Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=49758:gr-130403-2007&catid=1494&Itemid=566
Timestamp: 2019-04-25 00:39:30+00:00

Document:
G.R. No. 130403 - Francisco Gonzales v. Severino C. Lim, et al.
FRANCISCO GONZALES, Petitioner, v. SEVERINO C. LIM and TOYOTA SHAW, INC., Respondents.
At bar is an appeal by certiorari under Rule 45 of the Rules of Court questioning the decision1 and resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 41716 entitled Severino C. Lim and Toyota Shaw, Inc. v. Francisco Gonzales and Carmen Gonzales.
Petitioner Francisco Gonzales, Roque Ma. Gonzales and Carmen Gonzales (Gonzaleses) were the owners of Motown Vehicles, Inc. (Motown). Motown was the licensed distributor of Ford vehicles in the country. Its assets included two buildings standing on a 4,944 sq. m. lot leased from Tanglaw Realty Inc. (Tanglaw).
WHEREAS, Motown, which owns these fixed and moveable improvements and equipments'does not own the land on which these improvements and equipments are located, but merely leases the bare land' from Tanglaw Realty Corp. under 2 Lease Contracts both dated June 17, 1978 both commencing Nov. 15, 1977 and expiring Nov. 14, 2002.
After paying the initial installment of P6,246,000 to the Gonzaleses, respondents claimed they discovered that one of Motown's lease contracts had already been terminated prior to the sale. As a result, they were allegedly constrained to negotiate with Tanglaw for a new lease contract (with a higher rental).
Subsequently, respondents filed a case in the Regional Trial Court (RTC), Branch 65 of Makati,4 for declaratory relief with damages against the Gonzaleses, seeking release from their obligation to pay the P500,000 balance.
During the trial, respondents (as then plaintiffs) accused the Gonzaleses of falsely representing to them that the latter's two lease contracts were still subsisting at the time of the sale. They maintained that the Gonzaleses guaranteed a "continuing and unhampered use" of the premises but Tanglaw had nonetheless threatened to evict them from one of the leased portions.
To support their claim, they presented in court a copy of the "Agreement" indicating the Gonzaleses' alleged warranty that the two lease contracts with Tanglaw were still good.
Petitioner (with his then co-defendants) countered that respondents were well aware of the termination of one of the two lease contracts at the time of sale. He denied giving a warranty on both contracts and explained that he only signed the "Agreement" (showing Motown's two lease contracts with Tanglaw) on prodding by respondents that they needed it to convince Toyota Philippines they were ready with their dealership site. According to petitioner, respondents told him it was only "for show" and amendments thereto would be made later on.
Petitioner added that his only undertaking was to help respondents negotiate a new lease contract that would have similar terms as his. As a counterclaim, petitioner asked for the payment of respondents' P500,000 balance.
...[T]he court finds that [petitioner] did not warrant the existence of the lease on one of the premises. The court believes that even before the ["Agreement"] has been executed[,] [respondents were] already aware that one of the leases has been terminated' [I]f [petitioner] warranted anything at all, it was only that he will help [respondents] procure a new lease contract under the old term.
'In view of the foregoing, the complaint is DISMISSED[.] On the counterclaim, [respondents] are ordered to pay [petitioner] P500,000, representing the outstanding balance for the sale of Motown shares of stocks plus legal interest from October 10, 1989, the date of the lease between Tanglaw Realty and Toyota Shaw, Inc., when [petitioner] was deemed to have fulfilled his promise.
'[W]ith regard to the question of whether [respondents] are now obliged to pay [petitioner] the P500,000.00', the Court finds that [petitioner had] not been able to fulfill [his] obligation to submit the required official communication from Tanglaw Realty Corporation. Thus, [respondents] are freed from their obligation to pay the final installment of P500,000.00.
Petitioner filed a motion for reconsideration (MR), contending that the payment of the P500,000 balance was already due because respondents themselves had prevented him from fulfilling his undertaking in the "Agreement." Petitioner insisted that since respondents negotiated directly with Tanglaw for a new lease contract, petitioner's obligation should be deemed fulfilled.
In this petition, the lone issue for resolution is whether petitioner was still entitled to the payment of P500,000 despite failure to comply with the provision in the "Agreement" requiring him to obtain an official communication from Tanglaw regarding the continuation of Motown's lease contract.
At the outset, petitioner's undertaking set forth in the "Agreement" may be deemed a "condition," a future and uncertain event upon which the existence of an obligation is made to depend or that which subordinates the existence of a liability under a contract to a certain future event.9 It was a condition that was imposed on an obligation after the consummation of the contract of sale, not a condition on the perfection of the contract itself (non-fulfillment of which could have prevented the juridical relation from coming into existence).
These options were echoed in Romero v. CA,10 where we declared that if the condition was imposed on an obligation of a party which was not complied with, the other party may either (1) refuse to proceed with the agreement or (2) waive the fulfillment of the condition.
Did respondents, however, waive fulfillment of the condition? Yes.
The records reveal that respondents negotiated directly with Tanglaw for a new lease contract even without the required official communication that petitioner was supposed to obtain for them, a condition in the "Agreement" which they themselves imposed on the latter. Although they had the right to require his compliance with the condition or compel his performance of the undertaking, they opted otherwise.
Moreover, respondents' contention that the condition did not preclude them from dealing with Tanglaw or that they were "to refrain from negotiating directly"13 can only mean that they did not really expect petitioner to comply strictly and absolutely with it. Respondents' conduct showed that they did not only disregard the condition but also placed petitioner in a position that his compliance was no longer necessary. We are thus constrained to rule that they had effectively waived compliance with the condition.
WHEREFORE, the petition is hereby GRANTED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 41716 are hereby SET ASIDE and the decision of the Regional Trial Court REINSTATED.
1 Decision dated April 17, 1997. Penned by Justice Ramon A. Barcelona (retired), with the concurrence of Associate Justices Jesus M. Elbinias (retired) and Maximiano G. Asuncion (deceased), of the Eleventh Division of the Court of Appeals. Rollo, pp. 47-69.
2 Resolution dated August 21, 1997. Resolved by Justice Ramon A. Barcelona (retired), with the concurrence of Associate Justices Jesus M. Elbinias (retired) and Maximiano G. Asuncion (deceased). Id., pp. 72-74.
4 Respondents' principal business address was at Makati City.
5 Dated February 18, 1993. Decided by Judge Salvador S. Abad Santos. CA Records, pp. 87-89.
8 Carmen Gonzales did not join petitioner in this case. Roque Ma. Gonzales, on the other hand, was already dead at the time of the filing of this petition.
9 Black's Law Dictionary. Both the CA and the RTC held that petitioner's undertaking in the "Agreement" was not a warranty.
10 320 Phil. 269 (1995). See also Lim v. CA, G.R. No. 118347, 24 October 1996, 263 SCRA 569; Heirs of MacuÃ±ana v. CA, G.R. No. 158646, 23 June 2005, 461 SCRA 186; Almira, et al. v. CA, 447 Phil. 467 (2003). See also Civil Law Obligations and Contracts by Jose C. Vitug, Vol. 3, 2003 Ed., p. 251, Rex Printing Co., Inc., Quezon City, Philippines.
12 Development Bank of the Philippines v. Licuanan, G.R. No. 150097, 26 February 2007.
13 Respondents' Memorandum. Rollo, p. 609.
14 Per RTC decision (supra), respondents' and Tanglaw's lease contact was dated October 10, 1989.

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