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NOVEMBER 18, 2012 CIV2 CASES

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 178610 November 17, 2010

HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT PLAN, RetirementTrust Fund, Inc.) Petitioner,vs.SPOUSES BIENVENIDO AND EDITHA BROQUEZA, Respondents.

D E C I S I O N

CARPIO, J.:

G.R. No. 178610 is a petition for review1assailing the Decision2promulgated on 30 March 2006 bythe Court of Appeals (CA) in CA-G.R. SP No. 62685. The appellate court granted the petition filed byFe Gerong (Gerong) and Spouses Bienvenido and Editha Broqueza (spouses Broqueza) anddismissed the consolidated complaints filed by Hongkong and Shanghai Banking Corporation, Ltd. -Staff Retirement Plan (HSBCL-SRP) for recovery of sum of money. The appellate court reversedand set aside the Decision3of Branch 139 of the Regional Trial Court of Makati City (RTC) in CivilCase No. 00-787 dated 11 December 2000, as well as its Order4dated 5 September 2000. TheRTCs decision affirmed the Decision5dated 28 December 1999 of Branch 61 of the MetropolitanTrial Court (MeTC) of Makati City in Civil Case No. 52400 for Recovery of a Sum of Money.

The Facts

The appellate court narrated the facts as follows:

Petitioners Gerong and [Editha] Broqueza (defendants below) are employees of Hongkong andShanghai Banking Corporation (HSBC). They are also members of respondent Hongkong ShanghaiBanking Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP, plaintiff below). The HSBCL-SRP is aretirement plan established by HSBC through its Board of Trustees for the benefit of the employees.

On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the amount ofPhp175,000.00. On December 12, 1991, she again applied and was granted an appliance loan inthe amount of Php24,000.00. On the other hand, petitioner Gerong applied and was granted anemergency loan in the amount of Php35,780.00 on June 2, 1993. These loans are paid through

automatic salary deduction.

Meanwhile [in 1993], a labor dispute arose between HSBC and its employees. Majority of HSBCsemployees were terminated, among whom are petitioners Editha Broqueza and Fe Gerong. Theemployees then filed an illegal dismissal case before the National Labor Relations Commission(NLRC) against HSBC. The legality or illegality of such termination is now pending before thisappellate Court in CA G.R. CV No. 56797, entitled Hongkong Shanghai Banking Corp. EmployeesUnion, et al. vs. National Labor Relations Commission, et al.

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Because of their dismissal, petitioners were not able to pay the monthly amortizations of theirrespective loans. Thus, respondent HSBCL-SRP considered the accounts of petitioners delinquent.Demands to pay the respective obligations were made upon petitioners, but they failed to pay.6

HSBCL-SRP, acting through its Board of Trustees and represented by Alejandro L. Custodio, filedCivil Case No. 52400 against the spouses Broqueza on 31 July 1996. On 19 September 1996,

HSBCL-SRP filed Civil Case No. 52911 against Gerong. Both suits were civil actions for recoveryand collection of sums of money.

The Metropolitan Trial Courts Ruling

On 28 December 1999, the MeTC promulgated its Decision7in favor of HSBCL-SRP. The MeTCruled that the nature of HSBCL-SRPs demands for payment is civil and has no connection to theongoing labor dispute. Gerong and Editha Broquezas termination from employment resulted in theloss of continued benefits under their retirement plans. Thus, the loans secured by their futureretirement benefits to which they are no longer entitled are reduced to unsecured and pure civilobligations. As unsecured and pure obligations, the loans are immediately demandable.

The dispositive portion of the MeTCs decision reads:

WHEREFORE, premises considered and in view of the foregoing, the Court finds that the plaintiffwas able to prove by a preponderance of evidence the existence and immediate demandability ofthe defendants loan obligations as judgment is hereby rendered in favor of the plaintiff and againstthe defendants in both cases, ordering the latter:

1. In Civil Case No. 52400, to pay the amount of Php116,740.00 at six percent interest perannum from the time of demand and in Civil Case No. 52911, to pay the amount ofPhp25,344.12 at six percent per annum from the time of the filing of these cases, until theamount is fully paid;

2. To pay the amount of Php20,000.00 each as reasonable attorneys fees;

3. Cost of suit.

SO ORDERED.8

Gerong and the spouses Broqueza filed a joint appeal of the MeTCs decision before the RTC.Gerongs case was docketed Civil Case No. 00-786, while the spouses Broquezas case wasdocketed as Civil Case No. 00-787.

The Regional Trial Courts Ruling

The RTC initially denied the joint appeal because of the belated filing of Gerong and the spousesBroquezas memorandum. The RTC later reconsidered the order of denial and resolved the issues inthe interest of justice.

On 11 December 2000, the RTC affirmed the MeTCs decision in toto.9

The RTC ruled that Gerong and Editha Broquezas termination from employment disqualified themfrom availing of benefits under their retirement plans. As a consequence, there is no longer anysecurity for the loans. HSBCL-SRP has a legal right to demand immediate settlement of the unpaid

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balance because of Gerong and Editha Broquezas continued default in payment and their failure toprovide new security for their loans. Moreover, the absence of a period within which to pay the loanallows HSBCL-SRP to demand immediate payment. The loan obligations are considered pureobligations, the fulfillment of which are demandable at once.

Gerong and the spouses Broqueza then filed a Petition for Review under Rule 42 before the CA.

The Ruling of the Court of Appeals

On 30 March 2006, the CA rendered its Decision10which reversed the 11 December 2000 Decisionof the RTC. The CA ruled that the HSBCL-SRPs complaints for recovery of sum of money againstGerong and the spouses Broqueza are premature as the loan obligations have not yet matured.Thus, no cause of action accrued in favor of HSBCL-SRP. The dispositive portion of the appellatecourts Decision reads as follows:

WHEREFORE, the assailed Decision of the RTC is REVERSED and SET ASIDE. A new one ishereby rendered DISMISSING the consolidated complaints for recovery of sum of money.

SO ORDERED.11

HSBCL-SRP filed a motion for reconsideration which the CA denied for lack of merit in itsResolution12promulgated on 19 June 2007.

On 6 August 2007, HSBCL-SRP filed a manifestation withdrawing the petition against Gerongbecause she already settled her obligations. In a Resolution13of this Court dated 10 September2007, this Court treated the manifestation as a motion to withdraw the petition against Gerong,granted the motion, and considered the case against Gerong closed and terminated.

Issues

HSBCL-SRP enumerated the following grounds to support its Petition:

I. The Court of Appeals has decided a question of substance in a way not in accord with lawand applicable decisions of this Honorable Court; and

II. The Court of Appeals has departed from the accepted and usual course of judicialproceedings in reversing the decision of the Regional Trial Court and the Metropolitan TrialCourt.14

The Courts Ruling

The petition is meritorious. We agree with the rulings of the MeTC and the RTC.

The Promissory Notes uniformly provide:

PROMISSORY NOTE

P_____ Makati, M.M. ____ 19__

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FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay to THE HSBCRETIREMENT PLAN (hereinafter called the "PLAN") at its office in the Municipality of Makati, MetroManila, on or before until fully paid the sum of PESOS ___ (P___) Philippine Currency withoutdiscount, with interest from date hereof at the rate of Six per cent (6%) per annum, payable monthly.

I/WE agree that the PLAN may, upon written notice, increase the interest rate stipulated in this note

at any time depending on prevailing conditions.

I/WE hereby expressly consent to any extensions or renewals hereof for a portion or whole of theprincipal without notice to the other(s), and in such a case our liability shall remain joint and several.1avvphi1

In case collection is made by or through an attorney, I/WE jointly and severally agree to pay tenpercent (10%) of the amount due on this note (but in no case less than P200.00) as and forattorneys fees in addition to expenses and costs of suit.

In case of judicial execution, I/WE hereby jointly and severally waive our rights under the provisionsof Rule 39, Section 12 of the Rules of Court.15

In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil Code:

Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, orupon a past event unknown to the parties, is demandable at once.

x x x. (Emphasis supplied.)

We affirm the findings of the MeTC and the RTC that there is no date of payment indicated in thePromissory Notes. The RTC is correct in ruling that since the Promissory Notes do not contain aperiod, HSBCL-SRP has the right to demand immediate payment. Article 1179 of the Civil Codeapplies. The spouses Broquezas obligation to pay HSBCL-SRP is a pure obligation. The fact thatHSBCL-SRP was content with the prior monthly check-off from Editha Broquezas salary is of no

moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand toenforce a pure obligation.

In their Answer, the spouses Broqueza admitted that prior to Editha Broquezas dismissal fromHSBC in December 1993, she "religiously paid the loan amortizations, which HSBC collectedthrough payroll check-off."16A definite amount is paid to HSBCL-SRP on a specific date. EdithaBroqueza authorized HSBCL-SRP to make deductions from her payroll until her loans are fully paid.Editha Broqueza, however, defaulted in her monthly loan payment due to her dismissal. Despite thespouses Broquezas protestations, the payroll deduction is merely a convenient mode of paymentand not the sole source of payment for the loans. HSBCL-SRP never agreed that the loans will bepaid only through salary deductions. Neither did HSBCL-SRP agree that if Editha Broqueza ceasesto be an employee of HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP canimmediately demand payment of the loans at anytime because the obligation to pay has no period.

Moreover, the spouses Broqueza have already incurred in default in paying the monthly installments.

Finally, the enforcement of a loan agreement involves "debtor-creditor relations founded on contractand does not in any way concern employee relations. As such it should be enforced through aseparate civil action in the regular courts and not before the Labor Arbiter."17

WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals in CA-G.R. SP No.62685 promulgated on 30 March 2006 is REVERSED and SET ASIDE. The decision of Branch 139

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of the Regional Trial Court of Makati City in Civil Case No. 00-787, as well as the decision of Branch61 of the Metropolitan Trial Court of Makati City in Civil Case No. 52400 against the spousesBienvenido and Editha Broqueza, are AFFIRMED. Costs against respondents.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-29900 June 28, 1974

IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased, GEORGEPAY, petitioner-appellant,vs.SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.

Florentino B. del Rosario for petitioner-appellant.

Manuel V. San Jose for oppositor-appellee.

FERNANDO,J.:p

There is no difficulty attending the disposition of this appeal by petitioner on questions of law. Whileseveral points were raised, the decisive issue is whether a creditor is barred by prescription in hisattempt to collect on a promissory note executed more than fifteen years earlier with the debtor suedpromising to pay either upon receipt by him of his share from a certain estate or upon demand, thebasis for the action being the latter alternative. The lower court held that the ten-year period oflimitation of actions did apply, the note being immediately due and demandable, the creditoradmitting expressly that he was relying on the wording "upon demand." On the above facts as found,and with the law being as it is, it cannot be said that its decision is infected with error. We affirm.

From the appealed decision, the following appears: "The parties in this case agreed to submit thematter for resolution on the basis of their pleadings and annexes and their respective memoranda

submitted. Petitioner George Pay is a creditor of the Late Justo Palanca who died in Manila on July3, 1963. The claim of the petitioner is based on a promissory note dated January 30, 1952, wherebythe late Justo Palanca and Rosa Gonzales Vda. de Carlos Palanca promised to pay George Pay theamount of P26,900.00, with interest thereon at the rate of 12% per annum. George Pay is nowbefore this Court, asking that Segundina Chua vda. de Palanca, surviving spouse of the late JustoPalanca, he appointed as administratrix of a certain piece of property which is a residential dwellinglocated at 2656 Taft Avenue, Manila, covered by Tax Declaration No. 3114 in the name of JustoPalanca, assessed at P41,800.00. The idea is that once said property is brought underadministration, George Pay, as creditor, can file his claim against the administratrix." 1 It then stated

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that the petition could not prosper as there was a refusal on the part of Segundina Chua Vda. dePalanca to be appointed as administratrix; that the property sought to be administered no longerbelonged to the debtor, the late Justo Palanca; and that the rights of petitioner-creditor had alreadyprescribed. The promissory note, dated January 30, 1962, is worded thus: " `For value received fromtime to time since 1947, we [jointly and severally promise to] pay to Mr. [George Pay] at his office atthe China Banking Corporation the sum of [Twenty Six Thousand Nine Hundred Pesos]

(P26,900.00), with interest thereon at the rate of 12% per annum upon receipt by either of theundersigned of cash payment from the Estate of the late Don Carlos Palanca or upon demand'. . . .

As stated, this promissory note is signed by Rosa Gonzales Vda. de Carlos Palanca and JustoPalanca." 2 Then came this paragraph: "The Court has inquired whether any cash payment has beenreceived by either of the signers of this promissory note from the Estate of the late Carlos Palanca.Petitioner informed that he does not insist on this provision but that petitioner is only claiming on hisright under the promissory note ." 3 After which, came the ruling that the wording of the promissorynote being "upon demand," the obligation was immediately due. Since it was dated January 30,1952, it was clear that more "than ten (10) years has already transpired from that time until to date.The action, therefore, of the creditor has definitely prescribed." 4 The result, as above noted, was thedismissal of the petition.

In an exhaustive brief prepared by Attorney Florentino B. del Rosario, petitioner did assail thecorrectness of the rulings of the lower court as to the effect of the refusal of the surviving spouse ofthe late Justo Palanca to be appointed as administratrix, as to the property sought to beadministered no longer belonging to the debtor, the late Justo Palanca, and as to the rights ofpetitioner-creditor having already prescribed. As noted at the outset, only the question of prescriptionneed detain us in the disposition of this appeal. Likewise, as intimated, the decision must beaffirmed, considering the clear tenor of the promissory note.

From the manner in which the promissory note was executed, it would appear that petitioner washopeful that the satisfaction of his credit could he realized either through the debtor sued receivingcash payment from the estate of the late Carlos Palanca presumptively as one of the heirs, or, asexpressed therein, "upon demand." There is nothing in the record that would indicate whether or notthe first alternative was fulfilled. What is undeniable is that on August 26, 1967, more than fifteen

years after the execution of the promissory note on January 30, 1952, this petition was filed. Thedefense interposed was prescription. Its merit is rather obvious. Article 1179 of the Civil Codeprovides: "Every obligation whose performance does not depend upon a future or uncertain event, orupon a past event unknown to the parties, is demandable at once." This used to be Article 1113 ofthe Spanish Civil Code of 1889. As far back as Floriano v. Delgado, 5 a 1908 decision, it has beenapplied according to its express language. The well-known Spanish commentator, Manresa, on thispoint, states: "Dejando con acierto, el caracter mas teorico y grafico del acto, o sea la perfeccion deeste, se fija, para determinar el concepto de la obligacion pura, en el distinctive de esta, y que esconsecuencia de aquel: la exigibilidad immediata." 6

The obligation being due and demandable, it would appear that the filing of the suit after fifteenyears was much too late. For again, according to the Civil Code, which is based on Section 43 of ActNo. 190, the prescriptive period for a written contract is that of ten years. 7 This is another instancewhere this Court has consistently adhered to the express language of the applicable norm. 8 There isno necessity therefore of passing upon the other legal questions as to whether or not it did suffice forthe petition to fail just because the surviving spouse refuses to be made administratrix, or justbecause the estate was left with no other property. The decision of the lower court cannot beoverturned.

WHEREFORE, the lower court decision of July 24, 1968 is affirmed. Costs against George Pay.

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Zaldivar (Chairman), Barredo, Antonio, Fernandez and Aquino, JJ., concur.

MITH, BELL & CO., LTD VS.VICENTE SOTELO MATTI

G.R. No. L-16570 March 9, 1922

FACTS:

Smith Bell and Co. entered into contract with Mr. Vicente Sotelo in August 1918. Two steel

tanks were to be sold to Sotelo in the amount of P21,000.00; two expellers at P25,000.00 each

and two electric motors at P2,000.00 each. The steel tanks are to be delivered within 3 or 4

months; the expellers to be delivered in September 1918 or as soon as possible; electric motors

approximate delivery within 90 days and is not guaranteed. The tanks arrived at Manila on the27th of April, 1919: the expellers on the 26th of October, 1918; and the motors on the 27th of

February, 1919. The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of

these goods, but Mr. Sotelo refused to receive them and to pay the prices stipulated.The plaintiff brought suit against the defendant, based on four separate causes of action,

1.) alleging, among other facts, that it 2.) immediately notified the defendant of the arrival of the

goods, and 3.) asked instructions from him as to the delivery thereof, and that the defendant 4.)

refused to receive any of them and to pay their price. The plaintiff, further, alleged that the

expellers and the motors were in good condition.

In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining

and By-Products Co., Inc., denied the plaintiff's allegations as to the shipment of these goods

and their arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter's refusal to

receive them and pay their price, and the good condition of the expellers and the motors,

alleging as special defense that Mr. Sotelo had made the contracts in question as manager of

the intervenor, the Manila Oil Refining and By-Products Co., Inc which fact was known to the

plaintiff, and that "it was only in May, 1919, that it notified the intervenor that said tanks had

arrived, the motors and the expellers having arrived incomplete and long after the date

stipulated." As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff's

delay in making delivery of the goods, which the intervenor intended to use in the manufacture

of cocoanut oil, the intervenor suffered damages in the sums of one hundred sixteen thousandseven hundred eighty-three pesos and ninety-one centavos (P116,783.91) for the nondelivery of

the tanks, and twenty-one thousand two hundred and fifty pesos (P21,250) on account of the

expellers and the motors not having arrived in due time.

ISSUE:

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Was the condition dependent upon chance or upon will of third persons?

RULING:

Yes. And as the export of the machinery in question was, as stated in the contract,

contingent upon the sellers obtaining certificate of priority and permission of the United States

Government, subject to the rules and regulations, as well as to railroad embargoes, then the

delivery was subject to a condition the fulfillment of which depended not only upon the effort of

the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill

the condition. In cases like this, which are not expressly provided for, but impliedly covered, by

the Civil Code, the obligor will be deemed to have sufficiently performed his part of the

obligation, if he has done all that was in his power, even if the condition has not been fulfilled in

reality.

In such cases, the decisions prior to the Civil Code have held that the obligee having done all

that was in his power, was entitled to enforce performance of the obligation. This performance,

which is fictitious not real is not expressly authorized by the Code, which limits itself only

to declare valid those conditions and the obligation thereby affected; but it is neither disallowed,

and the Code being thus silent, the old view can be maintained as a doctrine.

CHAVES VS. GONZALES

32 SCRA 547

FACTS:Plaintiff Chaves delivered to defendant Gonzales a typewriter for routine cleaning and servicing.

The defendant was not able to finish the job after some time despite repeated reminders by

plaintiff. Eventually, Chaves took back his typewriter which was returned to him in shambles

with some parts missing. Chaves had the typewriter fixed by someone else which cost him a

total of Php 89.85.Subsequently, Chaves filed a case before the CFI demanding Php 90 as actual damages

among others. The CFI found for the plaintiff but ruled that the total cost of Php 89.85 should not

be fully charged against the defendant and that only the total value of the missing parts at Php

31.10 should be paid by Gonzales to Chaves.

Chaves appealed to the Supreme Court with the contention that under Article 1167 defendant

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should pay him the whole cost of labor and materials that went into the repair of the

machine. Gonzales, on the other hand, contended that he is not liable at all for anything

because his contract with Chaves did not contain a period and that Chaves should have first

filed a petition for the court to fix the period under 1167 of the Civil Code.

ISSUE:Does the contract contain a period?

RULING:Yes. Based on the facts it was clear that both parties had a perfected contract for

cleaning and servicing a typewriter; that they intended that the defendant was to finish it atsome future time although such time was not specified; and that such time had passed without

the work having been accomplished. The time for compliance having evidently expired, and

there being a breach of contract by non-performance, it was academic for plaintiff to have first

petitioned the court to fix a period. Defendant cannot invoke Article 1197 of the Civil Code for

he virtually admitted non-performance by returning the typewriter that he was obliged to repair in

a non-working condition with essential parts missing. For such contravention, Gonzales is liable

under Article 1167 of the Civil Code which makes him liable for the cost of executing the

obligation in a proper manner. In addition, he is likewise liable under Article 1170 of the Code for

cost of the missing parts, in the amount of Php 31.10 for in his obligation to repair the typewriter

he was bound, but failed or neglected to return it in the same condition it was when he receivedit.

SINGSON ENCARNACION VS. BALDOMAR77 PHIL 470

FACTS:Vicente Singson Encarnacion leased his house to Jacinta Baldomar and her son, Lefrando

Fernando upon a month-to-month basis. After Manila was liberated in the last war, Singson

Encarnacio notified Baldomar and her son Fernando to vacate the house because he needed it

for his office as a result of the destruction of the building where he had his office before. Despite

the demand, the Baldomar and Fernando continued their occupancy.

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The defense of Baldomar and Fernando was that the contract with Singson Encarnacion

authorized them to continue occupancy indefinitely while they should faithfully fulfill their

obligation with respect to payment of rentals. Singson Encarnacion contended that the lease

had always and since the beginning been upon a month-to-month basis.

ISSUE:Was it tenable for Singson Encarnacion to discontinue the lease of Baldomar and her son?

RULING:

The continuance and fulfillment of the contract of lease cannot be made to depend solely

and exclusively upon the free and uncontrolled choice of the lessees between continuing payingthe rentals or not, completely depriving the owner of all say in the matter. The defense of

Baldomar and Fernando would leave to the sole and exclusive will of one of the contracting

parties the validity and fulfillment of the contract of lease, within the meaning of Article 1256 of

the Civil Code. For if this were allowed, so long as the lessee elected to continue the lease by

continuing the payment of the rentals the owner would never be able to discontinue the lease;

conversely, although the owner should desire the lease to continue, the lessee could effectively

thwart his purpose if he should prefer to terminate the contract by the simple expedient of

stopping payment of the rentals.

ELEIZEGUI VS MANILA LAWN TENNIS CLUBG.R. 967

FACTS:This suit concerns the lease of a piece of land for a fixed consideration and to endure at

the will of the lessee. By the contract of lease the lessee is expressly authorized to make

improvements upon the land, by erecting buildings of both permanent and temporary character,

by making fills, laying pipes, and making such other improvements as might be considered

desirable for the comfort and amusement of the members.With respect to the term of the lease the present question has arisen. In its decision three

theories have been presented: One which makes the duration depend upon the will of the

lessor, who, upon one month's notice given to the lessee, may terminate the lease so stipulated;

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another which, on the contrary, makes it dependent upon the will of the lessee, as stipulated;

and the third, in accordance with which the right is reversed to the courts to fix the duration of

the term.The first theory is that which has prevailed in the judgment below, as appears from the language

in which the basis of the decision is expressed: "The court is of the opinion that the contract oflease was terminated by the notice given by the plaintiff on August 28 of last year . . . ." And

such is the theory maintained by the plaintiffs, which expressly rests upon article 1581 of the

Civil Code, the law which was in force at the time the contract was entered into (January 25,

1890). The judge, in giving to this notice the effect of terminating the lease, undoubtedly

considers that it is governed by the article relied upon by the plaintiffs, which is of the following

tenor: "When the term has not been fixed for the lease, it is understood to be for years when an

annual rental has been fixed, for months when the rent is monthly. . . ." The second clause of

the contract provides as follows: "The rent of the said land is fixed at 25 pesos per month."

ISSUE:Was there a conventional term, a duration, agreed upon in the contract in question?

RULING:Yes. The obligations which, with the force of law, the lessors assumed by the contract

entered into, so far as pertaining to the issues, are the following: "First. . . . They lease theabove-described land to Mr. Williamson, who takes it on lease. . . for all the timethe members

of the said club may desire to use it . . . Third. . . . the owners of the land undertake to maintain

the club as tenant as long as the latter shall see fit, without altering in the slightest degree the

conditions of this contract, even though the estate be sold."

In view of these clauses, it can not be said that there is no stipulation with respect to the

duration of the lease, or that, notwithstanding these clauses, article 1581, in connection with

article 1569, can be applied. If this were so, it would be necessary to hold that the lessors spoke

in vain that their words are to be disregarded a claim which can not be advanced by the

plaintiffs nor upheld by any court without citing the law which detracts all legal force from such

words or despoils them of their literal sense.

PHILIPPINE BANKING CORPORATION VS. LUI SHE

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1967 SEPTEMBER 12

FACTS:Justina Santos y Canon Faustino and her sister Lorenza were the owners in common of a piece

of land in Manila.

The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the

restaurant. Wong had been a long-time lessee of a portion of the property, having a monthly

rental of P2,620.On September 22, 1957 Justina Santos became the owner of the entire property as her sister

died with no other heir. Then already well advanced in years, being at the time 90 years old,

blind, crippled and an invalid, she was left with no other relative to live with, but she was taken

cared of by Wong.

"In grateful acknowledgment of the personal services of the Lessee to her," Justina Santos

executed on November 15, 1957, a contract of lease in favor of Wong, covering the portion then

already leased to him and another portion fronting Florentino Torres street. The lease was for

50 years, although the lessee was given the right to withdraw at any time from the agreement;

the monthly rental was P3,120. Ten days later (November 25), the contract was amended so as

to make it cover the entire property, including the portion on which the house of Justina Santos

stood, at an additional monthly rental of P360.

On December 21 she executed contract giving Wong the option to buy the leased premises forP120,000, payable within ten years at a monthly installment of P1,000. The option was

conditioned on his obtaining Philippine citizenship,a petition for which was then pending in the

Court of First Instance of Rizal.

On November 18, 1958 she executed two other contracts, one extending the term of the lease

to 99 years, and another fixing the term of the option at 50 years. Both contracts are written in

Tagalog. In two wills executed on August 24 and 29, 1959, she bade her legatees to respect the

contracts she had entered into with Wong, but in a codicil of a later date (November 4, 1959)

she appears to have a change of heart. Claiming that the various contracts were made by her

because of machinations and inducements practised by him, she now directed her executor to

secure the annulment of the contracts.

Both parties however died, Wong Heng on October 21, 1962 and Justina Santos on December

28, 1964. Wong was substituted by his wife, Lui She, the other defendant in this case, While

Justina Santos was substituted by the Philippine Banking Corporation. Justina Santos

maintained now reiterated by the Philippine Banking Corporation that the lease contract

should have been annulled along with the four other contracts because it lacks mutuality,

among others

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Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this

agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which

provides that "the contract must bind both contracting parties; its validity or compliance cannot

be left to the will of one of them."

ISSUES:

1. (OBLICON ISSUE) Was the insertion in the contract of a resolutory condition, permitting the

cancellation of the contract by one of the parties, valid?2. (RELATED, but Consitutional Issue) Was the contract between Wong (Lui She) and Justina

Santos (Phil. Banking) enforceable?

RULING:

1. Yes. In the early case of Taylor vs. Uy Tiong Piao, the Supreme Court said:

Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment to the

insertion in a contract for personal service of a resolutory condition permitting the cancellation of

the contract by one of the parties. Such a stipulation, as can be readily seen, does not make

either the validity or the fulfillment of the contract dependent upon the will of the party to whom

is conceded the privilege of cancellation; for where the contracting parties have agreed that

such option shall exist, the exercise of the option is as much in the fulfillment of the contract as

any other act which may have been the subject of agreement. Indeed, the cancellation of a

contract in accordance with conditions agreed upon beforehand is fulfillment

Further, in the case at bar, the right of the lessee to continue the lease or to terminate it was so

circumscribed by the term of the contract that it cannot be said that the continuance of the lease

depends upon his will. At any rate, even if no term had been fixed in the agreement, this case

would at most justify the fixing of a period but not the annulment of the contract.

2. No. The contract of lease, as in this case, cannot be sustained. However, to be sure, a lease

to an alien for a reasonable period was valid, so was an option giving an alien the right to buyreal property on condition that he is granted Philippine citizenship.

But if an alien was given not only a lease of, but also an option to buy, a piece of land, by virtue

of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50

years, then it became clear that the arrangement was a virtual transfer of ownership whereby

the owner divested himself in stages not only of the right to enjoy the land (jus possidendi, jus

utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus disponendi)

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rights the sum total of which make up ownership. It was just as if today the possession is

transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all the

rights of which ownership is made up are consolidated in an alien. And yet this was just exactly

what the parties in this case did within this pace of one year, with the result that Justina Santos'

ownership of her property was reduced to a hollow concept. If this can be done, then the

Constitutional ban against alien landholding in the Philippines, is indeed in grave peril.

The contracts in question are annulled and set aside; the land subject-matter of the contracts

was ordered returned to the estate of Justina Santos as represented by the Philippine Banking

Corporation.

LIM VS. PEOPLE133 SCRA 333

FACTS:On January 10, 1966, appellant Lourdes Valerion Lim who is a businesswoman went to

the house of Maria Ayroso and proposed to sell Ayrosos tobacco consisting of 615 kilos at

P1.30 a kilo. The appellant was to receive the overprice for which she could sell the tobacco.

This agreement was made in the presence of the plaintiffs sister, Salud Bantug. Salvador

Bantug drew the document which apprised of a certification that appellant had received from

Ayroso the amount of 615 kilos of leaf tobacco to be sold at P1.30 per kilo. It is also stated there

that the proceeds in the amount of P799.50 will be given to Ayroso as soon as it was sold. Itwas signed by the appellant and witnessed by the complainants sister Salud Bantug and the

latters maid Genoveva Ruiz. The appellant that time was bringing jeep, and the tobacco was

simply loaded in the jeep. However, of the total value of P799.50, the appellant had paid to

Ayroso only P240.00 and this was paid on three different times. As no further amount was paid,

complainant Ayroso filed a complaint against appellant Lim for estafa. Judgment was rendered

against appellant. In this petition for review on certiorari, appellant claimed that the obligation

does not fix a period and that the court should fix the duration thereof pursuant to Article 1197 of

the Civil Code.

ISSUE:

Is appellants contention, saying that Article 1197 applies, correct?

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RULING:No. It is clear in the agreement that the proceeds of the sale of the tobacco should be

turned over to the complainant as soon as the same was sold, or, that the obligation was

immediately demandable as soon as the tobacco was disposed of. The agreement constituted

her as an agent with the obligation to return the tobacco if the same was not sold. The fact thatappellant received the tobacco and the proceeds to be given to complainant as soon as it was

sold, strongly negates transfer of ownership of the goods to the appellant. Furthermore, where a

person obliged himself to pay to another the proceeds of the latters tobacco as soon as they

are disposed of, a period exists for payment of the obligation and, therefore, Article 1197 does

not apply. The receipt, therefore, should be considered as a contract of agency to sell the

subject tobacco between the appellant and complainant.

ARANETA VS PHIL. SUGAR ESTATES DEVELOPMENT CO.20 SCRA 330

FACTS:J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, and on July 28,

1950, [through Gregorio Araneta, Inc.] sold a portion thereof to Philippine Sugar Estates

Development Co., Ltd.

The parties stipulated, among in the contract of purchase and sale with mortgage, that the buyerwill build on the said parcel land the Sto. Domingo Church and Convent while the seller for its

part will construct streets. But the seller, Gregorio Araneta, Inc., which began constructing the

streets, is unable to finish the construction of the street in the Northeast side because a certain

third-party, by the name of Manuel Abundo, who has been physically occupying a middle part

thereof, refused to vacate the same;

Both buyer and seller know of the presence of squatters that may hamper the construction of

the streets by the seller. On May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its

complaint against J. M. Tuason & Co., Inc., and instance, seeking to compel the latter to comply

with their obligation, as stipulated in the above-mentioned deed of sale, and/or to pay damages

in the event they failed or refused to perform said obligation.The lower court and the appellate court ruled in favor of Phil. Sugar estates, and

gave defendant Gregorio Araneta, Inc., a period of two (2) years from notice hereof, within

which to comply with its obligation under the contract, Annex "A". Gregorio Araneta, Inc. resorted to a petition for review by certiorari to this Court.

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ISSUES:

Was there a period fixed?

RULING:Yes. 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." If the contract so

provided, then there was a period fixed, a "reasonable time;" and all that the court should havedone 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,

Was it within the powers of the lower court to set the performance of the obligation in two years

time?NO. 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 included it as first amended;

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 can not 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.It must be recalled that 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 beinferred that a period was intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the

Court must then proceed to the second step, and decide what period was "probably

contemplated by the parties" (Do., par. 3). So that, ultimately, the Court can not 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.

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Does reasonable time mean that the date of performance would be indefinite?The Court of Appeals objected to this conclusion that it would render the date of performance

indefinite. Yet, the circumstances admit no other reasonable view; and this very indefiniteness is

what explains why the agreement did not specify any exact periods or dates of performance.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-55480 June 30, 1987

PACIFICA MILLARE, petitioner,vs.HON. HAROLD M. HERNANDO, In his capacity as Presiding Judge, Court of Instance of Abra,Second Judicial District, Branch I, ANTONIO CO and ELSA CO, respondents.

FELICIANO, J.:

On 17 June 1975, a five-year Contract of Lease 1 was executed between petitioner Pacifica Millareas lessor and private respondent Elsa Co, married to Antonio Co, as lessee. Under the writtenagreement, which was scheduled to expire on 31 May 1980, the lessor-petitioner agreed to rent out

to thelessee at a monthly rate of P350.00 the "People's Restaurant", a commercial establishmentlocated at the corner of McKinley and Pratt Streets in Bangued, Abra.

The present dispute arose from events which transpired during the months of May and July in 1980.According to the Co spouses, sometime during the last week of May 1980, the lessor informed themthat they could continue leasing the People's Restaurant so long as they were amenable to payingcreased rentals of P1,200.00 a month. In response, a counteroffer of P700.00 a month was made bythe Co spouses. At this point, the lessor allegedly stated that the amount of monthly rentals could beresolved at a later time since "the matter is simple among us", which alleged remark was supposedlytaken by the spouses Co to mean that the Contract of Lease had been renewed, prompting them tocontinue occupying the subject premises and to forego their search for a substitute place to rent. 2 Incontrast, the lessor flatly denied ever having considered, much less offered, a renewal of theContract of Lease.

The variance in versions notwithstanding, the record shows that on 22 July 1980, Mrs. Millare wrotethe Co spouses requesting them to vacate the leased premises as she had no intention of renewingthe Contract of Lease which had, in the meantime, already expirecl. 3 In reply, the Co spousesreiterated their unwillingness to pay the Pl,200.00 monthly rentals supposedly sought bv Mrs. Millarewhich they considered "highly excessive, oppressive and contrary to existing laws". They alsosignified their intention to deposit the amount of rentals in court, in view of Mrs. Millare's refusal toaccept their counter-offer. 4 Another letter of demand from Mrs. Millare was received on 28 July 1980

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by the Co spouses, who responded by depositing the rentals for June and July (at 700.00 a month)in court.

On 30 August 1980, a Saturday, the Co spouses jumped the gun, as it were, and filed aComplaint 5 (docketed as Civil Case No. 1434) with the then Court of First Instance of Abra againstMrs. Millare and seeking judgment (a) ordering the renewal of the Contract of Lease at a rental rate

of P700.00 a nionth and for a period of ten years, (b) ordering the defendant to collect the sum ofP1,400.00 deposited by plaintiffs with the court, and (c) ordering the defendant to pay damages inthe amount of P50,000.00. The following Monday, on 1 September 1980, Mrs. Millare filed anejectment case against the Co spouses in the Municipal Court of Bangued, Abra, docketed as CivilCase No. 661. The spouses Co, defendants therein, sut)sequently set up lis pendens as a CivilCase No. 661. The spouses Co, defendants therein, subsequently set up lis pendensas a defenseagainst the complaint for ejectment.

Mrs. Millare, defendant in Civil Case No. 1434, countered with an Omnibus Motion toDismiss 6 rounded on (a) lack of cause of action due to plaintiffs' failure to establish a valid renewalof the Contract of Lease, and (b) lack of jurisdiction by the trial court over the complaint for failure ofplaintiffs to secure a certification from the Lupong Tagapayapaof the barangay wherein bothdisputants reside attesting that no amicable settlement between them had been reached despiteefforts to arrive at one, as required by Section 6 of Presidential Decree No. 1508. The Co spousesopposed the motion to dismiss. 7

In an Order dated 15 October 1980, respondent judge denied the motion to dismiss and ordered therenewal of the Contract of Lease. Furthermore plaintiffs were allowed to deposit all accruing monthlyrentals in court, while defendant Millare was directed to submit her answer to the complaint. 8Amotion for reconsideration 9 was subsequently filed which, however, was likewise denied. 10 Hence,on 13 November 1980, Mrs. Millare filed the instant Petition for Certiorari, Prohibition andMandamus, seeking injunctive relief from the abovementioned orders. This Court issued a temporaryrestraining order on 21 November 1980 enjoining respondent, judge from conducting furtherproceedings in Civil Case No. 1434. 11Apparently, before the temporary restraining order could beserved on the respondent judge, he rendered a "Judgment by Default" dated 26 November 1980

ordering the renewal of the lease contract for a term of 5 years counted from the expiration date ofthe original lease contract, and fixing monthly rentals thereunder at P700.00 a month, payable inarrears. On18 March 1981, this Court gave due course to the Petition for Certiorari, Prohibition andMandamus. 12

Two issues are presented for resolution: (1) whether or not the trial court acquired jurisdiction overCivil Case No. 1434; and (2) whether or not private respondents have a valid cause of action againstpetitioner.

Turning to the first issue, petitioner's attack on the jurisdiction of the trial court must fail, though forreasons different from those cited by the respondent judge. 13 We would note firstly that theconciliation procedure required under P.D. 1508 is not a jurisdictional requirement in the sense that

failure to have prior recourse to such procedure would not deprive a court of its jurisdiction eitherover the subject matter or over the person of the defendant.14 Secondly, the acord shows that twocomplaints were submitted to the barangay authorities for conciliation one by petitioner forejectment and the other by private respondents for renewal of the Contract of Lease. It appearsfurther that both complaints were, in fact, heard by the Lupong Tagapayapain the afternoon of 30

August 1980. After attempts at conciliation had proven fruitless, Certifications to File Actionauthorizing the parties to pursue their respective claims in court were then issued at 5:20 p.m. of thatsame aftemoon, as attested to by the Barangay Captain in a Certification presented in evidence bypetitioner herself. 15

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Petitioner would, nonetheless, assail the proceedings in the trial court on a technicaety, i.e., privaterespondents allegedly filed their complaint at 4:00 p.m. of 30 August 1980, or one hour and twentyminutes before the issuance of the requisite certification by the Lupng Tagapayapa. The defect inprocedure admittedly initially present at that particular moment when private respondents first filedthe complaint in the trial court, was cured by the subsequent issuance of the Certifications to File

Action by the barangay Lupong TagapayapaSuch certifications in any event constituted substantial

comphance with the requirement of P.D. 1508.

We turn to the second issue, that is, whether or not the complaint in Civil Case No. 1434 filed by therespondent Co spouses claiming renewal of the contract of lease stated a valid cause of action.Paragraph 13 of the Contract of Lease reads as follows:

13. This contract of lease is subject to the laws and regulations ofthe goverrunent;and that this contract of lease may be renewed after a period of five (5) years underthe terms and conditions as will be mutually agreed upon by the parties at the time ofrenewal; ... (Emphasis supplied.)

The respondent judge, in his Answer and Comment to the Petition, urges that under paragraph 13

quoted above.

there was already a consummated and finished mutual agreement of the parties to renewthe contract of lease after five years; what is only left unsettled between the parties to thecontract of lease is the amount of the monthly rental; the lessor insists Pl,200 a month,while the lessee is begging P700 a month which doubled the P350 monthly rental underthe original contract .... In short, the lease contract has never expired because paragraph13 thereof had expressly mandated that it is renewable. ... 16

In the "Judgment by Default" he rendered, the respondent Judge elaborated his views obviouslyhighly emotional in character in the following extraordinary tatements:

However, it is now the negative posture of the defendant-lessor to block, reject and

refuse to renew said lease contract. It is the defendant-lessor's assertion and positionthat she can at the mere click of her fingers, just throw-out the plaintiffs-lessees fromthe leased premises and any time after the original term of the lease contract hadalready expired; This negative position of the defendantlessor, to the mind of thisCourt does not conform to the principles and correct application of the philosophyunderlying the law of lease; for indeed, the law of lease is impressed with publicinterest, social justice and equity; reason for which, this Court cannot sanction lotowner's business and commercial speculations by allowing them with "unbridleddiscretion" to raise rentals even to the extent of "extraordinary gargantuanproportions, and calculated to unreasonably and unjustly eject the helpless lesseebecause he cannot afford said inflated monthly rental and thereby said lessee isplaced without any alternative, except to surrender and vacate the premisesmediately,

-" Many business establishments would be closed and the public woulddirectly suffer the direct consequences; Nonetheless, this is not the correct conceptor perspective the law of lease, that is, to place the lessee always at the mercy of thelessor's "Merchant of Venice"and to agit the latter's personal whims and caprices;the defendant-lessor's hostile attitude by imposing upon the lessee hereinan "unreasonable and extraordinary gargantuan monthly rental of P1,200.00", to themind of this Court, is "fly-by night unjust enrichment"at the expense of said lessees;but, no Man should unjustly enrich himself at the expense of another; under thesefacts and circumstances surrounding this case, the action therefore to renew the

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lease contract! is "tenable" because it falls squarely within the coverage andcommand of Articles 1197 and 1670 of the New Civil Code, to wit:

xxx xxx xxx

The term "to be renewed" as expressly stipulated by the herein parties in the original

contract of lease means that the lease may be renewed for another term of five (5) years;its equivalent to a promise made by the lessor to the lessee, and as a unilateralstipulation, obliges the lessor to fulfill her promise; of course the lessor is free to complyand honor her commitment or back-out from her promise to renew the lease contract; but,once expressly stipulated, the lessor shall not be allowed to evade or violate theobligation to renew the lease because, certainly, the lessor may be held hable fordamages caused to the lessee as a consequence of the unjustifiable termination of thelease or renewal of the same; In other words, the lessor is guilty of breach of contract:Since the original lease was fixed for five (5) years, it follows, therefore, that the leasecontract is renewable for another five (5) years and the lessee is not required beforehand to give express notice of this fact to the lessor because it was expressly stipulatedin the original lease contract to be renewed; Wherefore, the bare refusal of the lessor torenew the lease contract unless the monthly rental is P1,200.00 is contrary to law,

morals, good customs, public policy, justice and equity because no one should unjustlyenrich herself at the expense of another. Article 1197 and 1670 of the New Civil Codemust therefore govern the case at bar and whereby this Court is authorized to fix theperiod thereof by ordering the renewal of the lease contract to another fixed term of five(5) years. 17

Clearly, the respondent judge's grasp of both the law and the Enghsh language is tenuous at best.We are otherwise unable to comprehend how he arrived at the reading set forth above. Paragraph13 of the Contract of Lease can only mean that the lessor and lessee may agree to renew thecontract upon their reaching agreement on the terms and conditions to be embodied in such renewalcontract. Failure to reach agreement on the terms and conditions of the renewal contract will ofcourse prevent the contract from being renewed at all. In the instant case, the lessor and the lesseeconspicuously failed to reach agreement both on the amount of the rental to be payable during the

renewal term, and on the term of the renewed contract.

The respondent judge cited Articles 1197 and 1670 of the Civil Code to sustain the "Judgment byDefault" by which he ordered the renewal of the lease for another term of five years and fixedmonthly rentals thereunder at P700.00 a month. Article 1197 of the Civil Code provides as follows:

If the obligation does not fix a period, but from its nature and the circumstances it canbe inferred that a period was intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when it depends upon the will ofthe debtor.

In every case, the courts shall determine such period as may, under thecircumstances, have been probably contemplated by the parties. Once fixed by thecourts, the period cannot be changed by them. (Emphasis supplied.)

The first paragraph of Article 1197 is clearly inapplicable, since the Contract of Lease did in fact fixan original period of five years, which had expired. It is also clear from paragraph 13 of the Contractof Lease that the parties reserved to themselves the faculty of agreeing upon the period of therenewal contract. The second paragraph of Article 1197 is equally clearly inapplicable since theduration of the renewal period was not left to the wiu of the lessee alone, but rather to the will of both

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the lessor and the lessee. Most importantly, Article 1197 applies only where a contract of leaseclearly exists. Here, the contract was not renewed at all, there was in fact no contract at all theperiod of which could have been fixed.

Article 1670 of the Civil Code reads thus:

If at the end of the contract the lessee should continue enjoying the thing left for 15days with the acquiescence of the lessor and unless a notice to the contrary by eitherparty has previously been given. It is understood that there is an implied new lease,not for the period of the original contract but for the time established in Articles 1682and 1687. The ther terms of the original contract shall be revived. (Emphasissuplied.)

The respondents themselves, public and private, do not pretend that the continued occupancy of theleased premises after 31 May 1980, the date of expiration of the contract, was with theacquiescence of the lessor. Even if it be assumed that tacite reconduccionhad occurred, the impliednew lease could not possibly have a period of five years, but rather would have been a month-to-month lease since the rentals (under the original contract) were payable on a monthly basis. At the

latest, an implied new lease (had one arisen) would have expired as of the end of July 1980 in viewof the written demands served by the petitioner upon the private respondents to vacate thepreviously leased premises.

It follows that the respondent judge's decision requiring renewal of the lease has no basis in law or infact. Save in the limited and exceptional situations envisaged inArticles ll97 and 1670 of the CivilCode, which do not obtain here, courts have no authority to prescribe the terms and conditions of acontract for the parties. As pointed out by Mr. Justice J.B.L. Reyes in Republic vs. Philippine LongDistance Telephone,Co., 18

[P]arties cannot be coerced to enter into a contract where no agreement is hadbetween them as to the principal terms and conditions of the contract. Freedom tostipulate such terms and conditions is of the essence of our contractual system, and

by express provision of the statute, a contract may be annulled if tainted by violence,intimidation or undue influence (Article 1306, 1336, 1337, Civil Code of thePhilippines).

Contractual terms and conditions created by a court for two parties are a contradiction in terms. Ifthey are imposed by a judge who draws upon his own private notions of what morals, good customs,

justice, equity and public policy" demand, the resulting "agreement" cannot, by definition, beconsensual or contractual in nature. It would also follow that such coerced terms and conditionscannot be the law as between the parties themselves. Contracts spring from the volition of theparties. That volition cannot be supplied by a judge and a judge who pretends to do so, actstyrannically, arbitrarily and in excess of his jurisdiction. 19

WHEREFORE, the Petition for Certiorari, Prohibition and mandamus is granted. The Orders of therespondent judge in Civil Case No. 1434 dated 26 September 1980 (denying petitioner's motion todismiss) and 4 November 1980 (denying petitioner's motion for reconsideration), and the "Judgmentby Default" rendered by the respondent judge dated 26 November 1980, are hereby annulled andset aside and Civil Case No. 1434 is hereby dismissed. The temporary restraining order dated 21November 1980 issued by this ourt, is hereby made permanent. No pronouncement as to costs.

SO ORDERED.

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Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, Gancayco and Sarmiento, JJ., concur.