unnecessary and only serve to delay the resolution. The defendant does not claim that
it could present better evidence in a separate action, making it a mere formality. The court agrees with the
lower court's decision but modifies the date from which the adjudged interest will run. Instead of running
from the day the action was commenced in the municipal court, the interest will only run from the default
of payment of the principal within the court's specified period of one year.

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