Professional Documents
Culture Documents
ObliCon Digests II
ObliCon Digests II
105567
November 25, 1993
GSIS v. CA AND SPS. RAUL AND ESPERANZA LEUTERIO
Facts: GSIS increased the purchase price stipulated in the Deed of Conditional
Sale with the Sps., involving one of its house and lots in its village after the final
construction costs. Because the Deed did not subject the price to change, where
the marginal notation of such effect was only inserted, the agreement was only
to pay the original price, which obligation the Sps had already complied with
and which necessitates the execution of a Final Deed of Sale.
> Deed of Conditional Sale (1965) between GSIS and Sps. Raul and Esperanza
Leuterio where the former would sell a house and lot to the latter ~ by virtue of a
lottery for lots and housing units of GSIS Village on December 18, 1963 where
Sps. Leuterios won > Certificate of Acknowledgement to purchase were issued
to the Sps. (December 27, 1963) > CONDITIONS: Sps. to pay P19,740 within
15y, in 180 equal monthly installments (P168.53); Par. 11: Upon full payment
by the Vendee of the purchase pricethe Vendor agrees to execute in favor of
the Vendee a final Deed of Sale > Deed of Conditional Sale notarized after 3y >
Completion of the Village ~ Board of Trustees increased the purchase price
(allegedly due to the final costs of the construction) in accordance with (1) the
marginal notation subject to adjustment pending approval of the Board of
Trustees on the face of the Deed; (2) the recommendation of an ad hoc
committee created by President Marcos to investigate the price increase which it
found to be justified ~ pursuant to the petition of a group of vendees > SUIT for
Specific Performance with Damages (May 20, 1984), after the Sps completion
of payment of the original purchase price (plus taxes) and GSIS failure to
execute a final deed of sale > CONTENTION OF THE SPS: Marginal notation
was not there when they signed it > CONTENTION OF GSIS: Sps. was bound
by the Ad hoc committees recommendation of the price increase > RTC Held in
favour of Sps: Marginal notation was inserted without the Sps. knowledge or
consent (such fact was not questioned during appeal to CA) > CA Upheld by
virtue of estoppels
> FINAL DEED OF SALE SHOULD BE EXECUTED IN FAVOUR OF THE
SPOUSES > Parties only agreed on the purchase price of P19,740 ~ the
agreement was not made subject to any posterior event or condition > (A)
Marginal Notation was not included in the contract when signed: Judicial
admission by GSIS in (1) its Answer to the Complaint that it was only an honest
mistake (made by the clerk who typed it) and in (2) its Petition for Review on
Certiorari that it was only inserted >
(B) Also, Recommendation by the ad hoc committee was set aside by President
Marcos (May 30, 1970) and GSIS reconsideration was denied (December 18,
1990) > HENCE, the obligation mutually agreed upon was the payment of
P19,740 > Art. 1473: GSIS cannot unilaterally adjust the price without the Sps
knowledge and consent > Obligation was thus completed by the Sps. upon full
payment
> Failure of GSIS to foresee the construction costs is due to their own fault > It
cannot excuse itself from performing > BAD BUSINESS JUDGMENT IS NOT
AN EXCUSES
G.R. No. 148599
March 14, 2005
PROFESSIONAL ACADEMIC PLANS, INC., FRANCISCO COLAYCO
and BENJAMIN DINO v. DINNAH L. CRISOSTOMO
Facts: Sales associate Crisostomo negotiated with AFPSLAI and received
commission for the initial MOA contracted, involving educational plans. When
the MOA was amended, PAPI stopped her commission, alledging the
termination of the first MOA and hence, Crisostomos lack of right to said
commissions. However, the second MOA was only a modification of the first
since the abandonment of contracts must be mutual between the contracting
parties. Crisostomo and the new president of AFPSLAI did not intend to rescind
the contract and hence, the former remains entitled to her commission.
> Memorandum of Agreement (November 9, 1988) between PAPI and
AFPSLAI > District Manager of PAPI for MM, Dinnah L. Crisostomo, and VP
for Sales, Guillermo Macariola, agreed to sell and AFPSLAI agreed to purchase
educational plans from PAPI ~ Originally offered by Noel Rueda (PAPIs sales
consultant) but finalized by Crisostomo as his supervisor when he was
terminated > Commission for the contract was given to Crisostomo by the
Executive Committee when Macariola declined (disqualified because she was an
employee) in favor of Crisostomo (she receives no salary but is entitled to
franchise commission worth 10% of remittances for every contract negotiated by
her for PAPI) > Crisostomo received the commission from December 1988 to
April 1989 > Commission was later reduced (to 5%, 4%, 3.75%, 2%) upon the
instance of Benjamin Dino, Ass. VP for Marketing, allegedly to support
operational expenses > Crisostomo was issued a Memorandum (February 7,
1991) by Dino and Cruz (VP for Finance and Admin) reducing the commission
to 2% > Amendment of the MOA with AFPSLAI between the new AFPSLAI
President and PAPI (April 1992) after the former wrote a letter and suspended
the first MOA > Crisostomo no longer received her commission after the
amendment > Crisostomo was issued a Memorandum (June 1, 1992),
terminating her franchise commission on the transactions with AFPSLAI ~
WHY: (1) Amendment of the contract due to the sales associates
misrepresentations; (2) Amendment was largely due to managements efforts;
(3) Crisostomo failed to complete 100 new plans as stipulated in the first MOA
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> Steamship of Compania arrived with Companys two locomotive boilers but
the former was not able to discharge the boilers because they were too heavy for
its equipment > Compania thus hired Atlantic for the purpose > One boiler was
severely damaged due to ineffective lifting that dropped the boiler twice (caused
by improper adjustment of the sling due to Leydens gross negligence, the
foreman in charge) ~ Had to be sent back to England for repair and shipped bank
> Company spent P22,343.39 for the damage, repair and loss of use of the boiler
> Company sued Compania and latter insisted that Atlantic be made its
codefendant > RTC ruled in favor of Company against Atlantic but absolved
Compania
> Contract between Compania and Company > Former to transport safely the
boiler from England to Manila, including its discharge from the ship >
Compania is liable for negligence, failing to exercise due diligence in delivering
safely the boiler to the port of Manila > No ruling yet that the failure to comply
with a contractual obligation can be excused by showing that such delinquency
was due to the negligence of one to whom the contracting party had committed
the performance of the contract
> Obligation of Atlantic to Compania > Atlantic agreed to render its service
when Compania assumed all risk (of damages) incident to the discharge of the
boilers ~ that while Atlantic would use all due care in getting the boilers out, no
responsibility was assumed for damage done either to ship or cargo (testimony
of Atlantics VP as the practice being customary to Atlantic) ~ BUT diligence is
an implied obligation arising from law > Exemption from liability excludes
those caused by negligence and referred to disasters which might result from
some inherent hidden defect in the lifting apparatus or other unforeseen
occurrence not directly attributable to negligence of Atlantic in the lifting
operations > (1) Liability from negligence is demandable in all kinds of
obligations (Art. 1103) > Contracts against liability for damages are not favored
by the law (Crew v. Bradstreet Company) > (2) Exempted negligence, if so
allowed, must have been not gross and such conditions must have been
expressly declared; (3) Absolute exemption is inequitable and unfair; (4)
Promise to exercise due care has a legal effect as much as the exemption
promised > Art. 1903 which absolves liability by proving due care applies only
to those acquired outside a contract
> No Obligation of Atlantic to Company > Contract was between Atlantic and
Compania > No contract between Atlantic and Company > No right was
conferred to Company for damages > No double responsibility of Atlantic to
Compania (contract) and to Company (culpa aquiliana) because the liability
arises only from its obligation to Compania which was authorized to contract
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conveyance, and the payment of rentals or damages > Contention of Orense: that
the sale was executed without his knowledge and consent, express or implied ~
that he did not authorize Duran verbally or thru a special power of attorney and
that he knew of the sale long after it was made
the mortgage were in fact his salaries; (2) his acquittal in a criminal case that
used the chattel mortgage as evidence of his liability was a bar to the present
civil case
> Orense knew and consented to the sale: Ratification of the sale by means of
Orenses verbal declaration (March 14, 1912) that he gave consent during the
estafa case against Duran ~ proven as fact during the trial and made the basis of
Durans acquittal > Constitute an express grant of a power of agency to Duran to
sell the property Despite lack of written authority > Consent is valid even if
SUBSEQUENT to the sale > Art. 1259: No one can contract in the name of
another without being authorized by him or without having his legal
representation according to law. A contract executed in the name of another by
one who has neither his authorization nor legal representation shall be void,
unless it should be ratified by the person in whose name it was executed
before being revoked by the other contracting party. > Thought the sale was
initially void, Orenses subsequent consent cured the defect
> Chattel Mortgage does not violate the law, morals or public policy
> Testimony of Orense that verbally declared his consent to the sale was the
basis of Durans acquittal and hence, Orense could not deny it thereafter because
it would be unjust to Gutierrez who would thereby be a victim of estafa
> No res judicata where acquittal in criminal case bars the present civil case >
No identity of subject matter and no dependence of the civil to the criminal
> Chattel Mortgage does not lack consideration > It was executed voluntarily to
guarantee the deficiencies resulting from his erroneous appraisals of the jewels
(CA Held) > Thus, a preexisting admitted liability is a good consideration for
a promise > EXCEPTIONS: if the inadequacy of the consideration is so gross
as to amount to fraud, oppression or undue influence, or when statutes require
the consideration to be adequate
> Compliance with the Act 1508, Chattel Mortgage Law, Section 5 > Marco
signed as Director-Manager with confirmation from the administration > Law on
chattel mortgage contracts only need substantial compliance and not literal
>> Public Policy > A contract which is neither prohibited by law nor condemned
by judicial decision, nor contrary to public morals, contravenes no public policy
> Violative of public policy if the contract has for its consideration a tendency to
injure the public, or if it is against the public good, or if it contravenes some
established interests of society, or is inconsistent with sound policy and good
morals, or tends clearly to undermine the security of individual rights, whether
of personal liability or of private property
>> Consideration > right, interest, benefit, or advantage conferred upon the
promisor, to which he is otherwise not lawfully entitled, or any detriment,
prejudice, loss, or disadvantage suffered or undertaken by the promise other than
to such as he is at the time of consent bound to suffer
G.R. No. 61594
September 28, 1990
PAKISTAN INTERNATIONAL AIRLINES CORPORATION v. HON.
BLAS F. OPLE (as Minister of Labor), HON. VICENTE LEOGARDO, JR.
(as Deputy Minister), ETHELYNNE B. FARRALES and MARIA
MOONYEEN MAMASIG
Facts: PIA illegally dismissed Farrales and Mamasig because their termination
was without clearance from MOLE. Despite the contractual agreement that
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reserved the right of termination to PIA, labor is a matter of public policy and
interests and hence, the Labor Code applies. The Labor Code prohibits the
limitation of employment for the purpose of circumventing security of tenure
and requires MOLE clearance for termination. Hence, the termination was
illegal because the provision in the contract is facultative, dependent solely upon
the will of PIA and thus preventing security of tenure of F,M, and because the
termination was made without clearance, thus presumed to be without cause.
> Two Contracts of Employment (signed December 2, 1978, effective January 9,
1979) between PIA, a foreign corporation with license in the Ph, and Ethelynne
Farrales and Maria Mamasig as flight stewardesses for a 3y period > Conditions:
Right of PIA to terminate employment given a 1m notice in writing or payment
of 1ms worth of salary; Applicability of Pakistan laws and sole jurisdiction of
the Courts of Karachi in any matter arising from the agreement > Employment
of Farrales and Mamasig until Notices of Termination (dated August 1, 1980,
effective September 1, 1990) was served to them on August 2, 1980, 1y4m prior
to the expiration of their contracts > JOINT SUIT by Farrales and Mamasig
against PIA in Ministry of Labor and Employment for illegal dismissal and nonpayment of benefits and bonuses > Contention of PIA: that F,M were habitual
absentees, that they bring in sizeable quantities of personal effects from abroad,
that customs officials warned Manila International Airport to advise F,M to stop
the habit > MOLE, thru the Regional Director, ruled in favor of F,M (January
22, 1981), ordering their reinstatement because (1) their dismissal was
(conclusively presumed to be) without just cause because it was without
MOLEs clearance (as required by Sec. 278, (Labor Code concerning regular
employees), and hence, illegal; (2) the 3y period of employment violated the
Labor Code (Art. 280-281) on regular and casual employment where F,M have
become regular employees for having rendered continued services for more than
1y > Contention of PIA: (1) MOLE has no jurisdiction; (2) No due process due
to no oral hearing; (3) order of reinstatement is a violation of their rights in the
employment contracts
> SC HELD: Illegal Dismissal
> Ph Laws apply despite agreement that Pakistan laws should govern
BECAUSE Labor is a matter of public policy > Party Autonomy is not absolute
> Contract is the law between the parties but Art. 1306 requires that they not be
contrary to law, morals, good customs, public order or public policy > Laws
relating to public policy are thus deemed written into the contract > Laws on
labor and employment cannot thus be excluded from contracts especially where
(1) the contracts were executed and performed in the Ph; (2) F,M are Ph citizens
and are based in the Ph; (3) PIA is a resident of the Ph; (4) No proof of the
relevant Pakistani laws and hence, they are presumed to be the same as the Ph
> Par. 5&6 of the Contract, providing for the 3y period and right of PIA to
termination, is void for circumventing the security of tenure of the employees >
Condition is facultative ~ authority to shorten the term is solely dependent upon
the will of PIA at any time and for any cause satisfactory to itself > Although a
contract providing for employment with a fixed period is not necessarily
unlawful, it must have no intent to circumvent the law(ie where the employee
insists upon a period; where the nature of the engagement is such that a definite
date of termination is a sine qua non ~ Otherwise, the law would restrict without
reasonable distinctions the right of an employee to freely stipulate with his
employer the duration of his engagement) > Evil sought to be avoided:
agreements entered into precisely to circumvent security of tenure > Must have
been mutually and voluntarily made by the parties
> MOLE with jurisdiction > Regional Director given authority under Labor
Code to reinstate employees who were illegally dismissed by reason of lack of
clearance from MOLE
> Due process present > Opportunity to be heard in position papers > PIA did
not choose to present evidence
G.R. No. L-15127
May 30, 1961
EMETERIO CUI v. ARELLANO UNIVERSITY
Facts: Contract of Waiver between Emeterio, law student/scholar, and Arellano
University, where the former is granted scholarship but prohibited to transfer
schools, is prohibited for being contrary to public policy, embodied in
Memorandum No. 38 that deems scholarships as recognitions of merit and not
as business schemes, and good morals, where such practice is not generally
accepted.
> Emeterio Cui was a scholar in the College of Law of the Arellano University
until the last semester of his final school year when he left with his uncle,
Francisco R. Capistrano who was Dean of the College of Law, to transfer to the
College of Law of Abad Santos University where his uncle became Dean and
Chancellor > Arellano University subsequently refused to release his transcripts
of records which Emeterio needed to apply for the bar exams until he has paid
back the value of the scholarship which the latter refunded to him per semester,
which amounted to P1,033.87 (Each tuition that Emeterio had paid at the start of
the semester was refunded to him at the end of the semester for scholastic merit)
> Memorandum No. 38 (August 16, 1949) of the Director of Private Schools
prohibited the refund of scholarship when students transfer to other schools >
Bureau of Private Schools advised Arellano University to release Emeterios
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records without requiring him to pay the tuition fee > Arellano refused >
Emeterio paid under protest in order to take the bar > SUIT by Emeterio for
recovery of the amount > Contention of Arellano: Scholarship Contract of
Waiver (September 10, 1951) with Emeterio provided that the latter, in
consideration of the scholarship grant, waives any right to transfer to another
school without having refunded to the University the equivalent of the
scholarship cash
> Contract provision is Null and Void for violating public policy >
Memorandum of the Bureau of Private Schools, considered as a practice of
government officials, is a factor in determining a public policy of the state >
Director submitted (1) that the policy of the Memorandum was a sound policy
where scholarships are awarded to recognize merit and help gifted students in
whom society has an established interest or a first lien and not to keep
outstanding students in the school to bolster its prestige; (2) that Arellano treated
the scholarship as a business scheme designed to increase its business potential;
(3) that, thus, Arellanos contract is contrary to public policy and even good
morals
> Contrary to Public Policy > if its consideration contravenes the interests of
society and in inconsistent with sound policy and good morals and tends to
undermine the security of individual rights
> Contrary to Good Morals > if against good customs, those generally accepted
principles of morality which have received some kind of social and practical
confirmation
the dismissal of the case > Non-compliance and refusal of Marcela to sign a
written agreement > SUIT by Ignacio > RTC ruled in favor of Marcela due the
illegality of the contracts consideration
> Agreement contrary to public policy > Owner of stolen goods cannot stifle the
prosecution of the accused charged with theft merely for a pecuniary or other
valuable consideration > It is a public interest that criminals be prosecuted and
punished > Hence, criminal proceedings should abide by the laws > It is a
perversion of justice to allow the offender to purchase immunity from private
individuals and escape the penalties prescribed by law > Art. 1255: conditions
should not contravene the law, morals or public order > Art. 1275: Contracts
with illicit considerations, or those contrary to law and good morals, are without
effect
G.R. No. L-19638
June 20, 1966
FILIPINAS COMPANIA DE SEGUROS, ET AL v. HON. FRANCISCO Y.
MANDANAS (as Insurance Commissioner) and AGRICULTURAL FIRE
INSURANCE & SURETY CO., INC., ET AL
Facts: The power of the Ph Rating Bureau to refuse to do business with
insurance companies that are not its members is valid because it is not contrary
to law or public policy as it reasonably restraints competition merely by fixing
rates which it has, in the first place, the license to do.
Facts: Agreement between Ignacio and Marcela, client of Alfred, where Ignacio
agreed to have the case for theft (on appeal) against Marcela dismissed for some
benefit is void. It is against public policy where the criminal justice system is
perverted by the mere purchase of immunity by the accused from a private
individual at the prejudice of the public.
> Letters (March 11, 1960, April 11, 1960, April 9, 1961) by Insurance
Commissioner Mandanas to the Ph Rating Bureau, requesting the deletion of
Art. 22 of the Constitution of the Ph Rating Bureau because it was allegedly
unlawful for allowing the Bureau to refuse representation or reinsurance from
companies not members in good standing of the Bureau ~ otherwise he would
suspend the license issued to the Bureau and its members > SUIT (May 16,
1961) by non-life insurance companies against Hon. Mandanas for Declaratory
Relief re: constitutionality of Art. 22 of the Constitution of the Ph Rating
Bureau, the former alleging its constitutionality while the former assailing its
validity for being an illegal or undue restraint of trade
> Judgment of theft against Marcela Juanez, represented by Alfred Berwin (as
procurador judicial of the law office of Atty. John Bordman) and prosecuted by
Ignacio Arroyo, for having the canes on the land of Ignacio cut > Verbal
Agreement (August 14, 1914, during hearing for appeal) before Roque Samson
where Marcela recognized Ignacios ownership of the land in which she ordered
the canes therein cut and promised not to oppose Ignacios application for
registration for a Torrens title; Ignacio agreed to dismiss the case > Requests for
where the former agreed to sell his land for P131,831.91 and latter agreed to
purchase the same and to assume Dizons debt to DBP and PNB; (2) Option to
Purchase Real Estate where Dizon was granted the right to repurchase the
properties from Gaborro (from January 1965 to December 31, 1970) for the
same amount plus 8% annual interest > Gaborro possessed the land > Letter
(October 7, 1959) by Gaborro to DBP, informing the latter of his assumption of
mortgage ~ Approved by the Board of Governors, DBP (October 21, 1959) ~
Conditional Sale of the Properties (July 11, 1960) between DBP and Gaborro,
over the land for P36,090.95 ~ Assignment of Right of Redemption (January 7,
1960) by Dizon, as owner and mortgagor, to Gaborro of his right to redeem the
land within 1y from the foreclosure > Payment and improvements by Gaborro >
Letter-Offer to Reimburse (July 5, 1961) by Dizon, thru counsel, to Gaborro but
without tender of payment ~ Gaborro refused > Contention of Dizon: agreement
was not an absolute sale but merely an equitable mortgage by way of security
for the reimbursement or refund by Dizon to Gaborro of any payments made by
the latter for the mortgages ~ only a grant of possession and enjoyment of the
property > Contention of DBP: Dizons right is limited to redemption because
was no longer the owner of the land
> DBPs Inchoate Right in the Property > Mortgage was foreclosed
extrajudicially and hence, debtor has 12m to redeem it (Act 3135, Sec. 6) during
which he has the right of possession and enjoyment of the property and its fruits
> the only rights that Dizon could have transferred to Gaborro: redemption,
possession and enjoyment > Deed of Sale is invalid for lack of consideration
(property because Dizon no longer has the full right and capacity to dispose of it
as owner money, and money) > Gaborro thus has no more than these same rights
to grant to Dizon under the Option to Repurchase > No transfer of full title and
ownership between Dizon and Gaborro because DCB was already the owner
> True intention of the parties: Gaborro to assume the debt of Dizon to DBP and
PNB and Dizon to give Gaborro the possession and enjoyment of his properties
until he had reimbursed Gaborro of the amounts the latter had paid > to pay the
debts to the banks, to make the land productive, and to return the land to the
original owner > Mutual Mistake by both Dizon and Gaborro in wording their
deeds as one of absolute sale > Cause for reformation
> Grant of Reconveyance of Property to Dizon upon his payment to Gaborro of
the principal obligation which the latter had paid to the banks within 1y from the
decisions finality
>> Innominate Contracts (Art. 1307) > agreement to give and to do certain
rights and obligations respecting the land and mortgage debts of Dizon but
partaking the nature of antichresis
G.R. No. L-40424
June 30, 1980
R. MARINO CORPUS v. COURT OF APPEALS and JUAN T. DAVID
Facts: Atty. David is entitled to attorneys fees despite the absence of an express
contract providing for the same due to the principle of innominate contracts
where he does and his client Corpus gives.
> Dismissal of R. Marino Corpus (March 1958 after suspension on March 18,
1958, pending investigation) by Governor of Central Bank, Miguel Cuaderno,
Sr., despite the investigating committees finding that there was no merit,
because he had lost confidence in him, by virtue of the Monetary Boards
resolution of July 20, 1959 > SUIT (August 18, 1959) by Corpus thru Atty.
Alvarez for certiorari, mandamus and quo warranto with preliminary mandatory
injuction and damages against Cuaderno and Mario Marcos who was appointed
to his position ~ Dismissed (June 14, 1960) due to Corpus failure to exhaust,
available administrative remedies > (Contention of David) Prior to the
expiration of the period for appeal, Meeting between Atty. Juan T. David and
Corpuss father where the latter requested the former to handle the case of his
son due to Atty. Alvarezs disenchantment and desire to give it up ~ Atty. David
accepted the request but only as a collaborating atty. with Atty. Alvarez >
(Contention of Corpus that David approached him and offered his services) >
Joint efforts of Atty. Alvarez and Atty. David > SC ruled in favor of Corpus
(March 30, 1962) ~ dismissal reversed and case remanded > Letter (April 18,
1962) from Corpus to David where the former enclosed a check worth P2k for
legal services, thanked David and stated that I could give more but as you
know we were banking on a SC decision reinstating me and reimburse my back
wageLooking forward to a continuation of the case in the lower court >
Reply-Letter (April 25, 1962) by David to Corpus where the former declined the
check, explaining that his professional fee was not his primary motive but their
friendship (very intimate relations) which you and I have enjoyed > Remand
of the Case ~ Ruled (June 24, 1963) illegal dismissal, Corpus reinstatement,
and payment of his back salaries and allowances and award of P5k as attorney's
fees ~ David appealed ~ SC affirmed (March 31, 1965) > Demand (April 19,
1965) by Davids law office for collection of 50% of the amount recovered by
Corpus ~ Corpus refused due to his outstanding obligations and expectation to
net only around P10k > Letter (April 19,1965) by David to the Governor of
Central Bank, that the payment to Corpus be made out in two: one in favor of
Corpus and the other representing the professional fees equivalent to 50% of the
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said back salaries being claimed ~ ACTION by David (July 20, 1965) for
certiorari to obtain a favorable decision from the Governor > RTC ruled in favor
of David (September 4, 1967) for payment of P30k as attorneys fees ~ CA
Affirmed, finding that Corpus accepted Davids services with the understanding
of both that the latter was to be compensated in money > Contention of Corpus:
that David is not entitled to attorney's fees because there was no contract to that
effect > Contention of David: that the absence of a formal contract for the
payment of the attorney's fees will not negate the payment because the contract
may be express or implied, and there was an implied understanding between
them that Corpus will pay Davids attorney's fees when a final decision shall
have been rendered in favor of Corpus reinstating him to his former position and
paying his back salaries
> Attorneys fees to David is JUSTIFIED: (1) Implied Agreement; (2)
Innominate Contract
> Implied Agreement between Corpus and David for payment of attorneys fees
> Admitted and recognized by Corpus in: (1) payment of P2k in check with the
wish I could give more but as you know we were banking on a SC decision
reinstating me and reimbursing my back salaries and with the anticipation of
the cases continuation, constituting a promise to pay more upon his
reinstatement and payment of his back salaries; (2) request for help by Corpus
father and acceptance of David as collaborate lawyer where it would have been
unethical for him to even offer his services when Corpus had a competent
counsel in the person of Atty. Alvarez; (3) reply of Corpus to Davids demand
of payment (May 7, 1965) which disagreed as to the amount of attorney's fees
demanded but without a categorical denial of Davids right to attorney's fees; (4)
payment of P2500 ( of the awarded P5k as attorneys fees); (5) admission in
Corpus motion for recon in CA that David was entitled to compensation for
legal services > Absence of express contract explained by their close
relationship which signifies mutual trust and confidence between them
> Innominate Contract where David rendered service and hence becomes
entitled to compensation by Corpus who had benefited from such rendered
service > Right to Reasonable Amount, determined by the extent of his services,
given that there is not contract for contingent fee (which depends on an express
contract and hence, an attorney is not entitled to a percentage of the amount
recovered by his client in the absence of an express contract to that effect) >
David was collaborating counsel of principal counsel Alvarez, for 4y, entered at
the crucial stage (after dismissal of the case by RTC), advanced legal
propositions (while Alvarez laid down the basic theory and foundation of the
case), joint efforts of Atty. Alvarez and Atty. David: in filing the motion for
reconsideration (both signed), arguing the case before the SC, Baguio (David),
arguing the remanded case before the lower court (both) > Alvarez was paid
P20k, David demands P75k but since Corpus received only P150,158.50 as back
salaries and emoluments after deducting taxes, the reasonable amount for
Davids fees is P20k
>> Innominate Contract of facio ut des > I do and you give > based on the
principle that no one shall unjustly enrich himself at the expense of another >
Art. 1307 that such contracts shall be regulated by (1) the stipulations of the
parties, by (2) the general provisions or principles of obligations and contracts,
by (3) the rules governing the most analogous nominate contracts, and by (4) the
customs of the people > Perez vs. Pomar: consideration of a tacit and mutual
consent as to the rendition of the services, giving rise to the obligation upon the
person benefited by the services to make compensation since the bilateral
obligation to render service, on the one hand, and on the other to pay for the
service rendered, is thereby incurred
G.R. No. L-27696
September 30, 1977
MIGUEL FLORENTINO, ROSARIO ENCARNACION de
FLORENTINO, MANUEL ARCE, JOSE FLORENTINO, VICTORINO
FLORENTINO, ANTONIO FLORENTINO, REMEDION
ENCARNACION and SEVERINA ENCARNACION [or A] v.
SALVADOR ENCARNACION, SR., SALVADOR ENCARNACION, JR.,
and ANGEL ENCARNACION [or B]
Facts: Stipulation in Deed of Extrajudicial Partition, favoring the Church,
cannot be revoked by the appellees because as a stipulation pour autrui which
confers benefit to a third person, the acceptance of the beneficiary, the Church,
need not follow any form or be done in a fixed period as long as it had been
done before revocation. The Church had already impliedly accepted it by its
unquestioned enjoyment long before the revocation of appelees. Hence, given
that the stipulation has not been revoked on time, the contract is binding on all
parties.
> Application for Registration of a parcel of agricultural land (May 22, 1964) A
and B as the common and pro-indiviso owners in fee simple of the land,
acquired by virtue of the Deed of Extrajudicial Partition of the estate of their
predecessor-in-interest, aunt Dona Encarnacion Florentino ~ that they knew of
no mortgage, lien, or encumbrance or third persons interested > Hearing set by
and published, No opposition (Director of Lands withdrew opposition), Order of
default against the world, Evidence presented > Registration of property to A
and B ~ CFI Denied the request of Miguel Florentino (A) to consider as an
encumbrance the arrangement (stipulated in the Deed of Extrajudicial Partition),
9
that the fruits of the land is for payment of the expenses for religious functions
specified, due to its non-registration in the Register of Deeds, the absence of
acceptance by the donee Church (considering the arrangement as a donation,
pure and simple), the non-grant of Angel and Salvador Encarnacion, Jr. (B)
when they did not sign the Deed ~ such payment was ordered deducted from the
undivided shares of A only, excluding B who denied it > CFI Modified its
answer: that as a donation, usufruct or ellemosynary gift, the arrangement can be
revoked as what B have done given that there had been no proof of acceptance
by the Church; also, A is not a real party in interest and the Church should have
been the right party to demand the arrangement
> Arrangement cannot be revoked unilaterally at the option of co-owners B >
Why: stipulation is a stipulation pour autrui ~ Intention of A and B: to confer a
direct and material benefit upon the Church > Hence, Requirement of
acceptance has no required form or specified time limit! ~ as long as done
before revocation > Implied Acceptance by Church before revocation:
enjoyment without question of the arrangement since time immemorial (17y
from the time of Dona Encarnacions ownership of the land) > HENCE,
stipulation is binding on all parties of the Deed, which is a contract, the law
among the parties > Art. 1309 (1257): force of law of contracts and mutuality
among parties > B, even if non-signatories, are bound for having purchased the
shares of the original heirs and for not objecting to the stipulation
> Church need not be the plaintiff > Stipulation is already binding among all
parties given that the Church has already accepted it ~ thus, the stipulation is
valid
>> Stipulation pour autrui > stipulation in favor of a third person conferring a
clear and deliberate favor upon him ~ merely part of a contract entered into by
the parties, neither of whom acted as agent of the third person, and such third
person may demand its fulfillment provided that he communicates his
acceptance to the obligor before it is revoked > Requisites: (1) that the
stipulation in favor of a third person should be a part, not the whole, of the
contract; (2) that the favorable stipulation should not be conditioned or
compensated by any kind of obligation whatever; (3) neither of the contracting
parties bears the legal representation or authorization of the third party; (4 - JJ)
Acceptance by the third party > Validity: purpose and intent of the stipulating
parties is to benefit the third person (not mere incidental benefit), regardless of
the nature of the obligation in which it is stipulated (ie donation, contract)
>> Cristobal v. Gomez: A trust constituted between two contracting parties for
the benefit of a third person is not subject to the rules governing donation of real
10
Facts: The benefit in favor of the son of Pastor and Herminia, as the purpose of
the Deed of Absolute Sale between the parents, is a cause of action for the
fathers case against the mother, seeking to restraint the latter from alienating
the subject properties. Even if their son was not a party to the Deed of Absolute
Sale, the latter was constituted for his benefit and as a third person, he may
demand its fulfillment as co-plaintiff. (*Even if he was not co-plaintiff, the
father could have demanded the fulfillment with the acceptance of the son of the
benefit by being co-plaintiff and absent revocation by mother.)
> Deed of Absolute Sale (October 30, 1953) between Pastor Constantino and
Herminia Espiritu where former sold his house and lots to the latter for P8k ~
understanding the Herminia would hold it in trust for their unborn, illegit son,
Pastor Jr. > Mortgage and Sale of the house and lots by Herminia to Republic
Savings Bank to secure the payment of her loans (amounting P5k) > SUIT for
Preliminary Injunction by Pastor against Herminia ~ to restraint Herminia from
alienating the properties and to compel her to execute a Deed of Absolute Sale
in favor of Pastor Jr. (5y/o already) > Contention of Herminia: No cause of
action where Pastor Jr. was not included as party-plaintiff > Contention of
Pastor: the properties were held in trust > Complaint Dismissed but a new
Amended Complaint was submitted by Pastor which includes Pastor Jr.
> Deed of Absolute Sale is a Contract pour autrui between Pastor and Herminia
> (Action is for specific performance) > Third person for whose benefit the
contract was entered into, their son, may also demand its fulfillment > Inclusion
of Pastor Jr. in amended complaint as co-plaintiff served as acceptance of the
benefit, before revocation > Thus, the contract has become binding on all of the
three
> Third party need not be identified
> What applies to Third Party is merely the benefit but not the other stipulations
G.R. No. 79518
January 13, 1989
REBECCA YOUNG, assisted by her husband ANTONIO GO v. CA, PH
CREDIT CORP., PHIL. HOLDING, INC., FRANCISCO VILLAROMAN,
FONG YOOK LU, ELLEN YEE FONG, and THE REGISTER OF DEEDS
OF MANILA
Facts: The Compromise Agreement between Rebeccas dad and Ph Holding
conferring to Antonio the right of first refusal to purchase is not pour autrui in
favor of Rebecca. The intention of the parties was not to include her where her
involvement was subject to her being impleaded in the civil action and to her
affixing her signature in the agreement, both of which were unsatisfied. Hence,
Rebecca does not have such right since she is not a third party beneficiary nor a
party to the agreement.
> Order of Demolition obtained by Ph. Holding, Inc. over its building ~
occupied by Antonio Young, his daughter Rebecca Young, and Sps. Foong
Yook Lu and Ellen Yee Fong, among others > Action for Annulment of the
Demolition Order by Antonio Young ~ Compromise Agreement (submitted
September 24, 1981) where Antonio and Rebecca would voluntarily vacate their
tenanted units in 60d but would have the right of first refusal should Ph Holding
decide to sell the property > Sale of the property (September 17, 1981) by way
of dacion by Ph Holding to Ph Credit Corporation ~ Latter subdivided the
property (November 9, 1982) into two parcels and sold it to Blessed Land
Development Corporation (Antonio Young, President; December 8, 1982) and
to Sps. Fong Yook Lu and Ellen Yee Fong (September 16, 1983) > SUIT for
Annulment of Sale (to Sps. Fong) and Specific Performance by Rebecca Young,
among others > Contention of Rebecca: Right of first refusal to purchase the
property sold to Sps. Fong > RTC Dismissed: (1) Rebecca not a party to the
Compromise Agreement; (2) Even if agreement pour autrui, lack of notice to the
obligor of her acceptance of her right of first refusal; (3) Lack of evidence of
exercise of right of first refusal
> Rebecca has no right of first refusal > (1) Compromise agreement not pour
autrui > WHY: Intention of Antonio and Holding: not to include Rebecca in the
beneficient provisions of the agreement > though impleaded in the compromise
agreement (Antonio Young and Holding agree to implead in this action as
necessary party-plaintiff, Rebecca Youngwhose written conformity appears
hereunder), it was subject to her being impleaded in the civil case and to her
written conformity which was unsatisfied ~ not impleaded by either Antonio or
Holding and no signature; (2) Rebecca not a party to the compromise agreement
and hence, not entitled to enforce it which is granted and binding only to the
parties
G.R. No. L-79734
December 8, 1988
MARMONT RESORT HOTEL ENTERPRISES v. FEDERICO GUIANG,
AURORA GUIANG, and CA
Facts: Marmont Hotel is a third person beneficiary of the Sale between Maris
and Sps. Guiang because the sole purpose of the sale is to provide a water
supply system for Marmont. Hence, Marmont has possessory rights and thus
cannot have been prevented from accessing the water supply facility.
11
> MOA (May 2, 1975) between Marmont (hotel and resort business) and Maris
Trading where latter is to install the water system of the Marmont Resort Hotel
for P40k > Maris installed a water supply facility (well and water pump) on the
property owned by Sps. Guiang > MOA between Maris and Aurora, witness by
Federico Guiang where latter would be paid P1500 for the portion of the
property wherein the well and pump were installed and would transfer all rights
to Maris > Inadequacy of water supply to meet demand of Marmont Hotel,
Advise of another contractor to install a submersible pump in the well (to
increase pressure and improve water flow), Permission to inspect and modify
water pump from Marmont not granted by Sps. Guiang (*Maris apparently not
informed) > SUIT (May 13, 1980) by Marmont against Sps. Guiang for
damages resulting from latters refusal to allow inspection of the water facility
site > Contention of Sps. Guiang: No knowledge of MOA 1 and Invalidity of
MOA 2 because the property sold was conjugal and sold by Aurora Guiang
without the consent of her husband, and was still part of the public domain
pending Federicos Miscellaneous Sales Application > RTC Dismissed where
sale of land by Aurora was valid but no evidence that Maris transferred its rights
to Marmont
> Marmont has possessory right over the water supply facility > MOA 2 which
conferred possessory rights of the property from Sps. Guiang to Maris has a
stipulation pour autrui where Marmont was to benefit by way of having a water
system facility, which was installed by Maris in the property of Sps. Guiang
with the latters knowledge and consent > Purpose of Maris in acquiring the
property: to supply the water requirements of Marmont ~ water facility intended
solely for Marmont ~ interest not incidental
> BUT alleged stipulation is merely a recital/statement but not terms of
agreement > No deliberate conferment of right to a beneficiary
> Even if MOA 2 is read as having no stipulation pour autrui, Sps. Guaing are
still liable for damages > Refusal of access to Marmont forced the latter to locate
alternative sources of water
> MOA 2, or sale by Aurora, is valid because Federico was then present and
even gave consent by signing as a witness
> Sale valid even if covering public land because Sps. had possessory and other
rights which they could have validly appropriated
> Two MOAs admissible in evidence due to the Sps. and Marmonts stipulation
of facts that judicially admitted the existing of the MOAs
>> Stipulation pour autrui > a stipulation in favor of a third person conferring a
clear and deliberate favor upon him > found in a contract entered into by parties
neither of whom acted a agent of the beneficiary
> But is it an enforceable obligation? Just a guideline, not part of contract with
Bankard
> Can Mandarin sue Clodualdo if latter had no money in the bank that resulted
to the dishonor of his card? NO, Mandarin not a beneficiary/third person in
contract between Clodualdo and Bankard
> Atty. Clodualdo not negligent in not bringing sufficient cash > Common
Practice in restaurants to honor credit cards as means of payment
> Humiliation not due to comment of one guest but because Mandarin
dishonored his credit card
G.R. No. 13505
February 4, 1919
GEO W. DAYWALT v. LA CORPORACION DE LOS PADRES
AGUSTINOS RECOLETOS, ET AL
Facts: Church not liable for damages as a stranger when Teodorica for a long
time refused to surrender the title of her property to Daywalt, as agreed by the
Deed of Sale, resulting to losses he had incurred in failing to pursue a mining
enterprise. Strangers cannot be liable for than the person they had benefitted.
Church has no liability because Teodorica herself is not liable where: (1) the
right of Daywalt to recover such damages from Teodorica had been exhausted
by his previous action against her and thus, cannot be recovered in an
independent action; (2) damage, as a special damage, had not been contemplated
by the parties; (3) damage was too remote to breach of contract.
> Three Documents Teodorica Endencia and Geo W. Daywalt: (A) Contract of
Conveyance (1902) between Teodorica Endencia and Geo W. Daywalt covering
the formers land which was to be conveyed upon the perfection of Torrens title
to Teodorica by the Court of Land Registration > Grant of Right to Property as
Owner (August 1906) to Teodorica but without issuance of Torrens title > (B)
Deed of Conveyance (August 16, 1906) where Teodorica would convey her
property for P4k ~ Did not take effect due to non-issuance of Torrens title > (C)
Contract (October 3, 1908) where Teodorica was to deliver the Torrens title to
the Hongkong and Shanghai Bank in Manila upon its receipt ~ superseded the
old contract > Issuance of the Torrens title (1909) but property was larger than
expected (1,248 hectares where contract contemplated 452 hectares) ~
Reluctance of Teodorica to convey the entire land > Contract of Sale (1911)
between Daywalt and S.B. Wakefield > Surrender by Teodorica of the Title to
Fr. Isidoro Sanz (and then to procurador Fr. Juan Labarga in Manila) of the La
Corporacion de los Padres Recoletos whom she trusts and who knew about her
contracts ~ that she was misinformed about the area of her property and did not
intend to sell so large an amount and that the latter proposed to pay Teodorica
P424/y for use and occupation of her property, which was adjacent to theirs, for
the pasturing of their cattle > Church surrendered the Title by virtue of the SC
Decision pursuant to Suit by Daywalt for enforcement of contract (C) ~ Granted,
contract in full force and effect while decree attained finality in 1914 > SUIT by
Daywalt against the Church for having unlawfully interfered and induced
Teodorica to refrain from the performance of her contract and to withhold the
delivery of the Title ~ Damage in failure of the sugar growing and milling
enterprise with Wakefield due to dispossession of title
> Liability of Teodorica from Damages consequent to breach of contract >
Present BUT cannot be claimed due to res judicata of the action for specific
performance (1909) which was granted in favor of Daywalt > HENCE, if
damages are not sought in the action to enforce performance, they cannot be
recovered in an independent action ~ WHY: Indemnification from breach of
contract is a right inseparably annexed to every action for the fulfillment of the
obligation > Right of Daywalt had already been exhausted thus ~ res judicata
> Liability of Teodorica from Wrongful detention of real property as vendor >
Value dependent on the interest: the value of the use and occupation of the land
from the time it was withheld > YET, such damage, as a special damage, was
not within contemplation of the parties when the contract was made and was too
remote to be the subject of recovery
> Liability of the Church > Liability of Strangers > No more than what could be
recovered from the party in whose behalf he intermeddles > (1) Teodorica has
no liability, Church has no liability > MOREOVER, (2) Church NOT liable to
damages to vendee > Mere advise is not an actionable interference with such
contract of sale > They merely sympathized and believed in good faith that the
contract could not be enforced and that Teodorica would be wronged if it should
be carried into effect > No improper motive, no desire to secure to themselves
the property
> Reconciliation of Liability of Strangers and Exclusivity of Parties to a
Contract
> A stranger to a contract may, by an unjustifiable interference in the
performance thereof, render himself liable for the damages consequent upon
non-performance > Principle that any person who entices a servant from his
employment is liable in damages to the master ~ Basis: Masters juridical right
in the service rendered by his employee > Presumption of Malice in interference
~ that the wrongful-doer, having knowledge of the existence of the contract
relation, in bad faith sets about to break it up or to prevent its performance by
13
termination of the lease > Failure of Tek Hua to respond ~ Lease contract
rescinded > Letter (March 1, 1991) by Manuel Tiong, President of Tek Hua, to
So Ping Bun, demanding the possession of the warehouse in 14d because he
would need it for his textile business ~ So Pin Bum refused, requested a contract
of lease with DCCSI (March 4, 1992), and claimed that he had been paying rents
~ Lease Contract granted > SUIT for Nullification of Lease Contract by Tek
Hua and Tiong against So Ping Bun
> Liability of So Pin Bum (Trendsetter Marketing) > In asking DCCSI for a
contract of lease, it deprived Tek Hua of its property right by virtue of its lease >
BUT his act was not motivated by malice but only the intention to benefit
himself > YET detrimenting Tek Hua is not without consequences ~ Injunction
and Nullification of Lease granted but without Damages
>> Damage > the loss, hurt, or harm which results from injury; the recompense
or compensation awarded for the damage suffered > Liability for an action for
damage for a nontrespassory invasion of anothers interest in the private use and
enjoyment of asset if OR an unlawful interference by one person of the
enjoyment by the other of his private property: (a) the other has property rights
and privileges with respect to the use or enjoyment interfered with, (b) the
invasion is substantial, (c) the defendants conduct is a legal cause of the
invasion, and (d) the invasion is either intentional and unreasonable or
unintentional and actionable under general negligence rules > Elements of
Tortuous Interference: (1) existence of a valid contract; (2) knowledge on the
part of the third person of the existence of contract; and (3) interference of the
third person is without legal justification or excuse >> Legal Justification: sole
purpose of the defendant is to benefit himself, ie the furtherance of his own
financial or economic interest or any substantial interest > financial or profit
motivation will not necessarily make a person an officious interferer liable for
damages as long as there is no malice or bad faith involved > HENCE, where
the alleged interferer is financially interested, and such interest motivates his
conduct, it cannot be said that he is a malicious intermeddler
G.R. No. 119107
March 18, 2005
JOSE V. LAGON v. CA and MENANDRO V. LAPUZ
Facts: In purchasing the property of Bai from her heirs, Lagon did not interfere
the contract of lease of Lapuz with the late Bai because Lagaon did not know of
the existence of the valid contract and had no malice in purchasing said
property.
14
> Contract of Lease (1964) between Bai Tonina Sepi and Menandro Lapuz
where the former leased her property to the latter who would construct
commercial buildings thereon and who would lease it to new tenants, the rentals
of which would serve as payment of Lapuz to Sepi > Renewal of the Contract
(1974) due to the non-completion of the commercial buildings > Death of Bai,
Payment by Lapuz of rent to the administrator of her estate > Sale (June 23,
1982) where Jose Lagon bought two parcels of land from the Estate (thru an
intestate court) > Administrator thus advised Lapuz to stop collecting rents and
Lapuz then discovered that Lagon became the new owner and had been
collecting the rents > SUIT for torts and damages by Menandro Lapuz who had
induced the heirs of Bai to sell the property to him and had violated his
leasehold rights > RTC ruled in favor of Lapuz where Contract of Lease was
authentic > Contention of Lagon: (1) denied interfering with Lapuzs leasehold
rights because, based on his personal investigation, there were no lease claims or
encumbrances when he purchased the lots, that he knew of no lease contract ~
went to Atty. Fajardo who had notarized the lease between Bai and Lapuz and
was shown that the copies of lease renewal were not signed; (2) denied inducing
the heirs who were in dire need of money to pay Bais obligations
> There was no interference > Absence of the 2nd and 3rd Elements > 2nd Element
of Knowledge of Contract ~ Personally investigated the property and found no
suspicious circumstance that would have made a cautious man probe deeper > 1st
Element of a valid contract is present ~ notarized lease contract that has the
value of a prima facie evidence and which was declared valid by the trial court >
3rd Element is not present because (A) there was no bad faith on the part of
Lagon ~ allegation of inducing the heirs was not supported by evidence and
disproved by the records that show the voluntariness of the heirs acts; (B) no ill
motive ~ only motive was to advance his financial interests, absent proof to the
contrary
> Case is damage without injury > Hence, Suit for damages cannot prosper and
petition is granted
> Interference with Contractual Relations (Art. 1314) > When a third party
induces another to violate his contract ~ liable for damages to the other
contracting party > WHY: It violates the property rights of a party in a contract
to reap the benefits that should result therefrom > Elements of Tortuous
Interference: (1) existence of a valid contract; (2) knowledge on the part of the
third person of the existence of contract ~ need not be actual knowledge but
mere awareness of the facts which, if followed by a reasonable inquiry, will lead
to a complete disclosure of the contractual relations and rights of the parties in
the contract; and (3) interference of the third person is without legal justification
or excuse ~ defendant must have acted with malice, or must have been driven by
purely impious reasons to injure the plaintiff ~ financial or profit motivation will
not necessarily make a person an officious interferer liable for damages as long
as there is no malice or bad faith involved
> Induction > where a person causes another to choose one course of conduct by
persuasion or intimidation
> Damnum Absque Injuria > Damage without Injury where Injury is the legal
invasion of a legal right and Damage is the hurt, loss or harm which results from
the injury
G.R. No. 20732
September 26, 1924
C. W. ROSENSTOCK, as administrator or the estate of H. W. Elser v.
EDWIN BURKE and THE COOPER COMPANY
Facts: Elser cannot be compelled to purchase the yacht of Burke because his
letter to him did not constitute an offer of purchase but a mere invitation to his
offer of purchase. The words used did not manifest his resolution to purchase,
which was testified by Elser himself and his stenographer.
> Written Offer of Purchase (February 12, 1922) by H.W. Elser of the yacht
being sold by Edwin Burke (which was mortgaged to Asia Banking Corporation
for a debt due prior to the negotiations with Elser) for the purpose of organizing
a yacht club and selling the same to it thru him afterwards ~ Offer to pay P120k
valid for 30d from date of letter > Without acceptance of the offer by Burke,
Elser paid for the repairs to the yacht (P6972.21 to Cooper Company) pursuant
to his suggestion that he would invite businessmen to a voyage to sell it to them
and to Burkes lack of funds > Voyage (March 6, 1922 to March 23, 1922) >
Application (March 31, 1922) by Elser to Bank for a loan of P20k which he
would use to replace the engine but stated that he could not purchase the yacht
for more than P70k ~ Bank refused ~ Request that Burke communicate with the
Bank > Agreement (April 3, 1922) that Elser is in position and willing to
entertain the purchase of the yacht for P80k according to terms that were
accepted by Burke > Disapproval of the Loan Application of Elser worth P20k
from the Bank for the yachts engine ~ Return of the yacht to Burke > Demand
(April 8, 1922) by Burke for the performance of the sale because he had already
accepted, with the consent of Asia Banking Corporation > SUIT by Elser for
Recovery of P6139.28, the value of the repairs made on the yacht paid by him >
Contention of Burke: that the agreement about the repairs was that Elser was to
pay for them for his own account in exchange of the gratuitous use of the yacht
by him > Cross-Complaint by Burke to reinforce the sale which offer was
accepted by him on April 3, 1922
15
> Agreement of April 3, 1922 was NOT a contract of sale BUT mere invitation
to an offer > (1) No resolution of Elser to purchase the yacht ~ I am in position
and am willing to entertain the purchase of it under the following terms ~ to
entertain an act is not a resolution to perform it > a man in his transactions in
good faith uses the best means of expressing his mind that his intelligence and
culture permit so as to convey and exteriorize his will faithfully and
unequivocally ~ Elser is a prominent merchant > Resolution to Purchase must be
of easy and unequivocal meaning, ie. I want to purchase / I offer to purchase / I
am in position to purchase > HENCE, agreement is not a definite offer but only
a position to deliberate > Testified by Elser, his stenographer and another
employee that while the letter was being dictated by Elser, Burke interrupted
and requested a definite offer to which Elser replied that he was not in position
to make such; (2) No intention to offer purchase ~ intention was to sell the yacht
to another but thru him in order to gain from the transaction; (3) Resolution to
Purchase of Elser was dependent upon the grant of loan which he would use to
replace the engine of the yacht ~ not granted to him
> Payment of Repairs by Elser ~ in exchange for the use of the yacht
> Whats the relationship between Offer-Acceptance and the essential elements
of contracts? (Consent, Object, Cause) ~ External manifestation of the elements
16
17
18
>> Contract to sell > TITLE is reserved in the vendor and is not to pass until the
FULL PAYMENT of the price ~ Retained by the vendor until the full payment
of the price, a positive suspensive condition and failure of which is not a breach
but an event that prevents the obligation of the vendor to convey title from
becoming effective
>> Contract of sale > TITLE passes to the vendee upon the DELIVERY of the
thing sold ~ Lost and cannot be recovered by the vendor until and unless the
contract is resolved or rescinded
>> Sale > A consensual contract perfected by mere consent > Essential
Elements for PERFECTION: (1) consent or meeting of the minds, that is, to
transfer ownership in exchange for the price; (2) object certain which is the
subject matter of the contract; (3) cause of the obligation which is established >
PERFECTION IS NOT CONSUMMATION of the acquisition and transfer of
ownership because sale is only a title and not a mode
>> Contracts, in general, are perfected by mere consent ~ manifested by the
meeting of the offer and the acceptance upon the thing which are to constitute
the contract > Offer must be certain and the Acceptance absolute > Contracts
shall be obligatory provided all the essential requisites for their validity are
present >> only constitute titles or rights to the transfer or acquisition of
ownership ~ Delivery or Tradition is the mode of accomplishing the same > Sale
by itself does not transfer or affect ownership but only creates the obligation to
transfer ownership
>> Mode is the legal means by which dominion or ownership is created,
transferred or destroyed ~ ie Delivery or Tradition (Article 1497 to 1501) > (1)
Actual Delivery consists in placing the thing sold in the control and possession
of the vendee; (2) Legal or Constructive Delivery thru (a) the execution of a
public instrument evidencing the sale, (b) symbolical tradition such as the
delivery of the keys of the place where the movable sold is being kept, (c)
traditio longa manu or by mere consent or agreement if the movable sold cannot
yet be transferred to the possession of the buyer at the time of the sale, (d)
traditio brevi manu if the buyer already had possession of the object even before
the sale, (e) traditio constitutum possessorium, where the seller remains in
possession of the property in a different capacity
>> Title is only the legal basis by which to affect dominion or ownership ~ ie
Contracts
>> Double Sale > Rules of preference between the two purchasers of the same
property > Principle of primus tempore, potior jure (first in time, stronger in
right) > Art. 1544. If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property. Should it be
immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property. Should there be no
inscription, the ownership shall pertain to the person who in good faith was first
in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
>> Purchaser in good faith > one who buys property of another without notice
that some other person has a right to, or interest in, such property and pays a full
and fair price for the same at the time of such purchase, or before he has notice
of the claim or interest of some other person in the property
>> Notice of lis pendens only serves as a warning to a prospective purchaser or
incumbrancer that the particular property is in litigation; and that he should keep
his hands off the same, unless he intends to gamble on the results of the
litigation
landfill project ~ Letter (February 27, 1997) where MMDA Chairman Prospero
I. Oreta informed JANCOMs Chief Executive Officer Jay Alparslan that the
EXECOM had approved the PBAC recommendation to award to JANCOM the
San Mateo Waste-to-Energy Project on the basis of the final Evaluation Report
declaring JANCOM as the sole complying (winning) bidder for the San Mateo
Waste Disposal site, subject to negotiation and mutual approval of the terms and
conditions of the contract of award > Submission of the Contract (March 5,
1998) to the President ~ Ramos term ended but he endorsed it to Estrada who
appointed the Chairman of the Presidential Committee on Flagship Programs
and Project to be the EXECOM chairman, adopted the Clean Air Act of 1999
and ordered the closure of the San Mateo landfill > Resolution by Greater
Manila Solid Waste Management Committee not to pursue the BOT contract
with JANCOM ~ Letter of Notice (November 4, 1999) to JANCOM due to
changes in policy and economic environment > (Pending appeal by JANCOM to
Estrada) Publication (February 22, 2000) by MMDA of its invitation to prequalify and to submit proposals for solid waste management projects for Metro
Manila > SUIT by JANCOM certiorari to declare i) the resolution disregarding
the BOT Contract and ii) the acts of MMDA calling for bids as illegal,
unconstitutional, and void; and for prohibition to enjoin the GMSWNC and
MMDA from implementing the resolution and disregarding the Award to and
the BOT contract with JANCOM > CONTENTION OF MMDA: No valid
contract because: a) the contract does not bear the signature of the President; b)
the conditions precedent specified in the contract were not complied with; and c)
there was no valid notice of award as required by the BOT Law
> Valid and binding contract between the Republic of the Philippines and
JANCOM: (1) Consent and meeting of minds when the parties signed the
contract, concurring in the offer (JANCOMs bid proposal) and acceptance with
respect to the object (waste management project) and the cause (BOT scheme)
where the effect of an unqualified acceptance of the offer or proposal of the
bidder is to perfect a contract; (2) Lack of Presidents Signature only suspended
the effectivity of the contract but not its validity ~ (i) DENR Secretary had the
authority to sign in behalf of the Republic pursuant to Section 1 of Executive
Order No. 380 that Secretaries of all Departments can enter into publicly bidded
contracts regardless of amount; (ii) Contract stipulated that the Presidents
signature is necessary only for its effectivity; (3) Failure to comply with several
conditions precedent also contemplates an effective contract where the
conditions where to be undertaken within 2 months from execution of this
Contract as an effective document; (4) Defect in Notice of Award was cured by
the subsequent execution of the contract entered into and signed by authorized
representatives of the parties ~ in negotiating on the terms and conditions and
signing said contract, the government had led JANCOM to believe that the
notice of award given to them satisfied all the requirement of the law ~ Form is
>> Contracts (Art. 1305) > A meeting of minds between two persons whereby
one binds himself, with respect to the other, to give something or to render some
service > Three distinct stages: (a) Negotiation begins from the time the
prospective contracting parties manifest their interest in the contract and ends at
the moment of agreement of the parties; (b) Perfection or birth of the contract
takes place when the parties agree upon the essential elements of the contract ~
by mere consent (Art. 1315) manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract
(Art.1319); (c) Consummation of the contract wherein the parties fulfill or
perform the terms agreed upon in the contract, culminating in the
extinguishment thereof
> Revocation of the Valid Contract requires the consent of both parties, not just
MMDA > Because the contract has the force of law, parties are bound to the
fulfillment of what has been expressly stipulated and to all the consequences
which, according to their nature, may be in keeping with good faith, usage, and
law > Defects as causes for annulment must be conclusively proven since the
validity and the fulfillment of contracts cannot be left to the will of one of the
contracting parties > Reasons cited by MMDA for not pushing through were: 1)
the passage of the Clean Air Act, which allegedly bans incineration but not
absolutely and only those which emit poisonous and toxic fumes; 2) the closure
of the San Mateo landfill site yet the contract stipulates that in case the site is not
delivered, the Republic would provide within a reasonable period of time, a
suitable alternative acceptable to JANCOM; and 3) the costly tipping fee are
not, by itself, enough to abrogate the entire agreement because neither the law
nor the courts will extricate a party from an unwise or undesirable contract, or
stipulation for that matter, he or she entered into with full awareness of its
consequences
2y from said date, with the understanding that said option shall be deemed
terminated and elapsed if Sanchez shall fail to exercise it > Several tenders of
payment by Sanchez but rejected by Mrs. Rigos ~ Consignation (March 12,
1963) by Sanchez to CFI > SUIT by Sanchez for specific performance and
damages > CONTENTION of Rigos: that the contract was void because it is a
unilateral promise to sell, and the same being unsupported by any valuable
consideration, by force of the New Civil Code, is null and void (ART. 1479 that
an accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price) > CONTENTION of Sanchez: that Rigos
agreed and committed to sell and Sanchez agreed and committed to buy the land
~ promises as "reciprocally demandable" (Art. 1479)
JJ: INCONSISTENCY BETWEEN 1324 and 1479:
(a) former allows the withdrawal of the offer by offeror while the latter makes it
immediately binding
(b) contract is valid in the former and its merely the withdrawal that is restricted
but the contract is not valid in the latter if it is without a consideration ~ subject
is the Restriction of ability to withdraw the offer, on the one hand, and the
existence of contract itself
*What if: 1479 whose validity and binding force depends upon a consideration
is consistent with the exception of 1324 where the contract cannot be withdrawn
if it has a consideration
*But Sir: Whats the legal effect of 1479? Invalidity if without consideration?
~ 1479 Due to binding nature of the contract, there is no option to speak of that
can be withdrawn pursuant to 1324
~ Exception of 1324 speaks only of the option to withdraw and not validity /
legal effects of contract without consideration
~ Does 1479 add another requirement of consideration for validity of a contract?
~ Is 1479 a special situation where it nullifies 1324 itself
> Contract of Option to Sell ~ Not enforceable until payment ~ No contract
> Option is a mere agreement in advance ~ itll always be independent
consideration
> Consideration must exist independently of each contract entered into; does not
pass from one contract to another ~ consideration in option and sale is
necessarily different
> Contract is VALID > Option did not impose upon Sanchez the obligation to
purchase but merely granted an "option" to buy > Unilateral promise may be
binding upon the promisor but Article 1479 requires the concurrence of a
condition, namely, that the promise be supported by a consideration distinct
from the price ~ nothing in the contract to indicate that her agreement, promise
and undertaking is supported by a consideration distinct from the price ~ no
valid contract without a cause or consideration unless the former establishes the
existence of said distinct consideration > Promisee cannot compel the promisor
to comply with the promise ~ not bound by his promise and may, accordingly,
withdraw it upon notice of its withdrawal
of cane is completely finished; while Jalandoni is to answer for all the rights and
obligations of the land;
(4) Agreement due to Jalandonis doubt that the amount of the land and of the
crop was overestimated where Asiain promised to sell to the former his land and
the former to pay P55k, both with a reserved right to forfeit the expenses already
advanced on account of the sale by the other who should decide to withdraw
> Payment by Jalandoni of P30k with balance of P25k, which was not paid due
to Discrepancy between the Contemplated and Actual Size of Property and
Amount of Sugar Cane Output ~ Sugar cane produced only 800 piculs and
property only contained an area of 18 hectares, as derived from the certificate of
title and survey of the land > SUIT by Asiain to compel Jalandoni to fulfil the
contract (to pay the balance) > Relief prayed for by Jalandoni: to annul the
contract and to return what each had received > CFI HELD: Agreement Null
and Void ~ Refund of P30k to Jalandoni and Return of Property to Asiain
> Sale is Sale in Gross (size is more or less) but with Gross Mistake as to
Quality of Land Sold and Standing Crop (size is not just more or less but a lot
less) which produces the effect of rescission given that the Consent was given
by reason of error
> Sale was a Sale in Gross (Number 3) and not a Contract of Hazard >
Description of more or less in Agreement is that they did not contemplate or
intend to risk more than the usual rates of excess or deficit in similar cases, or
than such as might reasonably be calculated on as within the range of ordinary
contingency> Vendee does not thereby ipso facto take all risk of quantity in the
tract ~ covers only inconsiderable or small differences > Gross Mistake and a
Mutual Mistake as to the quantity of the land sold and as to the amount of the
standing crop > HENCE, both parties acted obviously under a mistake in regard
to the subject-matter of the sale that is so material that if the truth had been
known to the parties, the sale would not have been made > RELIEF: that equity
will rescind a contract for the sale of land for mutual mistake as to the quantity
of land which the boundaries given in the contract contained, where the
deficiency is material > SC UPHELD CFI where Agreement rescinded and
parties put back in exactly their respective positions before they became
involved in the negotiations (refund of payment and payment for rent)
> Entitled to Rescission?
> Unilateral Mistake is sufficient ~ Vitiates consent of the party ~ Contract
requires both consent
> Must not always be mutual
> To claim mistake, is it necessary to communicate hesitation to other party?
>> Sales in gross: (A) Cannot be modified even if fraudulent: (1) Sales strictly
and essentially by the tract, without reference in the negotiation or in the
consideration to any designated or estimated quantity of acres; (2) sales of the
like kind, in which, though a supposed quantity by estimation is mentioned or
referred to in the contract, the reference was made only for the purpose of
description, and under such circumstances or in such a manner as to show that
the parties intended to risk the contingency of quantity, whatever it might be, or
how much so ever it might exceed or fall short of that which was mentioned in
the contract; (B) Equitable Relief if there is an unreasonable surplus or deficit:
(3) sales in which it is evident, from extraneous circumstances of locality, value,
price, time, and the conduct and conversations of the parties, that they did not
contemplate or intend to risk more than the usual rates of excess or deficit in
similar cases, or than such as might reasonably be calculated on as within the
range of ordinary contingency; (4) sales which, though technically deemed and
denominated sales in gross, are in fact sales by the acre, and so understood by
the parties
~ EFFECTS (Commentators Opinion): Vendor shall be obliged to deliver all
that is included within such boundaries, even should it exceed the area
specified in the contract, OTHERWISE, should he not be able to do so, he
shall suffer a reduction of the price in proportion to what is lacking of the area,
unless the contract be annulled by reason of the vendee's refusal to accept
anything other than that which was stipulated > WHY: Vendor sold everything
within the boundaries and this is all the purchaser has paid, or must pay, for
whether much or little it is found > Obligation of Vendor: to deliver all the land
included within the boundaries assigned to the property, although the area may
be found to be much greater or far less than what was expressed >
ERRONEOUS TO HOLD AS AN ABSOLUTE RULE for it would do injustice
to have the vendor suffer the loss of the value of the excess of his land and of the
value of the price which would be reduced if the land is smaller ~ must take into
account the conduct of the parties, the value, extent, and locality of the land, the
date of the contract, the price, and other nameless circumstances >
EXCEPTIONS: Gross Mistake as if the area of the land sold is grossly
deficient from that expressed in the sale ~ Slight excess or deficiency is
immaterial > RELIEF ON THE GROUND OF GROSS MISTAKE: Vendee can
opt (i) to have the price reduced proportionately; or (ii) to ask for the rescission
of the contract > GRANTED WHERE (1) the sale is of a specific quantity which
is usually denominated a sale by the acre; (2) the sale is usually called a sale in
gross > FAVOURABLE TO VENDEE, giving the excess to the purchaser
without compensation to the vendor and allows the purchaser either to secure a
deduction from the price in case a deficiency or to annul the contract
22
>> Contract of Hazard where the sale is a sale in gross and not by acreage or
quantity as a basis for the price WHERE mistake on the part of the vendor as to
quantity of thing sold constitutes no ground for relief
>> Art. 1471 applies to:
(1) Sale of Real Estate for a lump sum (and not at the rate of specified price of
each unit or measure) > No relief (increase/decrease of the price) even if the area
be found to be more or less than that stated in the contract
(2) Sale of Two or More Estates are sold for a single price
(3) Sale of Real Estate where the boundaries and area estate are stated
>> Non-Application of Arts. 1469 and 1470 ~ sale being made at a certain price
for each unit of measure or number
G.R. No. 150179
April 30, 2003
HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO SEVILLA,
WILSON SEVILLA, WILMA SEVILLA, WILLINGTON SEVILLA, AND
WILLIAM SEVILLA, JR., HEIRS OF MARIA SEVILLA, NAMELY:
AMADOR SEVILLA, JENO CORTES, VICTOR CORTES, MARICEL
CORTES, ALELEI* CORTES AND ANJEI** CORTES v. LEOPOLDO
SEVILLA, PETER SEVILLA, AND LUZVILLA SEVILLA
Facts: Felisa donated her share of her sisters estate to her nephew, Leopoldo.
Despite her old age and alleged sickness at the time of the execution of the Deed
of Donation, the donation remains valid because of the lack of evidence to rebut
the presumption of valid consent. There was no proof of specific acts that
Leopold had employed to vitiate the consent of his aunt. Also, the condition of
Felisa was also not proven to show her susceptibility to fraud.
> Three Instruments Executed by Felisa Almirol:
(1) Last Will and Testament (November 25, 1985) where she left to her nephew,
Leopoldo, her undivided share to the parcel of land, which she co-owned with
her sisters (Honorata already died on 1982 and hence, only Felisa ad Filomena
share it);
(2) Donation Inter Vivos (August 8, 1986) where she ceded to Leopoldo the
same undivided share that was accepted by Leopoldo in the same document;
(3) Deed of Extrajudicial Partition (September 3, 1986) of Honoratas estate
where she adjudicated the formers 1/3 share in favour of herself and the heirs of
Filomena who had already died as well (December 10, 1973) ~ New TCTs
issued in favour of Felisa and Filomenas heirs but were without signatures of
the Register of Deeds pending submission by Peter Sevilla, son of Filomena, of
a Special Power of Attorney authorizing him to represent the other heirs of
Filomena
> SUIT (June 21, 1990) for Annulment of the Deed of Donation and the Deed of
Extrajudicial Partition by Filomenas heirs > CONTENTION of Heirs: that the
Deed of Donation was void for being tainted with fraud because Felisa was
already 81y and seriously ill and of unsound mind at the time of its execution;
that the Deed of Extrajudicial Partition was void because it was executed
without their knowledge and consent > CONTENTION of Leopoldo: that the
Deed of Donation was valid because Felisa was of sound mind at the time of its
execution and that she freely and voluntarily ceded her undivided share in
favour of Leopoldo > RTC Held (December 16, 1994): Donation Valid due to
absence of proof of fraud but Partition Void due to lack of legal requisites of
SPA
> VALID DONATION (SC Upheld RTC)
> Consent of Filomena: presumption of valid consent absent full, clear and
convincing evidence of fraud or undue influence > Must be established by
specific acts that vitiated a party's consent ~ allegation only that she lived with
Leopoldo, that she was already 82, that she was seriously ill and of unsound
mind BUT without specifying what acts of Leopoldo constituted fraud and
undue influence and on how these acts vitiated the consent of Felisa and why
Felisa should be held incapable of exercising sufficient judgment
> Legal Capacity of Filemona: already the owner of 1/2 undivided portion of the
Lot when she and Filomena inherited the 1/3 share of their sister Honorata after
the latter's death ~ unnecessary that partition of Honoratas estate should first be
had because what was donated to Leopoldo was the 1/2 undivided share of
Felisa
> Deed of Extrajudicial Partition VOID AB INITIO > Felisa had no legal
capacity to execute the deed dividing the share of her deceased sister Honorata
between her and the heirs of Filomena ~ WHY: she was no longer the owner of
the 1/2 undivided portion of the Lot, having previously donated the same to
Leopoldo ~ she was neither the owner nor the authorized representative of
Leopoldo
>> Donation > an act of liberality whereby a person disposes gratuitously of a
thing or right in favor of another who accepts it > Agreement of the parties is
essential ~ OTHERWISE, attendance of a vice of consent renders the donation
voidable > CAPACITY TO DONATE (Art. 737): the donor's capacity shall be
determined as of the time of the making of the donation
>> Donation inter vivos > immediately operative and final and results in an
effective transfer of title over the property from the donor to the donee >
Perfected from the moment the donor knows of the acceptance by the done ~
donee becomes the absolute owner of the property donated
23
>> Fraud > When through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without
them, he would not have agreed to
>> Undue influence > When a person takes improper advantage of his power
over the will of another, depriving the latter of a reasonable freedom of choice ~
the circumstances of confidential, family, spiritual and other relations between
the parties, or the fact that the person alleged to have been unduly influenced
was suffering from mental weakness, or was ignorant or in financial distress, are
considered
> Where is the mistake here: Mistake of Felisa in thinking that she can donate
the property to Leopolodo because she still does not own the undivided share to
the parcel of land
for Sps. Theis to insist on the house and lot when they intended to purchase a
vacant lot in the first place
Facts: Sale of Parcel 4 (in title) to Sps. Theis by Calsons is void because the
said title mistakenly conveyed the real properties of Calsons (Parcels 1&2) as
Parcel 4 which he did not own. Hence, Calsons could not have sold such lot
because he did not own them. Also, Sps. Theis cannot insist on keeping the
mistaken survey of Parcel 1 which is Parcel 3 in reality because the latter has a
house constructed theron which value exceeds the purchase price. Hence, due to
the erroneous survey of the lots that was translated to the title, the consent of
Calsons was vitiated when it sold Parcel 4/1&2 because of the lack of his full
and correct knowledge about the thing of the sale.
>> Error > Includes (a) Ignorance, which is the absence of knowledge with
respect to a thing; (b) Mistake, which is a wrong conception about said thing, or
a belief in the existence of some circumstance, fact, or event, which in reality
does not exist > There is a lack of full and correct knowledge about the thing of
the obligation
Facts: Due to a previous debt arising from a lawsuit, Andrea signed a document
wherein she acknowledged her P101 debt to Felix Modelo who had lent him the
amount. Even though Andrea did not know how to write, she signed the
document believing Felix in good faith. The document turned out to be a Deed
of Sale of her land and carabao. Because her consent was given by mistake, on
the premise that the document was an acknowledgement of debt than a sale, it is
void and hence, the Deed of Sale which she actually signed was also void.
> When you enter a contract, its your responsibility to know what youre
getting yourself into > Why make the responsibility to the other party >
HENCE, doesnt make sense ~ you should take the risk or have a friend explain
it
> Contract VOID on the ground of Mistake > Art. 1390 that the following
contracts are voidable or annullable, even though there may have been no
damage to the contracting parties: 2) Those where the consent is vitiated by
mistake, violence, intimidation, undue influence, or fraud > Consent of Calsons
vitiated by honest mistake when he sold Parcel 4 based on the erroneous survey
that conveyed Parcels1&2 as Parcel 4 ~ Lack of full and correct knowledge
about the thing of the contract of sale > Quite impossible for Calsons to sell the
lot at it was not owned by it > Good faith manifested in immediate offer, (a) to
sell the two other vacant lots or, (b) to reimburse them with twice the amount
paid, after discovery of error
> Deed of Sale (November 3, 1911) between Andrea Dumasug and Felix
Modelo where the former allegedly sold her 2-parcel land and carabao to the
latter for P333.49 which she received > Possession (February 1912) by Felix of
her land and carabao
> SUIT (June 17, 1912) by Andrea for Annulment of the Deed of Sale
> CONTENTION of Andrea: (a) that she doesnt know how to write; (b) that
Felix had sent for her and had persuaded her to sign the document (placed a
cross between her Christian name and surname) by falsely and maliciously
making her believe that it was a mere acknowledgement that she owed him the
sum of P101 for the work he had performed in her behalf in the two actions she
had brought to recover her land (recovery of land against Rosales Albarracin and
Gaudencio Saniel who had filed an annulment of the judgment in Andreas
favour in Cebu; Felix was not her counsel but was asked for advise by Andrea
and he merely told her to bring the matter to the authorities and helped engage
the services of Atty. Andres Jayme to be her counsel) ~ did not object because
> Cannot allow retention of Parcel 3 where a 2-storey house has been
constructed thereon > Unjust enrichment ~ Sps. Theis only paid P486k while
house was constructed prior to the sale for the amount of P1.5M > Unreasonable
25
she believed in good faith that he had told her the truth and discovered the truth
only when Felix took possession of the same ~ No witnesses to the signing but
she was afterwards taken to the notary who did not ask her any question; (c) that
Felix offered to buy her carabao for P120 but she refused because it was her
only means of livelihood
> CONTENTION of Felix: that Andrea sold the land and carabao to him, which
sale was executed and signed by Andrea in the presence of witnesses, Mariano
Abear and Apolina Minosa and notarized even by Anselmo S. Legaspi after the
latter had explained to her that it was a conveyance by absolute sale of the lands
and carabao
> Deed of Sale is NULL AND VOID > No Consent ~ obtained by means of
fraud and deceit on the part of Felix > contents were not duly and faithfully
explained to Andrea > Made to believe that the Deed of Sale was an instrument
wherein she recognizes her debt > Andrea thus signed by mistake, which error
invalidates the contract because it goes to the very substance of the thing which
was the subject matter of said contract > Document which she signed with her
own free will and which she authenticated with her mark is not the Deed of Sale
> That the debt arose from the expenses of suit which Andrea defrayed >
UNTENABLE > (1) Andrea could not have defrayed Judge Minosa's expenses
in Cebu, allowing him to board in restaurants, to amuse himself in the
cinematographs and to remain four days in that city each time that he went there
all at her expense when the proceedings in the case had not gone beyond
the filing of a demurrer and was dismissed before the complaint was answered
and the trial was held where no witnesses were examined and Andrea, the
principal defendant, went to Cebu only twice, staying there one day each time ~
It would have been better for her to let go of the usurped property that maintain
the suit because the latter would have cost more ~ REAL DEBT was P101 than
P333.49 since the most that she could have spent on, attorneys fees, was only
P80-90; (2) Felix was neither an attorney nor a procurador judicial, and the
record does not show that he acted as an attorney, procurador judicial, or friend
of Andrea in the case
G.R. No. 107132
October 8, 1999
MAXIMA HEMEDES v. THE HONORABLE COURT OF APPEALS,
DOMINIUM REALTY AND CONSTRUCTION CORPORATION,
ENRIQUE D. HEMEDES and R & B INSURANCE CORPORATION
G.R. No. 108472
October 8, 1999
paid its realty taxes, and was named owner of the property in the cadastral
survey and in the records of the Ministry of Agrarian Reform
(5a) February 28, 1979: Enrique to Dominium Realty and Construction
Corporation by virtue of a Deed of Sale
(5b) May 14, 1981: Dominium to its sister corporation, Asia Brewery, Inc., by
virtue of a Lease
>Asia Brewery constructed two warehouses made of steel and asbestos costing
about P10M each > Prompted (i) R&B to write AB (March 16, 1981), claiming
ownership and its right to appropriate the constructions; (ii) Maxima to write AB
(May 8, 1981), claiming ownership and its right to appropriate the constructions;
(iii) Maxima to write R&B (May 8, 1981), denying mortgage > SUIT (August
27, 1981) by Dominium and Enrique for Annulment of TCT of R&B and
Conveyance of Property to Dominium as the absolute owner of the subject
property
> CONTENTIONS of Dominum and Enrique: (1) that Justa Kausapin never
transferred the land to Maxima as repudiated in her April 10, 1981 Affidavit ;
(2) that Maxima failed to explain the Deed of Conveyance, that was in English,
to Justa who did not know how to read and write English ~ required by Art.
1332; (3) that Enrique had no knowledge of the registration proceedings
initiated by Maxima
> SC HELD: R&B AS OWNER (from Maxima who owned and mortgaged it)
> Maxima, not Enrique, was the Owner of the Property > VALIDTY OF THE
DEED OF RECONVEYANCE IN HER FAVOR > > WHY NOT
Spurious/Sham:
(1) Art. 1332 NOT APPLICABLE ~ Justas Claim of Non-existence of the Deed
of Conveyance ~ Claim of Complete Absence of Consent ~ Art. 1332
contemplates a situation where a contract is entered into and consent of a party
was given but vitiated due to mistake/fraud > Nonetheless, Justa never
questioned the validity of Joses Donation which was also in English
(2) Failure to Disprove the authenticity of Justas thumbmark in the Deed of
Conveyance ~ refused to have Justas thumbmark and the one in the Deed
checked and compared ~ Legal presumption that evidence willfully suppressed
would be adverse if produced where the failure to refute the due execution of the
Deed by making a comparison with Justa's thumbmark necessarily leads one to
conclude that she did in fact affix her thumbmark upon the Deed
(3) Repudiation by Justa cannot prosper > Failed to prove invalidity of the Deed
of Conveyance which is a public instrument with prima facie authenticity > A
party to a contract cannot just evade compliance with his contractual obligations
by the simple expedient of denying the execution of such contract > Any claim
>> Fraud may vitiate consent ~ when, through insidious words or machinations
of one of the contracting parties, the other is induced to enter into a contract
which, without them, he would not have agreed to
>> Usufruct gives a right to enjoy the property of another with the obligation of
preserving its form and substance > RIGHTS: right to personally enjoy the thing
in usufruct, and all the natural, industrial and civil fruits of the property, to lease
it to another, or alienate his right of usufruct, even by a gratuitous title > BUT all
the contracts he may enter into as such usufructuary shall terminate upon the
expiration of the usufruct > Only jus utendi and jus fruendi over the property
>> RIGHT OF THE OWNER TO ALIENATE DESPITE USUFRUCT: jus
disponendi or the power to alienate, encumber, transform, and even destroy the
same > owner of property the usufruct of which is held by another, may alienate
it, although he cannot alter the property's form or substance, or do anything
which may be prejudicial to the usufructuary
>> An innocent purchaser for value > one who buys the property of another
without notice that some other person has a right to or interest in such property
and pays a full and fair price for the same at the time of such purchase or before
he has notice of the claim of another person > Every person dealing with
registered land may safely rely on the correctness of the certificate of title issued
and the law will in no way oblige him to go behind the certificate to determine
the condition of the property
>> witness is said to be biased ~ when his relation to the cause or to the parties
is such that he has an incentive to exaggerate or give false color to his
statements, or to suppress or to pervert the truth, or to state what is false
which is the mere security of loan by property, which reason Lustan signed the
contract, shall prevail.
> Special Power of Attorney (July 29, 1970 and February 18, 1972) executed by
Adoracion Lustan in favour of Nicolas Parangan where the latter, as lessee of
Lustans property (since February 25, 1969), was to secure loans from
Philippine National Bank with the lot as collateral in order to help her with her
childs educational expenses (in addition to the loans he had been giving her) >
Loans acquired by Parangan by virtue of the 2nd SPA: (a) P24k (December 15,
1975) with Lustans knowledge; WITHOUT Lustans knowledge and USED for
Parangans own benefit, (b) P38k (September 6, 1976); (c) P38,500 (July 2,
1979); (d) P25k (June 2, 1980) > Deed of Pacto de Retro Sale (April 16, 1973)
and Deed of Definite Sale (May 4, 1979) which Lustan, who was illiterate, was
made to sign upon Parangan's representation that the same merely evidences the
loans extended by him unto the former ~ BUT actual stipulation is that Lustan is
to absolutely convey the property to Parangan for P75k > Demand by Lustan for
the Return of her TCT > Refusal of Parangan, asserting his rights over the
property which allegedly had become his by virtue of the Deed of Definite Sale
> SUIT by Parangan for the cancellation of liens, quieting of title, recovery of
possession and damages
> Deed of Definite Sale is REALLY AN EQUITABLE MORTGAGE
> Intention Prevails over Language > Agreement intended was one of a loan
secured by Lustans property ~ to consolidate the Lustan's indebtedness to
Parangan in a single instrument and to secure the same with the subject property
> WHY Equitable Mortgage: Art. 1602 (6) where it may be fairly inferred that
the real intention of the parties is that the transaction shall secure the payment of
a debt or the performance of any other obligation
> INFERRED CIRCUMSTANCES:
(i) Lustan, an illiterate, had no knowledge that the contract she signed was not a
Consolidation of Debts BUT a Deed of Sale ~ NOT informed or explained of
the contract and its content as required under Art. 1332 > BURDEN TO PROVE
EXPLANATION: (a) when one of the contracting parties is unable to read, or
(b) if the contract is in a language not understood by him, and (c) mistake or
fraud is alleged, the person enforcing the contract must show that the terms
thereof have been fully explained to the former ~ Burden is on the party
interested in enforcing the contract to prove that the terms thereof are fully
explained to the former in a language understood by him
(ii) FAILURE OF PARANGAN TO PROVE EXPLANATION TO LUSTAN:
(1) testimony of the witness to the notarization, Celso Pamplona, that the
contract was not read nor explained to Lustan and he himself was informed by
Parangan that he will witness a document consolidating Lustans debts; (2)
28
testimony of notary, Judge Lebaquin, that he did not know of Lustans illiteracy
~ had he known that Lustan is illiterate, his assistance would not have been
necessary; HENCE Lustan failed to intelligibly formulate in her mind the
consequences of her conduct and the nature of the rights she was ceding in favor
of Parangan ~ Merely relied upon Parangans assurance that the contract only
evidences her indebtedness to the latter > CONSENT BY MISTAKE ~ NO
INTENTION TO SELL
> Three Mortgages for Parangans Benefit and Without Knowledge of Lustan
STILL VALID AND ENFORCEABLE AGAINST LUSTANS PROPERTY >
By virtue of the SPAs: Parangans acts are deemed to have been performed
within the scope of the agent's authority > SPAs are a continuing one and absent
a valid revocation in a public instrument and duly furnished to the mortgagee,
the same continues to have force and effect as against third persons who had no
knowledge of such lack of authority > No proof that PNB was aware of Lustans
lack of knowledge and express authority
>> INTENTION OF A CONTRACT OVER ITS LANGUAGE > A contract is
perfected by mere consent while a contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object of the contract and
upon the price > MEETING OF MINDS IS THE INTENT of the parties in
entering into the contract respecting the subject matter and the consideration
thereof > IF WORDS ARE CONTRARY TO THE EVIDENT INTENTION, the
latter prevails ~ EVEN IF a document appears on its face to be a sale, the owner
of the property may prove that the contract is really a loan with mortgage by
raising as an issue the fact that the document does not express the true intent of
the parties
>> Art. 1602 where The contract shall be presumed to be an equitable mortgage
in any of the following cases: 1) When the price of a sale with right to
repurchase is unusually inadequate; 2) When the vendor remains in possession
as lessor or otherwise; 3) When upon or after the expiration of the right to
repurchase, another instrument extending the period of redemption or granting a
new period is executed; 4) When the vendor binds himself to pay the taxes on
the thing sold; 5) When the purchaser retains for himself a part of the purchase
price; 6) In any other case where it may be fairly inferred that the real intention
of the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
>> Art. 1604 where The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.
>> Presumption of an equitable mortgage > Requisites: (1) that the parties
entered into a contract denominated as a contract of sale; (2) that their intention
>> Contract of sale ~ Perfected from the meeting of minds upon the thing which
is the object of the contract and upon the price > Intent of the parties in entering
into the contract respecting the subject matter and the consideration thereof >
Elements of a Contract of Sale: (a) consent, (b) object, and (c) price in money or
its equivalent > Consent may be vitiated by the presence of ANY: (1) mistake,
(2) violence, (3) intimidation, (4) undue influence, and (5) fraud (Art. 1330)
they did not wait of Jose, as requested, but left after she signed it without
leaving a copy; that she received a copy only when she hired a lawyer >
HENCE, Deed was void because her consent was vitiated and because Tomasina
and Jose were never married and can thus have no cp but only co-ownership
> CONTENTION of Sebastians: that they all appeared before Judge Juan
Austria on July 27, 1988 to acknowledge the execution of the extrajudicial
partition; that Judge Austria read and explained the contents of the document
which all of them, including Restituta, voluntarily signed
> RTC Held: (1) that the element of duress or fraud that vitiates consent was not
established; (2) that the proper action was the reformation of the instrument, not
the declaration of nullity of the extrajudicial settlement of estate
> Deed IS VOID > Vitiated Consent > (1) Deed was not explained in a language
known to her ~ did not know English, only Pangasinan; finished only 3rd grade;
(2) No proof that Judge Austria explain the Deed in Pangasinan dialect, known
to Restituta; (3) Uncertainty of Judge Austria regarding the presence of all
parties during the notarization > HENCE, not in a position to give her free,
voluntary and spontaneous consent DUE TO THE misrepresentation, deception
and undue pressure of her half-sister Corazon ~ Presumption of Mistake not
rebutted > EFFECT: Annulment on the ground of Mistake ~ involves a
substantial mistake regarding her alleged share in the estate clearly prejudicial to
the substantive interests of Restituta in her mothers estate
> Although Action filed is Declaration of Nullity, what is sought by the
allegation and evidence is the Annulment > not the caption of the pleading but
the allegations that determine the nature of the action
>> Consent > Essence: the agreement of the parties on the terms of the contract
~ acceptance by one of the offer made by the other ~ concurrence of the minds
of the parties on the object and the cause which constitutes the contract > must
extend to all points that the parties deem material or there is no consent at all >
Requisites of Validity: (a) it should be intelligent, or with an exact notion of the
matter to which it refers ~ can be vitiated by error; (b) it should be free ~ vitiated
by violence, intimidation or undue influence; (c) it should be spontaneous ~
vitiated by fraud > EFFECTS OF MISTAKE: invalidity of the consent if it
refers to the substance of the thing which is the object of the contract, or to those
conditions which have principally moved one or both parties to enter into the
contract
>> Contracts where consent is given by mistake or because of violence,
intimidation, undue influence or fraud > VOIDABLE > WHY: defects of the
will ~ impairs the freedom, intelligence, spontaneity and voluntariness of the
favour of Aldecoa and Bank for the dismissal and withdrawal of the latters civil
and criminal suits against her husband. The contract is valid because it was not
obtained thru force or intimidation where she had the aid of her counsel (who
were also her in-laws) who represented her during all the negotiations and where
she acted according to reason when she chose the Win-Win situation of losing
her property but not her husband because in either judicial or extrajudicial way,
Aldecoa and Bank would have acquired the properties in question. Latter two
merely allowed the Sps. to choose the manner by which their action would be
pursued and the Sps. chose the amicable settlement to save the husband from
imprisonment.
> Suits against Alejandro S. Macleod, managing partner of Aldecoa & Co.
(1) Civil Action (April 1907) by Hongkong & Shanghai Banking Corporation,
creditor of Aldecoa against Alejandro, his wife Mercedes Martinez, Aldecoa and
Viuda e Hijos de Escao ~ that P45k notes granted in favour of Aldecoa as
security for latters debt had been wrongfully transferred by Alejandro to his
wife Mercedes ~ HENCE, prejudice to Bank, having a creditor's lien in the
nature of a pledge over certain properties of the debtor
(2) Civil Action (May 1907) by Aldecoa against Alejandro for Recovery of
certain shares of stock worth P161k ~ that Alejandro mismanaged the firms
affairs during his management
(3) Criminal Action (July 17, 1907) by Aldecoa against Alejandro for
falsification of a commercial document ~ Warrant of Arrest
(4) Criminal Complaint (August 9, 1907) by Prosecuting Atty. against Alejandro
for Embezzlement ~ Issuance of Warrants of Extradition
> Previous Escape by Alejandro (July 13, 1907) to Macao ~ No extradition
agreement between US and Portuguese where latter denied formers request
> Contract of Settlement (August 14, 1907) executed by Mercedes (represented
by William Macleod, attorney-in-fact) and entered into with Aldecoa and Bank
~ Product of negotiations, commenced by the former, mediated by Mr. Cohn as
requested by both parties, where latter two insisted upon the conveyance of all
the property of Alejandro and also of share of the Malate property claimed by
Mercedes but offered to dismiss the civil suits and withdraw the criminal
charges ~ Wife, with assistance from family and counsels, stoutly objected to
the conveyance required of her, claiming the property to be her separate and
exclusive property and not liable for the debts of her husband
> Possession of the Properties, Dismissal of Civil Cases and Withdrawal of
Criminal Charges by Aldecoa and Bank
> Return of Alejandro to Manila
> SUIT for Annulment of Contract (December 3, 1907) by Mercedes
> CONTENTION of Mercedes > Signed under Duress > that Mr. Kingcome, her
son-in-law and a businessman, and William Macleod, attorney-in-fact, nephew
and close friend of the Sps., got the impression from Mr. Stephen, Bank
manager, during the negotiations they respectively attended, that unless their
differences were amicably settled, additional and mortifying misfortunes wound
fall upon Mr. Macleod's family ~ Alejandro was one of the prominent members
of society
> SC HELD: CONTRACT VALID > CONSENT FREELY GIVEN
> REQUISITES OF DURESS > Influence must have been exercised over the
party that she was deprived of her free will and choice > She must have acted
from fear and not from judgment
(a) that there was no time within which to deliberate the matter as it should have
been deliberated
(b) that there was no time or opportunity to take the advice of friends or of
disinterested persons
(c) that there was no time or opportunity to take advice of counsel
(d) that threats were made to secure the performance of the acts complained of,
made directly to the complaining party by the person directly interested or by
someone in his behalf
~ There was no time during the course of the negotiations that there were any
direct personal relations or communications between the parties ~ All offers,
proposition, or treats, if any, made by Aldecoa and Bank were made through the
personality, mind, and judgment of Mercedes own attorneys or relatives, all of
them being persons who had her welfare and the welfare of her family deeply at
heart and who were acting for her and her husband and not for the former
(e) that there was no consideration for the performance of the act complained of
except immunity from the prosecution threatened
~ The negotiations also settled Mercedes own controversies ~ Suit by Bank
against her, Aldecoa and Escao (April 1907) where she was able to settle the
Banks claim (of P45k worth of notes fraudulently taken from the assets of
Aldecoa and transferred into the name and possession of Mercedes) by releasing
her rights to the Escao notes under the settlement
(f) that the property transferred or incumbered by the act complained of was the
separate property of the person performing the act in which the person for whom
the act was performed claimed no interest whatever
(g) that there was no dispute as to the title of the property transferred or
incumbered, no claim made to it by anybody, no suits pending to recover it or
any portion of it, and no pretension that it could be taken for the debts of the
husband or of any other person
32
> Mercedes ceded the Escao notes and interest in the Malate property ~ Both
claims were substantially in litigation and the legality of both was seriously
questioned and strongly doubted even by her own attorneys who advised her that
the rights claimed by her in the property transferred are fictitious, unreal, and
defeasible, having no foundation in law
ALSO,
~ Mercedes did not challenge the contracts validity when, after its execution,
she required the fulfillment of every one of its provisions which are favorable to
herself ~ partition of the Malate property, payment of P2k, dismissal of the
pending action against her on account of the Escao notes
~ Aldecoa and Bank could not have benefitted from the settlement as much as it
could have by pursuing the suits ~ Dropped the charges after securing exactly
the same property in the settlement proposed ~ Immaterial to them whether they
obtain those properties through the courts or by means of a settlement ~ Left
Macleod and his wife to choose for themselves, upon their own judgment and
upon the advice of their attorneys and relatives, the course to be by them
pursued ~ That the Sps. chose the settlement (where Mr. Fisher, their atty, was
even made to withhold an important information from Aldecoa for fear that such
information would deter them at the last moment from giving their assent to the
arrangement)
> HENCE, she entered the contract acting accordingly to the dictates of good
business judgment rather that from duress and undue influence ~ to lose her
property and save her husband OR to lose her property and her husband
> Contracts of Reparation are Not duress:
~ that Mercedes loathed to relinquish certain rights which she claimed to have in
certain property and that she persisted for a considerable time in her refusal to
relinquish such claimed rights and now regrets having performed at their
demand instead of compelling a resort to judicial proceedings
~ WHY: Made by free choice, although these may be evidence of duress or facts
from which duress may be inferred, they are not duress of themselves ~
OTHERWISE, If such a contract were null and void, then would be null and
void every contract of reparation
> Relevant Provisions:
ART. 1265. Consent given under error, violence, intimidation, or deceit shall be
null.
ART. 1267. There is violence when, inorder to obtain the consent, irresistible
force is used.
There is intimidation when one of the contracting parties gives his consent on
account of a reasonable and well-grounded fear of suffering an imminent and
ascendants, to give his consent. To determine the degree of the intimidation, the
age, sex and condition of the person shall be borne in mind. A threat to enforce
once's claim through competent authority, if the claim is just or legal, does not
vitiate consent.
> No Intimidation > Voluntary Consent despite Reluctance and Protestations
(a) She is highly educated and very familiar with banking procedures ~ graduate
with a degree of Business Administration in Banking and Finance from NCBA,
with a Masters degree, with job experience with the Insular Bank of Asia and
America as a bank teller
(b) She admittedly actively participated in the deposit and withdrawal of the
proceeds of the controversial check ~ She was even willing to return P48k
which she took since it was only up to this amount where her involvement lies ~
Only when she realized that she would have the enormous task of reimbursing
the bank the balance of the proceeds of the forged check allegedly taken by
Carpio, she refused to cooperate any further
(c) Threat to sue is not unlawful
(d) She was able to move freely, unguarded, from the office of Francis at the
ground floor to the office of Cruz at the mezzanine floor where her sister found
her ~ Presence of many bank clients and bank security guards that Francis could
not have manifested overt acts to prevent her from leaving, as admitted by Maria
herself > She and her sister actually left the bank unescorted to eat their snack
and that they went home instead despite Francis demand for their return
(e) Alleged detention at the Bank was not due to Francis threat but due to
Marias desire to prove her innocence ~ she could have just left the Bank but
chose not to Because I cannot just leave him that way, insisting that the
responsibility of one person be my responsibility
(f) Encashment of the RCBC Time Deposit Certificate was suggested by her
sister and not by Francis and was accepted by Cruz (PRO) and not by Francis
(g) Her sister failed to corroborate her claim that she was denied the opportunity
to read the Affidavit
> Francis NOT NEGLIGENT in allowing the checks deposit and withdrawal ~
He was on leave when it was made
> Bank NOT NEGLIGENT in allowing the withdrawal of the check without the
presentation of the passbook ~ Exception of the rule is when the depositor is a
regular customer in depositing or withdrawing money in the bank
>> Reluctant Consent is NOT Absence of Consent > There is consent even if it
was given reluctantly, against his good sense and judgment, with hesitation
BECAUSE it is still voluntarily and independently
34
> There is no consent where he acts against his will under a pressure he cannot
resist as when his sense, judgment, and his will rebel and he refuses absolutely
to act as requested BUT is nevertheless overcome by force or intimidation to
such an extent that he becomes a mere automaton and acts mechanically only >
BECAUSE of the Disappearance of the personality of the actor ~ ceases to exist
as an independent entity with faculties and judgment, and in his place is
substituted another the one exercising the force or making use of the
intimidation > HENCE, there is only one party to the contract
>> FORCE that has compelled conduct against the will of the actor must be
present, immediate and continuous and threaten grave danger to his person
during all of the time the act is being committed
> JJ: Threat to sue not simply legal or just but enforceability ~ not just claim
but the ability to enforce the claim
G.R. No. L-9421 July 24, 1915
L.L. HILL v. MAXIMINA CH. VELOSO, ET AL.
Facts: A promissory note was executed by Maximina and Franco in favour of
Michael & Co. for a sale of goods delivered to the company of Maximina.
However, Maximina refused to honour the debt because she alleged that she
signed it on the premise that, according to Franco, it was for a debt she owed
Damasa, widow of her brother and not to Michael & Co. to whom she owed
nothing. The note remains valid, however, because the defense of fraud that
Franco allegedly employed against her cannot prosper where fraud must have
been employed by the other contracting party inducing the other. Franco is not
the other contracting party and in fact, constitutes one single contracting party
with Maximina. Absent proof that Michael & Co. threatened to sue Maximina
and/or that Levering, guardian of Damasas children, required her to issue the
note in Michael & Cos favor, fraud is not present.
> Promissory Note (December 30, 1910), worth P6,319.33, by Maximina
Veloso (with consent of husband Manuel M. Tio Cuana) and Domingo Franco
in favour of Michael & Co., S. en C. (for payment of goods sold and delivered to
Maximinas La Cooperativa Filipina) ~ to pay, jointly and severally, P500/m
with interest/m > Indorsed (January 12, 1911) or made payable to L.L. Hill by
Michael & Co. > Payment of P2k
> SUIT (July 5, 1911) by Hill against Maximina and husband Manuel for
Recovery of remaining P4,319.33, with 1.5% interest from July 1, 1911 until
payment, plus P473.18 interest from December 30 to June 30, 1911 ~ Franco
had already died (May 1911)
(6) No proof that Levering required Maximina or Franco to issue the promissory
note
(7) No doctrine that no right can be acquired by a person who obtains a
promissory note by indorsement ~ Cited cases dealt with promissory notes
issued for a sum of money but lost at a prohibited game
(8) Debt to Michael & Co. is not yet due and demandable at the time of
indorsement ~ Payment of the first amount of P500 of the principal had not yet
arrived *hence, credit can be indorsed
(9) Maximina benefited from Michael & Co. because it La Cooperativa
Filipina (whose license was issued in the name of Maximina) received the goods
delivered ~ Franco had no share/interest in the Company ~ No proof that the
sale was to Franco only
(10) No reason for Franco to sign the promissory note in favour of the minors he
did not owe anything to
(11) No reason why husband Manuel did not have to sign the instrument except
merely to authorize his wife
> HENCE, Sps. must pay principal remainder of P4,319.33, with 1.5% interest
from July 1, 1911 until payment BUT NOT P473.18 interest on the principal
because receipt from the creditor for the principal that contains no stipulation
regarding interest extinguishes the obligation of the debtor with regard thereto
> KINDS OF FRAUD
Performance of obligation ~ Claim for damages
Vitiate consent
No contract at all
Notebook:
WOODHOUSE v. HALILI
GERALDEZ v. CA
default, the notes are binding. There is no duress, fear or undue influence
employed for them to sign it. They are educated persons with business
experience. Absent proof to of vitiated consent, the notes remain valid and
effective.
> Notarized Promissory Notes (September 8, 1984) executed by EPIFANIA
EBARLE and daughters SOL EBARLE and ELE EBARLE in favour of
Armando V. Sierra ~ Worth P85k and P54,550 each, former signed in the
morning, latter in the afternoon > Note for P85k due on October 8, 1984, for
value received worth P85k, paid at Sierras residence, includes expenses for
collection and 12% interest/y in case of default
> SUIT (November 2, 1984) for Recovery of Sum of Money by Sierra pursuant
to Note of P85k
> CONTENTION of Ebarles: Note was executed under duress, fear and undue
influence
(a) that Epifanias debt was only P20k which Sierra loaned for the formers
logging and cattle business ~ to fatten the cattles and impress the Land Bank
with whom they applied for a loan but which was denied
(b) that they hesitated to sign the documents but did it anyway upon Sierras
assurance that the documents were a mere formality that he had to show his
business partner, who was demanding its immediate payment
(c) that they were told by Sierra to simply ignore the complaint if one should be
filed against them for recovery so that they would be declared in default and
then a new agreement would be concluded for the correct amount of the loan
and with easier terms of payment
(d) that they have not received the amount (beyond P20k) and it was unlikely
that Sierra would keep such large amounts of cash in his house
> No duress, fear or undue influence
(a) Ebarles were educated persons accustomed to business affairs and legal
transactions ~ own and operate a hacienda; Epifania is an English professor for
25y at Silliman Univ; Sol holds a degree in commerce; Ele holds a degree in
agriculture > HENCE, they fully understood the import and consequences of
what they were doing
(b) Note was written in plain English and consisted of only two short paragraphs
~ No fine print or Whereas clauses ~ Merely a simple promise to pay, for value
received, the amount indicated, not later than October 8, 1984, at his residence
and to assume all litigation expenses, with 12% interest, in case of default
(c) Questionable that all three signed the Notes which amount was seven times
beyond (P139,550) what they owed (P20k), on the same day, without
reservation ~ Reaction should have been an irate refusal and demand for the
correction of the notes ~ Alleged uneasiness or reluctance is belied by the fact
36
that not one of them voiced his or her apprehensions and made efforts to be
dissuade the others from signing
(d) Sol Ebarle admitted that no harassment or threat in any form was employed
by Sierra upon any of them
(e) Existence of two promissory notes signed on the same day is not spurious
because it indicates the acknowledgement of two loans (P85k and P54550), as
opposed to one (P20k) which could have been made in only one note
(f) Notarization of the notes without Ebarles presence is immaterial because
notarization is not necessary for the validity of the notes
(g) No evidence of the P20k loan ~ Sierra, as a businessman having no special
relationship with the Ebarles, would have required a written acknowledgment of
that loan
(h) Source of the money (WON it came from Sierras house wherein he
operates his own vineyard as well as his father's hacienda, besides dealing in the
sale of cars and real estate or from the bank) is Immaterial to the Validity of
the Notes signed, expressly and categorically acknowledged that they received
the specific amounts indicated therein
>> Undue influence ~ any means employed upon a party which, under the
circumstances, he could not well resist, and which controlled his volition and
induced him to give his consent to the contract, which otherwise he would not
have entered into ~ it must destroy the free agency of a party and interfere with
the exercise of that independent discretion which is necessary for determining
the advantage or disadvantage of a proposed contract ~ inherent is moral
coercion, effected through threats, expressed or implied, or through harassing
tactics
>> Fraud ~ misrepresentation must be serious; sufficient to impress, or to lead
an ordinarily prudent person into error; established by full, clear, and convincing
evidence, and not merely by a preponderance thereof;
>> Notarial Document as Prima Facie Evidence of Facts therein ~ A notarial
document, guaranteed by public attestation in accordance with the law, must be
sustained in full force and effect so long as he who impugns it does not present
strong, complete, and conclusive proof of its falsity or nullity on accounts of
some flaw or defect provided against by law
>> Promissory note > a genuine document, acknowledging a loan duly received
and promising to pay the same on the date indicated, in accordance with the
conditions therein set forth ~ a solemn acknowledgment of a debt and a formal
commitment to repay it on the date and under the conditions agreed upon by the
borrower and the lender ~ A person who signs such an instrument is bound to
honor it as a legitimate obligation duly assumed by him through the signature he
affixes thereto as a token of his good faith
37
> CONTENTION of Tuason: Concealment of the fact that the franchise had
already been lost by Crisanto when he sold the plant to him
> VALID CONTRACT: Innocent non-disclosure of a fact (cancellation of
franchise) does not effect the formation of the contract or operate to discharge
the parties from their agreement
(1) Franchise was not the determining cause of the purchase ~ contract merely
renewed a previous inventory of the property when it mentioned the property of
the electric light company;
(2) Franchise was then in force (by virtue of a special license) and either party
could easily have ascertained its status by applying at the office of the Public
Utility Commissioner
(3) No proof of fraud on the part of Crisanto
(4) Tuason is estopped by laches ~ Operated the plant for 16m without question
and even made the first payment without protest ~ Suit only after the venture
had proved disastrous
>> Estoppel by laches > Inexcusable delay in asserting a right and acquiescene
in existing conditions are a bar to legal action
G.R. No. 110672
September 14, 1999
RURAL BANK OF STA. MARIA, PANGASINAN v. THE HONORABLE
COURT OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN R.
ARCEO
G.R. No. 111201
September 14, 1999
ROSARIO R. RAYANDAYAN and CARMEN R. ARCEO v. COURT OF
APPEALS, HALSEMA INC. and RURAL BANK OF STA. MARIA,
PANGASINAN, INC.
Facts: Because Manuel has become delinquent on his debts, he sold his
property, which was then mortgaged to Bank, to Rosario and Carmen with
Assumption of Mortgage. It was not until later when Rosario and Carmen
communicated the Assumption to Bank who agreed to honor the Assumption
allegedly due to the financial capacity of Rosario and Carmen. But because
Rosario and Carmen did not disclose the Second Agreement they entered into
with Manuel which stipulated the higher purchase price for the property, the
Bank denied the validity of its MOA with Rosario and Carmen. However, there
was no fraud when the real purchase price was concealed because (1) the
purchase price was not the determining cause for the Bank to enter into the
MOA but to effect the payment of Manuels debt; (2) the non-disclosure could
not have prejudiced the security of the Bank because the property was kept as a
induced the other party to enter into the contract; (c) It was serious; and; (d) It
resulted in damages and injury to the party seeking annulment
>> Deceit > by means of concealing or omitting to state material facts, with
intent to deceive, by reason of which omission or concealment the other party
was induced to give a consent which he would not otherwise have given
>> Presumption of Ordinary Care, Fairness and Regularity Taken by a person
for his concerns and private transactions > Whosoever alleges fraud or mistake
in any transaction must substantiate his allegation
(c) Maria did not complain of the difference in the area of said second parcel
until 1926: (i) On June 1924, Copy of the plans of the two parcels, wherein
appear their respective areas; (ii) From 1921-1925, Letters by Maria to
Leodegario where she acknowledges her debt but confining herself to
petitioning for extensions of time for payment
(d) Maria had her attorney draw the Deed of Sale, based on the Deed of
Leodegario which he gave to her ~ Despite mistake in hectares, Leodegario
signed it because he did not pay any attention to the area of the second parcel
anymore with the belief that the area of the land stipulated had been taken from
his Deed
(e) No evidence that Leodegario misrepresented the size of the property BUT
EVEN IF HE DID, Maria accepted such representations at her own risk and she
is the only one responsible for the consequences of her inexcusable
credulousness
(f) No evidence that Leodegario prevented her from investigating the property
> No right to claim the shortage in area of the second property > WHY: No legal
basis
> ART. 1471 DOES NOT APPLY:
In case of the sale of real estate for a lump sum and not at the rate of a specified
price for each unit of measure, there shall be no increase or decrease of the price
even if the area be found to be more or less than that stated in the contract.
The same rule shall apply when two or more estates are sold for a single price;
but, if in addition to a statement of the boundaries, which is indispensable in
every conveyance of real estate, the area of the estate should be designated in
the contract, the vendor shall be obliged to deliver all that is included with such
boundaries, even should it exceed the area specified in the contract; and, should
he not be able to do so, he shall suffer a reduction of the price in proportion to
what is lacking of the area, unless the contract be annulled by reason of the
vendee's refusal to accept anything other than that which was stipulated.
~ 2nd parcel, in its entirety, had already been delivered to Maria
>> Songco v. Sellner: Exceedingly risky to accept seller's statements or dealer's
talk at its face value > assertions concerning the property which is the subject of
a contract of sale, or in regard to its qualities and characteristics, are the usual
and ordinary means used by sellers to obtain a high price ~ He who relies upon
such an affirmation made by a person whose interest might so readily prompt
him to exaggerate the value of his property does so at his peril, and must take
the consequences of his own imprudence > HENCE, Misrepresentation by a
vendor of real property with reference to its area are not actionable, where a
correct description of the property was given in the deed and recorded chain of
title, which the purchaser's agent undertook to investigate and report upon, and
the vendor made on effort to prevent a full investigation ~ One who contracts for
the purchase of real estate in reliance on the representations and statements of
the vendor as to its character and value, but after he has visited and examined it
for himself, and has had the means and opportunity of verifying such statements,
cannot avoid the contract on the ground that they were false or exaggerated
>> Sale of Determinate Objects: Sale is for a lump sum with its consideration an
object sold independently of its number or measure, the thing as determined by
the stipulated boundaries > The price is determined in relation to the determinate
object, and not the number of units it contains ~ greater or lesser area cannot
influence the increase or decrease of the price agreed upon > Sale is either of a
single realty or when it is two or more so long as they are sold for a single price
constituting a lump sum and not for a specified amount per unit of measure or
number > HENCE, no increase or decrease in price, no matter whether the area
be more or less than that given in the contract AS LONG AS everything
included within the boundaries is delivered ~ WHY: there is, strictly speaking,
no excess of area with respect to the area appearing in the deed because it was
not taken into account in entering into the contract inasmuch as the parties made
neither the amount of the price, nor the efficacy of the contract to depend on the
number of its units > WHAT THE LAW MEANS BY INABILITY TO
DELIVER: When the property contains a part, a building, a valley, various
pieces of land, a glen, etc., which are not his BECAUSE THEN he cannot
deliver a determinate object ~ Remedy of Annulment or Price Reduction applies
(8) She still made annexes and decorations of permanent nature upon the
premises notwithstanding the floods
> RISKS ASSUMED BY LAURETA > In purchasing the property upon the
assurances of Vicente, she is deemed to have accepted them at her own risk and
must therefore be responsible for the consequences of her careless credulousness
> SC HELD: Laureta retains the property but must pay the remainder of the
purchase price, P52,500 of P70k > Not Annulment of Contract but Fulfillment
for purposes of Justice and Equity: Laureta not in default as to warrant the
annulment and forfeiture of her payment where she was not simply unable to
pay but refused to do so upon the conviction that she was justified in doing so in
view of the defects she found in the property ~ Merely standing up to what she
considered her right ~ She was the one who sued Vicente and first argued that
the seller was not entitled to the additional installments because of his violation
of the contract > BUT Court cannot always extricate a person from bad bargains,
unwise investments, one-sided contracts, or foolish acts ~ Only if he has been
defeated or overcome illegally, or where there has been a violation of law
> Relevant Provisions
~ Art. 1338. There is fraud when, through insidious words or machinations of
one of the contracting parties, the other is induced to enter into a contract which,
without them, he would not have agreed to.
~ Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as
when the parties are bound by confidential relations, constitutes fraud.
~ Art. 1340. The usual exaggerations in trade, when the other party had an
opportunity to know the facts, are not in themselves fraudulent.
>> Songco v. Sellner: Exceedingly risky to accept seller's statements or dealer's
talk at its face value > assertions concerning the property which is the subject of
a contract of sale, or in regard to its qualities and characteristics, are the usual
and ordinary means used by sellers to obtain a high price ~ He who relies upon
such an affirmation made by a person whose interest might so readily prompt
him to exaggerate the value of his property does so at his peril, and must take
the consequences of his own imprudence > HENCE, Misrepresentation by a
vendor of real property with reference to its area are not actionable, where a
correct description of the property was given in the deed and recorded chain of
title, which the purchaser's agent undertook to investigate and report upon, and
the vendor made on effort to prevent a full investigation ~ One who contracts for
the purchase of real estate in reliance on the representations and statements of
the vendor as to its character and value, but after he has visited and examined it
41
for himself, and has had the means and opportunity of verifying such statements,
cannot avoid the contract on the ground that they were false or exaggerated
>> Presumption of Ordinary Care, Fairness and Regularity Taken by a person
for his concerns and private transactions > Whosoever alleges fraud or mistake
in any transaction must substantiate his allegation
G.R. No. L-11513
December 4, 1917
LAMBERTO SONGCO v. GEORGE C. SELLNER
Facts: Sellner bought the sugar canes of Songco in order to mix his own canes
to the latters to have it processed at the central which refused his canes. Songco
estimated his sugarcanes to produce 3k piculs but was only able to harvest 2,107
piculs. Sellner thus refused to pay the purchase price due to this alleged
misrepresentation. However, the misrepresentation of Songco is not sufficient
for fraud because fraud must have been related to a material interest of the buyer
and not to mere matters of opinion.
> Sale (December 1915) between George C. Sellner and Lamberto Songco
where the former bought the latters sugarcane, intending to have it milled at the
sugar central, together with his own sugarcanes which the central refused to
process ~ Consideration of P12k for the estimated 3k piculs of sugar on
Songcos 96.5 hectare farm > Refusal by Sellner to issue the third and last
promissory note (last of 3 installments of P4k) > SUIT by Songco for Payment
of P4k > CONTENTION of Sellner: Sale / Promissory notes were obtained by
means of certain false and fraudulent representations regarding the quantity of
uncut cane standing in the fields of Songco ~ that Songco estimated his canes to
produce 3,000 piculs of the sugar but only produced 2,017 piculs ~ that despite
Sellners request to guarantee the quantity which the latter claimed to be in
fields, he would not do so
> NO FRAUD
> EVEN IF Songco exaggerated about his produce where he knew what these
same fields had been producing over a long period of years and that the harvest
of this year should fall far below the amount stated BECAUSE misinterpretation
upon a mere matter of opinion is not an actionable deceit, nor is it a sufficient
ground for avoiding a contract as fraudulent > NOT EVERY FALSE
REPRESENTATION relating to the subject matter of a contract will render it
void ~ Fraud must relate to matters of fact substantially affecting the buyer's
interest, not as to matters of opinion, judgment, probability, or expectation
Held: NO in general, EXCEPT if there were no deceit or fraud on the part of the
other party in the execution of the contract
Apart from the issue of the real minority of Domingo and Josefa during the
execution of the contract because their age were not proven, minors who enter
into a sale of real estate, pretending to be of legal age when in fact they are not,
cannot excuse themselves from the fulfilment of the obligations contracted by
claiming their minority. The contract is and remains valid and its annulment
cannot be sought by the deceitful minors who had wilfully and voluntarily but
fraudulently acted on their own behalf.
G.R. No. L-12471
April 13, 1959
ROSARIO L. DE BRAGANZA, ET AL. v. FERNANDO F. DE VILLA
ABRILLE
Facts:
On October 30, 1944, Rosario de Braganza wrote a promise, signed by her sons
Rodolfo (16) and Guillermo (18) to Fernando de Villa Abrille that they would
pay him P10k plus interests in consideration of a loan granted by Abrille worth
P70k. When they failed to pay, Abrille sued them but the sons contended that
they were just minors at the time of the promises making.
Issue/s: WON Non-statement of age constitutes fraud on the part of the minor
Held: No
Non-appraisal of their age in the promissory note did not constitute a fraudulent
act of pretending to be of legal age when in fact they were not. The
fraud/misrepresentation must be actual and active. Mere silence or failure of the
minor to disclose his age is not sufficient to be the basis of an actual deceit.
However, since the minors benefited from the loan, they are liable to return such
amount.
43
from one (party) to the other at the time the contract is entered into ~ ie,
payment need not be made right there and then
Letter, withdrawn Petition for the surrender of the title, and Notice of Adverse
Claim on the property
Facts: There was a contract of Sale between Federico and Rafael whereby
former allegedly sold his property to latter so that latter can obtain a loan
agreement for formers expansion of his rice mill. Title was transferred to Rafael
although no payment had been made or demanded and Federico kept possession
of the property without any claim of possession by Rafael. Although a Deed of
Counter Sale was executed in favour of Federico over the property, Rafael
denied its validity for not being notarized and claimed the validity of the Sale as
genuine. Both Deeds were declared a simulation, however, because the intention
to retain ownership with Federico was obvious in his continued possession of
the property and in Rafaels lack of claim of ownership.
> Absolute Deed of Sale (May 19, 1962) between Federico Suntay (wealthy
landowner) and his lawyer/nephew Rafael Suntay where former allegedly sold a
parcel of land and all its improvements to the latter for P20k ~ Federico: that it
was for the purpose of obtaining a loan from the National Rice and Corn
Corporation as a miller-contractor, in the name of Rafael, because his own
application was declined due to his existing unpaid loans ~ Notarized > Issuance
of a New TCT in Rafaels name > Continued Possession by Federico of the
property > Counter Deed of Sale by Rafael, selling back the property to Federico
also for P20k ~ Not notarized where the page number indicated does not refer to
the same document in the notarial register > Letter Request (August 14, 1969)
by Federico for the delivery of the TCT so that he could have the Counter Deed
of Sale in his favor registered and use the property as collateral in securing a
bank loan to finance the expansion of the rice mill and warehouse facilities >
Rafael Denied > Suit by Federico for the surrender by Rafael of the TCT ~
Withdrawn due to Rafaels claim that the Counter Sale was a counterfeit due to
discrepancy in the notarization > SUIT (July 8, 1970) by Federico for
reconveyance and damages > CONTENTIONS of Federico: Simulated contract
of sale ~ (i) that he remained in possession of the property; (ii) that Rafael never
exercised a single act of ownership; (iii) that Rafael never paid and he never
demanded the payment P20k; (iv) that he paid all taxes > CONTENTION of
Rafael: (i) Genuine sale of the property as dacion en pago in satisfaction of
Federicos unpaid attys fees; (ii) Estoppel against Federico in claiming the
simulation of the Sale due to his judicial admissions of the sale in his Demand-
45
> Even if Deed was notarized and hence prima facie evidence of its contents, the
stated circumstanced rebutted the presumption > Intention of the parties still and
always is the primary consideration in determining the true nature of a contract ~
It may always be shown that the transaction was understood by the parties not to
have jural effect ~ not the intention nor the function of the notary public to
validate and make binding an instrument never, in the first place, intended to
have any binding legal effect upon the parties
G.R. No. L-32437
August 31, 1982
SALANDANG PANGADIL et al. V. THE COURT OF FIRST INSTANCE
OF COTABATO, BRANCH I, et al.
Facts: The children of Pangadil executed a Document in favour of Kagui
allegedly to formalize their fathers obligation to his in the form of a mortgage.
The Document, however, is a Sale but it was not an absolute simulation that
would have rendered it void. If any, the simulation consisted only in the
assumption that it was a mortgage. The siblings recognize their obligation and
bind themselves to the contract but only to the extent that they believed it to be a
mortgage. Hence, it was not a contract wherein the parties do not intend to be
bound at all which would thereby make it absolutely simulated and, therefore,
void. Moreover, the siblings cannot claim that they did not know of the true
nature of the contract because in two documents, private handwritten and
petition for guardianship, they recognized and sought to formalize the verbal
sale made by their father in favour of Kagui. Moreover, the annulment of a
fraudulent contract had already prescribed (4y) when they sought its annulment
only after 21y.
> Sale (December 1941) between Pangadil Maslamama and Tandingan Kagui
over the formers parcel of land for P750 ~ (i) Oral Sale by Pangadil himself;
(ii) Private Handwritten Document (August 3, 1944) signed by the chidren of
Pangadil confirming the sale made by their father in favor of Kagui, witnessed
by Datu Ugalingan Piang, a former congressman of Cotabato; (iii) Deed of
Absolute Sale (February 10, 1947) by daughter Salandang Pangadil, applying
(December 20, 1946) and acting as the guardian of her minor siblings in order to
execute the necessary document to formalize the verbal sale executed by their
father Pangadil ~ Deed approved by Court (May 19, 1947) > SUIT by Panagadil
for Annulment of the Deed of Sale (January 7, 1969) > CONTENTION of
Pangadil: that transaction was merely a mortgage and not a sale >
CONTENTION of Kagui: that transaction was a sale and the action to annul the
sale was barred by the statute of limitations because it was filed more than 27y
after its approval
> Deed of Sale is VALID
> Not Fictitious > Allegation that Kagui misled the siblings into affixing their
thumbmarks to the Deed on the misrepresentation that it was merely to ratify an
oral contract of mortgage entered into by their father in his favour is belied by
the fact that the nature of the transaction as a sale was brought to their attention
twice: (i) Handwritten Document confirming the sale made by their father in
favour of Kagui; (ii) Petition for appointment of guardianship to enable her to
formalize the same sale orally done by her father during his lifetime
> NEVERTHELESS, misrepresentation of the sale as a mortgage is Not an
absolute simulation of contract > Siblings recognized their obligation but merely
contended that they thought it was to ratify a contract of oral mortgage, instead
of an oral sale of land > Not a contract wherein the parties do not intend to be
bound at all which would thereby make it absolutely simulated and, therefore,
void
> Not Contrary to Public Policy > Allegation that it deprived the minor brothers
and sisters of Pangadil of their shares in the inheritance from their father cannot
prosper BECAUSE the conveyance of the land had been effected by their father
during his lifetime
> Fraudulent Contracts ONLY VOIDABLE > Prescribes in 4y (Art. 1391) > Not
void ab initio which is imprescriptible ~ does not fall upon the list in Art. 1409 >
Sale made December 1941 but annulment filed only after 27y on January 7,
1969 ~ Inaction for such a considerable period of time reflects on the credibility
of their pretense that they merely intended to confirm an oral mortgage, instead
of a sale of the land in question
>> Simulation of a contract > Either absolute or relative > absolute simulation
when the parties do not intend to be bound at all ~ legal effect: void > relative if
the parties merely conceal their true agreement ~ legal effect: binding upon the
parties unless it prejudices a third person and is intended for a purpose contrary
to law, morals, good customs, public order or public policy
46
Estate Mortgage, conduce to the conclusion that he and Castillos had every
intention to be bound by these contracts ~ strong indication that the parties
actually intended, or at least expected, to exact fulfillment of their respective
obligations from one another
(ii) That Rivera never made any advance payment, in the alleged amount of
P50,000.00, to Bormaheco is a breach of contract that can be availed of only by
the innocent party
(iii) Bormaheco, and not Rivera, paid the premium for the surety bond issued by
ICP only because Rivera executed a Deed of Sale with Right of Repurchase of
his car in favor of Bormaheco and agreed that part of the proceeds shall be used
to pay the premium for the bond ~ Payment to Bormaheco as agent of ICP
> No Fraud
(i) No proof of induction thru insidious words and machinations by Bormaheco
and PM Parts without which Rivera and Castillo would not have executed such
contract
(ii) Foreclosure proceeding and subsequent sale not done by under veil of
corporate entity because its really the corporation of PM Parts which desire to
enforce an alleged right against Castillos and Rivera
> Invalidity of Foreclosure:
(i) Failure of Bormaheco to demand payment from ICP where contract requires
that ICP be informed in writing within 30d from expiration of bond > ICP
released from liability;
(ii) Expiration of Surety at the time Slobec allegedly defaulted in payment >
ICPs surety expired on January 22, 1972 while Slobec's installment payment
was to end on July 23, 1972 ~ from January 23, 1972 up to July 23, 1972, the
liability of Slobec became an unsecured obligation > HENCE, default of Slobec
during this period cannot be a valid basis for the exercise of the right to
foreclose by ICP since its surety contract had already been terminated
>> Absolute Simulation > when the parties do not intend to be bound at all by
the contract > fact that the apparent contract is not really desired or intended to
either produce legal effects or in any way alter the juridical situation of the
parties > Legal Effect: contract null and void
>> Doctrine of piercing the veil of corporate entity when valid grounds therefore
exist ~ corporation will be considered as a mere association of persons and the
members or stockholders of the corporation will be considered as the
corporation > liability will attach directly to the officers and stockholders >
APPLIES WHEN the corporate fiction is used to defeat public convenience,
justify wrong, protect fraud, or defend crime, or when it is made as a shield to
47
confuse the legitimate issues or where a corporation is the mere alter ego or
business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation
>> Bond, as contractual in nature, is ordinarily restricted to the obligation
expressly assumed therein ~ except where required by the provisions of the
contract, a demand or notice of default is not required to fix the surety's liability
48
49
> SC HELD: (i) to convey and deliver of the properties adjudicated o Maxima
Santos as her share in the conjugal properties to the heirs and the legatees of her
husband Simeon Blas; (ii) to remand to let the heirs file their respective
adversary pleadings to determine the participation of each and every one of them
in said properties
>> future inheritance (Article 1271) > any property or right not in existence or
capable of determination at the time of the contract, that a person may in the
future acquire by succession
>> Compromise Agreement (Article 1809, OCC): Compromise is a contract by
which each of the parties in interest, by giving, promising, or retaining
something avoids the provocation of a suitor terminates one which has already
the provocation been instituted. (Emphasis supplied.)
> Why not future inheritance > Inchoate right but is it not that at the time of sale,
you can sell what you dont own? Because it might prejudice other heirs?
> Why does the law prohibit certain things from being object of the contract ~ ie
health, organs >
G.R. No. 141882 March 11, 2005
J.L.T. AGRO, INC. (thru manager JULIAN L. TEVES) v. ANTONIO
BALANSAG and HILARIA CADAYDAY
Facts: The Compromise Agreement between Julian and children Josefa and
Emilio where certain properties were assigned to Josefa and Emilio and the rest
to his 2nd wife and their children, is valid even though it concerns future legitime
because it is a partition inter vivos (before death) of Julians estate which is
valid in law as long as it is not prejudicial to compulsory heirs. His 2nd wife
and their children had not been prejudiced because they were assigned the
remainder of Julians properties. Concerning Lot No. 63 that had been
adjudicated to 2nd wife and kids but subsequently assigned to Agro, the right of
the former to the properties did not arise until the death of Julian as the legal
effect of a partition inter vivos. Hence, they cannot contend that the assignment
was void due to their alleged ownership being operative upon the Compromise
Agreement, because prior to Julians death they only had an inchoate interest but
not ownership. However, the ownership of Lot No. 63 did not validly confer to
Agro due to spurious acquisition of title based on an alleged loss of owners
duplicate as presented to the Deed of Register and not on the assignment.
HENCE, 2nd wife and kids acquired title upon the death of Julian and without
any valid transfer of ownership of property prior to his death upon which their
right of ownership arose.
> Two Marriages by Don Julian L. Teves, first with Antonia Baena and then
with Milagros Donio Teves after Antonias death > Suit between Julian and
daughter Josefa (1st marr) for Partition and Damages of the cp of Julian with
wife/mother Antonia > Decision by CFI (January 31, 1964), incorporating the
COMPROMISE AGREEMENT between them which divided the properties of
Julian: (i) siblings Josefa and Emilio and Julian as co-owners of Hacienda
Medalla Milagrosa, an electric plant, a movie property, the commercial areas,
and Julians house but to remain undivided during the lifetime of Julian; (ii)
Julian as owner of remainder of the properties; (iii) BUT UPON JULIANS
DEATH (Paragraph 13): (a) the properties adjudicated to Josefa and Emilio
would constitute their inheritance from their mothers estate and from Julians
estate as well; (b) the properties remaining with Julian (including Lot. No. 53)
shall exclusively be adjudicated to Milagros and their 4 minor children > Death
of Julian (April 14, 1974)
> Different Ownership of Lot No. 63
(1) By J.L.T. Agro, Inc., owned by Julian: (i) Deed of Assignment of Assets
with Assumption of Liabilities (November 16, 1972) by Julian, Josefa and
Emilio in favor of Agro; (ii) Supplemental to the Deed of Assignment of Assets
with the Assumption of Liabilities (July 31, 1973), transferring ownership over
Lot No. 63, among others, in favor of Agro; (iii) Reconstitution of TCT,
Issuance of New TCT (November 12, 1979) by Court Order to reconstitute the
owners duplicate of the TCT and to replace it with a new one pursuant to
petition for the reconstitution of the owners duplicate
(2) By Milagros and kids: (i) Possession after the Compromise Agreement; (ii)
Deed of Extrajudicial Partition of (Julians) Real Estate (March 18, 1980); (iii)
Lease Agreement with Sps. Antonio Balansag and Hilaria Cadayday (1974); (iv)
Deed of Absolute Sale of Real Estate (November 9, 1983) with Sps. Antonio
Balansag and Hilaria Cadayday; (v) Failure to Register the Deed due to Agros
ownership of the property
> SUIT by Sps. Balansag-Cadayday as vendees for Declaration of Nullity of
Agros TCT
> CONTENTION of Agro/RTC: (1) Adjudication in the Compromise
Agreement did not become automatically operative upon the approval of the
Compromise Agreement because future legitime cannot be determined,
adjudicated and reserved prior to the death of Don Julian; (2) Lot No. 63 could
not have transferred to Milagros and kids by the Deed of Extrajudicial Partition
(March 18, 1980) because prior to it, it had already been assigned to Agro (July
31, 1973) and hence, could not have been part of his estate
> CONTENTION of Sps/CA: (1) Compromise Agreement, incorporated in the
CFI Decision had already transferred the properties of Julian to his heirs who
50
acquired full ownership and possession of the properties and hence, Don Julian
himself could no longer dispose of the same; (2) New TCT issued in favor of
Agro is spurious and of dubious origin because the spaces for the Book No. and
Page No. of the TCT, referring to the exact location where the said title was
registered or transferred, were not filled up
> Ownership is with Sps., not Agro
> NOT BECAUSE the Compromise Agreement involved Future Inheritance >
It was a Valid Compromise Agreement AS a Partition inter vivos WHERE
future legitime had been validly adjudicated already prior to Julians death
BECAUSE it was a not prejudicial to compulsory heirs WHERE Julian did
not totally omit them by assigning other properties which they could inherit
upon his death (everything but those assigned to Josefa and Emilio and but Lot
No. 63) > LEGAL EFFECT of Partition inter vivos is transfer of ownership
ONLY AFTER DEATH > Reservation of ownership to Julian, as well as the
right to dispose of it > No right conferred to Milagros and Children; only an
inchoate/prospective/non-existent interest
> BUT BECAUSE of an Invalid Transfer to Agro ~ Invalid Deed of
Assignment > HENCE, Property not assigned and thereby transferring to
Milagros and kids upon Julians death
(1) Erring Register of Deeds: Agro acquired the new TCT by a petition for
reconstitution of the owners deed allegedly because it lost the owners duplicate
> Agro thus presented to the Register of Deed the Court Order issuing a new
TCT and not the Supplemental Deed, thereby misrepresenting that the new TCT
was because of an alleged loss of the owners duplicate > Agro did not present
at all the Supplemental Deed > HENCE, Register of Deeds exceeded its
authority in issuing not just a reconstituted owners copy of the original
certificate of title but a new transfer certificate of title in place of the original
certificate of title;
(2) No Consideration > Art. 1318 requires a cause for a valid contract and Art.
1352 declares that contracts without cause, or with unlawful cause produce no
effect whatsoever > (i) P84k in the dispositive portion does not represent the
consideration for the assignment made by Julian but is a mere statement of the
fair market value of all the 19 properties enumerated in the instrument that were
transferred to Agro; (ii) Mortgage in favor of Rehabilitation Finance
Corporation not a consideration there being no showing that Agro itself paid off
the mortgate obligation;
(3) Not a donation > Art. 749 requires acceptance for validity of donations >
Absence of acceptance by the done Agro in the same deed or even in a separate
document
>> Future Inheritance > any property or right not in existence or capable of
determination at the time of the contract > Cannot be an object of a contract
(Art. 1347) ~ Requisites of a Contract upon future inheritance: (1) That the
succession has not yet been opened; (2) That the object of the contract forms
part of the inheritance; (3) That the promissor has, with respect to the object, an
expectancy of a right which is purely hereditary in nature
>> GENERAL RULE: Contracts may have for its object all things, even future
ones, which are not outside the commerce of man > EXCEPTION: Future
Inheritance (Art. 1347) > EXCEPTION TO THE EXCEPTION: A partition
inter vivos (Article 1080), authorizing a testator to partition inter vivos his
property, and distribute them among his heirs
>> Partition inter vivos (Art. 1080): Should a person make a partition of his
estate by an act inter vivos, or by will, such partition shall be respected, insofar
as it does not prejudice the legitime of the compulsory heirs > LEGAL
EFFECT: Partition will be effective only after death ~ An instrument of a
special character that does not operate as a conveyance of title until his death >
Different from OCC Art. 1056 in permitting any person (not a testator, as under
the old law) to partition his estate by act inter vivos ~ WHY: to do away with the
requisite that testator must first make a will with all the formalities provided by
law in order to partition his estate inter vivos
>> Prejudice to Compulsory Heirs > Absolute Non-mention in the Will (Art.
854), that a preterition or omission of one, some, or all of the compulsory heirs
in the direct line, whether living at the time of the execution of the will or born
after the death of the testator, shall annul the institution of heir; but the devises
and legacies shall be valid insofar as they are not inofficious > Preterition as the
total omission of compulsory heir in the will, in the direct line from inheritance,
either by not naming him at all or, while mentioning him, by not instituting him
as heir without disinheriting him expressly, by not assigning to him some part of
the properties, by not giving him anything in the hereditary property
G.R. No. L-11240
December 18, 1957
CONCHITA LIGUEZ v. THE HONORABLE COURT OF APPEALS,
MARIA NGO VDA. DE LOPEZ, ET AL.
Facts: In order to live with minor Conchita and have sexual relations with her,
married man Salvador donated a parcel of land to her. Even if the donation was
premised upon an illicit causa (sex with a minor as a married man), manifested
in his motive to cohabit with her which is considered cause because it
predetermined the contract, the donation remains partly valid because Conchita
was not a guilty party since she did not participate much in the formation of the
51
donation and/or because even if both Salvador and Conchita were guilty, they
cannot invoke the donations illegality to null the same. Absent proof of
illegality against a donation valid on its face because it was ratified by the
Justice of Peace, the donation remains valid. However, inasmuch as the interest
of wife Maria and their children in the conjugal property are concerned, the
donation may be invalidated according to the prejudice against them which
would still be determined by the lower court by remand.
> Deed of Donation (May 18, 1943) by married man Salvador P. Lopez in
favour of 16 y/o Conchita Liguez covering a parcel of land > They thereafter
lived together until the Death of Salvador (July 1, 1943) > Adjudication of the
Same Property to Salvadors wife Maria Ngo and their children (1949) >
Possession by Maria and children > SUIT for Recovery by Conchita
> CONTENTIONS of Maria and Children: Donation is null and void: (1) Has an
illicit causa or consideration > that the donation, although ratified by the Justice
of the Peace of Davao for the consideration of Salvadors love and affection for
Conchita and for the good and valuable services rendered by her to him, was
actually made in order for Salvador, a married man, to live with minor (16 y/o)
Conchita and have sexual relations with her, such donation being required by
Conchitas parents; (2) Involves conjugal property co-owned by Salvador with
wife Maria;
> CONTENTIONS of Conchita: Donation was a contract of pure beneficence,
the consideration of which is the liberality of the donor ~ Desire of Salvador to
have sex with her is his mere motive, different from the causa > HENCE,
Liberality per se is not illegal since it is neither against law or morals or public
policy
> Donation was an Onerous Contract with an Illicit Causa
> Not Pure Beneficence > Salvador not moved exclusively by the desire to
benefit appellant Conchita Liguez, but also to secure her cohabiting with him, so
that he could gratify his sexual impulses
> With Illicit Causa > Motive of Lopez to cohabit and have sex with Conchita
also served as the Causa because it predetermined the purpose of the contract >
Lopez would not have conveyed the property in question had he known that
Conchita would refuse to cohabit with him > Cohabitation was an implied
condition to the donation > Unlawful/Illicit because cohabitation by a married
man with another is unlawful ~ Necessarily tainted the donation itself
> BUT DONATION STILL VALID (Partly) > (a) Valid on its face > Accepted
by Conchita, Signed and Ratified by Justice > Perfect and Binding UNLESS
Declared null > Illegality is not presumed, but must be duly and adequately
proved; (b) Art. 1412 (2): Donation valid because Conchita was not at fault >
Conchita was only a minor (16) when the donation was made while Salvador
was already advanced in years > No proof that she was fully aware of the terms
of the bargain entered into by and Lopez and her parents who insisted on the
donation before allowing her to live with Lopez > illegality is not presumed, but
must be duly and adequately proved; (c) Even if both parties to an illegal
contract are guilty, they are barred from pleading the illegality of the bargain
either as a cause of action or as a defense where they will not be aided by the
law but will both be left where it finds them > Since the defense of illegality
cannot be invoked by Salvador himself, if living, his heirs can have no better
rights than Lopez himself
> BUT DONATION VALID NOT IN ITS ENTIRETY > Donation of Conjugal
Property > (a) But Prejudicial to the interest of Wife Maria ONLY IF the value
of her share in the property donated cannot be paid out of the husbands share of
the community profits > REMAND; (b) But Prejudicial to Heirs ONLY IF
inofficious or in excess of the portion of free disposal > REMAND
>> Pure beneficence (Art. 1274) > contracts designed solely and exclusively to
procure the welfare of the beneficiary, without any intent of producing any
satisfaction for the donor > idea of self-interest is totally absent on the part of
the transferor > liberality of the donor is deemed causa
>> Remuneratory Contracts > consideration is the service or benefit for which
the remuneration is given
>> Motive is Causa in Exceptional Cases > General Rule: Motive is inoperative
and immaterial in determining the validity of the contract > Exception: When
contracts are conditioned upon the attainment of the motives of either party ~
Motive may be regarded as causa when it predetermines the purpose of the
contract
>> ART. 1412. If the act in which the unlawful or forbidden cause consists does
not constitute a criminal offense, the following rules shall be observed: (1)
When the fault is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking; (2) When only one of the contracting parties is at fault, he
cannot recover, what he has given by reason of the contract, or ask for
fulfillment of what has been promised him. The other, who is not at fault, may
demand the return of what he has given without any obligation to comply with
his promise.
G.R. No. L-33360
assignors knew fully well that the deed of assignment contained what, on its
face, it represented> There was never any agreement between the assignors and
the assignee authorizing the latter to merely represent his co-heirs in
negotiations with the Government ~ Any agreement other than the Deed of
Assignment is barred by the statute of frauds and is null and void because not in
writing, much less, in a public instrument; (ii) Prescription ~ that siblings cause
was based on a written contract and hence prescription in 10y ~ Registration on
February 21, 1947 as Constructive Notice but Petition only on September 4,
1958; and (iii) No cause of action because ownership over the property became
vested in Maximino by acquisitive prescription of 10y from its registration in his
name on February, 21, 1947; (iv) Siblings Action was for Reformation and not
Declaration of Nullity > BUT not raised in his Answer in the Trial Court and
only raised on Appeal ~ Cannot prosper
> VALID DEED
(1) There is consideration > P1 and acknowledgement by the siblings that the
decedent Mateo Carantes had, during his lifetime, expressed to the signatories to
the contract that the property subject-matter thereof rightly and exclusively
belonged to Maximino > VALUABLE CONSIDERATION
(2) Action is to Annul the Deed on the ground of fraud and thus prescribes in 4y
from discovery of fraud > When discovered: Registration of the Deed (March
16, 1940) in the Register of Deeds ~ Constitutes constructive notice to the whole
world > Prescription on March 16, 1940 ~ Suit filed on September 4, 1958;
(3) Deed not a trust created in favor of siblings > Clear and Open Repudiation
by Maximino of such trust ~ Anathema to concept of a continuing and subsisting
trust: (i) Formal deed of sale with Government; (ii) Mortgage of Lot D with
PNB as his exclusive property; (iii) Tax Declarations, Payment and Receipts in
the name of Maximino > EVEN IF DEED IS TRUST, an action for
reconveyance based on implied or constructive trust is prescriptible in 10y from
Registration of Deed (March 16, 1940) ~ Prescribes March 16, 1950
> When is there inadequacy of cause but adequacy of consideration? HOW
G.R. No. 126376 November 20, 2003
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION
JOAQUIN, SPOUSES JUANITO EDRA and NORA JOAQUIN, SPOUSES
RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD JOAQUIN
v. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and
FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA
BERNARDO, SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN,
SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES
ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES
TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES
53
payment only gives the right to demand the fulfillment or cancellation of the
obligation under an existing valid contract; it does not result to nullity > ALSO,
Vendee/Siblings actually paid the price anyway
(4) No cause of action > Children had no legal right to the properties sold ~ No
substantial interest but a mere expectancy or inchoate, future, contingent,
subordinate, or consequential interest that vests only upon their parents death >
Parents are still alive and can validly sell the properties > Sale did not even
prejudice their share in the estate because cash of equivalent value replaced the
lots taken from the estate
>> Contract Void if Consideration Inadequate BUT ONLY IF there is fraud,
mistake, or undue influence (Art. 1355) or defect in consent (Art. 1470)
G.R. No. L-27010
April 30, 1969
MARLENE DAUDEN-HERNAEZ v. HON. WALFRIDO DE LOS
ANGELES, Judge of the Court of First Instance of Quezon City,
HOLLYWOOD FAR EAST PRODUCTIONS, INC., and RAMON
VALENZUELA
Facts: Hernaez had an agreement with Hollywood to act for their movies for a
price. When Hollywood failed to pay, Hernaez filed a suit for breach of contract
but the same was dismissed by the CFI for having no cause of action because the
agreement was invalid and unenforceable because it was not in writing. Hence,
the agreement of Hernaez is valid and enforceable because it does not fall in the
exception to the general rule that contracts do not require to be written, and Art.
1358 does not make invalid a contract involving more than P500 not in writing.
Because the general rule applies as to the form of the Agreement where Art.
1358 does not in any way invalidate the same, Art. 1357applies which provides
that the parties can enforce the observation of the contract once perfected.
> SUIT for Breach of Contract and Damages by Actress Marlene DaudenHernaez against Hollywood Far East Productions, Inc. and President/General
Manager Ramon Valenzuela for failure to pay the balance of P14,700 due for
her services as leading actress in two motion pictures produced by the company
> CFI Dismissed: No cause of action since the agreement was invalid and
unenforceable ~ not in any written document, either public or private ~ defective
on its face for violating Art. 1359 (that it exceeds P500 and must be in a public
document) and 1358 (that it does not follow form prescribed in Art. 1359)
> Valid Contract Even if Not in Writing:
(1) Exception to the General Rule that contracts do not require to be in writing is
not applicable to the agreement of Hernaez > GENERAL RULE that contracts
54
are valid and binding from their perfection (by mere consent, Art. 1315; upon a
proper subject matter and consideration, Art. 1318) regardless of form whether
they be oral or written (Art. 1356) > EXCEPTIONS (Art. 1356): (a) solemn
contracts > Contracts for which the law itself requires that they be in some
particular form (writing) in order to make them valid and enforceable ~ ie
donation, contracts to pay interest on loans; (b) Contracts that the law requires
to be proved by some writing (memorandum) of its terms > CONTRACT of
Hernaez does not come under either exception which require writing;
(2) Art. 1358 does not provide that the absence of written form in its case will
make the agreement invalid or unenforceable;
(3) Art. 1357 provides that contracts covered by Article 1358 are binding and
enforceable by action or suit despite the absence of writing
and the occupied portions had not been assigned to him as his determinate share
~ In fact, he had agreed with Basilia Maneja that the latter would occupy the
upper portion of the property; (ii) Occupants were permitted by co-owners to
occupy property wherein they even built their houses
> Co-Owners Right of Possession > Art. 487 that any one of the co-owners to
bring an action in ejectment > WHY: a co-owner is the owner and possessor of
the whole, and that the suit for ejectment is deemed to be instituted for the
benefit of all co-owners > LEGAL EFFECT: Categorical and an unqualified
authorization of a co-owner to bring an action to exercise and protect the rights
of all
> Right of Possession and Ejectment by Borromeo as Co-Owner against
Resuenas and Garay: (a) No proof of their right/authority to occupancy ~
Persons who occupy the land of another at the latters tolerance or permission,
without any contract between them, are necessarily bound by an implied
promise that they will vacate the same upon demand ~ Tolerance in itself does
not bear any legal fruit, and it can easily be supplanted by a sudden change of
heart on the part of the owner > Art. 1358 that acts which have for their object
the creation, transmission, modification or extinguishment of real rights over
immovable property must appear in a public instrument; (b) Authority of
Borromeo pursuant to Art. 487 to institute the ejectment suit for the benefit of
all co-owners of the property absent proof that occupants are authorized to
occupy the same; (c) Testimony of Borromeo that he had agreed with Basilia
Maneja on the portions which they would occupy hardly establishes a definitive
partition, or moreover, any right of petitioners to dwell in any portion of Lot No.
2587 ~ the common ownership over Lot No. 2587 remained inchoate and
undivided
> Right of Possession and Ejectment by Borromeo as Co-Owner against Rosario
from Lot No. 2592: No proof of her right/authority to occupancy
> Why writing under Art. 1358 is required here and not in Hernaez: No
allegation or proof of any act conferring any right to occupants because
Tolerance is not a conferment of right WHILE in Hernaez, there was an alleged
agreement to pay her an amount that is beyond P500
> What is a statute of fraud: must be in writing otherwise unenforceable
contract; wholly executory ~ neither party has performed the obligation but just
agree
G. R. No. L-8060
> Deed of Sale (November 12, 1938) between Paulino Garcia and Maria Bisaya
where the latter sold to the former a parcel of land which was erroneously
designated as unregistered land > Garcias Recent Discovery that the land sold
to him was registered to a Torcuata Sandoval, not a vendor > SUIT for
Reformation (May 20, 1952) by Garcia ~ to correct the designation of the
property in the Deed of Sale as one of Registered from Unregistered > RTC
Dismissed: Action Prescribed ~ reformation of an instrument on account of
fraud prescribes in 4y (Carantes)
> DISMISSED
(1) No cause of action > Action is for Reformation of Contract YET (i) no
allegation that the instrument to the reformed does not express the real
agreement or intention of the parties, moreover, (ii) no allegation of what the
real agreement or intention was ~ ESSENTIAL since the object sought in an
action for reformation is to make an instrument conform to the real agreement or
intention of the parties; (iii) no right to be asserted by Garcia under the reformed
contract ~ alleged registered owner was not a vendor ~ would thus make the sale
ineffective for buying property not belonging to vendor; But wont fraudulent
contracts favor damages to Garcia? (iv) action should have been for annulment
since he had been led to enter into the contract of sale through fraud or
>> Action for Reformation > OBJECT: to make an instrument conform to the
real agreement or intention of the parties IN ORDER THAT the party is able to
assert right under the contract as reformed > NOT TO make a new agreement,
but to establish and perpetuate the true existing one
for their guidance in the enforcement thereof, or compliance therewith, and not
to settle issues arising from an alleged breach thereof
>> Prescription is intended to suppress stale and fraudulent claims arising from
transactions which facts had become so obscure from the lapse of time or
defective memory
G.R. No. 158901 March 9, 2004
PROCESO QUIROS and LEONARDA VILLEGAS v. MARCELO
ARJONA, TERESITA BALARBAR, JOSEPHINE ARJONA, and
CONCHITA ARJONA
Facts: In order to avoid litigation where Proceso and Leonarda sought to
recover their share in their grandmas inheritance, their uncle Marcelo agreed to
convey to them a parcel of land which tenant Jose Banda agreed to surrender.
The amicable settlements, however, could not be executed by the Court because
the property in the settlement was not duly defined. However, such defect did
not render the settlements void but merely subject to reformation. The
settlements were valid contracts, having a consent, cause and object. The object
was merely undefined but the same can be corrected by reformation and not
necessarily thru a new contract especially where Marcelo did not deny their right
to the inheritance.
> Suit for Recovery of ownership and possession of a parcel of land (December
19, 1996) by Proceso Quiros and Leonarda Villegas against their uncle Marcelo
Arjona covering their lawful share of the inheritance from their late grandmother
Rosa Arjona Quiros > TWO AMICABLE SETTLEMENTS (January 5, 1997):
(1) Agreement with Marcelo that he was to convey land consisting of more or
less 1 hectare which he inherited from Rosa to Proceso and Leonarda; (2)
Agreement with tenant Jose Banda that he was willing to voluntarily surrender
to Proceso and Leonarda the land of the Arjona family (in Sitio Torrod, Brgy.
Labney, San Jacinto, Pangasinan) that was entrusted to him > Petition for Writ
of Execution/Enforcement of the Compromise Agreement > DENIED because
subject property cannot be determined with certainty > CONTENTIONS of
Proceso and Leonarda: (1) Compromise Agreement is final and executory even
without final judgement given that it is not repudiated in 10d; (2) Marcelo
accompanied them to the actual site of the properties at Sitio Torod, Labney,
San Jacinto, Pangasinan and pointed to them the 1 hectare property referred to in
the said agreement ~ Denied by Marcelo since he was physically incapacitated
and without a vehicle to take him there
> REFORMATION OF 1st AGREEMENT ALLOWED:
57
>> Finality of Compromise Agreements > Section 416 of the Local Government
Code that an amicable settlement shall have the force and effect of a final
judgment upon the expiration of 10d from the date thereof, unless repudiated or
nullified by the proper court > Party-litigants can enter into an agreement in the
barangay level to reduce the deterioration of the quality of justice due to
indiscriminate filing of court cases > EXCEPTIONS (Santos v. Judge Isidro):
imperatives of substantial justice, or facts that may have transpired after the
finality of judgment which would render its execution unjust ~ Suspension of
execution
> Sales of Property (1920), Lot 535 of, Eulogio Atilano I to 5 vendees ~ Had the
property subdivided, sold Lot 535-E to his brother Eulogio Atilano II (May 18,
1920), B, C, D to others, and retained A > I and II constructed their houses on
their respective properties and I even expanded his property by purchasing the
adjacent property > Resurvey of Lot 535-E (July 16, 1959) by II and his
children to end the co-ownership that operated upon the death of IIs wife as
heirs of her estate > Discovery that the land designated as E in the Deed of Sale
was actually Lot A and the one designated as Lot A was actually Lot E >
Demand (January 25, 1960) by Heirs of II against Heirs of I to surrender actual
Lot E and exchange it for actual Lot A because the real Lot E was 2,612 sq.m.
and real Lot A was only 1,808 sq.m. > CONTENTIONS of Heirs of I: Reference
in Deed of Sale to Lot E was involuntary error and the intention of the parties to
that sale was to convey the lot correctly identified as lot No. 535-A
Facts: Brothers Atilano entered into a deed of sale where I sold Lot A to his
brother, but Lot A was mistakenly indicated as Lot E in the contract.
Nevertheless, the brothers possessed their respective properties until the vendee
brother discovered that what was indicated in the Deed of Sale was Lot E and
the indicated Lot A, which was retained by his brother, was actually Lot E.
Because the actual Lot E was bigger than Lot A, which was what they received,
the heirs of II demanded the exchange of property. However, because it was
evidently the intention of the brothers to sell Lot A on which vendee brother
even possessed and constructed his house thereon, while I possessed and
constructed his house on Lot E, the contract is valid. The mistake in the contract
need not be reformed because the intention of the parties was to sell Lot A but
was merely designated as Lot E. Hence, the parties just need to execute mutual
deeds of conveyance.
> NO REFORMATION:
(1) Real intention of I and II in Deed of Sale was to sell Lot A > II had already
possessed Lot A prior to the subdivision and sale and had constructed his
residence therein; I had also constructed his house on Lot E after the subdivision
and even expanded the property by purchasing the adjoining property > I and II
continued in possession of the respective portions the rest of their lives,
obviously ignorant of the initial mistake in the designation of the lot subject >
When one sells or buys real property, one sells or buys the property as he sees it,
in its actual setting and by its physical metes and bounds, and not by the mere
lot number assigned to it in the certificate of title;
58
(2) Designation of Lot A as lot No. 535-E in the deed of sale was simple mistake
in the drafting of the document > mistake did not vitiate the consent of the
parties, or affect the validity and binding effect of the contract between them;
(3) Not reformation BECAUSE (i) PRESCRIPTION ~ Contract on 1920 but suit
only on 1960 ~ lapse of 10y; (ii) real intention was indicated, which is to sell Lot
A but mistakenly inputed as E > REMEDY: mere conveyances of properties >
parties have retained possession of their respective properties conformably to the
real intention of the parties to that sale, and all they should do is to execute
mutual deeds of conveyance
Under what circumstances can you Reform? Interpret?
> When to INTERPRET ~ NOT when only one party challenges the contract
> When to REFORM ~ When there is error or mistake in the making of the
contract (Quiros)! NOT when both parties challenge the contract
G.R. No. L-33360
April 25, 1977
MAXIMINO CARANTES (Substituted by Engracia Mabanta Carantes) v.
COURT OF APPEALS, BILAD CARANTES, LAURO CARANTES,
EDUARDO CARANTES and MICHAEL TUMPAO
Facts: The siblings of Maximino executed a Deed of Assignment in his favour
covering their rights to Lot No. 44 for P1 and the acknowledgement that their
father/owner had considered Maximino as the owner of the property. The Deed
is valid because it has a consideration as previously stated and the action for its
annulment, which was based on fraud, has already prescribed (4y).
> Settlement of the Estate of Mateo Carantes (1933) where his son Maximino
(one of six children) was appointed as judicial administrator > Partition involved
Lot No. 44, which was subdivided into Lots A, B, C, D, and E where A had
previously been expropriated by the Government (for the construction of the
Loakan Airport), while B and C were subsequently sold to the Government as
well by Maximo thru a Formal Deed of Sale by virtue of an Assignment of
Right to Inheritance (October 23, 1939) where 4 of his siblings assigned their
rights to inheritance in Lot No. 44 to Maximino for a consideration of P1.00 and
the declaration that they acknowledge Mateos representation that Maximino is
the exclusive, continuous, peaceful and notorious possession of the property as
its rightful and exclusive owner (By agreement of all the direct heirs and heirs
by representation of the deceased Mateo Carantes as expressed and conveyed
verbally, by him during his lifetime, rightly and exclusively belong to the
particular heir, Maximino Carantes, now and in the past in the exclusive,
continuous, peaceful and notorious possession of the same for more than ten
years.) ~ Deed registered (March 16, 1940) and New TCTs for B to E issued in
Maximinos name > Meanwhile, D was mortgaged (1948) by Maximino, as his
exclusive property with the Philippine National Bank; and E remained registered
in his name
> SUIT (September 4, 1958) for Declaration of Nullity of Deed of Assignment
and Partition of Lots D and E into 6, by Maximinos siblings (the same who
executed the Deed of Assignment ~ Bilad, Sianang, Lauro and Crispino but the
latter by his heirs) > CONTENTIONS of Siblings: (i) Fraud, that they were
made to believe by Maximino that the Deed was only an authorization of the
latter to convey portions of Lot No. 44 to the Government in their behalf to
minimize expenses and facilitate the transaction ~ That they discovered the
assignment only on February 18, 1958; (ii) CA Held: Deed is void ab initio and
inexistent on the grounds that real consent was wanting and the consideration of
P1.00 is so shocking
> CONTENTIONS of Maximino: (i) On-its-face Agreement > No other
agreement than what appears in the Deed of Assignment > Deed was an
acknowledgment of the fact of designation of the property as specifically
pertaining or belonging by right of inheritance to the Maximino Carantes ~
assignors knew fully well that the deed of assignment contained what, on its
face, it represented> There was never any agreement between the assignors and
the assignee authorizing the latter to merely represent his co-heirs in
negotiations with the Government ~ Any agreement other than the Deed of
Assignment is barred by the statute of frauds and is null and void because not in
writing, much less, in a public instrument; (ii) Prescription ~ that siblings cause
was based on a written contract and hence prescription in 10y ~ Registration on
February 21, 1947 as Constructive Notice but Petition only on September 4,
1958; and (iii) No cause of action because ownership over the property became
vested in Maximino by acquisitive prescription of 10y from its registration in his
name on February, 21, 1947; (iv) Siblings Action was for Reformation and not
Declaration of Nullity > BUT not raised in his Answer in the Trial Court and
only raised on Appeal ~ Cannot prosper
> VALID DEED
(1) There is consideration > P1 and acknowledgement by the siblings that the
decedent Mateo Carantes had, during his lifetime, expressed to the signatories to
the contract that the property subject-matter thereof rightly and exclusively
belonged to Maximino > VALUABLE CONSIDERATION
(2) Action is to Annul the Deed on the ground of fraud and thus prescribes in 4y
from discovery of fraud > When discovered: Registration of the Deed (March
16, 1940) in the Register of Deeds ~ Constitutes constructive notice to the whole
world > Prescription on March 16, 1940 ~ Suit filed on September 4, 1958;
(3) Deed not a trust created in favor of siblings > Clear and Open Repudiation
by Maximino of such trust ~ Anathema to concept of a continuing and subsisting
trust: (i) Formal deed of sale with Government; (ii) Mortgage of Lot D with
PNB as his exclusive property; (iii) Tax Declarations, Payment and Receipts in
59
> Jose A. Villamor, as distributor of the lumber of Mr. Miller (agent of Insular
Lumber Company), often borrowed money from friend Canuto A. Borromeo >
1933, he borrowed a large sum and mortgaged his land and house in favor of
Borromeo to pay off his debts to Miller who had filed a civil suit against him
and even attached his property, including the mortgaged house and lot because
the mortgage was not registered for not being properly drawn up > Borromeo
thus demanded payment of his loans but Villamor instead issued a promissory
note (November 29, 1933) worth the total of P7220 with annual interest of 12%
payable as soon as he has money and effective even beyond 10y where he
waived his rights to prescriptions for the collection/recovery of the money ~
hereby relinquish, renounce, or otherwise waive my rights to the prescriptions
established by our Code of Civil Procedure for the collection or recovery of the
above sum of P7,220.00. ... at any time even after the lapse of ten years from the
date of this instrument. > Suit for collection (January 7, 1953) by Borromeo
due to Villamors failure to pay despite repeated oral demands and kindness not
to sue because no property was registered to Villamors name anyway > RTC
Granted but CA Reversed since the waiver of prescription was void due to lack
of legal basis and the principle that a person cannot renounce future prescription
> NOT A RENUNCIATION BUT INTENDED AS SUSPENSION:
(1) 10y waiver was intended only as waiver to act within the 10y period >
Debtor Villamor was only being excessively considerate to his creditor and
creditor Borromeo was more than willing to give him the utmost latitude as to
when his scantly resources will allow him to pay ~ Due to their friendship that
the debtor could be trusted to pay even after the termination of the 10y
prescriptive period;
(2) Prescription of 10y begins after November 29, 1943 to November 29, 1953
and Suit was filed on January 7, 1953;
(3) Even if the waiver clause was invalid, the clause did not invalidate the whole
contract > Kasilag v. Rodriguez that the terms, clauses and conditions contrary
to law, morals and public order should be separated from the valid and legal
contract when such separation can be made because they are independent of the
valid contract which expresses the will of the contracting parties
> When is it appropriate to interpret > Ambiguity ~ Language is capable of more
than one reasonable interpretation > Guide ~ Intention of the parties
G.R. No. 46623 December 7, 1939
MARCIAL KASILAG v. RAFAELA RODRIGUEZ, URBANO ROQUE,
SEVERO MAPILISAN and IGNACIO DEL ROSARIO
Facts: The contract of loan and mortgage between Kasilag and Emiliana were
not of sale because their intention was merely to secure the loan with the
mortgage with the condition that failure to pay the mortgage would give rise to
the obligation to execute a deed of sale.
> Contracts between Emiliana Ambrosio and Marcial Kasilag
(1) Contract of Loan worth P1k, Creditor Marcial, Debtor Emiliana;
(2) Contract of Mortgage (May 16, 1932) to secure the loan, over the
improvements of Emilianas property (acquired as homestead, June 11, 1931),
consisting of mango, bamboo, tamarind and bonga fruit-bearing trees;
CONDITIONS FOR EMILIANA: (i) Payment of all taxes on the land and
improvements; (ii) Payment of P1k with annual 12% by November 16, 1936 to
end the mortgage; (iii) Otherwise, Continuation of Mortgage subject to
foreclosure and Execution of Deed of Absolute Sale of Property upon failure to
redeem property for the same amount of P1k + interests
> Emilianas Failure to pay (1933) > Verbal Contract where Emiliana conveyed
to Marcial the possession of the land on condition that the latter would not
collect the interest on the loan, would attend to the payment of the land tax,
would benefit by the fruits of the land, and would introduce improvements
thereon > SUIT by Heirs of Emiliana for possession of the land
> INVALID POSSESSION BY MARCIAL OF THE PROPERTY
(1) Contract was not of sale but of Loan and Mortgage > Intention of the
contracting parties is to enter into the principal contract of loan in the amount of
P1k with annual interest at 12%, and into the accessory contract of mortgage of
the improvements on the land > Intention should always prevail over letter
because their will has the force of law between them; and although there was a
verbal agreement to possess the property
(2) Verbal agreement for possession of property was a Contract of Antichresis
that is invalid where pacts made by the parties independently of the mortgage
but alters the same converts the latter into a contract of antichresis (Art. 1881)
that is void because it is a real encumbrance burdening the land >
NEVERTHELESS, LOAN/MORTGAGE VALID because terms, clauses and
conditions contrary to law, morals and public order should be separated from the
valid and legal contract and when such separation can be made because they are
independent of the valid contract which expresses the will of the contracting
parties;
(3) Marcial possessor of property in good faith > excusable ignorance of the law
since he is not conversant with the laws because he is not a lawyer ~ consented
to receive the fruits but did not know, as clearly as a jurist does, that the
possession and enjoyment of the fruits are attributes of the contract of
antichresis and that the latter, as a lien, was prohibited by section 116, Act No.
2874
61
for the time established in Articles 1682 and 1687. The other terms of the
original contract shall be revived.
> Art. 1687: If the period for the lease has not been fixed, it is understood to be
from year to year, if the rent agreed upon is annual; from month to month, if it is
monthly; from week to week, if the rent is weekly; and from day to day, if the
rent is to be paid daily. However, even though a monthly rent is paid, and no
period for the lease has been set, the courts may fix a longer term for the lease
after the lessee has occupied the premises for over one year. If the rent is
weekly, the courts may likewise determine a longer period after the lessee has
been in possession for over six months. In case of daily rent, the courts may also
fix a longer period after the lessee has stayed in the place for over one month.
> Automatically extended in first contract; Extendable only in the second >
Guide in choosing one interpretation over the other ~ Contemporaneous and
subsequent acts of the parties
G.R. No. 109680 July 14, 1995
DIEGO RAPANUT v. THE COURT OF APPEALS and SUSAN
FLUNKER
Facts: The monthly payment of P500 by Rapanut applies to the principal debt
and not to the interest.
> Deed of Conditional Sale with Mortgage (November 29, 1985) where Susan
Flunker sold her land to Diego Rapanut for P42,840 payable in installments but
with annual interest of 10% on the remaining balance until the full amount is
paid > Supplemental Agreement (April 1986), decreasing price to P37,485
payable in monthly installments of P500 with an annual interest of 10% on the
remaining balance until the full amount is paid and with added condition that
failure to pay any monthly installments when due for 3m shall be sufficient
cause for rescission > Payment by Rapanut of total P24,500 (P500/m from
January 1986 to January 1990) > Rescission of Deed (Notice on February 13,
1990, SUIT on March 14, 1990) due to failure to pay annual interest on the
balance > CONTENTION of Susan: 10% interest should be paid every year and
hence, payments made by Rapanut applies not to purchase price but to unpaid
accrued annual interest pursuant to Art. 1253 that if the debt produces interest,
payment of the principal shall not be deemed to have been made until the
interests have been covered ~ Two kinds of payment, for principal and for
interest and payments made is for interest because they had not been paid yet
and thus cannot apply to principal > CONTENTION of Rapanut: Payment of
P500/m already includes principal and interest
> INTENT OF THE PARTIES IS TO APPLY P500/m TO PRINCIPAL
62
PCC and thus, cargo was held up in Bangkok > Negotiations where PCC would
deliver a Class G cement, cost free ~ Delivered but did not conform to the
specifications of ONG > Arbitrator (appointed by ONGs Commission as
provided in Clause 16) ruled on the matter of non-delivery of cement and nonconformity of replacement in favor of ONG (July 23, 1988) and ordered the
refund and payment of expenses incurred, totaling $899,603.77+ interest ~
Ratified by Indian Court (February 7, 1990) after denying objections sent by
PCC due to its failure to pay the filing fees allegedly because the letter (May 18,
1989) demanding payment of fees did not specify the amount needed > Refusal
of PCC to pay > SUIT by ONG for enforcement of the foreign judgment >
CONTENTION of PCC: Arbitrator had no jurisdiction since the dispute over the
non-delivery of cement cargo should have been settled thru litigation and not
arbitration under Clause 16
CLAUSE 16: Except where otherwise provided in the supply order/contract all
questions and disputes, relating to the meaning of the specification designs,
drawings and instructions herein before mentioned and as to quality of
workmanship of the items ordered or as to any other question, claim, right or
thing whatsoever, in any way arising out of or relating to the supply
order/contract design, drawing, specification, instruction or these conditions or
otherwise concerning the materials or the execution or failure to execute the
same during stipulated/extended period or after the completion/abandonment
thereof shall be referred to the sole arbitration of the persons appointed by
Member of the Commission at the time of dispute. It will be no objection to any
such appointment that the arbitrator so appointed is a Commission employer
(sic) that he had to deal with the matter to which the supply or contract relates
and that in the course of his duties as Commission's employee he had expressed
views on all or any of the matter in dispute or difference.
Facts: The agreement between ONG and PCC provided that disputes arising
from the contract are to be submitted to the arbitrator, under Clause 16. When
PCC failed to deliver the cement to ONG in India and when the replacement
cement delivered by PCC did not conform to the specifications of ONG, the
issue was submitted to the arbitrator who ruled in favor of ONG and which
decision was ratified by the Court, which did not accept the objections of PCC
for its failure to pay the filing fees despite demand. PCC challenged the
jurisdiction of the arbitrator and the validity of the foreign judgments but both of
which were valid. The arbitrator acquired jurisdiction over the dispute because
the issue thus submitted was not the non-delivery of the cement which it cannot
decide (because Clause 16 limits jurisdiction to technical aspects of the contract
only) but the non-conformity of the replacement cement to the negotiated
agreement which was well within its jurisdiction because it relates to the
technical aspect of the contract. Judgment of Court of India was also valid.
> Contract (February 26, 1983) between Pacific Cement Company, Inc. and Oil
and Natural Gas Commission (foreign corp., India) where PCC would supply
ONG 4300 metric tons of oil well cement, for $477,300 payable thru an
irrevocable, divisible, and confirmed letter of credit in PCCs favor ~ Paid but
not delivered to Bombay and Calcutta because ship owner had a dispute with
The arbitrator may with the consent of parties enlarge the time, from time to
time, to make and publish the award.
The venue for arbitration shall be at Dehra dun.
(1) Jurisdiction only for:
(a) all questions and disputes, relating to the meaning of the specification
designs, drawings and instructions herein before mentioned and as to quality of
workmanship of the items ordered; or
(b) any other question, claim, right or thing whatsoever, in any way arising out
of or relating to the supply order/contract design, drawing, specification,
instruction or these conditions; or
(c) otherwise concerning the materials or the execution or failure to execute the
same during stipulated/extended period or after the completion/abandonment
thereof.
> ONG misquoted CLAUSE 16 by inserting a comma between supply
order/contact and design when there is actually none
> the same in (c) third clause refers to supply order/order contract as referred
to in the preceding words ~ limited only to the design, drawing, instructions,
specifications or quality of the materials of the supply order/contract
> Except where otherwise provided in the supply order/contract provides that
the jurisdiction of arbitrator is not all-encompassing
> SO, intention of the parties was that any claim, right or thing whatsoever that
maybe arbitrated must arise out of purely technical aspects or relate to the
design, drawing, specification, or instruction of the supply order/contract >
OTHERWISE, CLAUSE 15 and Except would be useless
> HENCE, non-delivery of cement does not arise out of failure to execute the
supply order/contract design, drawing, instructions, specifications or quality of
the materials BUT UNDER CLAUSE 15
(2) Dispute of non-delivery should have been brought to trial court according to
CLAUSE 15: All questions, disputes and differences, arising under out of or in
connection with this supply order, shall be subject to the exclusive jurisdiction
of the court, within the local limits of whose jurisdiction and the place from
which this supply order is situated.
> JURISDICTION OF ARBITRATOR IN FAILURE OF THE
REPLACEMENT CEMENT TO CONFORM TO THE SPECS OF THE
CONTRACT > relates to the technical aspect of the contract > VALID
ARBITRATION BECAUSE it was only after the non-conformity was the matter
brought before the arbitrator ~ arbitration not just non-delivery of the cargo at
the first instance but also the failure of the replacement cargo to conform to the
specifications of the contract ~ clearly within the coverage of Clause 16
>> Doctrine of noscitur a sociis > where a particular word or phrase is
ambiguous in itself or is equally susceptible of various meanings, its correct
construction may be made clear and specific by considering the company of the
words in which it is found or with which it is associated ~ its obscurity or doubt
may be reviewed by reference to associated words > WHY: provisions of a
contract should not be read in isolation from the rest of the instrument but, on
the contrary, interpreted in the light of the other related provisions BECAUSE it
was enacted as an integrated measure and not as a hodge-podge of conflicting
provisions > HENCE, apparently inconsistent provisions should be reconciled
whenever possible as parts of a coordinated and harmonious whole
> What if theres a total waiver of court action?
G.R. No. 136423 August 20, 2002
SPOUSES EFREN N. RIGOR and ZOSIMA D. RIGOR, for themselves
and as owners of CHIARA CONSTRUCTION v. CONSOLIDATED ORIX
LEASING and FINANCE CORPORATION
Facts: To secure the loan by COLFC, sps. Rigor issued a promissory note and a
mortgage in its favor. When they defaulted, COLFC initiated foreclosure
proceedings on the mortgage in Dagupan City. Sps. Rigor contended that
Dagupan is an improper venue for the litigation because the Note exclusively
makes Makati City as the venue. However, COLFC argued that the venue in the
Note had been modified by the Mortgage which allows the parties to file in
Dagupan City. As an accessory obligation of the principal contract of loan, the
mortgage should be construed together with the principal contract of the Note
which it depends for existence. Hence, in order to reconcile the contrasting
provisions, the Mortgage is deemed to have modified the Note especially
considering that COLFC opened a branch office in Dagupan and thus had the
venue changed in the Mortgage but forgetting the Note. Also, Dagupan is the
more convenient venue for the parties which is the primary consideration in the
rules of venue.
> Loan worth P1,630,320, granted by Consolidated Orix Leasing and Finance
Corporation, in favor of sps. Efren and Zosima Rigor, was secured by: (a)
Promissory Note (July 31, 1996); (b) Deed of Chattel Mortgage over two dump
trucks > Failure to Pay several installments despite demand > SUIT for Replevin
(January 5, 1998) by COLFC to foreclose the chattel mortgage in RTC
Dagupan, following the stipulation of venue according to Deed of Chattel
Mortgage which modified the venue stipulation in Promissory Note > Motion to
64
(4) Other causes of action in Dagupan: Loan and Mortgage were negotiated and
concluded by the parties in Dagupan City, mortgaged vehicles were seized in
Dagupan City
>> General Rule on Venue > all personal actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, at the election of the
plaintiff > May be changed or transferred by written agreement of the parties
> WRONG DECISION! Promissory Note should have stood on its own and not
construed together with Mortgae
G.R. No. 119255 April 9, 2003
TOMAS K. CHUA v. COURT OF APPEALS and ENCARNACION
VALDES-CHOY
Facts: Choy agreed to sell her house and lot to Chua but only upon payment of
the purchase price. The intention to retain ownership until full payment is
evident in the reserved right to forfeit the earnest money paid in case of default
which necessarily means that she still has the right of ownership of property and
the right to resell the same. This option she validly invoked because the
documents that were to be in proper order for her to rescind were already
willing. Customarily, documents of ownership are TCT, deed of absolute sale,
tax declaration and realty tax receipt. It does not include the capital tax gains as
required by Chua because the same cannot be paid by the seller without the deed
of sale which she was unwilling to deliver until payment. Also, the condition of
issuance of title before payment is not customary in sales because what is
normally done is to deposit the payment in escrow pending the issuance.
> Payments and Documents:
(1) Agreement (June 30, 1989) between Tomas K. Chua and Encarnacion
Valdes-Choy to sell the latters house and lot for P10.8M, payable in cash ~
Evidenced by RECEIPT for P100k check paid as earnest money, to be foreited
in case of failure to pay the balance by July 15, 1989 provided that all papers
are in proper order
(2) Deeds of Absolute Sale (July 13, 1989) covering the house and lot, for P8M
and its furnishings, fixtures and movable properties for P2.8M
(3) Payment of P485k managers check, in favor of BIR, given to Choy as
advance so that she can pay the capital gains tax, evidenced by a RECEIPT
showing the balance as P10,215,000
> Non-Payment of balance by Chua (July 14, 1989) ~ Merely showed a
managers check of P10,215,000 BUT demanded the issuance of a TCT in his
name before he would pay > Rescission of Contract by Choy because the TCT
65
was not part of the agreement, tearing up the Deeds of Sale > Stop Payment
Order by Chua on the P485k managers check ~ honored nonetheless because he
subsequently verbally advised the bank that he was lifting the stop-payment
order due to his "special arrangement" with the bank
> (July 15, 1989) Suggestion by Choy for Chua to deposit in escrow the
P10,215,000 balance where she would still cause the issuance of a new TCT in
the name of Chua even without receiving the balance of the purchase price
> SUIT (July 17, 1989) by Chua for specific performance
> CHOYS RIGHT TO FORFEIT THE EARNEST MONEY
(a) Contract to Sell > Ownership is retained by Choy until full payment of the
purchase price ~ seller the right to rescind unilaterally the contract the moment
the buyer fails to pay within a fixed period > Evidenced by (i) Receipt that the
earnest money shall be forfeited in case the buyer fails to pay the balance of the
purchase price on or before 15 July 1989 ~ Meaning that Choy can sell the
Property to other interested parties; (ii) Deeds of Sale was issued later only
because she was under the impression that Chua was about to pay the balance of
the purchase price; (iii) Possession of the certificate of title and all other
documents relative to the sale;
(b) Stipulation that forfeiture can apply provided that all papers are in proper
order was satisfied > Choys failure to show that the capital gains tax had been
paid after he had advanced the money for its payment is irrelevant > Papers in
proper order CUSTOMARILY refer to (1) owner's duplicate copy of the Torrens
title; (2) signed deed of absolute sale; (3) tax declaration; and (3) latest realty tax
receipt ~ All of which Choy was willing to deliver > CANNOT INCLUDE
capital tax gains because the assessment of such requires the Deeds of Sale
themselves and it requires that the seller himself pay it ~ Already executed by
Choy but not willing to release until payment which Chua refused to do because
of non-payment of capital gains tax > and hence, she cannot comply with capital
tax payment > HENCE, Chua had no reason to not pay;
(c) New condition by Chua to have TCT first before payment is not considered
part of the omissions of stipulations which are ordinarily established as
requistes for ownership by usage or custom > customary is to deposit in escrow
the balance of the purchase price pending the issuance of a new certificate of
title in the name of the buyer
G.R. No. 133107
March 25, 1999
RIZAL COMMERCIAL BANKING CORPORATION v. COURT OF
APPEALS and FELIPE LUSTRE
Facts: Lustre purchased a car from Toyota and in order to secure the payment,
he executed a chattel mortgage over the purchased Corola in favour of Toyota.
check, which was alleged to not been encashed and hence not paid > Delay in
the performance of the obligation MUST BE either malicious or negligent: (i) no
proof that Lustre acted with malice or negligence in failing to sign the check; (ii)
Toyota salespersons testimony that Lustre signed the check and the down
payments were deemed completed and hence the car was released; (iii) nonobjection by RCBC of the unsigned check where it actually (a) debited the value
of the unsigned check from Lustres account and recredited it only 1y later to
him and (b) encashed checks subsequently dated, then abruptly refused to
encash the last two
>> Art. 1377: The interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity.
>> Contracts of adhesion ~ VOID only when the weaker party is imposed upon
in dealing with the dominant bargaining party and is reduced to the alternative
of taking it or leaving it ~ VALID when one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his consent > Ambiguities
in a contract of adhesion are to be construed against the party that prepared the
same ONLY IF the stipulations in such contract are obscure or ambiguous BUT
NOT IF the terms thereof are clear and leave no doubt upon the intention of the
contracting parties ~ literal meaning shall control
G.R. Nos. 85962-63
August 3, 1992
ROSARIO GACOS, ARNULFO PRIETO, and RENITA PRIETO v.
COURT OF APPEALS, SOLOMON BRIONES, LEONOR BRIONES and
TEODULFO MENDONES
Facts: Petrona sold a portion of her inherited property to Marcial but the
Contract of Sale indicated a larger measurement. Marcial subsequently measure
the correct size and declared the same in his Tax Declaration. However, when he
sold the same property to Rosario, the Contract indicated a bigger but different
size. Hence, when the heirs of Petrona sold her remaining property to Mendones
and partitioned the estate of Petrona which adjudicated to them the property
inherited by their mother, minus the portion sold to Marcial. The Contract of
Sale with Marcial was construed to transfer the least rights because the property
sold was indicated by boundaries and the size stipulated turned out erroneous.
> Two Faiths of the Property of Petrona Gacos
ORIGIN:
> From father Eladio Gacos > Adjudicated his 6,854 sq.m. property to his 3
daughters ~ Immediate Possession by Petrona Gacos of her 1/3 share (2,242
sq.m.) > Agreement of Partition of Real Property (May 14, 1950) among Lucia
and heirs of 2 sisters, formally confirming what was apportioned to them by
their father as their respective shares in the 6,854 sqm. Land ~ Petrona, 2,242
square meters; Lucia, 2,148 square meters; and Fortunata, 2,194 square meters
BUT PRIOR TO CONFIRMATION OF SIZE...
(1) Contract of Sale (March 13, 1948) by Patrona in favour of son-in-law
Marcial Olaybal, of a portion of her inherited property (866 sq.m. from 2,242
sq.m.) BUT alleged to be an entire 2,720 sq.m. in the Contract BUT measured
and declared by Marcial as 866 sq.m in his Tax Declaration
(a) Deed of Absolute Sale (December 30, 1950) by Marcial in favour of
Encarnacion Gacos, covering the parcel of land he bought from Petrona but
indicated 2,025 sq.m. instead of 866 sq.m. that he declared in the Tax
Declaration ~ Possession by Rosario Gacos, sister of Encarnacio who was
named as vendee and owner in Tax Declaration > Ratification of Ownership of
Realty (April 4, 1967) by Rosario, consolidating her 4 properties (including
purchased property from Marcial) into 1 parcel of land
(b) Sale (October 24, 1973) by Rosario of her land to nephew Arnulfo
Prieto ~ Possession and Ownership in Tax Declaration > Lease (March 14,
1975) by Arnulfo to sister Vivencia Prieto for 15y
(2) Sale (February 22, 1949) between Lucia and Teodolfo Mendones of 84 sq.m.
of Petronas share ~ PURSUANT TO Instruction by Petrona to sister Lucia,
administrator of her remaining property, to sell the 84 sq.m. of her property (in
the east) for her funeral expenses and novena
(a) Deed of Extra-judicial Settlement (August 1, 1975) by heirs of
Petrona, adjudicating onto themselves the 2,242 sq.m. share of their mothers
inheritance AFTER aunt Lucia informed them that a portion of the land had
been sold to Gacos and that a ricemill had been constructed on the land
> SUIT (September 1, 1975) by heirs of Petrona against Gacos for recovery of
1,352 sq.m., alleged to be the remnant of the 2,242 sq.m. because only 866 sq.m.
was sold to Marcial Olaybal > CONTENTION of Gacos: Sale was entire share
of 2,780 sq.m. and hence, no remnant of 1,352 to speak of
> SUIT (June 1, 1976) by sps. Arnulfo Prieto and Renita Chua Prieto against
Teodolfo Mendones and Visitacion Borrega and sps. Jesus and Merced Gabitos
for recovery of the 84 sq.m. property of Petrona which was fraudulently sold to
Mendones by Petronas sister Lucia
> PROPERTY SOLD TO MARCIAL ONLY 866 sq.m. NOT ENTIRE 2,242
sq.m. SHARE OF PETRONA
67
(1) Contract of Sale (March 18, 1948) between Petrona and Marcial indicated
2,720 sq.m with bounderies as that the subject property is bounded on the
North and West by the land of the late Eladio Gacos and other heirs
abovementioned, together with the widow of the late Severo Gacos, Mrs. Angela
Vda. de Gacos, on the East by National Road Irosin-Juban-Bulan, and on the
South, irrigation canal, and beyond the heirs abovementioned. ~ Cannot be
construed as a lump sale because the given boundaries do not coincide with the
boundaries declared in (i) the Tax Declaration of Marcial (866 sq.m.) and in the
sketch plan and filed sheet attached thereto, as testified by Marcial himself and
as pointed out by him when he encircled the property in the sketch plan made by
the Geodetic Engineer; (ii) the Partition of Eladios property as Petronas share
(2,242 sq.m.); (iii) the Deed of Absolute Sale by Marcial to Rosario (2,025
sq.m.) where the property indicated was bounded on the west by the Heirs of
Petrona Gacos
(2) Construction of a Fence by Marcial to separate the property he bought from
that of Petronas;
(3) Possession by Petrona, her 4 minor children and sister Lucia on the
remaining property;
(4) Instruction by Petrona to Lucia to sell her remaining property
(5) 27y possession by Prietos did not give a prescriptive right because the
possession must be under a claim of title or must have been adverse > Rosario
Gacos knew and recognized the sale on February 22, 1949 by Lucia to Teodolfo
Mendones of the eastern portion of the hereditary estate of Petrona ~ Mendones
is mentioned as the boundary owner on the south;
(6) Non-objection of the construction by sps. Gabito of a residential house on
the 84 sq.m. purchased property
>> Possession as prescriptive right must be possession under claim of title (en
concepto de dueno) or it must be adverse > mere tolerance of the owner are
clearly not "en concepto de dueno," and such possessory acts, no matter how
long so continued, do not start the running of the period of prescription
68
>> Rescission > general rule is that rescission of a contract will not be permitted
for a slight or casual breach, but only for such substantial and fundamental
breach as would defeat the very object of the parties in making the agreement. 12
The question of whether a breach of a contract is substantial depends upon the
attendant circumstances > LEGAL EFFECT (Art. 1385): to return the things
which were the object of the contract
>> Rescission
(1) Article 1191 > Rescission based on the breach of stipulation > Predicated on
breach of faith by the defendant, that violates the reciprocity between the
parties; injured party only; period; principal action > Principal action retaliatory
in character
(2) Article 1659 as an alternative remedy, insofar as the rights and obligations of
the lessor and the lessee in contracts of lease are concerned
(3) Article 1380 > Rescission based on economic prejudice > Subordinate to
the economic prejudice; third parties; no period; subsidiary action, exhaust all
remedies first;
>> royalty means the compensation paid for the use of a patented invention ~
when used in connection with a license under a patent, means the compensation
paid by the licensee to the licensor for the use of the licensor's patented
invention (Hazeltine Corporation vs. Zenith Radio Corporation)
G.R. No. 157480 May 6, 2005
PRYCE CORPORATION (formerly PRYCE PROPERTIES
CORPORATION) v. PHILIPPINE AMUSEMENT AND GAMING
CORPORATION
Facts: Pryce leased its hotel ballroom to PAGCOR for the operation of a casino
in Cagayan de Oro City. Despite the validity of the casino and the declaration of
unconstitutionality of the city ordinances prohibiting casinos, the casino in Pryce
Plaza Hotel failed and ceased due to the incessant public rallies. Nevertheless,
Pryce demanded the collection of rentals for the unexpired period. It was
rejected by PAGCOR and hence, Pryce exercised its right under the penal clause
and terminated the contract and demanded the payment of rentals that was
provided as penalty. The action sought by Pryce, hence, was not of rescission
but of termination because a rescission is a declaration of a contracts nullity
while termination is a fulfillment of the obligations. By seeking to collect
rentals, Pryce is enforcing its right under the contract which needs to be valid
thus and termination was the proper remedy which the court gave.
> Contract of Lease (November 11, 1992) between Pryce Properties Corporation
and Philippine Amusement and Gaming Corporation where former is to lease
the ballroom of the Pryce Plaza Hotel for a casino (plus 1k sq.m of the hotel
grounds for casino personnel) for 3y (December 1, 1992-November 30, 1995) >
Sangguniang Panlungsod of Cagayan de Oro Citys Policy Against Casinos that
resulted to the casinos closure:
(A) LAWS
(1) Resolution No. 2295 (November 19, 1990) prohibiting the establishment of a
gambling casino;
(2) Resolution No. 2673 (October 19, 1992) banning casinos in Cagayan De Oro
City;
(3) Ordinance No. 3353 (December 7, 1992) prohibiting the issuance of business
permits and canceling existing business permits to any establishment for using,
or allowing to be used, its premises or any portion thereof for the operation of a
casino ~ Subsequently declared as unconstitutional;
(4) Ordinance No. 3375-93 (January 4, 1993) prohibiting the operation of
casinos and providing for penalty ~ Subsequently declared as unconstitutional;
(B) RALLIES
(1) Afternoon of the casino opening (December 18, 1992) by local officials,
residents and religious leaders, with barricades to prevent entrance and exit to
casino of personnel;
(2) After PAGCOR resumed its casino operations upon declaration of
unconstitutionality of the ordinances (July 15, 1993);
(3) Incessant rallies
> Cease of Casino Operations by PAGCOR > Demand Letters (September
1,3,15, 1993) for payment of rental by Pryce, covering September 1 November
30, 1993 > Response of PAGCOR (September 20, 1993) that (i) its not
amenable to the payment of the full rentals due to the unforeseen legal and other
circumstances which prevented it from complying with its obligations; (ii) its
preterminating the contract; (iii) its demanding the refund of its rental deposits
> SUIT (November 15, 1993) by Pryce for sum of money > Letter by Pryce
(November 25, 1993): TERMINATION of the Contract by Pryce; Collection
Rental Payment as penalty pursuant to contract > CONTENTION of PAGCOR:
No rent to collect for the unexpired period because of termination of contract
> CONTRACT PENAL CLAUSE: That in case of breach or default, Pryce can
terminate the contract and collect rentals for the remaining term of the lease,
despite the exercise of such right to terminate > Article XX. BREACH OR
DEFAULT > a) The LESSEE agrees that all the terms, conditions and/or
covenants herein contained shall be deemed essential conditions of this
contract, and in the event of default or breach of any of such terms, conditions
and/or covenants, or should the LESSEE become bankrupt, or insolvent, or
70
compounds with his creditors, the LESSOR shall have the right to terminate and
cancel this contract by giving them fifteen (15 days) prior notice delivered at the
leased premises or posted on the main door thereof. Upon such termination or
cancellation, the LESSOR may forthwith lock the premises and exclude the
LESSEE therefrom, forcefully or otherwise, without incurring any civil or
criminal liability. During the fifteen (15) days notice, the LESSEE may prevent
the termination of lease by curing the events or causes of termination or
cancellation of the lease..c) Moreover, the LESSEE shall be fully liable to the
LESSOR for the rentals corresponding to the remaining term of the lease as well
as for any and all damages, actual or consequential resulting from such default
and termination of this contract.
> TERMINATION, Not Rescission was the prayer of Pryce
(1) An action praying for the payment of rental arrearages is for the partial
enforcement of a lease contract which is not rescission, but termination or
cancellation > Intention was not to rescind but to terminate and collect > (i)
Demand Letters seeking to collect the rentals; (ii) No evidence of intention to
rescind; (iii) Exercise of right to terminate from the penal clause;
(2) Reduction of rentals due because it was iniquitous > From P7,037,835.40 to
P687,289.50 > WHY: PAGCOR (i) first conducted a series of negotiations and
consultations before entering into the Contract ~ problems were told to be
surmountable; (ii) suffered tremendous loss of expected revenues;
>> Rescission
(1) Article 1191 > Rescission based on the breach of stipulation > Predicated on
breach of faith by the defendant, that violates the reciprocity between the parties
> Principal action retaliatory in character
(2) Article 1659 as an alternative remedy, insofar as the rights and obligations of
the lessor and the lessee in contracts of lease are concerned
(3) Article 1380 > Rescission based on exonomic prejudice > Subordinate to the
economic prejudice
>> Rescission v. Termination
> Rescission > Nature: to declare a contract null and void ab initio; abrogate it
from the beginning > Effect: mutual restitution; to restore the parties to relative
positions which they would have occupied had no contract ever been made > By
both or by either of the parties
> Termination > Nature: to end in time or existence; a close, cessation or
conclusion > Effect > to enforce the contracts terms prior to the declaration of
its cancellation > By both, by either exercising one of its remedies as a
consequence of the default of the other
> RIGHT TO RESCIND by sps. Galang under Art. 1191 because of Breach of
Faith in a mutual relationship
(1) Breach by sps. Cannu > Non-payment of the balance of the purchase price
and of the monthly amortizations with the NHMFC
(2) Breach by sps. Cannu was substantial > (a) Failure to pay for 18m before
sps. Galang (thru atty-in-fact) themselves paid for the balance of the mortgage;
(b) Failure to religiously pay the amortization WHERE they only paid 30ms
worth of debt in the span of 3y AND WHERE their application for assumption
of the mortgage obligation was not appoved because of their non-submission of
requirements > sps. Cannus clear intention to renege on and blatant noncompliance of their obligation > Alleged Managers Check is not tender of
payment for it was not consigned;
(3) Right to rescind not waived by Galangs in accepting payments of Cannu >
atty-in-fact merely accepted the installment payments as an accommodation
since they kept on promising they would pay;
(4) Exercise of option to rescind > Sps. Galang (thru atty-in-fact) constantly
followed-up the payment of the balance, presented the option to vacate the
property, and paid the balance themselves after a considerable time whereby
Cannus failed to pay ~ Payment by them was the act of rescission;
(5) Compliance of sps. Galang to their obligation > Delivery of the property
which the sps. Cannus even possessed;
(6) Although sps. Galang should have asked for judicial intervention to obtain a
judicial declaration of rescission, their Counterclaim seeks for the rescission of
the Deed of Sale with Assumption of Mortgage
>> Rescission or Resolution > Art. 1191 > Breach of faith > not be permitted for
a slight or casual breach of the contract as to defeat the object of the parties in
making the agreement > can be demanded only if the plaintiff is ready, willing
and able to comply with his own obligation, and the other is not
>> Rescission
(1) Article 1191 > Rescission based on the breach of stipulation > Predicated on
breach of faith by the defendant, that violates the reciprocity between the parties
> Principal action retaliatory in character
(2) Article 1659 as an alternative remedy, insofar as the rights and obligations of
the lessor and the lessee in contracts of lease are concerned
(3) Article 1380 > Rescission based on exonomic prejudice > Subordinate to the
economic prejudice
> Wrong to apply 1191?
G.R. No. 129107
How to harmonize with UP v. De los Angeles > automatic rescission has been
stipulated; otherwise, only via judicial decree
> My Answer to Example of Sir: Minors Guardian sold 70% of bus companys
buses for 40% less than the market value > What is the remedy? 2 Remedies for
rescission! 1381 by Minor, 1191 by Guardian in case the buyer does not pay the
purchase price because, for the first case, there is economic prejudice, and for
the second, there is breach of faith
G.R. No. 144934 January 15, 2004
ADELFA S. RIVERA, CYNTHIA S. RIVERA, and JOSE S. RIVERA v.
FIDELA DEL ROSARIO (deceased and substituted by her corespondents), and her children, OSCAR, ROSITA, VIOLETA, ENRIQUE
JR., CARLOS, JUANITO and ELOISA, all surnamed DEL ROSARIO
Facts: Fidela mortgaged her childrens property to Mariano in order to secure
the loan he granted to her. As part of the Agrement, the children of Mariano
would purchase the property and a Deed of Absolute Sale would be executed
upon the payment of the 2nd installment and the deposit of a check for the 3rd
installment to Fidela. Mariano failed to pay the full amount of the 2nd and 3rd
installments but caused the execution of the Deed of Sale which Fidela had
inadvertently signed together with the Agreement and Mortgage. Mariano was
thus able to acquire title to land upon registering the Deed of Sale which
prompted Fidela to file a suit for rescission of the Agreement and annulment of
the Deed of Sale. However, as a contract to sell, the Deed is ineffective and
hence cannot be subject to rescission. The contract did not acquire obligatory
force when the condition by which Fidelas obligation to sell is dependent on
did not arise, ie payment of the 2nd installment. Hence, the contract is ineffective
and without force. So, Art. 1191 cannot apply because it contemplates a failure
to comply with an obligation already extant, not a failure of a condition to
render binding that obligation.
> Deed of Real Estate Mortgage, Kasunduan (Agreement to Sell), and Deed of
Absolute Sale (March 10, 1987) between Fidela Del Rosario and Mariano
Rivera where former, under Special of Atty of her children, mortgaged the
parcel of land of the Del Rosario children in favor of Mariano to secure the
payment of the P250k loan he granted to her ~ Kasunduan provided that the
children of Mariano would purchase property (for P2,141,622.50) and that a
Deed of Absolute Sale would be executed only after the second installment
(P750k) is paid and a postdated check for the last installment (P1,141,622.50) is
deposited with Fidela ~ BUT Mariano already made the Deed of Absolute Sale
(where purchase price is only P601,160 and another lot was included) which
Fidela had inadvertently signed with the Agreemend and Mortgage > Surrender
of Title by Fidela to Mariano as guarantee for compliance of Kasunduan >
Failure of Mariano to pay the 2nd and 3rd installment ~ giving only a check of
P200k (October 30, 1987) to Fidela and P67,800 to Fidelas son who is
unauthorized to receive) > Refusal of Mariano to surrender the title ~ the
affidavit of loss by Del Rosario was offset when Mariano subsequently
registered the Deed of Absolute Sale (October 13, 1992) > SUIT (February 18,
1993) by Del Rosario for rescission of Kasunduan and Annulment of Deed of
Absolute Sale due to fraud, that Fidela never intended to enter into a Deed of
Sale at the time of its execution and that she signed the said deed on the
mistaken belief that she was merely signing copies of the Kasunduan (already
72y and confused as the documents were stacked one on top of the other at the
time of signing) > CONTENTION of Mariano: failure to prove that there was no
other legal means available to obtain reparation other than to file a case for
rescission; prescription
> NO RESCISSION > Contract is INEFFECTIVE, NO OBLIGATORY
FORCE > HENCE, 1385 does not apply
(1) As a contract to sell, it never became obligatory because of Marianos failure
to pay the entire purchase price ~ did not complete the 2nd installment and the 3rd
> Contract to sell imposes reciprocal obligations where Del Rosario is to sell
BUT ONLY UPON the 2nd installment of Mariano and Postdated check for the
3rd installment > Contract is ineffective > HENCE, not breach as contemplated
in Art. 1191 because there is no obligation; case not falling under 1381;
(2) No prescription yet > annulment of void contracts shall be brought within
four years, beginning from the time the fraud or mistake is discovered > Fraud
was discovered in 1992 and the complaint filed in 1993;
(3) In relation to 1385, there can be no restoration of what is received because
Mariano did not receive anything legally ~ no effective transfer of ownership >
BUT what about the payment received by Del Rosario?
>> Article 1385 that rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price with its
interest
>> RESOLUTION or Rescission of reciprocal obligations (Art. 1191) >
principal action that is based on breach of a party > obligors failure to comply
with an obligation already extant, not a failure of a condition to render binding
that obligation
>> Rescission of contracts (Art. 1383) > Rescission based on exonomic
prejudice > Subordinate to the economic prejudice
73
>>> BOTH contracts are validly entered into as well as subsisting, and both
require mutual restitution when proper
G.R. No. 133879 November 21, 2001
EQUATORIAL REALTY DEVELOPMENT, INC. v. MAYFAIR
THEATER, INC.
Facts: Carmelo leased his properties to Mayfair for 20y and with right of first
refusal to sale. But during the lease period, Carmelo sold the properties to
Equatorial without first offer to Mayfair. Mayfair thus had the Deed of Sale
annulled. Equatorial subsequently filed a suit for collection of the rent during the
period when the leases had expired and before the Deed of Sale to Equatorial
had been rescinded and to Mayfair issued by the Court. However, Equatorial has
no right of ownership because its Deed of Sale was not consummated by the
failure to deliver the property. Hence, it has no right of ownership and no right
to collect the rentals. Its constructive title by virtue of the Deed of Sale was
effectively destroyed by Mayfair when it filed the suit for annulment.
> Contracts of Lease between Carmelo & Bauermann, Inc. and Mayfair Theater
Inc. over the formers parcel of land and 2-storey buildings ~ (i) On June 1,
1967, for 20y, covering portion of the second floor and mezzanine of a twostorey building for the Maxim Theater, with right of first refusal to purchase the
subject properties; (ii) On March 31, 1969, for 20y, covering another portion of
the second floor and two store spaces on the ground floor and the mezzanine for
the Miramar Theater, with right of first refusal to purchase the subject properties
> Deed of Absolute Sale (July 30, 1978, within 20y lease) by Carmelo to
Equatorial Realty Development, Inc. for P11.3M, without first offer to Mayfair
> Suit by Mayfair for annulment of the Deed of Absolute Sale ~ Granted with
Deed Rescinded; Final and Executory (March 17, 1997) > Mayfair consigned
P11.3M and RTC issued a Deed of Sale in favor of Mayfair and Registry
canceled Equatorial's titles and issued new TCTs in the name of Mayfair > SUIT
(September 18, 1997) by Equatorial for the collection of a sum of money against
Mayfair as payment of rentals or reasonable compensation for Mayfairs use of
the premises after its lease contracts had expired ~ that Mayfairs contracts of
leases had expired (June 1, 1987; March 31, 1989) and as owner of the premises
for the period before the sale to Mayfair, Equatorial should be able to collect
rentals > That Art. 1385 provides that rescission creates the obligation to return
the things which were the object of the contract, together with their fruits, and
the price with its interest
> Equatorial has NO RIGHT to collect ~ Not Owners > No valid transfer of
ownership
(i) Deed of Sale between Carmelo and Equatorial was not consummated due to
the failure to deliver the property > Ownership is transferred only when the
object of the sale is delivered or placed in the control and possession of the
vendee > Equatorial never took actual control and possession of the property
sold ~ Payment of rentals by Mayfair to it was only to avoid ejectment and
maintain physical possession of the premises while awaiting the outcome of the
annulment case > No right of ownership conferred to Equatorial > The rentals
that fell due from the time of the perfection of the sale to Equatorial until its
rescission by final judgment should belong to the owner of the property during
that period, who is Carmelo;
(ii) Constructive title of Equatorial by virtue of the Deed of Sale was rebutted by
Mayfair when it opposed the transfer of the property in filing the annulment suit;
(iii) (RTC but held Wrong) Deed of Sale was rescinded and the effect of
rescission is to make the contract void from the beginning, as if it never
happened;
(iv) Even if the Deed is valid until rescinded, Rescission was timely sought by
Mayfair before the Deed was consummated > GENERAL PROPOSITION that a
rescissible contract is valid until rescinded is overcome by the SPECIFIC
PROVISION that ownership is acquired, not by mere agreement, but by
tradition or delivery in deciding specific cases (Justice Holmes) > Sale to
Equatorial may have been valid from inception, but it was judicially rescinded
before it could be consummated because the sale was not consummated by a
legally effective delivery of the property sold;
(v) Equatorial is a buyer in bad faith, rendering the Deed rescissible > Equatorial
was aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts > Equatorial cannot tenably claim to be a purchaser in
good faith, and, therefore, rescission lies
>> Rescssion > to rescind is to declare a contract void in its inception and to put
an end as though it never were; to abrogate it from the beginning > EFFECT:
not merely to terminate it and release parties from further obligations to each
other but to restore parties to relative positions which they would have occupied
had no contract ever been made
>> Ownership > a real right which the buyer acquires only upon delivery of the
thing to him in any of the ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the
vendor to the vendee > TRANSFER OF RIGHT not merely by contract, but also
by tradition or delivery
>> Delivery a composite act by which one party parts with the title to and the
possession of the property, and the other acquires the right to and the possession
of the sam; absolute giving up of the control and custody of the property on the
74
part of the vendor, and the assumption of the same by the vendee; transfer of
possession or when the thing sold "is placed in the control and possession of the
vendee > Either actual or constructive > Execution of a public instrument of sale
is only a constructive or symbolic delivery that becomes valid only when there is
no impediment that may prevent the passing of the property from the hands of
the vendor into those of the vendee
Watercraft Corporation in which they were also stockholders > Suit Granted
(July 19, 1977) in favour of Union and adverse claim on the vessels was
annotated for payment > Purchase (September 7, 1978) of the Vessels from
Valenzuela by Far East Chemco Leasing Corporation, then from Far East by
Peninsula Tourist Shipping Corporation (May 27, 1980) > SUIT (February 21,
1984) by Union against Far East for return of the vessels
>> Rent > a civil fruit that belongs to the owner of the property producing it by
right of accession
> Deed of Real Estate Mortgage, Kasunduan (Agreement to Sell), and Deed of
Absolute Sale (March 10, 1987) between Fidela Del Rosario and Mariano
Rivera where former, under Special of Atty of her children, mortgaged the
parcel of land of the Del Rosario children in favor of Mariano to secure the
payment of the P250k loan he granted to her ~ Kasunduan provided that the
children of Mariano would purchase property (for P2,141,622.50) and that a
Deed of Absolute Sale would be executed only after the second installment
(P750k) is paid and a postdated check for the last installment (P1,141,622.50) is
deposited with Fidela ~ BUT Mariano already made the Deed of Absolute Sale
(where purchase price is only P601,160 and another lot was included) which
Fidela had inadvertently signed with the Agreemend and Mortgage > Surrender
of Title by Fidela to Mariano as guarantee for compliance of Kasunduan >
Failure of Mariano to pay the 2nd and 3rd installment ~ giving only a check of
P200k (October 30, 1987) to Fidela and P67,800 to Fidelas son who is
unauthorized to receive) > Refusal of Mariano to surrender the title ~ the
affidavit of loss by Del Rosario was offset when Mariano subsequently
registered the Deed of Absolute Sale (October 13, 1992) > SUIT (February 18,
1993) by Del Rosario for rescission of Kasunduan and Annulment of Deed of
Absolute Sale due to fraud, that Fidela never intended to enter into a Deed of
Sale at the time of its execution and that she signed the said deed on the
mistaken belief that she was merely signing copies of the Kasunduan (already
72y and confused as the documents were stacked one on top of the other at the
time of signing) > CONTENTION of Mariano: failure to prove that there was no
other legal means available to obtain reparation other than to file a case for
rescission; prescription
> NO RESCISSION > Contract is INEFFECTIVE, NO OBLIGATORY
FORCE > HENCE, 1385 does not apply
(1) As a contract to sell, it never became obligatory because of Marianos failure
to pay the entire purchase price ~ did not complete the 2nd installment and the 3rd
> Contract to sell imposes reciprocal obligations where Del Rosario is to sell
BUT ONLY UPON the 2nd installment of Mariano and Postdated check for the
3rd installment > Contract is ineffective > HENCE, not breach as contemplated
in Art. 1191 because there is no obligation; case not falling under 1381;
(2) No prescription yet > annulment of void contracts shall be brought within
four years, beginning from the time the fraud or mistake is discovered > Fraud
was discovered in 1992 and the complaint filed in 1993;
(3) In relation to 1385, there can be no restoration of what is received because
Mariano did not receive anything legally ~ no effective transfer of ownership >
BUT what about the payment received by Del Rosario?
>> Article 1385 that rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price with its
interest
>> RESOLUTION or Rescission of reciprocal obligations (Art. 1191) >
principal action that is based on breach of a party > obligors failure to comply
with an obligation already extant, not a failure of a condition to render binding
that obligation
>> Rescission of contracts (Art. 1383) > Rescission based on exonomic
prejudice > Subordinate to the economic prejudice
>>> BOTH contracts are validly entered into as well as subsisting, and both
require mutual restitution when proper
G.R. No. 134685
November 19, 1999
MARIA ANTONIA SIGUAN v. ROSA LIM, LINDE LIM, INGRID LIM
and NEIL LIM
Facts: One year after a deed of donation was executed by Lim, she incurred
debt against Siguan for issuing 2 bouncing checks. The Deed of Donations were
registered after the charge was filed and was sought to be rescinded to answer to
the debt which was alleged to be fraudulent.
1. August 10, 1989: Deed of Donation covering parcels of land > by Rosa
Lim in favor of her children > registered only on July 2, 1991
2. July 31, 1990: Victoria Suarez filed a criminal charge against Lim for
estafa > convicted but criminally acquitted by SC but with civil liability
of P169k as actual damages
3. August 25&26, 1990: Lim issued 2 checks to Maria Antonia Siguan
worth P300,000 and P241,668, respectively, payable to cash >
Dishonoured because account closed
a. Siguan filed a criminal charge against Lim for issuing
bouncing checks > (Registration of Deeds of Donation on July
2, 1991) > Lim convicted (December 29, 1992) > action for
rescission and nullification of new titles by Siguan > as
creditor allegedly defrauded by donations because it left Lim
with no sufficient properties to pay her obligations
b. Contentions of Lim
i. No proof that donations were antedated to defraud
Siguan > Deed was notarized > public document >
prima facie evidence of the facts therein
76
No fraud
Not fraudulent because donations were made before debt was incurred
a. accion pauliana > action to rescind contracts in fraud of
creditors
i. Requisites > (1) the plaintiff asking for rescission has
a credit prior to the alienation, although demandable
later > existence of creditors at the time of the alleged
fraudulent alienation > date of the judgment
enforcing it retroacts to date of debt; (2) the debtor
has made a subsequent contract conveying a
patrimonial benefit to a third person; (3) the creditor
has no other legal remedy to satisfy his claim; (4) the
act being impugned is fraudulent; (5) the third person
who received the property conveyed, if it is by
onerous title, has been an accomplice in the fraud.
ii. Without any prior existing debt > neither injury nor
fraud
b. Lack of first 2 requisites > Deed of Donation executed 1 year
prior to the constitution of credit to Siguan (criminal charge) >
credit of Suarez cannot be invoked to justify rescission >
rescission is allowed only for recovery of creditors
unsatisfied credit > Art. 1384 provides that rescission shall
only be to the extent necessary to cover the damages caused ~
only the creditor who brought the action for rescission can
benefit from the rescission, not strangers (Suarez)
c. Lack of 3rd requisite > action for rescission is a subsidiary
remedy > the exhaustion of all remedies by the prejudiced
creditor to collect claims due him before rescission is resorted
to > Siguan had neither alleged nor proved that she did so
d. Lack of 4th requisite > Art. 1387: All contracts by virtue of
which the debtor alienates property by gratuitous title are
presumed to have been entered into in fraud of creditors when
the donor did not reserve sufficient property to pay all debts
contracted before the donation > must be established that the
2.
3.
> Suits (August 1909, March 1910) by Gutierrez Hermanos against Oria
Hermanos & Co. for the recovery of P147,204.28 and P12,318.57 > Dissolution
and Liquidation (April 30, 1910) of Oria Hermanos & Co. and its properties >
Contract of Sale (June 1910) between Tomas Oria (managing partner; coowner)
and 25y/o son Manuel Orio Gonzales, covering all of the property of Oria
Hermanos & Co. for P274k but with prohibition not to sell, alienate, transfer or
mortgage, either wholly or in part, the property sold without the written
authorization of Tomas > Judgment in favor of Gutierrez (September 17, 1910)
~ Attachment and Sale of Oria Cos steamship Serantes, which was included in
the sale to Gonzales ~ Gonzales notified the sheriff of his ownership but
Gutierrez paid a bond for his protection, as required by the Sheriff > SUIT
(October 19, 1910) by Gonzales against Gutierrez for injunction to prevent the
sale, declaration that he is the owner and restoration of possession >
CONTENTION of Gonzalez: Validity of the sale from Oria Hermanos & Co. to
him; Sufficiency of Companys other property to pay the judgment of Gutierrez
> CONTENTION of Gutierrez: Sale is fraudulent as against himself as creditor
> SALE WAS FRAUDULENT
(1) Sale was made while the actions of Gutierrez were already pending against
the Company > Claim was for P160k and the Sale involved assets worth P274k;
(2) Vendee was the son of Tomas and nephew of the coowners > that Company
would not have sold it if vendee was a stranger;
(3) No consideration > No proof of payment or delivery of any consideration;
(4) Oddity that vendee is able to afford P274k when he was just 25, a student
who owned no asset nor had any business at the time of the sale and without
gainful occupation > A proceeding so unusual, so devoid of care and caution,
and so wholly outside of the well defined lines of ordinary business transactions,
as to startle any person interested in the concern;
(5) Awareness of vendee Gonzales of the two suits that have already been begun
against the Company whose assets he was purchasing;
(6) Sale offered no security to the creditors of Company > prohibition against
the sale of the properties is not security > leaves the creditors substantially
without recourse BECAUSE the property of the company is gone, its income is
gone, the business itself is likely to fail, the property is being dissipated, and is
depreciating in value;
> HENCE, Sale is void in so far as was necessary to permit the collection of its
judgment ~ Steamship thus validly attached even without action for annulment
of sale
>> TEST OF FRAUD
b.
No fraud
Not fraudulent because donations were made before debt was incurred
a. accion pauliana > action to rescind contracts in fraud of
creditors
i. Requisites > (1) the plaintiff asking for rescission has
a credit prior to the alienation, although demandable
later > existence of creditors at the time of the alleged
fraudulent alienation > date of the judgment
enforcing it retroacts to date of debt; (2) the debtor
has made a subsequent contract conveying a
patrimonial benefit to a third person; (3) the creditor
has no other legal remedy to satisfy his claim; (4) the
act being impugned is fraudulent; (5) the third person
who received the property conveyed, if it is by
onerous title, has been an accomplice in the fraud.
ii. Without any prior existing debt > neither injury nor
fraud
b. Lack of first 2 requisites > Deed of Donation executed 1 year
prior to the constitution of credit to Siguan (criminal charge) >
credit of Suarez cannot be invoked to justify rescission >
rescission is allowed only for recovery of creditors
unsatisfied credit > Art. 1384 provides that rescission shall
only be to the extent necessary to cover the damages caused ~
5.
6.
only the creditor who brought the action for rescission can
benefit from the rescission, not strangers (Suarez)
c. Lack of 3rd requisite > action for rescission is a subsidiary
remedy > the exhaustion of all remedies by the prejudiced
creditor to collect claims due him before rescission is resorted
to > Siguan had neither alleged nor proved that she did so
d. Lack of 4th requisite > Art. 1387: All contracts by virtue of
which the debtor alienates property by gratuitous title are
presumed to have been entered into in fraud of creditors when
the donor did not reserve sufficient property to pay all debts
contracted before the donation > must be established that the
donor did not leave adequate properties which creditors might
have recourse for the collection of their credits existing before
the execution of the donation
i. Siguans credit existed only a year after the donation
> could not have been prejudiced or defrauded by
such alienation
ii. Lim still had parcels of land in Cebu and Leyte > no
proof that its actual market value were insufficient to
cover her debts existing before the donation was
made
Fraudulent Acts by Jurisprudence > not exclusive
a. The fact that the consideration of the conveyance is fictitious
or is inadequate;
b. A transfer made by a debtor after suit has begun and while it is
pending against him;
c. A sale upon credit by an insolvent debtor;
d. Evidence of large indebtedness or complete insolvency;
e. The transfer of all or nearly all of his property by a debtor,
especially when he is insolvent or greatly embarrassed
financially;
f. The fact that the transfer is made between father and son,
when there are present other of the above circumstances; and
g. The failure of the vendee to take exclusive possession of all
the property.
No legal basis > Awards of damages, attorney's fees and expenses of
litigation
the title on an earlier date than the annotation of the notice of levy and certificate
of sale in favor of Chinabank
> Validity of Redemption by Paulino of Alfonsos share
(1) Valid Deed of Assignment of Right to Redeem from Alfonso to Paulino > (i)
Good Faith: Lack of knowledge of Paulino about Alfonsos debt to Chinabank;
(ii) Consideration: Paulino paid Alfonso P100k for the right to redeem and paid
Metrobank P1,463,375.39 for the redemption ~ If it is questioned as insufficient,
the value was accepted by Metrobank, refers only to share of the property,
and value still undetermined subject only to liquidation of the conjugal
partnership > But what is the value of a right of redemption? Option = Fair
market value minus redemption price;
(2) Even if Assignment was void, redemption by Paulino was valid as a
compulsory heir of Alfonso ~ that judgment debtor or his successor in interest
may redeem real property sold on execution (Rule 39, Section 29 (a) of the 1964
Rules of Court);
(3) Expiration of redemption period wherein Chinabank, as a redemptioner,
could have redeemed the property from Metrobank > 12m (1964 Rules of Court)
> Annotation of Metrobanks title on December 22, 1987; Levy by Chinabank
on February 4, 1991 > No more right to redeem as redemptioner >
MEANWHILE, Paulino was able to redeem the property within the 12m, on
January 11, 1989;
(4) As a family home, of the property could not have been acquired by either
Banks as it will create an absurd co-ownership between a bank, on the one hand,
and a family, on the other hand, of the latters family home
>> HENCE, with or without the Deed of Assignment, the Property was no
longer Alfonsos when levied by Chinabank ~ Already Metrobanks and
Paulinos
>> PRESUMPTION OF FRAUD Against Creditors (Art. 1387)
(1) that alienations made by a debtor by gratuitous title are presumed fraudulent
when the donor did not reserve sufficient property to pay his outstanding debts
(2) that alienations by onerous title are presumed fraudulent when made by
persons against whom some judgment has been rendered or some writ of
attachment has been issued
> Presumptions NOT conclusive ~ Can be overthrown by evidence showing that
the conveyance was made (a) in good faith and (b) for a sufficient and valuable
consideration
>> successor-in-interest > a person to whom the judgment debtor has transferred
his right of redemption, or one to whom he has conveyed his interests in the
property for purposes of redemption, or one who succeeds to his property by
81
operation of law, or a person with a joint interest in the property, or his spouse
or heirs
G.R. No. 138104 April 11, 2002
MR HOLDINGS, LTD. v. SHERIFF CARLOS P. BAJAR, SHERIFF
FERDINAND M. JANDUSAY, SOLIDBANK CORPORATION, AND
MARCOPPER MINING CORPORATION
Facts: To secure the loan granted by ADB, Marcopper was provided cash flow
support by Placer Dome (coowner of Marcopper). When Marcopper defaulted,
Placer Dome thus paid its obligations to ADB thru its subsidiary, MR Holdings.
Meanwhile, Solidbank was able to obtain a partial judgment in its favor and
against Marcopper for money. Despite the partial judgment, Marcopper ceded
all its properties to MR Holdings. Nonetheless, Solidbank levied the properties.
Hence, MR Holdings sued to prevent the auction as the owner of the properties.
The Deed of Assignment by Marcopper in favor of MR Holdings was valid even
if it was made after the partial judgment because it was for a valuable
consideration of $18,453,450.02 and in good faith where even before the debt to
Solidbank, MR Holdings subsidiary (Placer Dome) had already agreed to
secure Marcoppers debt to ADB and ADB had already transferred its rights to
MR Holdings. Hence, MR Holdings right has greater weight than Solidbank as
the mortgage creditor for the mortgage properties of MR Holdings which the
Marcopper had assigned to MR Holdings as payment of its debt.
> Loan Agreements (November 4, 1992) by Asian Development Bank in favor
of Marcopper Mining Corporation for $40M (Principal loan worth $15M,
Complementary loan worth $25M to finance the latters mining project; former
funded by ADB itself and latter funded by the Bank of Nova Scotia,
participating finance institution of ADB) > Security of Loans: (i) Placer Dome,
Inc.(foreign corporation owning 40% of Marcopper) agreed to provide
Marcopper with cash flow support for the payment of its obligations to ADB;
(ii) Deed of Real Estate and Chattel Mortgage (November 11, 1992) in favor of
ADB, covering all of Marcoppers properties ~ registered (November 12, 1992)
> Default of Marcopper; Assumption of Marcoppers obligation (worth
$18,453,450.02) by MR Holding, Ltd., Placer Domes subsidiary corporation by
virtue of (i) Assignment Agreement (March 20, 1997) where ADB assigned all
its rights and interests under the loan agreements to MR Holding, and (ii) Deed
of Assignment (December 8, 1997) where Marcopper assigned its properties to
MR Holding ~ Change of debtor in relation to ADB and of creditor in relation to
Marcopper (MH Holding became the creditor of Marcopper when it paid ADB
and hence, Marcopper ceded its properties to it while ADB ceded its right to
collect to it) > MEANWHILE, Partial Judgment (May 7, 1997) in favor of
the consent of both. Gimena could not seek annulment as she was responsible
for the defect; husband had already died and should have sought annulment
during marriage. However, the children had the right to recover the property as
it prejudiced their rights to the share of their father. And because sps. Felipe
were buyers in bad faith, the children were able to annul the sale in due time
because the prescription of 30y was still operating.
> Purchase (1948 and 1950) by sps. Maximo Aldon and Gimena Almosara of
properties during marriage (1936) ~ Conjugal property > Sale of the conjugal
land by Ginema to sps. Eduardo Felipe and Hermogena V. Felipe (1951) ~
without Maximos consent > SUIT (April 26, 1976) by Gimena and children for
recovery of the property > CONTENTIONS of Gimena: that the transaction was
only an oral mortgage and that their offer to redeem it was refused >
CONTENTIONS of sps. Felipe: that it was a sale, with no right of redemption
> Transaction was of SALE but VOIDABLE > Lack of consent by Gemina >
Valid Annulment by the children
(1) The property was conjugal and hence, cannot be alienated by either spouse
without the consent of the other (Arts. 166, 172, former prohibiting husband,
latter wife) > Though there are exceptions, the sale does not fall in it;
(2) Voidable Contract for Lack of Consent > Gemina could not have sold the
property without husbands consent > Consent must have been given by both
spouses > Not (i) rescissible ~ Gimena's consent was tainted; (ii) unenforceable
~ does not fit in Art. 1403; (iii) void or inexistent ~ not in Art. 1409;
(3) Annulment can be sought by:
(i) the husband who was the victim because he had an interest in the contract
BUT only during the marriage > He died already > Marriage terminated and CP
dissolved already;
(ii) the children > inchoate right to the share of their father became actual upon
their fathers death > acquired the right to question the defective contract insofar
as it deprived them of their hereditary rights in their father's share
(iii) Not Gimena because she was the responsible party for the defect;
(4) Prescription has not yet lapsed > (a) Sps. Felipe are buyers in bad faith >
knew that they did not acquire ownership because they even attempted to have
Gimena sign a Deed of Sale (disguised as consent to construction of an
irrigation pump) in December 1970 > (b) Children's cause of action accrued
from the death of their father in 1959 and they filed the action in 1976 >
Prescription is 30y (Art. 1141)
> What is capacity to contract> Civil Code 37 ~ Act with legal effect
G.R. No. L-27343
property. SMSJ assailed the right of the grandchildren to the land as owners
because they were just minors. However, the defect in the redemption can only
be assailed by the victims, who were the minors themselves, and their lack of
action for the annulment of the same rendered the voidable contract valid until
annulled. Hence, they had the right as owners absent annulment of their
redemption.
> Ownership by Dr. Nicolas Valisno Sr. of 57-hectare property > Mortgage of
12-hectares (October 20, 21, 1972) by Dr. Valisno in favor of Renato and
Angelito Banting > Subdivision of the Property to 10 (November 8, 1972) ~
Title issued to children of Nicolas, Angelito Banting, and Renato Banting >
Foreclosure of the Mortgage, sold to Dr. Valisnos grandchildren (Maria
Cristina F. Valisno, Leonora Valisno Yujuico, Benedicto Valisno Yujuico and
Gregorio Valisno Yujuico) thru their parents by redemption from mortgagees
(October 25, 1973) ~ Issuance of title to redemptioners (November 26, 1998) >
Subjection of 57-hectare to expropriation > Memorandum (June 14, 1995) by
Provincial Agrarian Reform Officer that although the property had already been
subdivided among the heirs of Dr. Valisno, the excess over the five-hectare
retention limit could still be covered (RA 6657) ~ Same rationale by Secretary
Garilao who subjected the property to Comprehensive Agrarian Reform
Program, subject to the retention rights of the heirs > Consolidated Application
for Retention and Award under RA 6657 (September 25, 1997) by Valisno heirs
~ Granted > Oppostion by SMSJ ~ that the grandchildren are not actually tilling
nor directly managing the land in question as required by law ~ Grandchildren
not entitled to retention rights as landowners due to minority
> Valid Redemption by the Minors: Lack of Annulment by the Aggrieved Party
(1) Even as the victims or the aggrieved parties who had the only right to annul
the redemption, the minors never initiated any action > Why minors are the
aggrieved ~ Contract was made for them, not by them;
(2) Hence, the properties transferred to the Redemptioner-Grandchildren in 1973
and no longer part of the Valisno estate > Thus, as owners, they are entitled to
retention which is granted to all landowners > Limit is 5-hectares, Entire
Redeemed property is 12-hectares, Each owner only retains 3-hectares;
(3) Even if minors in 1973 when property was redeemed, they were of legal age
in 1994 when SMSP initiated the petition for coverage of the subject
landholding under the CARL, and in 1997 when all the Valisno heirs filed their
Consolidated Application for Retention and Award under RA 6657
>> Art. 1327 that minors are incapable of giving consent to a contract
>> Art. 1390 that a contract where one of the parties is incapable of giving
consent is voidable or annullable > not void ab initio
84
>> Requirements for an Action for the Annulment: (1) the plaintiff must have an
interest in the contract; and (2) the action must be brought by the victim and not
the party responsible for the defect > Art. 1397 that the action for the annulment
of contracts may be instituted by all who are thereby obliged principally or
subsidiarily
G.R. No. 74938-39
Facts: Ching was a lessee of the property of Jabit. When Jabit died, his daughter
offered the property for sale to Ching thrice but the latter refused. Daughter
Angelina thus demanded that he leave the property because she had already sold
it to another. Angelina also had the building thereon demolished. Ching sued for
the annulment of the sale to Leonida and the injunction of the demolish order.
However, as a third party to the contract, Ching cannot seek its annulment. He
does not have any right to the property as it was outside the coverage of the law;
even if it was the preemptive right cannot apply to him because the building was
belonged to the lessor; no contract of lease to even grant him the right of first
refusal; even if there was Angelina had thrice offered the land for sale.
> Lease of the Lot and Bldg of Mr. Jabit to Gaw Ching, non-citizen (1951; no
contract) ~ 1st flr, Chings Victoria Blacksmith Shop; 2nd flr, residence > Death
of Mr. Jabit; Continued Lease with daughter Angelina Malabanan (still no
contract) > Notices (April 27, 1980, May 13, 1980, October 2, 1980) by
Angelina to Ching that she is selling the property for P5k/sq.m. ~ Refusal of
Ching (not yet a Filipino citizen until October 7, 1980); Threat by Angelina that
she is to sell it to another > Payment by Ching of rentals to Pacific Banking
> VALID SALE > Cannot be contested and annulled by Ching who was not a
party to the contract > Does not come under exception because No right over the
property > No legal basis to grant his petition
(1) Ching had no legal right of preemption pursuant to Secs, 4, 6, PD 1517, PD
1893 and Letter of Instruction No. 935 which provides a preemptive right on the
part of a lessee over leased property > Property of Angelina is located outside
the Urban Reform Zones (as defined in PD 1517);
(2) [Assuming Property was covered by PD 1517], Ching has no right because
the preemptive/redemptive rights of a lessee under P.D. No. 1517 exists only in
respect of the urban land under lease on which the tenant or lessee had built his
home and in which he had resided for 10y or more > Building was built and
belonged to lessor;
(3) Preemptive right that Ching could have had could only have been created by
contract > No contract of lease between Ching and Jabit/Angelina;
(4) [Assuming Ching had Preemptive Right] Angelina thrice offered the
property to Ching but the latter had consistently refused to buy it > There was no
prejudice and could not have suffered any prejudice by the sale of the same
piece of land to Leonida;
(5) No fraud where the sale of the property to Leonida preceded the offer to
Ching;
85
(6) Any lease agreement by Ching must in any case be held to have lapsed when
the leased house was condemned and the order of demolition issued;
(7) HENCE, Ching does not have the right or interest to annul the contract
which he is not a party to
>> GENERAL RULE: strangers to a contract cannot sue either or both of the
contracting parties to annul and set aside that contract > Arts 1397 that action for
the annulment of contracts may be instituted by all who are thereby obliged
principally or subsidiarily; Art. 1311 that Contracts take effect only between the
parties, their assigns and > EXCEPTIONS (Ibanez v. Hongkong and Shanghai
Bank): Injury to a third person where nullification is absolutely necessary to
protect the her lawful rights ~ the existence of an interest in a particular contract
that is the basis of one's right to sue for nullification of that contract and that
essential interest in a given contract is, in general, possessed only by one who is
a party to the contract
PELC obtained an annulment of the sale to Henry and hence, is entitled to the
amount of its remaining cedars which Henry had purchased, plus the value of its
commission. The sale to the Government cannot be annulled for it was
consummated before the sale of PELC to Henry. Thus, the parties were ordered
to paid the amount due to the other.
> Delivery and Subsequent Sale of 581 Cedar Piles by Pacific Export Lumber
Company (Portland) to Henry W. Peabody & Company (Manila) ~ Original
Rate as Agent was $15/pile BUT Henry, as agent, communicated that there was
lack of demand (August 2, 1902) > MEANWHILE, Sale (August 4) by Henry of
213 piles to Government for $19/pile ~ Earned $10,41.66 > Offer by PELC to
sell $12/pile (August 5) ~ Accepted (August 6) > Payment by Henry to PELC of
$6,972 for the 581 piles at $12 each, which was $3,445.66 less than the amount
earned by Henry from sale to Government
> COMPUTATION:
(a) To PELC:
$1,760.88 (Remaining Piles purchased by Henry minus its commission)
+
$331.17 (Commission of Henry, disallowed due to annulment)
+
$359.77 (Interest rewarded by Court)
$4,541.98 or P9,083.96
> Payment of $4,541.98 or P9,083.96 by PELC to Henry
> Fraud that allows annulment is before/during contract because it would vitiate
consent > Incidental Fraud only and hence, only claim for damages (Not
rescind)
87
Velarde v. CA
Facts: ARRA sold its 2nd flr. to Pealoza. Nonetheless, it mortgaged the entire
lot and building to China Bank to secure payment of its loans. When ARRA thus
defaulted, ARRA foreclosed the properties but the same were redeemed by
ARRA thru GDCIA which was issued a Deed of Absolute Sale in its favor.
Hence, Pealoza sued for fulfillment of contract or refund what she had already
paid; the latter was granted by the Court. The Sale with Pealoza was valid and
binding and hence, she had the right to annul when ARRA mortgaged the
property sold. She is granted refund whild GDCIAs contract was maintained
and valid also absent proof of bad faith.
> Letter-Contract of Sale (November 18, 1982) between Arra Realty
Corporation (owner of lot and 5-storey building) and Engineer Erlinda Pealoza
where latter bought part of the 2nd flr. (552 sq.m.) for P3,105,838 ~
CONDITIONS for Pealoza is DP P901,738 until January 30, 1983 and Balance
in 20 equal quarterly installments of P110,205; CONDITIONS for Arra is
Delivery of Property and Title ASAP (as soon as 2nd flr was constructed) >
Possession (May 1983) by Pealoza of the 2nd flr. ~ Put up an Office and a
School (St. Michael International Institute of Technology) > Real Estate
Mortgage of Lot,Building (May 12, 1983) by Arra in favor of China Banking
Corporation as security for a loan ~ Annotated (June 3, 1983) BUT Unknown to
Pealoza > Payment by Pealoza (February 23, 1983 to May 31, 1984)
amounting to P1,175,124.59 ~ Stopped after she learned of the mortgage in July
1984 > Letter by Pealoza to Chinabank (August 1, 1984) of her sale of 2nd flr.
and offered to pay for Arras loan up to the equivalent amount of the balance of
the purchase price; Rejected; Letter with Deed of Absolute Sale with
Assumption of Mortgage (received from Arra as demanded by her Letter on
August 31, 1984) > Withholding of Installment Payments by Pealoza; Transfer
of the School (October 3, 1984); Closing of Office but which was Reopened
after it was padlocked by Arra when it closed > Affidavit of Adverse Claim
(November 26, 1984) by Pealoza ~ Annotated (November 27, 1984); Cancelled
(February 11, 1985) > Extrajudicial Foreclosure by Chinbank upon Failure of
Arra to pay its loan; Sale to Chinabank (August 13, 1986) for P13,953,171.07 >
Deed of Conditional Sale (April 29, 1987) byArra to Guarantee Development
Corporation and Insurance Agency which would redeem the property for P22M
~ Redeemed (May 4, 1987); Deed of Absolute Sale (May 14, 1987); TCT in
favor of GDCIA (May 15, 1987) > SUIT (May 28, 1987) by Pealoza against
the Arra, GDCIA, sps. Arguelles > CONTENTIONS of Arra: (a) No contract of
sale was perfected between Arra and Pealoza ~ Failure of Pealoza to pay the
balance of the total purchase price ~ Due January 1983 but DP Completion only
March 4, 1983, Payment of only 3 installments, 4th incomplete; (b)
Abandonment of property when Pealoza transferred the school without prior
notice; (c) Failure of Pealoza to pay for the advances extended to her
88
(P302,753.06) and of rentals for her occupancy of the property (P2,177,935); (d)
GDCIA was a purchaser of the property in bad faith ~ knowledge of the claims
of Pealoza and the fact that the building was occupied by private individuals;
(e) GDCIAs refusal of Arras offer to return the P21M purchase price ~
Rescission by Arra of Deed of Sale with GDCIA > RTC Held: Annulled Sale
between Arra and Pealoza; Pealoza Entitled to Refund of P1,444,124.59 with
12% annual interest; Valid Sale to GDCIA; No counterclaim for Arra ~ did not
petition for any damages but raised only when they moved for the
reconsideration of the decision of the CA
> November 18, 1982 Letter-Agreement: I would like to review the arrangement
arrived at our meeting yesterday afternoon. You shall share one (1) floor of the
proposed 5-storey office building to be constructed on a 992 sq. mt. lot owned
by ARRA Realty Corporation located at Alvarado St., Legaspi Village, Makati,
Metro Mla. The consideration for which you shall own one (1) floor is THREE
MILLION ONE HUNDRED FIVE THOUSAND EIGHT HUNDRED THIRTYEIGHT PESOS (P3,105,838.00) on a deferred payment plan. The initial
payment of NINE HUNDRED ONE THOUSAND SEVEN HUNDRED THIRTYEIGHT PESOS (P901,738.00) shall be paid within sixty (60) days from
November 20, 1982 and the balance payable in 20 equal quarterly payments of
ONE HUNDRED TEN THOUSAND TWO HUNDRED FIVE PESOS
(P110,205.00). Every payment that you make, ARRA shall credit your account
by way of partial payment to your stock subscriptions of ARRAs capital stock.
As soon as our contractor, Pyramid Construction and Engineering Corporation,
complete its commitment with us, which is not more than five (5) months, you
shall immediately take possession of the floor of your choice. Further, as soon
as practicable, the Title corresponding to the floor that you own shall be
transferred to your name.
However, should you pay in full at the end of the fourth quarter or at any time
prior to the 5-year arrangement, the price shall be adjusted accordingly.
I believe that this accurately summarizes our understanding. If you have any
questions or if I have not properly stated our agreement, please let me know,
otherwise, you may signify your conformity by signing the duplicate copy of this
letter.
> Pealozas Right to Refund
(1) Perfected Contract of Sale b/w Pealoza and Arra > (i) Meeting of Minds
despite Lack of Ownership by the seller of the thing sold at the time of the
perfection of the contract of sale ~ not an element of its perfection > (ii)
Perfection does not transfer ownership BUT Delivery ~ Pealoza took
possession of the 2nd flr, put up her office and operated the St. Michael
International Institute of Technology > Thus became the owner (Art. 1477);
(2) Failure by Pealoza to Pay > Failure to Pay DP on time ~ Vendor cannot
recover the thing sold even if the vendee failed to pay in full the initial payment
for the property BUT will merely give the vendor the option to rescind the
contract of sale judicially or by notarial demand (Art. 1592) > Arra accepted the
delayed payments without any objections;
(3) Pealoza may suspend the payment of the price of the property sold (Art.
1590) ~ reasonable grounds to fear such disturbance ~ mortgage of the
purchased property;
(4) Non-waiver by Pealoza of her right to enforce the Letter-Agreement >
maintained her office > Turned over the possession of the property on October
7, 1986 BUT immediately filed her complaint against Arra;
(5) No proof of Bad Faith of Pealoza and GDIAC;
(6) No action for rescission of sale with GDCIAC
>> Elements of Abuse of Rights: (a) the existence of a legal right or duty; (b)
which is exercised in bad faith; (c) for the sole intent of prejudicing or injuring
another > Core: Malice or bad faith > Good faith is presumed and he who
alleges bad faith has the duty to prove the same
>> Good faith refers to the state of the mind which is manifested by the acts of
the individual concerned > Consists of the intention to abstain from taking an
unconscionable and unscrupulous advantage of another
>> Bad faith connotes bad judgment to simple negligence > Imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of
known duty due to some motive or interest or ill-will that partakes of the nature
of fraud > Implies an intention to do ulterior and unjustifiable harm
89
> Deed of Absolute Sale (December 29, 1985) between Braulio Katipunan, Jr.
(lot and apartment owner), with his brother, Miguel Katipunan, and brothers
Edgardo Balguma and Leopoldo Balguma, Jr., represented by their father Atty.
Leopoldo Balguma, Sr. where Braulio sold his lot and apartment for P187k >
New TCT in favor of Balguma brothers, Collection of Rentals by Atty. Balguma
since January, 1986 > SUIT (March 10, 1987) by Braulio for annulment of the
Deed of Absolute Sale
> CONTENTIONS of Braulio: (1) that his brother Miguel, Atty. Balguma and
Inocencio Valdez convinced him to work abroad and through insidious words
and machinations, they made him sign a document purportedly a contract of
employment, which document turned out to be a Deed of Absolute Sale; (2) that
he did not receive the consideration stated in the contract; (3) that he only
reached 3rd grade
> CONTENTIONS of Petitioners: (1) that Braulio was aware of the contents of
the Deed of Absolute Sale; (2) that he received the consideration involved; (3)
that he knew that the Balguma brothers have been collecting the rentals since
December 1985 but has never objected or confronted them; (4) that he filed the
complaint because his sister, Agueda Savellano, urged him to do so (where his
motions to dismiss his complaint had been granted on the same ground for
which Atty. Balguma paid P2500; but motioned for reconsideration since he did
not sign the motions to dismiss voluntarily due to his poor comprehension and
the lack of assistance of counsel ~ sister Agueda was thus appointed as his
guardian ad litem)
> Deed of Absolute Sale is VOID >
(I) INCAPACITY TO GIVE A RATIONAL CONSENT ~ (a) medical report of
Dr. Annette Revilla (Resident Psychiatrist, PGH) that he has a very low IQ and a
mind of a six-year old ~ unrebutted by petitioners; (b) fact that he only reached
3rd grade; (c) difficulty of the trial court in communicating with him where it had
to clarify certain matters because Braulio was either confused, forgetful or could
not comprehend;
(II) VITIATED CONSENT ~ intimidation and undue influence exerted upon
him by his brother Miguel and Inocencio Valdez and Atty. Balguma:
(1) It was his brother Miguel who negotiated with Atty. Balguma;
(2) Braulio was not informed of the nature and contents of the document he
signed ~ written in English and embellished in legal jargon;
(3) Braulio was forced to sign the document by the shoving of his brother
Miguel and Sencio and the threat that if he does sign, something will happen;
>> Contract of sale ~ Perfected from the meeting of minds upon the thing which
is the object of the contract and upon the price > Intent of the parties in entering
into the contract respecting the subject matter and the consideration thereof >
Elements of a Contract of Sale: (a) consent, (b) object, and (c) price in money or
its equivalent > Consent may be vitiated by the presence of ANY: (1) mistake,
(2) violence, (3) intimidation, (4) undue influence, and (5) fraud (Art. 1330)
Major Bishop (to represent him in Manila) and Levering (to represent him in
Cebu) > AGREEMENT (October/November 1911) b/w Choa Tek Hee
(representative of Uy Soo Lim, under an SPA, whom he hired) and Candida,
Francisca and Concepcion to let 3 designated Chinese merchants give advise on
the dispute (decision not binding) > CHINESE ADVISE: Relinquishment of Uy
Soo Lims rights in the estate for P82,500 ~ Accepted by the parties > Deeds of
Cession (November 18, 29, December 6, 1911, Manila) by Uy Soo Lim (with
consent of his mother in a public document dated December 4, 1911), and Chan
Quieg, and Candida and Concepcion, respectively relinquishing and selling all
their rights to the estate to Francisca ~ Uy Soo Lim received sold his for
P82,500 > Deed by Basilio (December 4, 1911), renouncing all his rights to
Santiagos business in Cebu in favor of Francisca because he nor the Santiagos
brother were not a co-owner as declared in latters will > Court Order
(December 11, 1911) declaring Francisca as the sole owner of the estate of
Santiago and ordering its delivery to her
> SUIT (August 24, 1914) by Uy Soo Lim for the annulment of the Deed of
Cession to Francisca and of the court order > CONTENTIONS of Uy Soo Lim:
Minority at the time of the execution of the deed of cession ~ (a) Undue
influence and advantage taken by defendants of his youth, passions, and
inexperience; (b) Deceit or Misrepresentation of the materials facts concerning
the value of the property and interest in questions
> VALID DEED OF CESSION > Ratification of Deed by Failure to Repudiate:
(1) With full knowledge of his rights in the premises, Uy Soo Lim failed to
disaffirm his contract within a reasonable time after reaching majority > Failure
by Uy Soo Lim to repudiate the Deed of Cession upon age of majority (21 on
October 8, 1913) > Actually RATIFIED IT > Instead of repudiating it promptly
upon reaching his majority, he DISPOSED of the greater part of the proceeds
after he became of age and after he had full knowledge of the facts > Of the
P82,500, P20k was spent before 21y/o; P62,500 upon 21y/o, P7,500 of which
was spent before Annulment Case and P55k since filing the case, and the last
P7,200 of the the P55k, spent on April 13, 1916 or 2.5y after 21y/o and after he
knew all the facts now alleged by him to constitute fraud;
(2) Uy Soo Lim made no offer to return to Francisca the purchase price which
would be subject to her disposition if Deed of Cession would be annulled ~ Still
P62,412.67 of the purchase price was available for refund after 21y/o and P55k
when he filed his suit to rescind > He was utterly without funds to reimburse the
consideration ~ Testified in Choa Tek Hee case that the money to be obtained
was necessary to support oneself;
(3) NO DECEIT > Uy Soo Lim, though a minor then, acted deliberately with
full knowledge of the facts and after mature deliberation and upon the advice of
91
capable counsel > Understood all the essential facts bearing upon his interest in
the estate and intelligently comprehended the nature of the deed of cession, its
contents and its effect upon his interests; (i) He was a law student, with more
than ordinary intelligence and with a keen appreciation and understanding of all
the elements of strength and weakness in his case ~ Was able to avoid a direct
answer to inconvenient questions and in professing lack of memory in other
points during his testimony; (ii) Had 3 competent advisers to direct him ~ Choa
Tek Hee (a person of unusual ability ho had exerted all his ability to procure for
Uy Soo Lim the best possible terms) and lawyers Major Bishop (in Manila
where Deed was signed) and Mr. Levering (in Cebu where most of the property
was situated) who were well and favorably known to the Bench and Bar as
attorneys of ability and integrity ~ Would thus not allow their client to sign
without understanding what he is signing; (iii) No misrepresentation of rights
involved; > EVIDENCE of Recognition of Sale and Payment: (i) Revocation of
Choa Tek Hees SPA and Instruction to pay him directly (after Choa Tek Hee
failed to deliver him P42,500 or the value of the first three promissory notes for
P82,500 purchase price) ~ Granted P31,511.93 ~ Also immediately spent; (ii)
Suit against Choa Tek Hee for revocation of SPA as he was a minor when it was
executed, alleging that his interest in Santiagos estate was P200k but the same
was reduced to a money basis or sold for P83k more or less; (iii) Motion by Uy
Soo Lims guardian (Chas. E. Tenney) during case against Choa Tek Hee to
direct the latter to indorse the upcoming promissory notes to the clerk of court
for collection;
(4) Contention that he was of age in Chinese customs is set aside by Court to
take assumption of minority which is most favorable to appellant;
> HENCE, FORFEITURE of Uy Soo Lims Right to Rescind on account of his
minority > RECAP: Not only should he have refunded all moneys in his
possession upon filing his action to rescind, but, by insisting upon receiving and
spending such consideration after reaching majority, knowing the rights
conferred upon him by law, he must be held to have forfeited any right to bring
such action
>> Purpose of Minors Exemption in Contracts (Hastings vs. Dollarhide) >
Protection of the minor from prejudice by acts done or obligations incurred at a
time when they are not capable of determining what is for their interest to do >
HENCE, law gives them an opportunity, after they have become capable of
judging for themselves, to determine whether such acts or obligations are
beneficial or prejudicial to them, and whether they will abide by or avoid them >
BUT CEASES if the right to affirm or disaffirm extends beyond an adequate
opportunity to so determine and to act on the result
> LEGAL EFFECT (Englebert vs. Pritchett) > all consideration which remains
in the infant's possession upon his reaching majority or at the time of an
attempted disaffirmance in case he is still under age must be returned, but that
disaffirmance will not be defeated by inability to return what he has parted with
prior to such time > Not to be permitted to regain what he parted with or refuse
payment while still possessed of what he received > He must return such portion
thereof as remains in his possession when reaching majority > WHEN MADE:
Restitution before he can Rescind (Manning vs. Johnson) ~ Important fact is not
the time when he received the money, but the time when he disposed of it >
OTHERWISE, Affirmance of the contract when infant reaches majority still
possessing property (if he disposes of it so that he cannot restore it, or retains it
for an unreasonable length of time after attaining his majority) > WHY: to avoid
the tendency to squander the money if allowed to rescind first only after
conveyance to other party > BUT tendency of courts, in their anxiety to protect
the rights of infants in the matter of contracts made by them during non-age,
have after they have become adults, to treat them to the same extent as infants
still, exempting them from the operation of rules of law, not only of general
obligation, but founded on essential justice;
>> ART. 1295. Rescission obliges the return of the things which were the
objects of the contract, with their fruits and the sum with interest; therefore it
can only be carried into effect when the person who may have claimed it can
return that which, on his part, he is bound to do.
>> ART. 1304. When the nullity arises from the incapacity of one of the
contracting parties, the incapacitated person is not obliged to make restitution,
except to the extent he has profited by the thing or by the sum he may have
received.
>> ART. 1308. While one of the contracting parties does not return that which
he is obliged to deliver by virtue of the declaration of nullity, the other cannot be
compelled to fulfill, on his part, what is incumbent on him.
>> Art. 1314. The action for nullity of a contract shall also be extinguished
when the thing which is the object thereof should be lost by fraud or fault of the
person having the right to bring the action.
If the cause of the action should be the incapacity of any of the contracting
parties, the loss of the thing shall be no obstacle for the action to prevail, unless
it has occurred by fraud or fault on the part of the plaintiff after having acquired
capacity.
92
93
both parties and witnesses; 2nd is not dated; Signature of the WMLC does not
appear; Agreement not acknowledged before a person authorized to administer
oaths
> VALID CONTRACT:
(1) Statute of Frauds does not apply > Art. 1403 is Exclusive > An agreement
creating an easement of right-of-way is not one of those contracts covered
because it is not a sale of property or of an interest therein > WHAT IS IT
THEN? A contract of pure beneficence since no proof/allegation of
compensation? But wont it be extended at the pleasure of owner?;
(2) Amended Complaint was for the recognition of the existence of an easement
of right-of-way and a demand for the establishment of an easement of right-ofway, if none exist (Art. 649) ~ Partial enforcement due to permitted use of road
granted by Medalles after purchase of lot
> Is not an Easement an Interest on real property?
> What is the effect if not in writing?
> How does Statute discourage Fraud?
Property by BPI to National Book Store > CONTENTIONS of BPI: Sale with
Limketkai not perfected but continuing negotiations only ~ No written contract,
No authority of AVP Amorin to sell, Counter-Offer by Limketkai when it
offered to pay on terms instead
> PERFECTED CONTRACT OF SALE
(1) Lack of written contract of sale of real property BUT Statute of Frauds does
not apply:
(a) Exception to Statute of Frauds > existence of a written note or memorandum
evidencing the unwritten contract of sale > Complaint, par. 3 pleads that the deal had been
closed by Letter and Telegram which was signed by BPI, referring to the property sold, the purchase
price of P4/sq.m.; Letter of Kenneth Richard Awad addressed to Roland Aromin, authorizing the
sale of the subject property at the price of P1k/sq.m. giving 2% commission to the broker and
instructing that the sale be on cash basis; Authority to sell by BPI to Pedro Revilla, Jr., authorizing
the latter to sell the property at the initial quoted price of P1k/sq.m.; Letter authority signed by
Aromin allowing the buyer, Limketkai, to enter the premises of the property to inspect the same;
Letter by Pedro Revilla, Jr., that he had procured a buyer in the name of Limketkai; Letter by
Limketkai to BPI confirming their transaction regarding the purchase of the subject property; Tender
of Payment by Limketkai thru check for P33,056,000; Letter by Alfonso Zamora to Aromin to
resubmit new offers only if there is no transaction closed with Assetrade Co.;
Committee does not approve regular transactions ~ Sale already perfected upon
mutual agreement of purchase price of P1k and that if the proposed payment on
terms will not be approved by our Trust Committee, Limketkai should pay in
cash ~ Amount was no longer subject to the approval or disapproval of the
Committee
(3) NBS buyer in bad faith > ignored the notice of lis pendens annotated on the
title when it bought the lot > Able to purchase it just because its President is a
close friend of BPI Senior VP Barcelon > Even offered P7M to Limketkai just to
drop the case and give up the lot
95
>> Phases of a Contract > (a) Preparation, conception or generation, which is the
period of negotiation and bargaining, ending at the moment of agreement of the
parties; (b) Perfection or birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; (c) Consummation or death,
which is the fulfillment or performance of the terms agreed upon in the contract
>> Waiver of Defense of Statute of Frauds: RATIFICATION > Contracts
infringing the Statute of Frauds are ratified when the defense fails to object, or
asks questions on cross-examination > No timely objection or protest was made
to the admission of the testimony of the plaintiff with respect to the contract;
Cross-examination put by their counsel to the witnesses in respect to said
contract, tacitly waived their right to have it stricken out
> How do you know whether writing is sufficient to remove Agreement from
Statute of Frauds
G.R. No. L-8334 December 28, 1957
BIENVENIDO BABAO, ETC. v. FLORENCIO PEREZ, ETC., ET AL.
Facts: An Oral Agreement was allegedly made between Celestina and Santiago
where Celestina allowed Santiago to plant and administer her property and
promised him of the property upon her death. After the death of both parties,
the Estate of Santiago sought the recovery of said after the sale of the property
to another. RTC Granted such, ruling that the Statute of Frauds does not apply
due to partial performance of the Agreement by Santiago (oral evidence was
thus allowed), and that the Agreement was valid. However, the Agreement falls
under the Statute of Frauds as an Agreement not to be performed within a year
and as a Sale of Real Property because the Doctrine of Partial Performance
applies only if the Agreement was fully performed within a YEAR (Santiago
performed Agreement in 23y) and only if the Agreement was clear (Agreement
vague without specs as to what size was to be planted to coconuts and to crops).
Hence, Statute of Frauds apply and the oral evidence presented failed to satisfy
it. Hence, Agreement is unenforceable.
> Alleged Oral Agreement (1924) b/w Celestina Perez and Santiago Babao
(husband of Celestinas niece, Maria Cleofe Perez) where former allowed latter
to improve (by clearing all forest trees, by planting coconut trees and crops, rice,
corn, and bamboo trees) and administer her 156-hectare land (during her
lifetime) and promised to give him or his wife of her estate, Lupang Parang,
and its improvements after her death ~ Where all expenses for labor, and
materials would be at his cost > SALE (1945) by Celestina thru Leovigildo
Perez by Special Power of Atty of 127 hectares > CONTENTIONS of Babao:
(1) That he left his work as administrator of the Llana Estate, with P150/m
salary; (2) Cleared, administered, and planted, from 1924-1946, 50 hectares for
coconuts trees; 70 hectares for rice, corn; 50 hectares unimproved; (3) Balance
due him was P47k ~ Planting worth P7,400; P150/m salary worth P39,600;
> CONTENTIONS of Celestina: (1) No oral agreement ~ Property actually
cleared, planted and administered by Celestinas husband, Esteban de Villa, her
overseers and tenants (truco system where persons were allowed to clear the
land and plant thereon and from the harvest were compensated according to a
graduated scale of division varying from year to year); (2) Santiago did not have
anything to do with the land ~ Only in 1930 when Santiago Babao began
administering the land after Esteban died, and Until 1935 when she prohibited
Santiago from interfering with the administration of the land because of his
disgusting behaviour; (3) Compensation for work from 1930-1935 by receiving
the proceeds of the harvests; (4) Leovigildos SPA was executed in the presence
of Santiago who did not object > Death of Celestina (August 24, 1947) > Death
of Santiago (January 6, 1948) > SUIT by Estate of Santiago for recovery of of
156-hectare parcel of land and P47k (value of the produce gathered from August
1947), for annulment of sale; Motion to dismiss because the verbal agreement
was unenforceable under the Statute of Frauds > RTC In favour of Santiago
because the Statute of Frauds cannot be invoked for the reason that performance
by one party of his part of the contract takes the case out of the Statute ~
Santiago fully complied with his part of the oral contract between the parties;
CA Reversed but Decision Set Aside for lack of jurisdiction >
> Agreement falls under Statute of Frauds; Fails to Satisfy Doctrine of Partial
Performance to take it out of Statute of Frauds; Failure to Satisfy Statute of
Frauds; NO VALID AGREEMENT
(1) Agreement is one that is not to be performed within a year > Agreement was
allegedly made in 1924 where Santiago was to clear, level and plant coconut
trees and crops on 156 hectares of forest land > Obligations could not be
accomplished in one year and were in fact, accomplished during the lifetime of
Celestina which lasted over a period of 23y > WHY PARTIAL
PERFORMANCE IS NOT AN EXEMPTION HERE: Execution of Agreement
by more than 1 Year (23y) where the Doctrine of Partial Performance taking an
Oral Contract out of the Statute of Frauds only applies if the obligation is not to
be performed by BOTH PARTIES and ONE has completely performed it
WITHIN 1 YEAR ~ Other party cannot avoid the fulfillment of those incumbent
on him under the same contract by invoking the statute of frauds because the
latter aims to prevent and not to protect fraud;
(2) Agreement is one of sale of real property > WHY PARTIAL
PERFORMANCE IS NOT AN EXEMPTION: Vague Agreement where
Doctrine only applies if Agreement is certain, definite, clear, unambiguous and
unequivocal in its terms and subject matter, and completed in every respect
except for the writing required before the Statute may operate > All the essential
terms of the contract must be established by competent proof to have been
96
definitely understood and agreed upon by the parties, and shown to be definite,
certain, clear, and unambiguous > WHY VAGUE: without specifications on
how many hectares was to be planted to coconuts, to rice and corn, and to
bananas and bamboo trees ~ Easier and cheaper to plant crops than coconut
trees > No sane property owner would enter into such contract as it would cost
much more time, money, and labor to convert forest land to rice and corn land
than to convert it into a coconut plantation > Celestinas obligation also
impossible because executed only upon her death > Testimony of alleged
witness, Carlos Orense that Agreement was for Santiago to clear the land and
plant coconuts, for the land will eventually fall in his hands
G.R. No. L-5447 March 1, 1910
PAUL REISS, ET AL. v. JOSE M. MEMIJE
Facts: Because Lumber owner Reiss refused to further extend credit to Kabalsa,
contractor of Memije for the repair of his house, Memije promised to pay for the
lumber delivered and used. When Reiss sued for collection, Memije alleged that
the contract was unenforceable because it was oral and no written evidence was
presented thereof. However, the Statute of Frauds that requires written evidence
as to the promise to answer for anothers debt applies only to agreements of
surety, guaranty. The debt of Memije to Reiss was of a original debtor and not
as a collateral. Hence, written agreement was not required and evidence was
sufficient to establish the actual debt for and delivery of the lumber.
> Credit is given to a 3rd person ~ Agency of a creditor
> Oral Agreement b/w Paul Reiss (owner, Lumber company) and Jose Memije
(house owner, active Manila lawyer) for the repair of latters house ~ Memije,
accompanying contractor Buenaventura Kabalsa, agreed to pay for the lumber
needed after Kabalsa was unable to secure credit for the lumber needed, having
no money and after Reiss absolutely refused to allow any lumber to leave their
yard without payment in advance > Delivery of the lumber for the house repair
> SUIT by Reiss for recovery of unpaid balance of the purchase price of lumber
> CONTENTIONS of Memije: No guaranty of payment and even if there was, it
was not in writing, HENCE proof thereof was not admissible in evidence under
Sec. 335 of the Code of Civil Procedure > RTC admitted all the evidence
offered by both parties which established the existence of Memijes promise to
pay for the lumber and of a balance due on account of the lumber delivered to
Memijes contractor
> Oral Agreement Enforceable even if without Written Agreement or Evidence
therof BUT even if Written Evidence is required, weight of all the evidence,
including the evidence, thus admitted, supports Reiss allegation and establishes
his contention that this lumber was in fact delivered
> Oral Agreement not Unenforceable > Statute of Frauds does not apply > Sec.
335, Act No. 190 or Statute of Frauds NOT APPLICABLE because Agreement
was of Original Debt, NOT of Surety > As a special promise to answer for
anothers debt, default or miscarriage, Requirement of Writing applies only to
Agreement of Guarantiship, to a Collateral Promise and NOT IF Promise is
Original > Original Debt of Memije because: (i) Charges in Reiss Books were
made against Kabalsa and Bill was presented to Memije ONLY BECAUSE
Reiss acting manager mistakenly sent the Bill to Memije while he was in the
US and had no opportunity to go over the accounts with their acting manager ~
Acting Mgr had no knowledge whatever as to Reiss agreement with Memije;
(ii) Credit for the lumber was extended solely and exclusively to Memije,
lawyer, where Kabalsa had no commercial credit or standing in the community
and Reiss absolutely refused to extent him any credit
>> Statute of Frauds applicable only if Collateral and not Original Debt >>
Original, Independent Promise if promisor becomes primarily liable for the
payment of the debt > Debt is his own and his promise is good without writing
>> Collateral Promise if promisor is merely a surety or if any credit is given to a
third party alone and not to himself nor to both of them jointly > Promise must
be in writing in aid of the third party's liability >> Intention Determined from
the language and expressions used by the parties promising and from an
examination of the circumstance
G.R. No. 107624
January 28, 1997
GAMALIEL C. VILLANUEVA and IRENE C. VILLANUEVA v. COURT
OF APPEALS, SPOUSES JOSE and LEONILA DELA CRUZ, and
SPOUSES GUIDO and FELICITAS PILE
Facts: The owner of the apt offered to sell their land and bldg to Villanueva, a
tenant. Because of arrears in realty taxes, Villanueva advanced P10k but it was
alleged to be considered as part of the purchase price. Subsequently, of the
property was sold to another tenant with the permission of Villanueva to split
the purchase. The issue came about when Dela Cruz assigned the remaining
of the property to sps. Pile due to loans granted by the latter to the former.
Villanueva sought its annulment due to the alleged sale to them but no contract
of sale had been perfected. First, there was no meeting of minds as to the
purchase price. Dela Cruz quoted P550k on the Deed of Sale that remained
unsigned while Villanueva alleged it to be P550k, where the other tenant-buyer
paid P275k for . However, no proof of the Deed of Sale was presented and
97
Dela Cruz testified that they did not sign the Deed exactly because Villanueva
was still haggling on the price. Second, Statute of Frauds does not apply because
there was no perfected contract. Hence, even if there was no written agreement,
alleged sale is still not perfected due to lack of price and evidence thereof.
> Oral Agreement to Sell (February 1986) b/w Jose Dela Cruz and Gamaliel
Villanueva where former offered to sell his and wifes apartment bldg and 403
sq.m. land to latter-tenant-occupant ~ Letter of Authority (February 12, 1986) in
favour of Irene Villanueva (mother) to inspect the property BUT CounterOffered when Irene agreed to advance P10k for payment of realty taxes in
arrears of property if it were to be considered part of purchase price, alleged to
be P550k by Villanueva while Dela Cruz contended it to be P575k > Sale of
Property be Dela Cruz to Ben Sabio, another tenant, for P275k after permission
from Villanueva > Deed of Assignment over Remaining (March 6, 1987) by
Dela Cruz to sps. Guido Pile and Felicitas Pile as full payment of loan granted
by latter to former > SUIT (December 18, 1992) by Villanueva for annulment of
Deed of Assignment > CONTENTION of Dela Cruz: Statute of Frauds require
written evidence of sale of real property
> NO PERFECTED CONTRACT OF SALE, STATUTE OF FRAUDS
INAPPLICABLE
(1) No Perfected Contract of Sale > (i) No agreement yet on the Purchase Price,
expressly or impliedly, directly or indirectly ~ EVEN IF Advancement of P10k
supposedly to form purchase price and IF Other Tenant Paid P275k BECAUSE
NO PROOF of meeting of minds on Price and of Intention to Make P10k
Earnest Money > Draft of Deed of Sale was not presented where Sps. Dela Cruz
quoted P575k but Villanueva claimed it was reduced to P550k; Testimony of
Dela Cruz that Deed was unsigned because still haggling on price; Advancement
of P10k not earnest money absent proof that it was intended to form part of the
purchase price;
(2) Statute of Frauds Not Applicable > Statute of Frauds applies only to
executory contracts and not to partially or completely executed ones > No
perfected contract b/w Dela Cruz and Villanueva ~ Only a prolonged negotiation
to buy and sell where offer was counter-offered > Hence, No basis for the
application of the Statute of Frauds which presupposes the existence of a
perfected contract and requires only that a note or memorandum be executed in
order to compel judicial enforcement thereof
the mortgage Nor had the Court authorized the receiver to consent to the
execution of a new mortgage;
(2) EVEN IF Mortgage was perfected subsequent to the lifting of the
receivership, Deceit, Undue Influence, Fraud by PNB > Mortgage was made
when PNB was a dominating influence in the affairs of PVOC in person (as
largest creditor) and by proxy (PNB Membership in Board of Directors of
PVOC);
(3) BUT Fraud cannot be alleged by Whitaker because PVOC freely acted to
execute the mortgage and only a creditor could take advantage of the fraud to
intervene to avoid the conveyance > Whitaker was neither a successor in interest
nor legatee of the assets of PVOC ~ HENCE Cannot recover from PVOC;
(4) Other Security to PNB > 3 Mortgages (April 11, 1919, November 18, 1920
for P3.5M, and January 10, 1921 for P4M);
(5) Alleged Promise by PNB to Fund PVOC for its continued operation (premise
of termination of receivership) NOT PROVEN > PNBs General Manager was
authorized by the Board of Directors (pursuant to Charter) to advance funds to
PVOC worth P500k at most where General Manager is to report and secure the
approval of the Board for necessary credits from time to time > General
Manager Wilson wrote to Whitaker only to make a gratification of the additional
mortgage by Whitaker of his personal property but a friendly warning against it,
that it was good business for the PNB to operate PVOC as long as it had the
P500k guarantee > Despite Performance by Whitaker, there was No binding
promise, tacit or express, made by the PNB to continue indefinitely its backing
of the PVOC >> Statute of Frauds applies only to agreements not to be
performed ON EITHER SIDE within a year from the making thereof >
Agreement was on ONE SIDE because of lack of PNBs promise to answer
indefinitely for debt > of his part PURPOSE to Prevent not Further Fraud
G.R. No. L-11231
May 12, 1958
ROSARIO CARBONNEL v. JOSE PONCIO, RAMON INFANTE and
EMMA INFANTE
Facts: Jose agreed to sell his property to Rosario who paid part of the purchase
price already, had assumed the obligations of Jose as part of such price, and
promised to pay the balance upon the execution of a Deed of Sale. However,
Jose subsequently refused to execute such Deed and instead sold the property to
another. When Rosario sued for the annulment of the subsequent sale and
presented the testimony of the witness to their Agreement, Jose contended that
the Agreement and the testimony were unenforceable and inadmissible under the
Statute of Frauds. However, the partial performance by Rosario in paying part of
the price by cash and by assumption of obligation, removed the Agreement from
the Statute pursuant to the Doctrine of Partial Performance (which protects
contract. Even if the P5.5M offer was a new offer by the Bank, the oral evidence
by Demetria, Rivera and Atty. Fajardo (of the corporation who formerly owned
the properties) proving that purchase price was P5.5M were not objected to by
Bank.
> Verbal Agreement of Sale b/w Demetrio Demetria and Jose Janolo and
Mercurio Rivera, Head-Manager of the Property Management Department of
First Philippine International Bank/Producer Bank of the Philippines where
former offered to purchase Banks 6 parcels of land ~ Negotiated in Mtg
(August 1987) b/w Demetria, Jose and Rivera; Formal Letter of Offer to
Purchase (August 30, 1987) by DJ for P3.5M; Letter-Reply Couter-Offer
(September 1, 1987) by Bank for P5.5M; Letter Offer (September 17, 1987) by J
for P4.250M; Mtg (September 28, 1987) b/w DJ, Luis Co (Sr. VP, Bank); Letter
(September 30, 1987) by J accepting offer of Bank to sell at P5.5M > NonResponse by Bank but Advertisement of Sale of same property > Demands by
DJ for Response and Fulfillment and Tender of Payment of P5.5M (November
17, 1987) to Bank then to Conservator which they refused > SUIT (May 16,
1988) by DJ for Specific Performance > CONTENTIONS of Bank: Lack of
Authority of Rivera to make a Counter-Offer of P5.5 Million; Absence of
meeting of the minds as to the price
> PERFECTED CONTRACT OF SALE > Statute of Fraud does not apply
because Agreement Ratified by Failure to Object to Oral Testimony and by
Sufficient Memoranda
(1) Perfected Contract of Sale > Price validly determined and offered by Rivera
as Head Mgr of Banks Property Mgt Dept. who is tasked with entertaining,
accepting offer to purchase properties for sale, subject to Past Due Committees
evaluation and Conservators approval ~ P5.5M was the official and definitive
price at which Bank was selling the property after Rivera had duly presented
DJs offer for discussion by the Committee of such matters as original loan of
borrower, bid price during foreclosure, total claim of the bank, and market value
> Doctrine of apparent Authority where apparent authority of the officer of the
bank is borne out by similar circumstances surrounding his dealings with buyers
~ Corporations estopped from denying authority of its officers whom it permits
to act and to hold oneself out to the public as one possessing power to do such
acts;
(2) Non-applicability of Statute of Frauds:
(i) Letters as Sufficient Memorandum of P5.5M Offer of Bank ~ Included the
names of the parties, the terms and conditions of the contract, the price and a
description of the property as the object of the contract;
(ii) EVEN IF Counter-offer on September 28, 1987 constitutes a new offer
which was accepted by Janolo on September 30, 1987, there was Failure to
Object to Oral Testimony proving Banks (counter-)offer of P5.5M >
100
101
> SIMULATED Deeds of Sale > Luis was only given Administration of the
Hacienda, as new lawyer of the family, in order for him to support the family, to
facilitate and expedite the transaction with PNB who wanted to deal with only
one person for convenience, and then to reconvey the co-owners shares after
the mortgage indebtedness on Hacienda Pulo has been discharged:
(1) Co-owners remained in the property after such sales where the Hacienda
could have been leased to third persons to acquire rentals sufficient to liquidate
the obligation to PNB;
(2) Continued Support, Subsistence, Source of Livelihood of the Family from
Hacienda funds: (i) Unlikely that all of the co-owners should have come at the
same time to one mind about disposing of their participation in the Hacienda
when they counted so much on the Hacienda for their subsistence and selfesteem; (ii) Medical and Legal schooling of others financed by Luis as
administrator of common property;
(3) Insufficient and Non-Payment of Consideration > P2k for 1/5 share while
Joses 1/5 share sold only for P100 to pay Debt of P11k which could not have
created such necessity to sell at a meager price;
(4) Financial Condition of Luis Not Sufficient to purchase Hacienda as young
lawyer and bachelor to pay for the purchase price and debt ~ Studies being
financed by Jose;
(5) Only 2 copies of Deeds of Sale, instead of 5;
> No Implied Trust > Simulated Contract is Void and produces No Effect >
Transfers of rights were null and void ab initio and thus vested no rights
> Assuming Arguendo that there was, Not Yet Prescribed > Prescription of
Implied Trust in 10y from Date of Release of Mortgage (May 5, 1958)
BECAUSE knowledge by Co-owners of the settlement of the mortgage
obligation, the attainment of the purpose for which the trust was constituted
>> Simulation > contract is not really desired nor intended to produce legal
effects nor in any way alter the juridical situation of the parties
>> Void or Inexistent contract > no force and effect from the very beginning, as
if it had never been entered into > does not create, modify or extinguish the
juridical relation to which it refers > cannot be validated either by time or by
ratification or by prescription ~ WHY: Nullity is permanent, even if the cause
thereof has ceased to exist, or even when the parties have complied with the
contract spontaneously > cannot be invoked by a person whose interests are not
directly affected
102
> Contrary to Public Policy > if its consideration contravenes the interests of
society and in inconsistent with sound policy and good morals and tends to
undermine the security of individual rights
> Contrary to Good Morals > if against good customs, those generally accepted
principles of morality which have received some kind of social and practical
confirmation
G.R. No. 130716 December 9, 1998
FRANCISCO I. CHAVEZ v. PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT (PCGG) and MAGTANGGOL GUNIGUNDO (in his
capacity as chairman of the PCGG). GLORIA A. JOPSON, CELNAN A.
JOPSON, SCARLET A. JOPSON, and TERESA A. JOPSON, petitionersin-intervention
Facts: Two Agreements b/w PCGG and Marcoses provided for the division of
the ill-gotten wealth/property of the Marcoses. In exchange for the properties to
be recovered by the Govt, PCGG granted tax exemption (on the properties
kept) to the Marcoses, as well as waived all present and future civil, criminal,
administrative claims against Marcoses. The Agreements thus are void for being
contrary to the Constitution and law, violating provisions on tax exemptions and
uniformity and on judicial prerogative on cases, for being contrary to Civil
Code, waiving of future fraud and for being vague.
> Two Agreements (December 28, 1993) b/w PCGG Chairman Magtanggol
Gunigundo and Ma. Imelda Marcos-Manotoc, Ferdinand R. Marcos II and Irene
Marcos-Araneta concerning the division of Marcos property between Heirs and
Govt: (1) General Agreement: Division and Disclosure of Property in Exchange
of Immunity from civil, criminal, tax or administrative cases against Marcoses;
(2) Supplemental Agreement: Division of $356M Swiss Deposits in 75-25%
Sharing Ratio > SUIT by Francisco I. Chavez (taxpayer,citizen,former govt
official) to enjoin PCGG from perfecting the agreement with the Marcoses and
to publicize all negotiations and agreement, be they ongoing or perfected
pursuant to Constitutional right to information and duty of the State to disclose
publicly all its transactions involving the national interest > CONTENTIONS of
PCGG, Marcos: Action is premature because the Agreements have not become
effective and binding
> Agreements VOID
(1) Contrary to Constitution and Laws > Latter not subject to compromise
103
gathered their children (who had been staying in different households) and
together stayed at their house. (Their children informed Gilda that Judie already
has a new family.) The Guiangs consequently filed a complaint for trespassing
that led to an Amicable Settlement b/w Guiangs and Gilda that the latter and her
children would voluntarily vacate the property. Nonetheless, Gilga sought the
annulment of the settlmenet and remained in the property. Guians sought the
Execution of the AS. RTC and CA held that the sale was void due to the lack of
Gildas consent; Guiangs contended that it was merely voidable and the the AS
has already ratified the sale.
Issue:
YES
NO
Held:
Because the sale occurred under the FC, FC 124 applies which explicitly states
that sale without consent/authority of other spouse is VOID. This is especially
apparent in the difference b/w FC 124 and NCC 166 where latter rules that it is
merely voidable and that action against it prescribes in 10y. NCC1390 that
governs contracts with vitiated consent also does not apply because it deals with
contracts where there is consent but merely vitiated WHEREAS the Sale here is
one wherein consent was totally lacking.
Given that the sale was VOID, the Am.Set. did not serve to validate it or to alter
the void character of the sale because under NCC 1422, consequent contract to a
void one is also void. And because nowhere in the Am.Sett. was a continuing
offer mentioned, (it merely concerned Gilda vacating the property), it cannot be
considered as a continuing offer.
G.R. No. L-27841
October 20, 1978
MARIA ENCARNACION CASTILLO, ELISEA GALVAN, and
PATROCINIO GALVAN v. JOSEFA GALVAN, EMILIO SAMSON, and
NATIVIDAD GALVAN
Facts: Paulino was the owner of of 2 parcels of land, coowned with her
daughters by 1st marriage. When he died, his heirs by his 2nd marriage sought to
settle his estate but then discovered that his share had previously been sold to
the co-owner-daughters. They sought the declaration of nullity of the sale
because it was alleged to have been obtained thru fraud and it lacked
consideration. RTC, however, dismissed the complaint because an action based
on fraud prescribes in 4y. The RTC erred in dismissing the complaint because
the Action for Declaration of Nullity is imprescriptible.
> Interest of Paulino Galvan in 2 parcels of land (with family home thereon)
shared with daughters Josefa Galvan and Natividad S. Galvan (from first
marriage) > Deed of Absolute Sale (1953) over interest of Paulino to Josefa
and Natividad for P500 ~ Registered (August 3/4, 1955) > Death of Paulino
(February 10, 1961) > Discovery by Plaintiffs (other heirs of Paulino with Maria
Encarnacion Castillo) of the Sale of his Interest after initiating proceedings
for settlement of his estate in Registry of Deeds > SUIT (August 1, 1961) by
Plaintiffs for Declaration of Nullity of Deed of Absolute Sale against Josefa and
Natividad > CONTENTIONS of Plaintiffs: Void Sale due to (i)
misrepresentation by Josefa and Natividad to Paulino and Maria that the certain
document they signed was only for the purpose of enabling latter, as co-owners
of the parcels of land, to have their separate tax declarations for the respective
portions owned by them so that they can pay their respective real estate taxes
separately; (ii) Lack of Intention of Paulino to sell his share because he had no
other residential lot to live in and no need to sell property because of sufficient
income to sustain it; (iii) Insufficiency of consideration because property was
worth P22,500 while purchase price was only P500; (iv) Non-Payment of
Alleged Purchase Price > CONTENTIONS of Josefa and Natividad: Valid Sale,
known to the Plaintiffs even before the Complaint; Prescription of Action based
on Fraud in 4y from Registration (Registered August , 1955, Suit only on
August 1, 1961) > RTC Dismissed due to Prescription
> Action for Declaration of Nullity has No Prescription > Prayer is to Declare
Void and inexistent the Deed of Sale due to fraud and lack of consideration ~
Simulated/Fictituous Sale (Concurring Opinion) > Action is Imprescriptible
G.R. No. 153201 January 26, 2005
JOSE MENCHAVEZ, JUAN MENCHAVEZ JR., SIMEON
MENCHAVEZ, RODOLFO MENCHAVEZ, CESAR MENCHAVEZ,
REYNALDO, MENCHAVEZ, ALMA MENCHAVEZ, ELMA
MENCHAVEZ, CHARITO M. MAGA, FE M. POTOT, THELMA M.
REROMA, MYRNA M. YBAEZ, and SARAH M. VILLABER v.
FLORENTINO TEVES JR.
Facts: Menchavez and Teves entered into a Contract of Lease where the former
leased the fishpond covered by a lease application to latter for 5y. When the
fishpond was demolished by virtue of a Court Order in favour of other parties,
Teves sued Menchavez for Damages. However, neither party can claim for
remedy. The Contract of Lease was void. First, Menchavez cannot alienate the
fishpond because it was not theirs. They were still applying for a lease
application over the fishpond from the Govt at the time of Lease with Teves
and even if such application were to be approved, the property cannot be
105
subleased as prohibited by law. Also, the parties are in pare delicto because
while Menchavez knew of their lack of ownership, the same was known by
Teves. Hence, Teves cannot claim innocence.
> Contract of Lease (February 28, 1986) b/w Menchavezs et al and
Florentino Teves Jr. where former, alleged to be absolute and lawful co-owners,
leased a fishpond to the latter for 5y, P40k/y, with assurance of Teves peaceful
and adequate enjoyment of the lease > Demolition of the Fishpond (June 2,
1988) by Sheriffs pursuant to Cebu RTC Order (Denying Menchavezs lease
application and Delivery to other parties) > SUIT by Teves for Damages >
CONTENTIONS of Teves: Violation of Contract of Lease, specifically the
peaceful and adequate enjoyment of the property for the entire duration of the
Contract; Withholding of Court Decision involving the fishpond where the
Menchavezs were ordered to remove the dikes illegally constructed; Innocent
Party because he was induced to enter the Contract thru Serious
Misrepresentation of Menchavezs ownership > Third Party Complaint against
agents of Eufracia Colongan and Paulino Pamplona
> VOID CONTRACT OF LEASE > In Pari Delicto > No Mutual Recovery
(1) VOID as Contrary to Law > Fishpond owned by State, Not Menchaves:
Constitution, Art. XII, Secs. 2 where fisheries and natural resources are owned
by the state and 3 where agricultural lands are inalienable ~ Can only be leased
> EVEN IF Leased to Menchavez, latter cannot sublease the Fishpond: PD 704
that fishponds are to be least for at least 25y and cannot be subleased to another
> HENCE, Menchavez had no power to lease it WHERE (i) application for lease
not yet approved at the time of Lease to Teves, and (ii) fishpond cannot be
subleased anyway;
(2) IN PARI DELICTO > (a) Menchavez knew that they could not lease what
does not belong to them ~ they were even still applying for a lease of the same
property under litigation from the government at the time of the Lease to Teves;
(b) Teves was aware that Menchavezs were not the owners but were mere
holders or possessors: (i) Knowledge of Menchavezs lease application for the
fishpond from the State; (ii) Negotiation in the presence of his Lawyer who is
expected to know that fishponds belong to the State and are inalienable; (iii)
Contract, which stated that the area was still covered by a fishpond lease
application but which also stated Menchavez as owners of the fishpond, was
prepared by Teves and his Lawyer ~ Ambiguity should therefore be resolved
against him, being the one who primarily caused it; (iv) Failure to prove that
they misled him regarding the ownership of the fishpond ~ He who alleges must
prove > Teves THUS leased the fishpond at his own risk
>> Void Contract > equivalent to nothing; produces no civil effect; does not
create, modify or extinguish a juridical relation > Parties to a void agreement
cannot expect the aid of the law ~ leave them as they are > WHY: They are
deemed in pari delicto or in equal fault EXCEPT IF (Art. 1412) one party is not
at fault
106
demand the return of what he has given without any obligation to comply with
his promise.
G.R. No. L-1411 September 29, 1953
DIONISIO RELLOSA v. GAW CHEE HUN
Facts: Rellosa sold his property to Chinese Gaw Chee Hun who in turn leased it
to the former. When the application of Gaw to purchase property as an alien was
not approved by the Japanese Military Admin, Rellosa sued for the annulment of
the sale and lease and for the recovery of his title. Although the contracts are
void for being contrary to the Constitution, neither party can recover from each
other because they were both in fault for knowingly selling and buying property
without capacity to do so. Hence, the title cannot be reverted to Rellosa but Gaw
Chee Hun cannot remain in possession of it as an alien. The State should thus
seek for the propertys reversion.
> Contracts of Sale and Lease (February 2, 1944) where Dionisio Rellosa sold
his parcel of land and house, for P25k, to Gaw Chee Hun, a Chinese citizen, and
where Gaw Chee Hun leased the purchased property to the vendor until he
obtains the approval of the Japanese Military Administration for the purchase of
property by him (No. 6 issued) > Non-Approval of Application of Gaw Chee
Hun to Purchase Property > SUIT by Rellosa for the Annulment of Sale and
Lease, Return of Title: (1) Application for Purchase as Alien not granted to Gaw
Chee Hun; (2) Ownership by Gaw Chee Hun contrary to Art. XIII, Sec. 5,
Constitution > CONTENTIONS of Gaw Chee Hun: Valid sale, not contrary to
law, morals and public order
> VOID Contracts of Sale and Lease > BUT No Recovery of Title to Rellosa ~
In Pari Delicto > Remedy not to Rellosa but to State (to enforce prohibition of
alien ownership) is not in Annulment but in Reversion:
(1) VOID not accdg to Seirei No. 6 requiring approval of Director General of
the Japanese Military Administration before an alien can acquire any private
land BUT TO Constitution (September 4, 1943);
(2) No Recovery > In Pari Delicto > Both parties knew that what they were
doing was in violation of the Constitution;
(3) Remedy NOT Annulment for Recovery by either party BUT Reversion or
Escheat by the State > ONLY UPON Action by State
>> In Pari Delicto > Party to an illegal contract cannot come into a court of law
and ask to have his illegal objects carried out ~ Law will not aid either party to
an illegal agreement and leaves the parties where it finds them > THUS No
action arises, in equity or at law, from an illegal contract either (i) for its specific
and trust and took advantage of her old age (90), blindness, crippleness and
invalidity to circumvent the constitutional provision prohibiting aliens from
acquiring lands in the Philippines and also of the Philippine Naturalization Laws
> CONTENTIONS of Wong: Valid contracts made by Justina as gratification of
Wongs care for her, saving she and her sister from a fire in the property during
liberation, and his childrens visits to her whose recitation of prayers in Tagalog
were her consolation in life
> VOID CONTRACTS > Contrary to Constitution
(1) Lease Freely and Voluntarily Entered into by Justina > Desire to have Wong
enjoy the propertyes as she had no relatives but considered Wong Heng as a son
and his children her grandchildren (even at the point of their adoption) ~
Testified by her Atty. Alonzo;
(2) Void as Contrary to Constitution > Intention by both parties to circumvent
the Constitutional prohibition against the transfer of lands to aliens >
Singly, contracts show nothing illegal ~ Lease to an alien for a reasonable period
and an Option giving an alien the right to buy real property on condition that he
is granted Philippine citizenship are valid > BUT Collectively, they reveal an
insidious pattern to subvert by indirection what the Constitution directly
prohibits ~ Illicit purpose then becomes the illegal causa rendering the contract
void > Wong was given not only a lease but also an option to buy, by virtue of
which Justina cannot sell or otherwise dispose of her property for 50 years >
Clear that the arrangement is a virtual transfer of ownership, comprising of the
right to enjoy the land and right to dispose of it;
(3) Despite In Pari Delicto, Land to be returned to Justinas Estate > Public
Policy to Conserve Land for Filipinos would be defeated and continually
violated if the General Rule of In Pari Delicto is applied INSTEAD of setting
the contracts aside and ordering the restoration of the land to the estate of the
deceased Justina > Conflict with Rellosa v. Gaw Chee Hun
G.R. No. 143958
July 11, 2003
ALFRED FRITZ FRENZEL v. EDERLINA P. CATITO
Facts:
Alfred Fritz Frenzel, Australian citizen, went to the Ph in 1974 as a pilot,
married (1976) but later separated (1981) from Teresita Santos, Ph citizen.
When he returned to Sydney in Feb. 1983, he met Ederlina Catito, Ph citizen,
who was a masseuse at Kings Cross nightclub. Although both knew that
Ederlina was still married to German Klauss Muller and Alfred to Teresita, they
fell in love. Alfred persuaded her to stop working at Kings Cross, to return to
the Ph to engage in a wholesome business of her own (where he even financed
her trip and business of beauty parlour) and proposed marriage and assured her
that she would divorce his wife. Ederlina opted to wait for such divorce which
she promised she would also obtain for herself. Decided to stay in Ph for good
and live with Ederlina, Alfredo bought 5 real properties (Ermita, QC, Davao)
which were all in the sole name of Ederlina because he knew that he cannot own
land as a foreigner. He also opened a joint account in HSBC, HK with Ederlina.
Unfortunately, Ederlinas husband, Klaus, opposed the divorce (after Alfred
ignored his letter to stay away from his wife) and moreover demanded of
properties owned by Ederlina in Ph before he would agree to the divorce. Klaus
also threatened to file a bigamy suit against Ederlina. Alfred thereafter left
Ederlina who refused to establish a 70-30 partnership with him (by which he
could also own the property) and who insisted on her ownership of the
properties. Alfred thus sued for the declaration of ownership and recovery of the
real properties, alleging that Ederlina transferred his personal funds to their joint
acct without his knowledge/consent and by which purchased all the properties.
Ederlina contended that she purchased the properties using her own funds
especially where the deeds of sale, receipts, certificates of title were in her name
alone, that Alfred has no right over the props and has no cause of action.
Issue: WON Alfred can recover properties
Held: Evidence proves that Ederlina was the purchaser of the properties but
even if Alfred was the real purchaser, he cannot be declared owner and recover
the same (even just for the purpose of having the props sold at public auction)
because he is a foreigner and is prohibited by Sec. 14, Art. XIV, 1973 Consti to
acquire real props. Hence, such sales are void ab initio. He also cannot recover
his money because he acted in bad faith, knowing that Ederlina was married and
being married himself. Hence, being a party to an illegal contract, he cannot
come into a court of law and ask it to have his illegal objective carried out. One
who losses his money/prop by knowingly engaging in a contract which involves
his own moral turpitude may not maintain an action for his losses. Equity, as a
rule, will follow the law and will not permit that to be done indirectly which
because of public policy cannot be done directly.
G.R. No. 148376
March 31, 2005
LEONARDO ACABAL and RAMON NICOLAS v. VILLANER ACABAL,
EDUARDO ACABAL, SOLOMON ACABAL, GRACE ACABAL,
MELBA ACABAL, EVELYN ACABAL, ARMIN ACABAL, RAMIL
ACABAL, and BYRON ACABAL
Facts: Villaner sold his property to nephew Leonardo, and Leonardo then sold it
to Ramon. Villaner subsequently sought for both sales annulment, alleging that
what he signed was a mere contract of lease and not of sale. And hence, the
contracts of sale are void for being fictitious. However, Villaner, as the one who
alleged the simulation, failed to prove such allegation. He did not present
109
evidence as to how he came to sign the Deed of Sale and had not presented the
alleged women witnesses to the lease (contrary to the sps. witnesses of the Sale).
Moreover, he cannot contend that such sale was void for being contrary to
CARL that only allows 5 hectare property to be retained because the part of the
property that is covered by CARL only comprises 3-4 hectares and was thus
validly retained and sold by Leonardo and Ramon. But assuming arguendo that
such sale was in violation of CARL, he still cannot recover because he was also
a guilty party in selling agricultural property where the exception to the rule
does not apply because the prohibition is not meant for the benefit of the
plaintiff but of the farmers.
> Deed of Absolute Sale (April 19, 1990) b/w Villaner Acabal and godsonnephew Leonardo Acabal where former sold the parcel of land he had
previously purchased from his parents (July 6, 1971) for P2k to latter for P10k >
Deed of Sale (May 19, 1990) by Leonardo in favour of Ramon Nicolas over the
same property > SUIT (October 11, 1993) by Villaner for Annulment of Sales
(to Leonardo and to Ramon) > CONTENTIONS of Villaner: Simulated and
Fictitious because (i) he only intended and signed a Lease Contract in favour of
Leonardo, for 3y for P1k; (ii) he did not read the contents but just the title of
Lease Contract where the Deeds of Sale may have been included within the
pages; (iii) Witnesses to his signing were women employees of Judge Villegas
but witnesses to Deeds of Sale were sps. Carmelo (who prepared the Deed) and
Lacorte Cadalin; (iv) Non-Payment by Leonardo of any price >
CONTENTIONS of Leonardo: Valid Deeds of Sale where he already paid P10k
purchase price
(3) Assuming Arguendo that Sale was Contrary to CARL, Villaner has no
remedy > In Pari Delicto for Sale of Agricultural Property > Exception not
applicable because Prohibition not for Plaintiff but for Farmers
> Action of Villaners Spouse and Children for Recovery of their Share of the
Property > NOT Anuulment BUT Partition
>> Principle of pari delicto > 2 premises: (1) Courts should not lend their good
offices to mediating disputes among wrongdoers > Not to lend its aid to a man
who founds his cause of action upon an immoral or an illegal act; (2) Denying
judicial relief to an admitted wrongdoer is an effective means of deterring
illegality > EXCEPT IF: (1) Contract is not illegal per se but merely prohibited;
(2) Prohibition is for the protection of the plaintiffs; (3) Public policy is
enhanced thereby > WHY: Law will not aid either party to an illegal agreement
and will leave them where it finds them ~ Not for the sake of the defendant but
because they will not lend their aid to such a plaintiff
Who can bring the Suit?
What is the impact of the in pari delicto?
Void Contracts have VALUE ~ If no one challenges it
110
of his own funds as much as possible > Demand by Fisher for Return of the
entire amount paid by him
Facts: Because the PGCI failed in business, Robb felt morally responsible for
the loss of Fishers 2nd installment as stockholder of the company. He wrote him
that he would try as much as possible to return such installment. Nevertheless,
Fisher cannot judicially demand the fulfilment of such promise because it is a
mere moral obligation which has no force in law but only in conscience. It did
not suffice as consideration to make such promise an onerous contract because it
does not fall under the exceptions of law.
>> Consideration as the explanation of the contract; the essential reason for the
contract > Motives are particular reasons of a contracting party which do not
affect the other party and which do not preclude the existence of a different
consideration UNLESSs the efficacy of the consideration had been subordinated
to compliance with the motive as conditions
> BUT Consideration is not an essential element of a contract
> Is the action enforceable? NO (In my opinion) BECAUSE there is no contract
(no meeting of minds where they did not agree on the amount because Fisher
wanted the 1st and 2nd instalment while Robb only offered 2nd instalment)
Held: Although the document was executed due to a sense of moral obligation
on Juans part (because he did not have to since the original debt had already
prescribed), it resulted in an effective and demandable obligation voluntarily
entered into by him. Although there is a rule that only the original debtor can
make a new promise to pay a debt beyond the prescriptive period, this is rule is
not applicable to the case because the obligation is voluntarily assumed by Juan
himself.
> Already no debt to speak of due to prescription (death, 7y), Villaroel
voluntarily paid
> PAYMENT necessary in Natural Obligation! (that Natural Obligation arises
only when there was payment because the obligation is to retain what had been
given)
* Facts + Law = Resolution
G.R. No. 46274 November 2, 1939
A.O. FISHER v. JOHN C. ROBB
111
G. R. No. L-41001
September 30, 1976
MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER
OF THE ELKS, INC., v. THE HONORABLE COURT OF APPEALS,
CITY OF MANILA, and TARLAC DEVELOPMENT CORPORATION
No. L-41012
September 30, 1976
TARLAC DEVELOPMENT CORPORATION v. HONORABLE COURT
OF APPEALS, CITY OF MANILA, LODGE NO. 761, BENEVOLENT
AND PROTECTIVE ORDER OF ELKS, INC.
Facts: Manila City reclaimed part of Manila Bay to extend Luneta, as
authorized under Act 1360. It subsequently sold part of the southern area to
BPOE and then BPOE sold the same to TDC. When Manila City sought for the
reannotation of its right to repurchase on the title of TDC, TDC filed the suit for
declaration of ownership. Unfortunately, the SC ruled in favour of Manila City
that the sale is void because the reclaimed area is public property and not part of
the site allowed to be alienated. Hence, the contract lacked subject-matter. And
even if TDC was a buyer in good faith, he cannot claim it to estop Manila City
from invoking the invalidity of the sale because estoppel does not apply to
government agencies for errors made by its agent. Otherwise, allowing a
contract prohibited by law to subsist is tantamount to indirectly allowing what
directly cannot be allowed.
> Reclamation of part Manila Bay, for the Extension of Luneta, by City of
Manila ~ Pursuant to Act No. l360 amended by Act No. 1657 (June 26, 1905;
May 18, 1907; of the Philippine Commission) which hereby authorized
Manila City to reclaim land which is to belong to them, and to set aside a tract at
the north end for a hotel site and to sell or lease that portion, with the approval
of the Governor General, to a responsible person or corporation > Reclaimed 25
hectares, Registered to Manila City > Sale (January 16, 1909) of 5,543.07sq.m.
at the southern end of the reclaimed land to Manila Lodge No. 761, Benevolent
and Protective Order of Elks of the U.S.A. > Title in Manila Citys name
(January 20, 1911) ~ Issuance of Respective Titles to Manila and BPOE (July
13,17 1911) > Sale of 5,543.07sq.m. by BPOE to Tarlac Development
Corporation (November 19, 1963) for P4.7M > Reannotation of Right to
Purchase by Manila over 5,543.07sq.m. ~ After BPOE had it cancelled on
February 15, 1963 before the Sale > SUIT by TDC (April 28, 1971) against
Manila and BPOE for Declaration of Ownership of the Property and Right to
Recover against BPOE should the Property be Declared Public > RTC (July 14,
1972) Denied, Ruling that Land is Public Park/Plaza, Sale to BPOE and TDC is
null and void, TDC buyer in good faith who can recover the BPOE who can
recover from Manila the purchase price > CONTENTIONS of BPOE, TDC: (i)
it was addressed > SINE QUA NON: latter relied upon the misrepresentation
and had been influenced and misled thereby
> Ponciano NOT Estopped > No Proof that (i) he intentionally and deliberately
led sps. Mendoza to believe what was contained in the Pleading and to make
them act upon it ~ Sps. Mendoza not even a party in the case, not shown or had
happened to see the Pleading, not aware of its existence at the time of Sale; (ii)
his representation was addressed to Sps. Mendoza and intended that they would
act upon it
G.R. No. L-26699
March 16, 1976
BENITA SALAO, assisted by her husband, GREGORIO MARCELO;
ALMARIO ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and
ANITA ALCURIZA, the latter two being minors are represented by
guardian ad litem, ARTURO ALCURIZA v. JUAN S. SALAO, later
substituted by PABLO P. SALAO, Administrator of the Intestate of JUAN
S. SALAO; now MERCEDES P. VDA. DE SALAO, ROBERTO P.
SALAO, MARIA SALAO VDA. DE SANTOS, LUCIANA P. SALAO,
ISABEL SALAO DE SANTOS, and PABLO P. SALAO, as successors-ininterest of the late JUAN S. SALAO, together with PABLO P. SALAO,
Administrator
Facts:
> 4 Children of sps. Manuel Salao (died 1885) and Valentina Ignacio (died May
28, 1914): Patricio (died 1886, leaving son Valentin who in turn left two girls,
Benita, Victorina); Alejandra; Juan (leaving son Juan Jr.); Ambrosia > Purchase
(1911) by Juan and Ambrosia of Calunuran fishpond (47-hectares) and of Lewa
Fishpond (9-hectares) > Sales and Subsequent Redemptions of Calunuran
Fishpond by Ambrosia and Juan (December 1, 1911 to Vicente Villongco for
P800; June 8, 1914 to Eligio Naval for P3,360 > Extrajudicial Partition of Estate
of Valentina (December 29, 1918): Valentin allegedly obtained Calunuran
fishpond by verbal agreement; received fishponds and riceland worth P13,501
which exceeded the Distributive share of P8,135.25 of each legal heir ~ Directed
to pay his co-heirs P5,365.75 > Deaths of Juan (November 3, 1931) and of
Valentin (February 9, 1933) ~ Extrajudicial Partition of his Estate (December
28, 1934), consisting of 2 inherited fishponds > Donation (September 30, 1944)
by Ambrosia of share in Calunuran and Lewa Fishpond to nephew Juan Jr.
(who was already owner of other upon Juan Sr.s death) > SUIT (January 9,
1952) by Heirs of Valentin for Reconveyance of Valentins 1/3 interest in
Calunuran and Lewa Fishponds > CONTENTIONS of Valentin: Calunuran
Fishpond for fishpond business among Juan, Ambrosia, Alejandra and Valentin
that was funded by the inheritance from father Manuel Salao ~ Valentins share
was held in trust by his uncle and aunt > CONTENTIONS of Juan and
Ambrosia: Calunuran Fishpond purchased by Juan and Ambrosia alone
> NO TRUST > No Evidence of Express or Implied Trust:
(1) No Express Trust > Purely parol evidence offered by Valentin heirs ~ oral
partition in 1919 of the two fishponds where Calunuran was assigned to
Valentin Salao > Cannot be used to prove an Express trust concerning real
property;
(2) No Implied Trust > (i) No proof of Coownership over the lands supposedly
inherited from Manuel (used to purchase fishponds); (ii) No proof of Manuels
estate allegedly consisting 145 hectares where the mere 17-hectare Estate of
Valentina was partitioned in an elaborate Deed woth 22 pages; (iii) No proof of
intention of Ambrosia and Juan to create any trust in Valentins favour
(3) Laches > 40y Period from Registration of Fishponds (1911) before Writtedn
demand for Reconveyance (1951) and Action was filed for Reconveyance
(1952) ~ Implied Trusts prescribe in 10y
>> Trusts (fideicomosis) > right, enforceable solely in equity, to the beneficial
enjoyment of property, the legal title to which is vested in another, meaning
that the title of the Trustor is transferred to the Trustee > PARTIES: (i) trustor,
person who establishes a trust; (ii) trustee, one in whom confidence is reposed as
regards property for the benefit of another person; (iii) beneficiary, person for
whose benefit the trust has been created > Fiduciary relation between the trustee
and the cestui que trust > EITHER: Express, Implied
>> Express trusts are created by the intention of the trustor or of the parties ~
BY Fiduciary Relations > FORM: No particular words, it being sufficient that a
trust is clearly intended > HOW CREATED: By the direct and positive acts of
the parties; By some writing or deed, or will; By words either expressly or
impliedly evincing an intention to create a trust > HOW PROVED: Not by Oral
Evidence
>> Implied trusts come into being by operation of law > FORM: Without being
expressed > HOW PROVED: From the nature of the transaction as matters of
intent; Superinduced on the transaction by operation of law as matter of equity,
independently of the particular intention of the parties > EITHER: Resulting,
Constructive > Legal Difference (Not defined in statutes): Constructive in 10y
from discovery of fraud, trust established in the interest of justice; Resulting no
prescription, wanted to have a trust but which was not established;
>> Resulting trust is a trust which is raised or created by the act or construction
of law > HOW CREATED: By implication of law > HOW PROVED: Presumed
to have been contemplated by the parties, found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance
115
prescribves in 4y upon discovery and the more than 10y adverse possession of
S,T of the property had vested ownership in them.
> Purchase of Lot 164 of Friar Lands Estate (January 1, 1909) by Pablo Fabian
from Ph Govt for P112 ~ Issuance of Sale Certificate, Payment of 5
installments, Death (August 2, 1928) > Affidavit (October 5, 1928) by daughter
(1/4) Silbina and niece Teodora Fabian that Silbina was the only remaining heir
of Pablo ~ Issuance of Sale Certificate (November 14, 1928) in favour of Silbina
and Teodora over Lot 164 for P120 > Possession, Cultivation, Production of
Property, Payment of Taxes (since 1929) ~ Issuance of TCTs each in Silbina and
Teodoras name after subdivided into 2 > SUIT for Reconveyance (July 18,
1960) by Silbinas siblings (Esperanza, Benita I Fabian, Damaso Papa) aganist
sps. Silbina Fabian and Feliciano Landrito and Teodora Fabian and Francisco
del Monte > CONTENTIONS of Siblings: Silbina and Teodora was able to buy
Lot 164 by fraudulently misrepresenting in the Affidavit that Silbina was the
only daughter and heir of the deceased Pablo Fabian > DEFENSE: Valid
purchase by them because Fabian was not yet the owner (did not complete
amortizations) or because of acquisitive prescription or because action of
siblings already barred by laches
> VOID Sale BUT Valid Ownership BY Silbina and Teodora thru Laches,
Prescription:
(1) Ownership of Pablo DESPITE Incomplete amortizations > Issuance of Sale
Certificate and Payment of first 5 installements by Pablo > Friar Lands Act
provides the Transfer of ownership to Purchaser upon Payment of 1st instalment
and Issuance of Certificate of Sale WHERE Naked title is kept by Govt until
full payment ONLY TO protect State interest and prevent the purchaser from
encumbering or disposing of the lot purchased before the payment in full of the
purchase price; BUT Govt can no longer alienate property;
(2) Null and Void Subsequent Sale by Govt to Silbina and Teodora > Interest of
Pablo in Purchase Property upon his Death Transfers to His Heirs;
(3) BUT Ownership now validly with Silbina and Teodora: (i) Laches Barred
the Action to Enforce Constructive Trust (arising when property is acquired
through fraud and resulting in the person obtaining it being considered a trustee
of an implied trust for the benefit of the person from whom the property comes)
~ Assignment of Sale Certificate (Affidavit) on October 5, 1928, Actual transfer
of Lot 164 on November 14, 1928 BUT ACTION ONLY ON July 8, 1960 (32
big years later) ~ Absent Proof of Concealment of Facts giving rise to the trust
WHERE Silbina and Teodora were publicly and continuously under claim of
ownership of the Lot, cultivated it, harvested and appropriated the fruits for
themselves; (ii) Prescription of Action based on Fraud (4y); (iii) Adverse
Possession of Lot by Silbina and Teodora fore more than 10y ~ Act 190 that Ten
years actual adverse possession by any person claiming to be the owner for that
116
time of any land or interest in land, uninterruptedly continued for ten years by
occupancy, descent, grants, or otherwise, in whatever way such occupancy may
have commenced or continued, shall vest in every actual occupant or possessor
of such land a full and complete title
> Even if Void, Laches is not ratification but a Defense of Estoppel hence the
Defense is not ratification by passage of time but Protection from Suit due to
Estoppel
G.R. No. L-22587
April 28, 1969
RUFINO BUENO, FILOMENA B. GUERRO, LUIS B. GUERRERO,
BENJAMIN B. GUERRERO, VIOLETA B. REYES-SAMONTE,
FELICIDAD B. REYES-FONACIER, MERCEDES B. REYES, HONESTA
B. REYES-SARMIENTO, TEODORA B. REYES-DALUMPINES,
MAMERTA B. REYES-MERCADO, ROSARIO B. REYESCONCEPCION, FEDERICO B. REYES and CONCEPCION B. REYES v.
MATEO H. REYES, and JUAN H. REYES
Facts: The heirs of Jorge Bueno agreed to have Francisco (husband of Jorges
daughter) to file their answer to the cadastral proceedings in order to obtain their
title to a property which belonged to Jorge. Allegedly due to mistake or bad
faith, Francisco did file an answer and obtain a title but this was issued in his
name and his brothers as owners. The Buenos discovered the title only when
the brothers filed for possession. Hence, the Buenos sued them for
reconveyance. The trust relationship that arose from the entitlement of Francisco
of Buenos property was however only implied as it resulted by operation of law
and not by intention. Hence, the action to enforce such trust is not
imprescriptible. Reconveyance prescribes in 10y and for their case, it is counted
from the time such constructive trust (which warrants reconveyance) came about
and discovered. The case is remanded to determine such date because their
allegations contradict and because the proceedings and possession cannot serve
as constructive notice because they are in rem and in possession of Buenos
themselves.
> Agreement b/w Heirs of Jorge Bueno and Francisco H. Reyes (husband of
Jorges daughter, Eugenia) that latter would file the formers answer in the
cadastral proceedings over the title of Jorge Bueno to Lot No. 2587 and would
obtain title in ther favour > Filing of an Answer by Francisco in cadastral
proceedings (January 7, 1936) BUT declared the said parcel of land in his and
his brothers names (Juan, Mateo) allegedly due to bad faith or mistake ~
Issuance of Title in their names > SUIT for Reconveyance (December 12, 1962)
by Heirs of Bueno against Reyes > CONTENTIONS: Discovery of Fraud only
when Reyes brothers filed for a Writ of Possession; Express Trust which is
117
> Sale of Land (part; February 1, 1912) by sps. Vicente Tamayo and Cirila
Velasco-Tamayo to Fernando Domantay > Application for Title (September 29,
1913), Registration of Land in Names of Children Mariano and Marcos ~ After
Death of Vicente and Waiver of Cirila of her share in sonss favour >
Issuance of Title in sons names (November 15, 1915; but only part because of
sons acknowledgement that part of the land belonged to the estate of Gregorio
Flor Mata) > Sale of Purchased Land (August 22, 1918) by Domantay to
Aurelio Callejo ~ Possession > Issuance of Title in Marianos name (May 26,
1930) after Marcos sold him his share > Sale of Land (part; February 24, 1940)
by Mariano to Proceso Estacio, which includes the part sold to Domantay
Callejo ~ Surveyor sent by Estacio was not allowed by Callejo to enter >
Callejos Request to Mariano to exclude his part from latters title (Ignored),
Registration of Adverse Claim (June 16, 1952), SUIT (June 25, 1952) for
Reconveyance > CONTENTION of Callejo: Land portion is held in trust by the
Tamayos and that the action to enforce said trust does not prescribe >
DEFENSE: Callejos part not included in Marianos title
> Land Portion of Callejo Held IN TRUST by Tamayos > Implied but became
Express Trust ~ Imprescriptible until Repudiation:
(1) Implied Trust > Created by Tamayos application for registration (September
29, 1913) and the Portions inclusion in Tamayos Title (November 15, 1915);
(2) Express Trust > Public Instrument (June 28, 1918) by Mariano on his and his
brothers behald, that they explicitly acknowledged that his deceased parents,
Vicente Tamayo and Cirila Velasco, had sold to Fernando Domantay, for the
sum of P200, the parcel of land then held by the latter, and that Fernando
Domantay is the absolute owner of said land, free from any lien or encumbrance
thereon > Trust clearly intended to be created by the will of the parties >
Imprescriptible, continuing and subsisting UNTIL repudiated > Prescription of
10y begins at the time of repudiation ;
(3) Action not yet prescribed > Repudiation when Mariano Tamayo rejected
Aurelio Callejo's demand (June 1952) and SUIT (June 25, 1952), just weeks
after;
> Remanded to Determine Division of Property
Facts: When Quijano and Enriquez acquired free patents and titles to Lots 374
and 379, respectively, Heirs of Sanjorjo sought its cancellation before DENR.
Their complaint was dismissed though because it was commenced 3y after the
issuance of the patents and the law allows review only if based on fraud and
commence within 1y. But heirs of Sanjorjo are not left w/o remedy. The law
allows the cancellation of titles before courts of justice even if commenced more
than 1y as long as the title has not been transferred to purchasers in good faith.
Because the property remained with Quijano and Enriquez, heirs coud validly
seek reconveyance in court especially when their action has not yet prescribed
(10y) based on constructive trust.
> Issuances for Free Patents and Purchases, Issuance of Titles of Lots 374 and
379, Cadastre 374-D by Alan P. Quijano (August 29, 1988, September 6, 1988)
and Gwendolyn Q. Enriquez (November 11, 1988, February 11, 1989) > Suit for
Cancellation of Titles (May 22, 1991) by Heirs of Guillermo Sanjorjo, against
Quijano and Enriquez, before DENR Regional Executive Director > DENR
Dismissed because Action was filed more than one year from the titles issuance
and hence only the regular courts of justice have jurisdiction on the matter of
cancellation of title > SUIT for Cancellation of Titles and Reconveyance
(September 13, 1993) by Heirs of Guillermo Sanjorjo, against Quijano and
Enriquez, before CFI > CONTENTIONS: They had inherited Lots 374,379 from
predecessor Guillermo who bought it from original owner Ananias Ursal; No res
judicata from dismissal of DENR
> Action to enforce Constructive Trust based on Fraud is for Conveyance of
Property Which has not yet Prescribed:
(1) Constructive Trust based on allegation of absolute ownership of Sanjorjo of
the lots that were fraudulently deprived by Quijano and Enriquez when they
obtained free patents and certificates of title in their names > Art. 1456 that a
person acquiring property through fraud becomes by operation of law a trustee
of an implied trust for the benefit of the real owner of the property > Alleged
fraud created an implied trust > Right to seek reconveyance;
(2) No res judicata > (i) DENR proceedings was not a judgement on the merits
of the case (lack of 3rd element); (ii) PD 1529 does not bar actions to reopen title
registrations if commenced within 1y due to fraud, OR if commenced after 2y
from registration BUT IN CFI and ONLY WHEN that no innocent purchaser for
value has acquired the property or any interest thereon > Landowner whose
property has been wrongfully or erroneously registered in anothers name where
property has not passed to an innocent third party for value;
(3) Reconveyance still available to Heirs of Sanjorjo > Prescription in 10y
>> Elements of res judicata: (1) the previous judgment has become final; (2) the
prior judgment was rendered by a court having jurisdiction over the subject
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matter and the parties; (3) the first judgment was made on the merits; and (4)
there was substantial identity of parties, subject matter and causes of action, as
between the prior and subsequent actions
>> Judgment on the merits > rendered after argument and investigation, and
when there is determination which party is right
>> Action for reconveyance > seeks to transfer property, wrongfully registered
by another, to its rightful and legal owner > PROVE: (1) that the plaintiff was
the owner of the land; (2) that the defendant had illegally dispossessed him of
the same > BASIS: Implied or constructive trust, which prescribes in ten years
from the date of the issuance of the Certificate of Title over the property
provided that the property has not been acquired by an innocent purchaser for
value ~ OTHERWISE, Remedy if Action for Damages
G.R. No. 144773 May 16, 2005
AZNAR BROTHERS REALTY COMPANY v. LAURENCIO AYING, IN
HIS OWN BEHALF AND IN BEHALF OF THE OTHER HEIRS OF
EMILIANO AYING, PAULINO AYING, IN HIS OWN BEHALF AND IN
BEHALF OF THE OTHER HEIRS OF SIMEON AYING, AND
WENCESLAO SUMALINOG, IN HIS OWN BEHALF AND IN BEHALF
OF THE OTHER HEIRS OF ROBERTA AYING
Facts: An Extrajudicial Partition of Real Estate with Deed of Absolute Sale was
executed by some heirs of Aying siblings, the registered owner of the property
which they got from their mother. Said property was sold to Aznar who years
later sent notices to vacate to its occupants but who had been paying its taxes
since the sale. Upon such notice, the heirs of siblings sued for the cancellation of
the Partition and Sale, alleging it to be fraudulent because not all heirs signed it.
They action, however, that is based on constructive trust prescribes in 10y from
the time such trust came about. The registration of the document cannot be
considered because it was wrongfully done; hence, actual knowledge is the
starting point. Some said they knew of the document since 1967 while others
only in 1991 when the notices to vacate were sent. Hence, action regarding 1967
heirs has prescribed but not 1991.
> Issuance of Title over Lot No. 4399 in favour of 8 children of Crisanta
Maloloy-on, due to her death (1930) before Cadastral Decree ~ Lost in war >
Extra-Judicial Partition of Real Estate with Deed of Absolute Sale (March 3,
1964) of Lot by Heirs of Children in favour of Aznar Brothers Realty Company,
Registered (March 6, 1964 under Act No. 3344) > Payment of Real Property
Taxes by Aznar, Reconstitution of OCT (April 12, 1988) > Notices to Vacate
(1991) by Aznar to Lots occupants, Ejectment Suit and Order in its favour
(February 1, 1994 affirmed March 7, 2000) > SUIT for Cancellation of ExtraJudicial Partition with Absolute Sale and Recovery of Lot (August 19, 1993) by
Heirs of Crisanta > CONTENTIONS of Crisanta Heirs: Coowners of Lot as
descendants of registered owners (8 children) who had been in actual, peaceful,
physical, open, adverse, continuous and uninterrupted possession in concept of
owner of subject parcel of land since time immemorial ~ Disturbed only in 1991
upon notice to vacate; Extra-judicial partition of real estate with Deed of
absolute sale was a fraud, and null and void ab initio where not all the heirs of 8
children affixed their signature (those who supposedly signed said document had
been dead at the time) > DEFENSE of Aznar: Actual possession of subject land
as owner by virtue of the extra-judicial partition of real property and deed of
absolute sale and Payment of taxes; Prescription against Crisanta heirs where an
action to recover property based on an implied trust should be instituted within
4y from discovery of the fraud
> Action of Crisanta Heirs for Reconveyance based on Implied Trust Not
Impresciptible:
(1) Action is NOT for Declaration of Nullity which is imprescriptible > ExtraJudicial Partition of Real Estate with Deed of Absolute Sale NOT PROVEN as
forged nor simulated > Valid and binding BUT only as to the heirs who
participated in the execution thereof (excluding those of Emiliano, Simeon and
Roberta Aying who undisputedly did not participate);
(2) Action is for Reconveyance based on IMPLIED TRUST > (i) Implied Trust:
Art. 1456 that If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes > Aznar acquired the entire
parcel of land with the mistaken belief that all the heirs have executed the
subject document; (ii) Reconveyance is remedy;
(3) Action for Reconveyance Prescribes in 10y > Implied or constructive trust is
an offspring of the law thus favors the true owner > Art. 1144 that actions based
upon an obligation created by law on written contracts must be brought within
10y from the time the right of action accrues > COUNTED FROM (i) Actual
Notice in 1967 based on testimonies of heirs of Roberta and Emiliano that they
knew about the document at that time; (ii) Actual Notice in 1991 based on
notices to vacate, as admitted in their amended complaint; NOT FROM
Registration because Document not deemed registered because wrongfully
registered under Act No. 3344 and not under Act No. 496 (Land Registration
Act), despite the fact the land in dispute was already titled under Act No. 496 in
the names of the Aying siblings at the time the subject document was executed >
HENCE, Action of Other Heirs (whose knowledge began only in 1991) Has not
prescribed
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>> Burden of Proof on Knowledge > Which party to an action or suit will fail if
he offers no evidence competent to show the facts averred as the basis for the
relief he seeks to obtain > Defendant bears the burden of proof as to all
affirmative defenses which he sets up in answer to the plaintiffs claim ~ Heirs
of Crisanta
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