P.L. Uy Realty v. ALS Management (2012)

P.L. Uy Realty Corporation v. ALS Management and Development Corp. (2012)

Topic: Obligatory Force

PARTIES:

·       Petitioner: P.L. Uy Realty Corp

·       Respondents: ALS Management and Dev’t

FACTS:

·       Sept. 3, 1980 – PLU (vendor) and ALS (vendee) executed a Deed of Absolute Sale with Mortgage covering a parcel of land in the name of PLU, located at F. Blumentritt Street, Mandaluyong.

·       The purchase price for the land was set at P8M. The parties also stipulated in Par. 4 of the Deed on the eviction of informal settlers

·       Sec.6 of the Deed provided that “realty taxes during the validity of this mortgage, shall be for the account of ALS.”

·       Dec. 23, 1980 – Parties entered into an agreement

·       Par. 4 provided that in the event the informal settlers do not leave the property, PLU would reimburse ALS 

·       ALS failed to pay the second payment despite demands.

·       Aug. 25, 1982 – PLU filed a complaint against ALS for Foreclosure of Mortgage and Annulment of the documents; PLU alleged having had entered into an oral agreement with ALS where the latter would agree to take over the task of ejecting the squatters from the property issued in its name, through the efforts of ALS, the property was already 90% clear of informal settlers

·       May 9, 1986 – RTC Makati ruled that the obligation of PLU to clear the property of informal settlers was superseded by an oral agreement between the parties whereby ALS assumed the responsibility of ejecting said informal settlers and declared that the removal of the informal settlers on the property is still a subsisting and valid condition; that because the informal settlers still occupied 28% of the property, the condition as to their eviction, had not yet been complied with.

·       RTC Makati found that the obligation of ALS to pay the balance of the purchase price has not yet fallen due and demandable; thus it dismissed the case for being premature.

·       ALS appealed the case to the SC, questioning RTC’s decision that it had assumed the responsibility of ejecting the informal settlers on the property.

·       During the course of the trial, the Court conducted an ocular inspection and found 1 ½ hectares of the 5.4 hectare property still being occupied by informal settlers.

·       The RTC Pasig likewise dismissed the complaint, finding that the payment of the installments has not yet become due and demandable as the suspensive condition, the ejection of the informal settlers on the property, has not yet occurred; and even if ALS has taken up the obligation to eject the informal settlers, its inaction cannot be deemed as constructive fulfillment of the suspensive condition; that the foreclosure of the mortgage is not the proper remedy, and that PLU should have caused the ejectment of the informal settlers.

JUDGMENT: Dismissed.

RATIONALE/DOCTRINE:

·       Note that Art. 1306 of the Civil Code guarantees the freedom of parties to stipulate the terms of their contract provided that they are not contrary to law, morals, good customs, public order, or public policy. Thus, when the provisions of a contract are valid, the parties are bound by such terms under the principle that a contract is the law between the parties.

·       Here, both parties knew for a fact that the property subject of their contract was occupied by informal settlers, whose eviction would entail court actions that in turn, would require some amount of time. They also knew that the length of time that would take to conclude such court actions was not within their power to determine.

·       Despite such knowledge, both parties still agreed to the stipulation that the payment of the balance of the purchase price would be deferred until the informal settlers are ejected. There was never any allegation that PLU was coerced into signing the Deed of Sale with Mortgage or that its consent was in any way vitiated. PLU was free to accept or decline such contractual provision. Thus, PLU cannot now be allowed to renege on its agreement.