GR L 20400; (November 1975) (Digest)
G.R. No. L-20400 November 28, 1975
CITY OF ZAMBOANGA, plaintiff-appellant, vs. JUAN S. ALVAREZ, defendant-appellee.
FACTS
The City of Zamboanga entered into a contract with Juan S. Alvarez on June 7, 1950. Alvarez agreed to construct a building on city property within 180 days, donate it to the city, and then lease it back for ten years. The City Engineer was to prepare and approve the building plans. Alvarez failed to construct the building, and the City Council revoked the contract in 1953. The city filed a complaint for damages in 1959.
Alvarez defended his non-performance by citing three impediments: the lot was occupied by squatters paying rent to the city; stagnant water and waste from a public comfort station flooded the premises; and the City Engineer’s Office failed to prepare the required plans and specifications. The trial court found these facts established, noting the city’s long delay in seeking revocation and its acquiescence to the squatters’ presence.
ISSUE
Whether the defendant-appellee, Juan S. Alvarez, is liable for damages for his failure to construct the building as stipulated in the contract.
RULING
The Supreme Court affirmed the lower court’s dismissal of the complaint, absolving Alvarez of liability. The legal logic rests on the principle that a valid contract is the law between the parties, binding both equally. The Court deferred to the trial court’s factual findings, which established that the city, through its own actions and failures, prevented Alvarez from fulfilling his contractual obligations. Specifically, the city failed to deliver a vacant lot by allowing squatters to remain and collect rent, and its City Engineer breached the covenant to prepare the plans. These constituted breaches by the city that excused Alvarez’s performance. A party cannot demand compliance from the other while itself being in default. The city’s reciprocal obligations were unfulfilled, making its claim for damages untenable. The decision underscores that municipal corporations, while possessing contracting powers, are equally bound by their contractual stipulations.