#6 OCCENA v JABSON participation an amount equivalent to 40% of all cash receipts from the
GR NO. L-44349 sale of the subdivision lots.
OCT. 29, 1979
By: GUZMAN
Topic: EXTINGUISHMENT OF OBLIGATIONS; LOSS OF THE THING DUE; ART. 1267
Petitioners: JESUS V. OCCENA AND EFIGENIA C. OCCENA
Respondents: HON. RAMON V. JABSON, PRESIDING JUDGE OF THE CFI OF RIZAL
BRANCH XXVI; COURT OF APPEALS AND TROPICAL HOMES, INC.
Ponente: TEHANKEE, J.
RECIT-READY: Tropical Homes, Inc. agreed to develop a subdivision on the land
own by the petitioners. Respondents herein were going to be paid 40% of all cash
receipts from the sale of the lots. On Feb. 25, 1976, priv. respondent, filed a
complaint for modification of the terms and conditions of its subdivision contract
with petitioners. It was alleged that due to the increase of price of oil,
commodities including raw materials required for development of work, the cost
of development has risen to levels which are unanticipated, unimagined and not
within the contemplation of the parties. CFI, rendered judgment modifying the
contract. Petitioner appealed and moved to dismiss the complaint for lack of
cause of action. However, CA, also dismissed the case on the ground under Art.
1267 of the CC. Petitioner now argue that worldwide increase in prices cited by
the priv. respondent does not constitute sufficient cause of action for
modification of contract. The SC ruled in favor of the petitioner, on the basis of
misapplication of Art. 1267 CC, and therefore, there is no cause of action.
DOCTRINE: The Civil Code authorizes the release of an obligor when the service has
become so difficult as to be manifestly beyond the contemplation of the 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 bet. The parties.
FACTS
 Priv. Respondent, Tropical Homes, Inc. filed a complaint for modification
of the terms and conditions of its subdivision contract with petitioner.
o It was alleged that due to the increase in price of oil and
worldwide spiraling of prices, the cost of such development has
risen which the performance by the plaintiff will result in
situation where defendants would be unjustly enriched at the
expense of plaintiff.
 Under the said subdivision contract, priv. respondent “guaranteed
(petitioners as landowners) as the latter’s fixed and sole share and
 CFI: render judgment modifying the terms and conditions of the contract
by fixing the proper shares that should pertain to the parties out of the
gross proceeds from the sales of subdivided lots of subject subdivision.
 Petitioner moved to dismiss the complaint for lack of cause of action and
insist that the worldwide increase in prices does not constitute a sufficient
cause of action for modification of the subdivision contract.
 COURT OF APPEALS: affirmed the decision of the CFI and dismissed the
case on the ground under art. 1267 of the CC.
ISSUE
 WON respondents may demand modification of the contract on the basis
that the prestation has become so difficult. (NO)
HELD/RATIO
 NO. THE SC RULED IN FAVOR OF THE PETITIONER AND GRANTED THE
PETITION ON THE BASIS THAT THERE IS NO CAUSE OF ACTION AND
MISAPPLICATION OF ART. 1626 CC.
o While the respondent court correctly cited in its decision the
rationale for Art. 1267 of the CC, it misapplied the same.
o The cited article does not grant the courts this authority to
remake, modify or revise the contract or to fix the division of
shares bet. Parties as contractually stipulated with the force of
law bet. the parties.
o In the case at hand, priv. respondent’s complaint seeks not
release from the subdivision contract but that the court “render
judgment modifying the terms and conditions of the contract by
fixing the proper shares that should pertain to the parties out of
the gross proceeds from the sales of subdivided.
o Therefore, Respondent’s complaints for modification of contract
has no basis in law and therefore states no cause of action.