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Laws and Obligations

In: Business and Management

Submitted By erikamaex
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Case: Ernest Berg v. Magdalena Estate, Inc. (92 PHIL. 110),

October 17, 1952

RESPONDENT: Magdalena Estate

PONENTE: Bautista Angelo, J.

Ever since September 22, 1943 plaintiff, Berg and defendants under Magdalena Estate, Inc. were co-owners of the Property, Crystal Arcade. One third of it belonged to the plaintiff-petitioner and two thirds, to the defendant-respondent. These parties executed a deed of sale that should either of them sell his share, the other party will have an irrevocable option to purchase it at the seller’s at the seller’s price. The two, eventually had a disagreement on what really happened with regard to the deal.

On January. 1946, the petitioner offered his share for Php 200,000 and was accepted by the defendant, including the stipulation that Berg was giving the defendant a period of time which, including the extensions granted, would expire on May 31, 1947.

The defendant claimed that, in spite of the acceptance of the offer, plaintiff refused to accept the payment of the price and that because of this, they suffered damages in the amount of Php 100,000 and asked for specific performance. The plaintiff argued that this transaction, referred to by the defendant, is not supported by any note or memorandum subscribed by the parties and that this transaction falls under the statue of frauds and cannot be the basis of the defendant’s special defense.

In an application to sell or dispose their properties, both parties filed for separate applications regarding the subject property. In the defendant’s application, it desired a license in order “to use a portion of the P400,000 requested as a loan from the National City Bank of New York, Manila, or from any other bank in Manila, together with funds to be collected from old and new sales of his real estate properties, for the purchase of the one-third (1/3) of the Crystal Arcade property in the Escolta, Manila, belonging to Mr. Ernest Berg.

The lower court found that there was no agreement reached between the parties regarding the purchase and sale of the property in question, it granted the case in favor of the petitioner.
ISSUE/S Whether the term of payment stipulated in the defendant’s application for license to sell/purchase, “until they have obtained Php 400,000 from the National City Bank of New York, or after it has obtained funds from other sources”,is in line with the Civil Code
LAWS Article 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.

A day certain is understood to be that which must necessarily come, although it may not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of

the preceding Section. (1125a)
HOLDINGS Yes. The term of payment stipulated in the defendant’s application for license to sell/purchase, “until they have obtained Php 400,000 from the National City Bank of New York, or after it has obtained funds from other sources”,is in line with the Civil Code (Art. 1125).

A day certain is understood to be that which must necessarily arrive, even though it is unknown when. In order that an obligation may be with a term, it is, therefore, necessary that it should arrive, sooner or later; otherwise, if its arrival is uncertain, the obligation is conditional. To constitute a term, the period must end on a day certain.

In considering this article as to which the defendant relies for the enforcement of its right to buy the property, it would seem that it is not a term, but a condition. Considering the first alternative, that is, until defendant shall have obtained a loan from the National City Bank of New York – it is clear that the granting of such loans is not definite and cannot be held to come within the terms “day certain” provided for in the Civil code, for it may or it may not happen.

The loan did not materialize. And if we consider that the period given was until such time as defendant could raise money from other sources, we also find it to be indefinite and contingent and so it is also a condition and not a term within the meaning of the law.

Both parties did not put the terms in their agreement clearly in writing. The lower courts’ judgment is affirmed.…...

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