G.R. No. L-22558 May 31, 1967
GREGORIO ARANETA, INC., petitioner, vs. THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., respondent.

FACTS

J.M. Tuason & Co., Inc., owner of a tract of land in Quezon City, sold a portion to Philippine Sugar Estates Development Co., Ltd. through Gregorio Araneta, Inc. The contract stipulated that the buyer would build the Sto. Domingo Church and Convent on the land, and the seller (through Gregorio Araneta, Inc.) would construct streets on the NE, NW, and SW sides so the lot would be surrounded by streets. The buyer completed the church and convent. The seller began constructing the streets but could not finish the street on the NE side (Sto. Domingo Avenue) because a third party, Manuel Abundo, physically occupied a part of it and refused to vacate. Philippine Sugar Estates filed a complaint against J.M. Tuason & Co., Inc. and Gregorio Araneta, Inc. to compel compliance with the obligation and/or pay damages. Gregorio Araneta, Inc. defended that the action was premature because its obligation to construct the streets was without a definite period, which needed to be fixed by the court first. The trial court initially dismissed the complaint but later, upon plaintiff’s motion for reconsideration, amended its decision to give Gregorio Araneta, Inc. a period of two years from notice to comply. The Court of Appeals affirmed this with modification, giving two years from the finality of its decision. Gregorio Araneta, Inc. appealed to the Supreme Court via certiorari.

ISSUE

Whether the courts below correctly fixed a two-year period for Gregorio Araneta, Inc. to perform its obligation under Article 1197 of the Civil Code.

RULING

No. The Supreme Court reversed the decision of the Court of Appeals. The Court held that the fixing of a period under Article 1197 was not justified. The petitioner’s answer, which alleged it had a “reasonable time” to perform, put in issue whether the parties agreed on a period (reasonable time), not the absence of a period warranting judicial intervention under Article 1197. Furthermore, the complaint did not seek to fix a period but alleged a breach, so the court could not fix one without amending the complaint. Even assuming the court could fix a period, the two-year period was set arbitrarily without stating how it corresponded to the period “probably contemplated by the parties” as required by Article 1197. The contract showed the parties were aware the land was occupied by squatters, and they must have intended performance to be deferred until the squatters were evicted through legal processes, the duration of which was not within their control. Therefore, the time for performance was fixed at the date all squatters on the affected areas are finally evicted. Costs were awarded against the respondent.