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    Iloilo Jar v. Comglasco 815 S1

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    1) Comglasco leased a portion of a warehouse from Iloilo Jar under a 3-year lease agreement but requested to terminate the lease early, which was denied. Comglasco then stopped paying rent. 2) Comglasco argued it was released from the lease under Article 1267 of the Civil Code due to an economic crisis making it unable to comply. 3) However, the Court ruled that Article 1267 only applies to obligations to do, not obligations to give like a lease requiring rent payments. Financial struggles alone do not release one from contractual obligations. The economic crisis was also not an exceptional change warranting releasing the debtor.

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    Iloilo Jar v. Comglasco 815 S1

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    lil user
    44 views2 pages
    1) Comglasco leased a portion of a warehouse from Iloilo Jar under a 3-year lease agreement but requested to terminate the lease early, which was denied. Comglasco then stopped paying rent. 2) Comglasco argued it was released from the lease under Article 1267 of the Civil Code due to an economic crisis making it unable to comply. 3) However, the Court ruled that Article 1267 only applies to obligations to do, not obligations to give like a lease requiring rent payments. Financial struggles alone do not release one from contractual obligations. The economic crisis was also not an exceptional change warranting releasing the debtor.

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    1) Comglasco leased a portion of a warehouse from Iloilo Jar under a 3-year lease agreement but requested to terminate the lease early, which was denied. Comglasco then stopped paying rent. 2) Comglasco argued it was released from the lease under Article 1267 of the Civil Code due to an economic crisis making it unable to comply. 3) However, the Court ruled that Article 1267 only applies to obligations to do, not obligations to give like a lease requiring rent payments. Financial struggles alone do not release one from contractual obligations. The economic crisis was also not an exceptional change warranting releasing the debtor.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    44 views2 pages

    Iloilo Jar v. Comglasco 815 S1

    Uploaded by

    lil user
    1) Comglasco leased a portion of a warehouse from Iloilo Jar under a 3-year lease agreement but requested to terminate the lease early, which was denied. Comglasco then stopped paying rent. 2) Comglasco argued it was released from the lease under Article 1267 of the Civil Code due to an economic crisis making it unable to comply. 3) However, the Court ruled that Article 1267 only applies to obligations to do, not obligations to give like a lease requiring rent payments. Financial struggles alone do not release one from contractual obligations. The economic crisis was also not an exceptional change warranting releasing the debtor.

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    ARTICLES 1266 – 1267

    Doctrine of Unforeseen Events in Obligation to do


    Case Title: Iloilo Jar v. Comglasco 815 S1 (MENDOZA)
    G.R. No. 219509, January 18, 2017
    ILOILO JAR CORPORATION, Petitioner, v. COMGLAS COCORPORATION/AGUILA
    GLASS, Respondent.

    Facts: On August 16, 2000, petitioner Iloilo Jar Corporation (Iloilo Jar), as lessor, and respondent
    Comglasco Corporation/Aguila Glass (Comglasco), as lessee, entered into a lease contract over a portion
    of a warehouse building located on a parcel of land in Iloilo City. The term of the lease was for a period of
    three years or until August 15, 2003.

    On December 1, 2001, Comglasco requested for the pre-termination of the lease effective on the same
    date to which Iloilo Jar rejected the request. Despite the denial of the request for pre-termination,
    Comglasco still removed all its stock, merchandise and equipment from the leased premises on January
    15, 2002 and stop paying all rentals accruing thereon despite receiving several demand letters from Iloilo
    Jar.

    Consequently, Iloilo Jar filed a civil action for breach of contract and damages before the RTC to which
    Comglasco replied that by virtue of Article 1267 of the Civil Code, it was released from the lease contract
    citing the existing global and regional economic crisis for its inability to comply with its obligation.

    Iloilo Jar argues that Comglasco cannot rely on Article 1267 because it does not apply to lease contracts,
    which involves an obligation to give, and not an obligation to do. Hence this issue.

    Issue/s: Whether or not Comglasco was justified in treating the lease contract terminated due to the
    economic circumstances then prevalent.

    Ruling: NO.

    The Court held that Comglasco's position fails to impress because Article 1267 applies only to obligations
    to do and not to obligations to give. Thus, in Philippine National Construction Corporation v. Court of
    Appeals, the Court expounded:
     
    Petitioner cannot, however, successfully take refuge in the said article, since it is applicable
    only to obligations "to do," and not to obligations "to give." An obligation "to do" includes all
    kinds of work or service; while an obligation "to give" is a prestation which consists in the
    delivery of a movable or an immovable thing in order to create a real right, or for the use of
    the recipient, or for its simple possession, or in order to return it to its owner.
     
    The obligation to pay rentals or deliver the thing in a contract of lease falls within the
    prestation "to give"; xxx
     
    The principle of  rebus sic stantibus neither fits in with the facts of the case. Under this
    theory, the parties stipulate in the light of certain prevailing conditions, and once these
    conditions cease to exist, the contract also ceases to exist. xxx
     
    This article, which enunciates the doctrine of unforeseen events, is not, however, an
    absolute application of the principle of  rebus sic stantibus, which would endanger the
    security of contractual relations. The parties to the contract must be presumed to have
    assumed the risks of unfavorable developments. It is therefore only in absolutely exceptional
    changes of circumstances that equity demands assistance for the debtor.

    In this case, considering that Comglasco's obligation of paying rent is not an obligation to do, it could not
    rightfully invoke Article 1267 of the Civil Code. Even so, its position is still without merit as financial
    struggles due to an economic crisis is not enough reason for the courts to grant reprieve from contractual
    obligations. Also, it ruled that the economic crisis which may have caused therein petitioner's financial
    problems is not an absolute exceptional change of circumstances that equity demands assistance for the
    debtor.
     

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