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MEGAWORLD vs. MAJESTIC
MEGAWORLD vs. MAJESTIC
MAJESTIC
G.R. No.169694, Dec. 09, 2015
DOCTRINE/PRINCIPLES: Obligations: Reciprocal Obligations --- are those that arise from
the same cause, and in which each party is a debtor and a creditor of the other at the same time,
such that the obligations of one are dependent upon the obligations of the other. --- They are to
be performed simultaneously, so that the performance of one is conditioned upon the
simultaneous fulfillment of the other. In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills his obligation, delay by the other begins (Article
1169 of the Civil Code). In reciprocal obligations, before a party can demand the performance of
the obligation of the other, the former must also perform its own obligation.
FACTS:
Megaworld Properties and Holdings, Inc. (developer) entered into a Joint Venture
Agreement (JVA) with Majestic Finance and Investment Co., Inc. (owner) for the development
of the residential subdivision located in Brgy. Alingaro, General Trias, Cavite. According to the
JV A, the development of the 215 hectares of land belonging to the owner (joint venture
property) would be for the sole account of the developer and that upon completion of the
development of the subdivision, the owner would compensate the developer in the form of
saleable residential subdivision lots. The JV A further provided that the developer would
advance all the costs for the relocation and resettlement of the occupants of the joint venture
property, subject to reimbursement by the owner and that the developer would deposit the initial
amount of P10,000,000.00 to defray the expenses for the relocation and settlement, and the costs
for obtaining from the Government the exemptions and conversion permits, and the required
clearances. The developer and owner agreed, through the addendum to the JV A, to increase the
initial deposit for the settlement of claims and the relocation of the tenants from P10,000,000.00
to P60,000,000.00. The developer, by deed of assignment, transferred, conveyed and assigned to
Empire East Land Holdings, Inc. (developer/assignee) all its rights and obligations under the JV
A including the addendum.
The owner filed before the RTC a complaint for specific performance with damages
against the developer, the developer/assignee and respondent Andrew Tan, who are now the
petitioners herein. The complaint was mainly based on the failure of the petitioners to comply
with their obligations under the JVA.
ISSUE:
W/N the petitioners are obligated to perform their obligations under the JVA, including
that of providing round-the-clock security for the subject property, despite respondents' failure or
refusal to acknowledge or perform their reciprocal obligations there?
RULING:
The SC held that the petitioners are not obligated to perform their obligations under the
JVA such as that of providing round-the-clock security for the subject property since the
obligations of the parties therein were unquestionably reciprocal.
Reciprocal obligations are those that arise from the same cause, and in which each party
is a debtor and a creditor of the other at the same time, such that the obligations of one are
dependent upon the obligations of the other. They are to be performed simultaneously, so that the
performance by one is conditioned upon the simultaneous fulfillment by the other.
It appears that upon the execution of the JVA, the parties were performing their
respective obligations until disagreement arose between them that affected the subsequent
performance of their accrued obligations. Being reciprocal in nature, their respective
obligations as the owner and the developer were dependent upon the performance by the other of
its obligations; hence, any claim of delay or non-performance against the other could prosper
only if the complaining party had faithfully complied with its own correlative obligation.
The SC further held that all of the obligations under the JVA were subject to the
happening of the complete development of the joint venture property, or if it would become
indubitable that the completion would not take place, like when an obligation, whether
continuous or activity, was not performed. Should any of the obligations, whether continuous
or activity, be not performed, all the other remaining obligations would not ripen into
demandable obligations while those already performed would cease to take effect. This is
because every single obligation of each party under the JVA rested on the common cause of
profiting from the developed subdivision.
According to Article 1184 of the Civil Code, the condition that some event happen at a
determinate time shall extinguish the obligation as soon as the time expires, or if it has become
indubitable that the event will not take place. Here, the common cause of the parties in entering
into the joint venture was the development of the joint venture property into the residential
subdivision as to eventually profit therefrom. Consequently, all of the obligations under the JVA
were subject to the happening of the complete development of the joint venture property, or if it
would become indubitable that the completion would not take place, like when an obligation,
whether continuous or activity, was not performed. Should any of the obligations, whether
continuous or activity, be not performed, all the other remaining obligations would not ripen into
demandable obligations while those already performed would cease to take effect. This is
because every single obligation of each party under the JVA rested on the common cause of
profiting from the developed subdivision.
WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES
and SETS ASIDE the decision promulgated on April 27, 2005 and the resolution promulgated
on September 12, 2005; NULLIFIES the orders issued on November 5, 2002 and May 19, 2003
in Civil Case No. 67813 by the Regional Trial Court, Branch 67, in Pasig City; DIRECTS the
Regional Trial Court, Branch 67, in Pasig City to resume the proceedings in Civil Case No.
67813 with dispatch; and ORDERS the respondents to pay the costs of suit.