OCCENA v.

JABSON
GR No. L-443349 | October 29, 1976 | Teehankee, J. | First Division
Loss of the Thing Due or Impossibility of Performance
RBA

DOCTRINE: NCC 1267 does not grant a cause of action for modification of an obligation, but merely the right to ask to be released from the
performance of an obligation.
CASE SUMMARY: Tropical homes stipulated that it would grant the Occenas a fixed percentage from the gross receipts from the sales of the
latter’s lots. When global prices increased, Tropical asked the court to modify the contract, to “fix the proper shares” of the Occenas as
regards the proceeds due them from the sales. The Court held that there is no cause of action to support Tropical’s complaint.

FACTS:
Tropical Homes Occenas = Petitioner
 Tropical Subdivision and Occenas entered into a subdivision contract. Tropical guaranteed the Occenas 40% of all cash receipts from the
sale of the subdivision lots.

 Private Respondent Tropical Homes (Tropical) filed a Complaint for Modification of Terms and Conditions of Subdivision
Contract with petitioners Occenas, who are landowners of a 55k sqm land in Davao City.
o Tropical Homes alleged that Occenas would be unjustly enriched at the expense of Tropical, due to rising cost of oil and other
materials related to developing said land. (Robbie’s note: might be because Tropical will not be able make the profit it initially
expected, as they have to now account for higher related expenses.)
 Occenas filed motion to dismiss complaint for lack of cause of action.
 TC: denied Occenas’ motion to dismiss; ruled in favor of Tropical Homes
 CA: affirmed denial of Occenas’ motion; ruled that Art 1267 applies, as “a positive right is created in favor of the obligor to be released
from the performance of the obligation in full or in part when its performance ‘has become so difficult as to be manifestly beyond the
control of the parties.’”
 Occenas elevated case with SC; contended that worldwide increase in prices does not constitute a sufficient cause of action for
modification of the subdivision contract.

ISSUE: WoN alleged unforeseen/unexpected increases in prices worldwide gives rise to a cause of action for modification of contract - NO

RULING:
Tropical Homes averred: worldwide increase in prices e.g. oil, raw materials > cause of axn for modification of contract to adjust the shares
(ELAM: basis is Art 1267 “service has become so difficult x x x ”)
Court ruled (with Occenas):
 The general rule is that impossibility of performance releases the obligor (ELAM: Art 1266 “impossibility of performance”). However, it
is submitted that when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the court should
be authorized to release the obligor in whole or in part. The intention of the parties should govern, and if service turns out to be so
difficult as have been beyond their contemplation, it would be doing violence to that intention to hold the obligor still responsible.
 Art 1267 authorizes release of an obligor when the service has become so difficult as to be manifestly beyond contemplation of parties,
but does not authorize the courts to modify or revise the subdivision contract between the parties or fix a different sharing ratio from
that contractually stipulated with the force of law between the parties.
o Art 1267 does not grant courts to remake, modify or revise contract or to fix division of shares between parties as contractually
stipulated with the force of law between the parties, so as to substitute its own terms for those covenanted by parties themselves.

 In this case, Tropical Homes’ complaint for modification of the contract has no basis in law, and must therefore be dismissed for failure
to state a cause of action. Even assuming Tropical Homes meet the criterion provided by Art. 1267, Court would still rule in favor of
Occenas since Tropical Homes seeks to modify the terms, not to release themselves from the obligation.
o If Tropical Home's complaint was for it to be released as obligor, and assuming it could show that service had "become so difficult as
to be manifestly beyond contemplation of parties," Court would have ruled in favor of Tropical Homes as per Art 1267.

(ELAM: IOW – Art 1267 = performance must be “difficult beyond contemplation of parties” + court can only release obligor, and not
modify terms of contract as force of law exists between parties)

DISPOSITION:
Petition gratned, Tropical’s complaint in the lower court is ordered dismissed.