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PNCC vs. CA. G. R. No. 116896.

May 5, 1997

Nature: Petition for review on certiorari of decision made by the Court of Appeals (CA)

Facts: On 18 November 1985, petitioner Philippine National Construction Corporation (PNCC) executed a contract of
lease with private respondents, stipulating to pay rent for the use of land, at the monthly rate of P 20,000.00 payable
yearly in advance. The said land is to be used by petitioner as site for a rock crushing plant. The term of lease is for five
years, commencing on the date of issuance of an industrial clearance by the Ministry of Human Settlements (Ministry).

On 7 January 1986 PNCC obtained a Temporary Use Permit from the Ministry for the proposed rock crushing project.
Nine days later private respondents wrote to PNCC, asking for the first annual rental, and assuring that they have stopped
considering proposals of other aggregates plants in favor of PNCC.

In reply, PNCC argued that the contract must commence on the date of issuance by the Ministry of an industrial clearance
in their favor. It also expressed its desire to terminate the contract it executed with respondents, due to “financial, as well
as technical difficulties.” Respondents refused to accede to PNCC’s request for pre termination and on 19 May 1986,
instituted an action against PNCC for Specific Performance with Damages. Trial court ruled in favor of respondents and
ordered PNCC to pay rentals for two years, with legal interests plus attorney’s fees. The Court of Appeals affirmed the
decision of the trial court upon appeal by PNCC; hence, this case.

Issues:

(1) WON contract commences on the date of issuance of clearance by Ministry;

(2) WON PNCC should be released from its contract with respondents due to unforeseen events and causes beyond its
control;

(3) WON sum of money ordered to be paid by the court is excessive and;

(4) WON PNCC was deprived of right to due process.

Held: Petition denied.

Ratio:

(1) PNCC is estopped from claiming that Lease Contract commences on the date of issuance of clearance by Ministry,
because in its letter to respondents, PNCC recognized its obligation to pay rentals counted from the date the temporary
permit was issued.

(2) PNCC cites Art. 1266, asserting that it should be released from the obligatory force of the contract because its purpose
did not materialize due to unforeseen events and causes beyond its control. However, this article applies only to
obligations “to do” and not “to give”, while obligation arising out of said contract is an obligation “to do”. Further, PNCC
executed the contract with open eyes on the deteriorating conditions of the country and mere pecuniary inability to fulfill
an engagement does not discharge a contractual obligation. The “unforeseen events and causes beyond its control” cited
by PNCC are not the legal and physical impossibilities contemplated in Art. 1266.

(3) PNCC asserts that it was not able to use and enjoy the land and is not entitled to pay damages cited by the court.
However, respondents suffered damages because of its inability to use the premises. Respondents are entitled to
indemnification under Art. 1659 of the Civil Code.

(4) PNCC was not deprived of due process because trial court granted several postponements to petitioner before it
waived the presentation of evidence in petitioner’s behalf.