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Araneta, Gregorio vs PH Sugar Estates Dev’t Co.

G.R. No. L-22558


5/31/1967

Facts:
 JM Tuason and Co is the owner of a land in QC (Sta. Mesa Heights Subdivision). Through Araneta, said company sold
a portion of the land to PH Sugar Estates. The purchase and sale contract with mortgage stipulates that the PH Sugar
Estate will, build Sto. Domingo Church and a convent while JM Tuason will construct streets.
 PH Sugar Estate complied but Araneta was unable to finish said streets because there was an occupant interfering
with the construction whose name was Manuel Abundo.
 This prompted PH Sugar Estates to file a complaint against the company and Araneta in the CFI seeking to compel
both to comply with said obligation as agreed in the deed and/or pay damages for said refusal.
 Araneta averred that the action was premature since the obligation to construct the streets was w/o a definite
period w/c needs to be fixed by the court in a proper suit for such purpose before filing for specific performance.
 The CFI dismissed the complaint by PH Sugar Estates and upheld Araneta’s defense. PH Sugar Estates filed an MR,
praying that the court fix a period for Araneta to comply.
 Araneta opposed this claiming that the complaint did neither express nor imply praying for the fixing of a period to
comply with its obligation and the evidence presented were insufficient to warrant the fixing of such period.
 The CFI found granted the MR and ruled that Araneta has 2 years to comply with his obligation. Araneta filed an MR
but was denied then went to the CA to appeal. In the CA, Araneta argued that the period fixed by the CFI was not
justified by the pleadings and facts and such relief granted in effect allowed a change of theory after the case was
submitted for resolution. The CA ruled that such was not the case since Araneta himself put the said conditions in
the contract hence overruled his arguments. This prompted Araneta to file for certiorari to the SC.

Issue: Whether the parties agreed that Araneta should have reasonable time to perform his obligation.

Ruling:
 The fixing of a period by the courts under NCC 1197 is sought to be justified on the basis that Araneta placed the
absence of a period in issue by pleading in its answer with PH Sugar Estates gave Araneta a reasonable amount of
time to comply with his obligation.
 If the contract provided that there was fixed period, then all the court should have done was to determine is such
time has elapsed when the suit was filed. If it indeed passed, the court should declare Araneta had breached the
contract. If it had not yet elapsed, the court is bound to dismiss the action for being premature. But in no case can it
be held that under the plea, under the intervention of the court to fix the period for performance was warranted for
NCC 1197 is invoked when the period is absent.
 Even assuming that the court should have found that no time was fixed, still, the complaint not having sought that
SC should set a period, the court could not proceed to do so unless the complaint was amended. The original
decision is clear that the complaint proceeded on the theory that the period for performance had already elapsed
hence the contract was breached by Araneta.
 The amended decision is defective in that there was no basis to state to support the conclusion that the period set
of 2 years is after final judgement. NCC 1197 states that a period cannot be arbitrarily set.
 NCC 1197 has a 2 step process. First, the court must determine that the obligation does not have a fixed period but
due to the nature/circumstances of the obligation it can be inferred that a period was intended. Second, the court
should decide on the period which is probably contemplated by the parties. The court cannot fix a period arbitrarily
and should look at the intention of the parties.
 The parties were aware that there were squatters. They have to go through the legal process in evicting the
squatters and must have realized that such processes are beyond their control. It can be concluded then that the
parties have intended to defer the performance under the contract until the squatters were evicted as contented by
Araneta.
 It follows that there is no justification in law for setting the date of performance at any other time than that of the
eviction of the squatters hence the lower courts erred in setting the 2 year period. The ejectment case against
Abundo was still pending. The SC finally held that Araneta’s obligations is fixed at the date when all squatters are
finally evicted.