EDUARDO FELIPE, HERMOGENA V. FELIPE AND VICENTE V.

FELIPE, petitioners,
vs.
HEIRS OF MAXIMO ALDON, NAMELY: GIMENA ALMOSARA, SOFIA ALDON, SALVADOR ALDON, AND THE
HONORABLE COURT OF APPEALS, respondents.

FACTS:
1. Maximo Aldon married Gimena Almosara in 1936. They bought several pieces of land sometime between 1948 and 1950.
2. In 1951, Gimena Almosara sold the lots to the spouses Eduardo Felipe and Hermogena V. Felipe. The sale was made without
the consent of her husband,.
3. On April 26, 1976, the heirs of Maximo Aldon, namely his widow Gimena and their children Sofia and Salvador Aldon filed a
complaint that alleged that the plaintiffs were the owners of Lots 1370, 1371 and 1415; that they had orally mortgaged the same
to the defendants; and an offer to redeem the mortgage had been refused so they filed the complaint in order to recover the
three parcels of land.
4. The trial court sustained the claim of the defendants and rendered judgment in favor of Spouses Felipe as lawful owners.
5. The Court of Appeals set aside the decision of CFI declaring the parcels were purchased by plaintiff Gimena Almosara and
her late husband Maximo Aldon (the lots having been purchased during the existence of the marriage, the same are presumed
conjugal) and inferentially, by force of law, could not, be disposed of by a wife without her husbands consent. Hence this
petition.

ISSUE: WON the sale made by Gimena is a defective contract but of what category?

HELD: It is a voidable contract.

According to Art. 1390 of the Civil Code, among the voidable contracts are [T]hose where one of the parties is incapable of
giving consent to the contract. (Par. 1.) In the instant case-Gimena had no capacity to give consent to the contract of sale. The
capacity to give consent belonged not even to the husband alone but to both spouses.

The case of Sofia and Salvador Aldon is different. After the death of Maximo they acquired the right to question the defective
contract insofar as it deprived them of their hereditary rights in their fathers share in the lands. The fathers share is one-half
(1/2) of the lands and their share is two-thirds (2/3) thereof, one-third (1/3) pertaining to the widow.

The petitioners have been in possession of the lands since 1951. It was only in 1976 when the respondents filed action to
recover the lands. In the meantime, Maximo Aldon died.
As to the second question, the childrens cause of action accrued from the death of their father in 1959 and they had thirty (30)
years to institute it (Art. 1141, Civil Code.) They filed action in 1976 which is well within the period.

WHEREFORE, the decision of the Court of Appeals is hereby modified. Judgment is entered awarding to Sofia and Salvador
Aldon their shares of the lands as stated in the body of this decision; and the petitioners as possessors in bad faith shall make
an accounting of the fruits corresponding to the share aforementioned from 1959 and solidarity pay their value to Sofia and
Salvador Aldon; costs against the petitioners.

SINGSONG V ISABELA SAWMILL

FERNANDEZ; February 28, 1979

NATURE
Appeal from the judgment of the CFI of Negros Occidental

FACTS
- On January 30, 1951 the defendants Leon Garibay, Margarita G. Saldejeno, and Timoteo Tubungbanua entered into a
Contract of Partnership under the firm name "Isabela Sawmill"

- On April 25, 1958, an action to dissolve the partnership was filed by the spouses Cecilio Saldajeno and Margarita G. Saldajeno
against Isabela Sawmill, Leon Garibay, and Timoteo Tubungbanua

- On April 27, 1958 the defendants Leon Garibay, Timoteo Tubungbanua and Margarita G. Saldajeno entered into a
"Memorandum of Agreement

- On May 26, 1958 the defendants Leon Garibay, Timoteo Tubungbanua and Margarita G. Saldajeno executed a document
entitled "Assignment of Rights with Chattel Mortgage" in favor of Saldejano
- Thereafter the defendants Leon Garibay and Timoteo Tubungbanua did not divide the assets and properties of the "Isabela
Sawmill" between them, but they continued the business of said partnership under the same firm name "Isabela Sawmill".

- The chattel mortgage was later foreclosed

- On May 18, 1959 the Provincial Sheriff of Negros Occidental published two (2) notices that he would sell at public auction on
June 5, 1959 at Isabela, Negros Occidental certain trucks, tractors, machinery, office equipment and other things

- On October 15, 1969 the Provincial Sheriff of Negros Occidental executed a Certificate of Sale in favor of the defendant
Margarita G. Saldajeno

- On October 20, 1959 the defendant Margarita G. Saldajeno executed a deed of sale in favor of the Pan Oriental Lumber
Company transferring to the latter for the sum of P45,000.00 the trucks, tractors, machinery, and other things that she had
purchased at a public auction

- Plaintiffs herein are creditors of the defendant partnership - Breakdown of Outstanding Balance a. Oppen, Esteban, Inc.

- P1,288.89 b. Agustin E. Tonssay- P933.73 c. Manuel G. Singsong- P3,580.50, P143.00 d. Jose L. Espinos- P1,579.44 e.
Bacolod Southern Lumber Yard- P1,048.78 f. Jose Balzunce- P2,052.10

- They sued the defendants to recover the sums of money they have advanced to the partnership, and asked for the nullity of the
chattel mortgage.

- CFI of Negros Occidental ruled in favor of plaintiffs, saying that plaintiffs, as creditors of the defendant partnership, have a
preferred right over the assets of the said partnership, and over the proceeds of their sale at the public auction.

- Saldejanos appealed - CA certified the case to SC considering that the resolution of appeal involves purely questions of law

ISSUES
1. WON the Court of First Instance of Negros Occidental had no jurisdiction over the case because the plaintiffs Oppen,
Esteban, Inc., Agustin R. Tonsay, Jose L. Espinos and the Bacolod Southern Lumber Yard sought to collect sums of money, the
biggest amount of which was less than P2,000.00 and, therefore, within the jurisdiction of the municipal court

2. WON the chattel mortgage may no longer be annulled because it had been judicially approved by the Court of First Instance
of Negros Occidental and said chattel mortgage had been ordered foreclosed by the same court (different branch from that
which gave the judgment subject of this appeal)

3. WON plaintiffs cannot bring an action to annul the chattel mortgage of the properties of the partnership executed by Leon
Garibay and Timoteo Tubungbanua in favor of Margarita G. Saldajeno

4. WON appellants are liable for attorneys fees

HELD
1. NO

This contention is devoid of merit because all the plaintiffs also asked for the nullity of the assignment of right with chattel
mortgage.

-This cause of action is not capable of pecuniary estimation and falls under the jurisdiction of the Court of First Instance.

Ratio Where the basic issue is something more than the right to recover a sum of money and where the money claim is purely
incidental to or a consequence of the principal relief sought, the action is as a case where the subject of the litigation is not
capable of pecuniary estimation and is cognizable exclusively by the Court of First Instance.

2. NO

Ratio One branch of the Court of First Instance of Negros Occidental can take cognizance of an action to nullify a final judgment
of the other two branches of the same court.

Reasoning On the question of whether a court may nullify a final judgment of another court of co-equal, concurrent and
coordinate jusridiction, this Court originally ruled that a court has no power to interfere with the judgments or decrees of a court
of concurrent or coordinate jurisdiction having equal power to grant the relief sought by the injunction. -This was pursuant to the
policy of judicial stability -In December 1971, however, this court re-examined and reversed its earlier doctrine on the matter. In
Dupla V Court of Appeals, the SC declared that a court of first instance or a branch thereof has the authority and jurisdiction to
take cognizance of, and to act in, suit to annul final and executory judgment or order rendered by another court of first instance
or by another branch of the same court.

3. NO
Ratio A contract cannot be assailed by one who is not a party thereto. However, when a contract prejudices the rights of a third
person, he may file an action to annul the contract.
Reasoning This Court has held that a person, who is not a party obliged principally or subsidiarily under a contract, may
exercise an action for nullity of the contract if he is prejudiced in his rights with respect to one of the contracting parties, and can
show detriment which would positively result to him from the contract in which he has no intervention. -The plaintiffs-appellees
were prejudiced in their rights by the execution of the chattel mortgage over the properties of the partnership "Isabela Sawmill" in
favor of Margarita G. Saldajeno by the remaining partners, Leon Garibay and Timoteo Tubungbanua, hence, they have a right to
file an action to nullify the chattel mortgage.

4. NO
Ratio There will be no liability for attorneys fees absent a showing of wanton disregard of the rights of the plaintiffs.
Disposition The decision appealed from is hereby affirmed with the elimination of the portion ordering appellants to pay
attorney's fees and with the modification that the defendants, Leon Garibay and Timoteo Tubungbanua, should reimburse the
defendants-appellants, Margarita G. Saldajeno and her husband Cecilio Saldajeno, whatever they shall pay to the plaintiffs-
appellees.

SAMAHAN NG MAGSASAKA SA SAN JOSEP V. MARIETTA VALISNO, ET AL

G.R. No. 158314, June 3, 2004
FACTS: Dr. Nicolas Valisno, Sr. is the registered owner of a 57-hectare property situated in La Fuente, Sta. Rosa, Nueva. Dr.
Valisno mortgaged 12 hectares of his property to the Angelo and Renato Banting.
Thereafter, the property was subdivided into ten lots and individual titles were issued in the name of the eight children of Dr.
Valisno, to Angelito Banting and to Renato Banting.

The mortgage on the 12 hectare portion was foreclosed and the property sold at public auction. Four grandchildren of Dr.
Valisno redeemed the property. At the time of the redemption, only one was of legal age, the others were only minors.
Subsequently, petitioner SMSP filed a petition for coverage of the subject property. The petition was dismissed but DAR
Secretary ultimately held that the property was covered by CARP subject to the retention rights of the heirs of Nicolas, Sr.
The Valisno heirs including the four grandchildren-redemptioners filed a consolidated Application for Retention and Award under
R.A. No. 6657.

The Regional Director approved the retention of the Valisno children. The request for the award to the grandchildren-
redemptioners retention rights of three hectares each was approved on appeal to the CA. Petitioners filed a Motion for
Reconsideration holding that the redemptioners are not entitled to retention rights. The said motion same was denied. Hence,
this Appeal.

ISSUE: Whether or not the grandchildren of the landowner are still entitled to retention rights?

HELD: As owners in their own right, the redemptioner-grandchildren enjoyed the right of retention granted to all the landowners.
This right of retention is a constitutionally guaranteed right, which is subject to qualification by balancing the rights of the
landowner and the tenant and by implementing the doctrine that social justice was not meant to perpetrate an injustice against
the landowner. A retained area, as its name denotes, is land which is not supposed to leave the landowner's dominion, thus,
sparing the government from the inconvenience of taking land only to return it to the landowners afterwards, which would be a
pointless process.

The fact that the grandchildren are minors at the time the redemption was made does not make the contract void but only
voidable or valid until annulled. Under the Civil Code, the action to annul the minors' redemption could only have been initiated
by the minors themselves, as the victims or the aggrieved parties in whom the law itself vests the right to file suit. This action
was never initiated by the minors.

Any action for the annulment of the contracts thus entered into by the minors would require that: (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. Article 1397
of the Civil Code provides in part that [t]he action for the annulment of contracts may be instituted by all who are thereby obliged
principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted.
The action to annul the minors redemption in 1973, therefore, was one that could only have been initiated by the minors
themselves, as the victims or the aggrieved parties in whom the law itself vests the right to file suit. This action was never
initiated by the minors. We thus quote with approval the ratiocination of the Court of Appeals:

Respondents contend that the redemption made by the petitioners was simulated, calculated to avoid the effects of agrarian
reform considering that at the time of redemption the latter were still minors and could not have resources, in their own right, to
pay the price thereof.

We are not persuaded. While it is true that a transaction entered into by a party who is incapable of consent is voidable, however
such transaction is valid until annulled. The redemption made by the four petitioners has never been annulled, thus, it is valid.

ANGELINA MALABANAN vs. GAW CHING & IAC

GR Nos. 74938-39, 17 January 1990

FACTS:
 Gaw Ching has been leasing the house and lot located in Asuncion St, Binondo. When Mr. Jabit died, his daughter,
Malabanan continued to lease the premises to Gaw Ching but an at an increased rental rate of P1k per month.
In 1980, Malabanan told respondent that she was selling the house and lot for P5k per sqm, if he is not agreeable, she
will sell it to another person at P4k per sqm. Ching testified he was willing to buy the property at P4k per sqm.
Ching received a letter from Malabanan informing him that the subject house and lot has been already sold to Senolos.
The lawyer of Ching requested that documents of the sale be sent to then, which was however, not sent to them.
Ching then filed a civil case against Malabanan and Senolos. He presented the receipt of rentals he paid, deposited
rentals which Malabanan refused to accept, and that he had to move out the premises when it was demolished by
Malabanan. Trial court upheld the validity of contract of sale between Malabanan and Selonos. The trial court declared
that Petitioner had not violated preemptive right on the part of a lessee over leased property.
Gaw Ching went on appeal to Intermediate Appellate Court which reversed the decision and nullified the contract of
sale. It was held that transaction between petitioners was vitiated by fraud, deceit and bad faith allegedly causing
damage to respondent.

ISSUE: Whether or not the Intermediate Appellate Court erred in (1) nullifying the deed of sale and (2) granting P350k of moral,
exemplary and actual damages.

HELD: YES
(1) The settled rule is that strangers to a contract cannot sue either or both of the contracting parties to annul and
set aside that contract as embodied in Art 1387.

Art 1397 follows form Art 1311, which established the fundamental rule that contracts take effect only between the
parties, their assigns and heirs except in case where the rights and obligations arising from the contract are not transmissible by
their nature or by stipulation or by provision of law. Their heir is not liable beyond the value of the property received from the
decedent.

In Ibanez v Hongkong and Shanghai Bank, the Court pointed out that it is the existence of an interest in a particular
contract that is the basis of ones 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.

Justice Torres however indicate a possible qualification to the general principle, that he who is not the party obligated
principally or subsidiarily in a contract may perhaps be entitled to exercise an action for nullity if he is prejudiced in his rights with
respect of the contracting parties; but in order that such be the case, it is indispensable to show the detriment which positively
would result to him from the contract in which he had no intervention.
The limitation upon the right of a person who is in fact injured by the very operation of a contract between 2 third parties
to sue to nullify the contract is that, the contract may be nullified only to the extent that such nullification is absolutely necessary
to protect the plaintiffs lawful rights.

In Santos v CA, the Court held that where both land and building belong to the lessor, the preemptive or redemptive
right was simply not available under the law.
In the case, what is important is that respondent does not fall within the possible exception recognized. Ching had no
legal right of preemption in respect of the house and lot, and that it was located outside the Urban Land Reform Zones declared
pursuant to PD 1517.

Malabanan offered 3x the land to Gaw Ching but the latter consistently refused to buy. Since Ching refused to accept
offer, he suffered no prejudice and could not have suffered any prejudice by sale of petitioner to Senolos. No fraud was worked
upon him. The fact that Ching had been a lessee of the house and lot was not enough basis for a right to bring action to set
aside the contract between petitioners. A lessee cannot attack the title of his lessor over the subject matter of the lease.

(2) The Court finds that appellate court lasped into reversible error in granting the claim for damages. The order of
demolition had been issued by proper authorities which was valid and subsiting at the time of the demolition was
actually carried out. Under the Abandonment/demolition of Building of the Ruels and Regulations Implementing
the national Building Code of the Ph, an order for demolition may be appealed by the owner of the building to
the Secretary of Public Works and Highways.

In the case at bar, Ching was merely a lessee of the building. His lawyer only obtained a letter form the Office of the City
Engineer and Building Official , which the office testified as not a normal practice of receiving such letter.

Gaw Ching had ample notice of the demolition order and had adequate time to remove his belongings form the
premises. He chose not to obey that order.
Petition Granted. Order reversed and set aside.

G.R. No. L-18210

December 29, 1966

LAURENTIO ARMENTIA v. ERLINDA PATRIARCA, FLORENCIA SOMECIERA JULIANA ARMENTIA JOSE SOMECIERA
and SOFRONIO FLORES in his capacity as The Register of Deeds for the Province of Iloilo

In point is Concepcion vs. Sta. Ana, 87 Phil. 787. The facts there may well be analogized with those of the present. In the
Concepcion case, plaintiff Monico Concepcion was the only surviving legitimate brother of Perpetua Concepcion, who died
without issue and without leaving any will. In her lifetime, or more precisely, on June 29, 1945, said Perpetua Concepcion, "in
connivance with the defendant and with intent to defraud the plaintiff, sold and conveyed three parcels of land for a false and
fictitious consideration to the defendant, who secured transfer certificate of title of said lands issued under her name and that the
defendant has been in possession of the properties sold since the death of Perpetua Concepcion, thereby causing damages to
6
the plaintiff in the amount of not less than two hundred (P200) pesos".

On motion to dismiss, the lower court threw the complaint out of court upon the ground that "the plaintiff is not a party to the
deed of sale executed by Perpetua Concepcion in favor of the defendant"; that even on the assumption "that the consideration of
the contract is fictitious, the plaintiff has no right of action against the defendant"; that under Article 1302 of the old Civil Code,
"the action to annul a contract may be brought by any person principally bound thereby"; that "plaintiff is not bound by the deed
of sale executed by the d ceased in favor of the defendant"; and that he has "no obligations under the deed."

The following reproduced in haec verba from the Concepcion opinion is illuminating:
(2) As to the appellant's second and last contention, under the law action to annul a contract entered into with all the requisites
mentioned in article 12617 whenever they are tainted with the vice which invalidate them in accordance with law, may be
brought not only by any person principally bound or who made them, but also by his heir to whom the right and obligation arising
from the contract are transmitted. Hence if no such rights, actions or obligations have been transmitted to the heir, the latter can
not bring an action to annul the contract in representation of the contracting party who made it. In Wolfson vs. Estate of Martinez,
20 Phil., 340, this Supreme Court quoted with approval the judgment of the Supreme Court of Spain of April 18, 1901, in which it
was held that "he who is not a party to a contract, or an assignee thereunder, or does not represent those who took part therein,
8
has under Articles 1257 and 1302 of the Civil Code no legal capacity to challenge the validity of such contract". And in Irlanda
vs. Pitargue (22 Phil. 383) we held that "the testamentary or legal heir continues in law as the juridical personality of his
predecessor in interest, who transmit to him from the moment of his death such of his rights, actions and obligations as are not
extinguished thereby".

The reason why a forced heir has the right to institute an action of rescission is that the right to the legitime is similar to a credit
9
of a creditor. As the same Spanish author Manresal correctly states in commenting on article 1291 of the Civil Code: "The rights
of a forced heir to the legitime are undoubtedly similar to a credit of a creditor in so far as the rights to the legitime may be
defeated by fraudulent contracts" and are superior to the will of those bound to respect them. In its judgment of October 28,
1897, the Supreme Court of Spain held that the forced heirs instituted as such by their father to the latter's testament have the
undeniable right to institute an action to annul contracts entered into by the father to their prejudice. As it is seen the action is
called action of nullity, but is rather an action of rescission taking into account the purpose for which it is instituted and the
confusion of ideas that has prevailed in this matter. The doctrine we shall expound in commenting on articles 1302 (1397) and
10 11
1306 will confirm what we have just stated'. (Manresa, Codigo Civil, 4th edition, Vol. 8, pp. 667 and 668.)

Maximino Carrantes vs. Court of Appeals, Bilad Carrantes, Lauro Carrantes, Eduardo Carrantes,
and Michael Tumpao
76 SCRA 514

Facts: Mateo Carantes, original owner of Lot No. 44 situated at Loakan, Baguio City, died in 1913 leaving his widow Ogasia,
and six children, namely, Bilad, Lauro, Crispino, Maximino, Apung and Sianang,. In 1930, the government, in order to expand
the landing field of the Loakan Airport, filed for the expropriation of a portion of Lot. No. 44. Said lot was subdivided into Lots. No.
44A to 44E for the purpose.

In 1913, Maximino Carrantes (MAX) was appointed the judicial administrator of the estate of Mateo. Four heirs, namely, Bilad,
Lauro, Sianang, and Crisipino, executed a deed denominated Assignment of Right to Inheritance assigning to Max their rights
over said lot in 1939. The stated monetary consideration is P1.00. On same date, Max sold Lot Nos. 44B and 44C to the
government. One year later the Court of First Instance, upon joint petition of the Carrantes heirs, issued an order cancelling
O.C.T. No. 3 and TCT No. 2533 was issued in its place.

On 16 March 1940, Max registered the deed of Assignment of Right to Inheritance. Thus, TCT No. 2533 was cancelled and
TCT 2540 was issued in the name of Max. A formal deed of Sale was also executed by Max on the same date in favor of the
government. Hence, TCT 2540 was cancelled and new TCTs were issued in favor of the government and Max, respectively. On
4 Sept. 1958, Bilad, Lauro, and Crispino, along with the surviving heirs of Apung and Sianang filed complaint in the CFI.

They claimed that the execution of the deed of assignment was attended by fraud. The trial court decided that the action of the
heirs had already prescribed since an action on fraud prescribes on four years from discovery of such, in this case, on 16 March
1940 when Max registered the deed of assignment. The Court of Appeals reversed and found that a constructive trust was
created. Hence, the present petition.

Issue: 1. whether a constructive trust involves a fiduciary relationship?

2. Whether action had already prescribed?

Held: 1. The court, assuming that there was fraud, and in turn, a constructive trust in favor of the other heirs, said that
constructive trust does not involve a promise nor fiduciary relations. Hence, the respondent courts conclusion that the rule on
constructive notice does not apply because there was a fiduciary relationship between the parties lacks the necessary premise.

2. Action had already prescribed because there was constructive notice to the heirs when Maximino registered the deed of
assignment with the register of deeds on 16 March 1940. Such date is the reckoning point of counting prescription based on
fraud.
Anent respondent courts contention that constructive trust is imprescriptible, the court said that it is untenable. It is already
settled that constructive trusts prescribes in 10 years. In this case, the ten year period started on 16 March 1940. And since the
respondents commenced the action only on 4 Sept. 1958, the same is barred by prescription.

CADWALLER & CO. V SMITH, BELL, AND CO.

TRACEY; February 9, 1907

NATURE
Appeal from a judgment of the C FI of Manila
FACTS

Cadwaller & Co. as assignees of the Pacific Export Lumber Company (PELC) asks for the amount of $3,486 which is the sum
differential of the money that turned over to them and the money actually received. PELC exported cedar piles to be bought by
Peabody & Company (defendant/appellee) for the amount of $12 apiece however later on it was found out that P&C was able to
negotiate with the government and sold the piles for $19 apiece. Hence this case.

ISSUE
WON there is a breach of duty from which the defendant should not benefit from

HELD
YES, there is a breach of duty. The concealment from their principal of the negotiation with the Government resulted in a sale at
$19 apiece and in misrepresenting the condition of the market is a breach of duty. The contract of sale is founded on fraud and
is subject to the annulment of the aggrieved party (CC Arts. 1265 and 1269). The defendants are not entitled to retain their
commission realized upon the piles included under the annulled contract. However this is only for those that are subsequently
sold at the time of the negotiation with the Government and its selling at the amount of $19 apiece.

Disposition

NATURE
Judgment modified

It is plaint that in concealing from their principal the negotiations with the Government, resulting in a sale of the piles at 19 a
piece and in misrepresenting the condition of the market, the agents committed a breach of duty from which they should benefit.
The contract of sale to themselves thereby induced was founded on their fraud and was subject to annulment by the aggrieved
party. (Civil Code, articles 1265 and 1269.) Upon annulment the parties should be restored to their original position by mutual
restitution. (Article 1303 and 1306.) Therefore the defendants are not entitled to retain their commission realized upon the piles
included under the contract so annulled. In respect of the 213 piles, which at the time of the making of this contract on August 5
they had already sold under the original agency, their commission should be allowed.
The court below found the net amount due from the defendants to the plaintiff for the Quito piles, after deducting the expense of
landing the same and $543.10 commission, was $1,760.88, on which it allowed interest at the rate of 6 per cent from March 1,
1903. This amount should be increased by the addition thereto of the amount of the commission disallowed, to wit, $331.17
giving $2,092.05. Interest computed on this sum to the date of the entry of judgment below amounts to $359.77, which added to
the principal sum makes $2,241.82, the amount of plaintiff's claim, which is to be deducted from defendants' counterclaim of
$6,993.80, leaving a balance of $4,541.98, equivalent to 9,083.96 pesos, the amount for which judgment below should have
been entered in favor of the defendants.

Velarde et al vs CA
FACTS:
The private respondent executed a Deed of Sale with Assumption of Mortgage, with a balance of P1.8 million, in favor of the
petitioners. Pursuant to said agreements, plaintiffs paid the bank (BPI) for three (3) months until they were advised that the
Application for Assumption of Mortgage was denied. This prompted the plaintiffs not to make any further payment.

Private respondent wrote the petitioners informing the non-fulfillment of the obligations. Petitioners, thru counsel responded that
they are willing to pay in cash the balance subject to several conditions. Private respondents sent a notarial notice of
cancellation/rescission of the Deed of Sale. Petitioners filed a complaint which was consequently dismissed by an outgoing
judge but was reversed by the assuming judge in their Motion for Reconsideration. The Court of Appeals reinstated the decision
to dismiss.

ISSUE:
Whether or not there is a substantial breach of contract that would entitle its rescission.

RULING:
YES.
Article 1191 of the New Civil Code applies. The breach committed did not merely consist of a slight delay in payment or an
irregularity; such breach would not normally defeat the intention of the parties to the contract. Here, petitioners not only failed to
pay the P1.8 million balance, but they also imposed upon private respondents new obligations as preconditions to the
performance of their own obligation. In effect, the qualified offer to pay was a repudiation of an existing obligation, which was
legally due and demandable under the contract of sale. Hence, private respondents were left with the legal option of seeking
rescission to protect their own interest.
Mutual Restitution
Required in Rescission

As discussed earlier, the breach committed by petitioners was the nonperformance of a reciprocal obligation, not a
violation of the terms and conditions of the mortgage contract. Therefore, the automatic rescission and forfeiture of payment
clauses stipulated in the contract does not apply. Instead, Civil Code provisions shall govern and regulate the resolution of this
controversy.
Considering that the rescission of the contract is based on Article 1191 of the Civil Code, mutual restitution is required to
bring back the parties to their original situation prior to the inception of the contract. Accordingly, the initial payment of P800,000
and the corresponding mortgage payments in the amounts of P27,225, P23,000 and P23,925 (totaling P874,150.00) advanced
by petitioners should be returned by private respondents, lest the latter unjustly enrich themselves at the expense of the former.
Rescission creates the obligation to return the object of the contract. It can be carried out only when the one who
demands rescission can return whatever he may be obliged to restore. To rescind is to declare a contract void at its inception
and to put an end to it as though it never was. It is not merely to terminate it and release the parties from further obligations to
each other, but to abrogate it from the beginning and restore the parties to their relative positions as if no contract has been
made.

Ines v CA
In support thereto, petitioners argue that a party who has not himself appealed cannot obtain from the appellate court any
affirmative relief other than those granted in the decision of the court below. Thus, they maintain that the award of legal interest,
an affirmative relief granted by the respondent court, is erroneous as private respondents never appealed from the trial court's
decision which did not award such interest.

We find the appeal unmeritorious. The respondent court ruled for the return of the contract price of P150,000.00 with legal
interest over the subject property to private respondents with the following justification which we quote with approval:

. . . Since the sale is annulled the parties are to be governed by Article 1398 of the Civil Code whereunder they shall
restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with
interest; the same precept is substantially embodied in Article 1385 in reference to rescission of contracts. Indeed even
3
the principle against unjust enrichment (Article 22, Civil Code) would eschew a contrary conclusion.

Furthermore, in resolving the petitioner's motion for reconsideration to delete the award of interest, respondent court correctly
explained that the imposition of legal interest on the amount due was made not because the appellees sought affirmative relief
but because the award of legal interest on the amount due is a necessary consequence of the finding that the Contract of Sale
executed by appellant Hortencia Ines is void in its entirety, and in the exercise of its appellate jurisdiction it may resolve or
consider errors not assigned in the appellant's brief when it is necessary for a just, fair and equitable resolution of the case, or
when an issue is closely related to an error properly assigned in the appellants' brief and upon which the resolution of an
4
assigned error is dependent.

Arra Realty Corp. vs. Guarantee Development Corp.

348 SCRA 441

FACTS:
Arra Realty Corporation (ARC) was the owner of a parcel of land located at Makati City. Through its president, Architect Carlos
Arguelles, ARC decided to construct a five-storey building on its property and engaged the services of Engr. Erlinda Pealoza as
the project and structural engineer.

ARC and Pealoza agreed that the former would share the purchase price of one floor of the building which the latter took
possession on the one-half portion of the second floor. Unknown to her, ARC executed a mortgage over the entire lot and
building to China Bank Corporation. When ARC failed to pay its loan to the said Bank, the subject property was foreclosed
extrajudicially and sold at a public auction by the said Bank. Pealoza filed a complaint for specific performance against
petitioners.

ISSUE:
Whether or not there has been a perfected contract of sale?

HELD:
YES.

The parties agreed on the price and the terms of payment. The contract of sale was perfected. It being consensual in nature,
perfected by mere consent, was manifested the moment there was meeting of the minds as to the offer and acceptance. The
parties entered into the contract of sale as vendor and vendee. Perfection per se does not transfer ownership but which occurs
upon actual or constructive delivery of the thing sold.

Moreover, Article 1205 provides that, if the creditor accepted the debtors defaulted payment without any protest, it is deemed
complied with. In the case at bar, Pealoza defaulted in the downpayment but the petitioner ARC still accepted it without any
objections. Hence, it still deemed complied with.

Article 1398:
In view of the failure of the petitioner ARC to transfer the title of the property to her name because of the mortgage thereof to
China Banking Corporation and the subsequent sale thereof to the GDCIA, respondent Pealoza is entitled to the refund of the
amount she paid to the petitioner ARC, conformably to Article 1398 of the New Civil Code, which reads:

Art. 1398. An obligation having been annulled, the contracting parties shall restore to each other the things which have
been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law.

In obligations to render service, the value thereof shall be the basis for damages.

We reject the petitioners claim that respondent Pealoza is liable for P2,177,935 by way of advances and unpaid rentals. We note
that in their answer to the amended complaint of respondent Pealoza, the petitioners did not interpose any counterclaims for
actual damages in the form of unpaid rentals. Neither did the petitioners assign as error in their brief in the CA the failure of the
trial court to award P302,753.06 to them for advances. It was only when they moved for the reconsideration of the decision of
the CA did they claim, for the first time on appeal, their entitlement to P302,753.06 as refund for advances. The petitioner ARC
[41]
is, thus, barred from raising the said issue in this Court.

Katipunan v Katipunan
Facts:

Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door apartment constructed thereon, which were
occupied by lessees. Respondent assisted by his brother petitioner Miguel entered into a Deed of Absolute Sale with brothers
Edardo Balguma and Leopoldo Balguma, Jr. ( co-petitioners), represented by their lawyer-father involving the subject property
for a consideration of P187,000.00. So, the title was registered in the names of the Balguma brothers and they started collecting
rentals thereon.

Later, Braulio filed a complaint for annulment of the Deed of Absolute Sale, contending that his brother Miguel, Atty. Balguma
and Inocencio Valdez ( one of the petitioners) convinced him to work abroad. 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. He
further alleged that he did not receive the consideration stated in the contract. He claimed that there was evident bad faith and
conspiracy in taking advantage of his ignorance, he being only a third grader.

The RTC dismissed the complaint because Braulio failed to prove his cause of action since he admitted that he obtained loans
from the Balgumas, he signed the Deed of Absolute Sale, and he acknowledged selling the property and stopped collecting the
rentals. But when the case was elevated, the decision of RTC was reversed and it was held that Braulio was incompetent, has
very low I.Q., illiterate and has a slow comprehension. The CA based its decision on Arts.1332 and 1390 of NCC and Sec. 2,
Rule 92 of the Rules of Court, concerning the incompetence of a party in contract.

Issue:
Whether there was a valid contract of sale between the parties.

Held:
The Supreme Court found the petition devoid of merit. There was a vitiated consent on the part of the respondent as he signed
the Deed of Absolute Sale without the remotest idea of what it was and received no consideration thereof. The contract entered
into by the parties being voidable contract, was correctly annulled on appeal.

A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and
upon the price. This meeting of minds speaks of the intent of the parties in entering the contract respecting the subject matter
and the consideration thereof. Thus, the elements of a contract of a sale are consent, object, and price in money or its
equivalent. Under Art. 1330 of NCC, consent may be vitiated by any of the following: mistake, violence, intimidation, undue
influence, and fraud. The presence of any of these vices renders the contract voidable.

A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation
is not void ab initio but only voidable and is binding upon the parties unless annulled proper court action. The effect of annulment
is to restore the parties to the status quo ante insofar as legally and equitably possible---this much is dictated by Art. 1398
provides that when the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not
obliged to make any restitution, except when he has been benefited by the things or price received by him.

Thus, since the Deed of Absolute Sale between respondent and Balguma brothers is voidable and hereby annulled, then the
restitution of the property and its fruits to respondent is just and proper.
A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation
is not void ab initio but only voidable and is binding upon the parties unless annulled by proper Court action.

The effect of annulment is to restore the parties to the status quo ante insofar as legally and equitably possible-- this much is
dictated by Article 1398 of the Civil Code. As an exception however to the principle of mutual restitution, Article 1399 provides
that when the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to
make any restitution, except when he has been benefited by the things or price received by him. Thus, since the Deed of
Absolute Sale between respondent and the Balguma brothers is voidable and hereby annulled, then the restitution of the
property and its fruits to respondent is just and proper. Petitioners should turn over to respondent all the amounts they received
starting January, 1986 up to the time the property shall have been returned to the latter. During the pre-trial and as shown by the
Pre-Trial Order, the contending parties stipulated that the Balguma brothers received from the lessees monthly rentals in the
following amounts:

PERIOD AMOUNT OF RENTALS

January, 1986 to
December, 1987 P 481.00 per month
January, 1988 to
December, 1988 P2,100.00 per month
January, 1989 to
present P3,025.00 per month

Article 24 of the Civil Code enjoins courts to be vigilant for the protection of a party to a contract who is placed at a disadvantage
on account of his ignorance, mental weakness or other handicap, like respondent herein. We give substance to this mandate.

KATIPUNAN V KATIPUNAN
SANDOVAL-GUTIERREZ; January 30, 2002

NATURE
Petition for review on certiorari assailing the Decision of the Court of Appeals which set aside the Decision of the Regional Trial
Court (RTC) of Manila, Branch 28, in Civil Case No. 87-39891 for annulment of a Deed of Absolute Sale.

FACTS

- Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door apartment constructed thereon
located at 385-F Matienza St., San Miguel, Manila. The lot is registered in his name under TCT No. 109193 of the Registry of
Deeds of Manila. The apartment units are occupied by lessees.

- On December 29, 1985, respondent, assisted by his brother, petitioner Miguel Katipunan, entered into a Deed of Absolute Sale
with brothers Edgardo Balguma and Leopoldo Balguma, Jr. (co-petitioners), represented by their father Atty.
Leopoldo Balguma, Sr., involving the subject property for a consideration of P187,000.00. Consequently, respondents title to the
property was cancelled and in lieu thereof, TCT No. 168394 was registered and issued in the names of the Balguma brothers. In
January, 1986, Atty. Balguma, then still alive, started collecting rentals from the lessees of the apartments.

- On March 10, 1987, respondent filed with the RTC of Manila, Branch 21, a complaint for annulment of the Deed of Absolute
Sale, docketed as Civil Case No. 87-39891.He averred that his brother Miguel, Atty. Balguma and Inocencio Valdez (defendants
therein, now petitioners) convinced him to work abroad. They even brought him to the NBI and other government offices for the
purpose of securing clearances and other documents which later turned out to be falsified. 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. By virtue of the said sale, brothers Edgardo and Leopoldo, Jr. (co-defendants), were able to register the title to
the property in their names. Respondent further alleged that he did not receive the consideration stated in the contract. He was
shocked when his sister Agueda Katipunan-Savellano told him that the Balguma brothers sent a letter to the lessees of the
apartment informing them that they are the new owners. Finally, he claimed that the defendants, now petitioners, with evident
bad faith, conspired with one another in taking advantage of his ignorance, he being only a third grader.

- In their answer, petitioners denied the allegations in the complaint, alleging that respondent was aware of the contents of the
Deed of Absolute Sale and that he received the consideration involved; that he also knew that the Balguma brothers have been
collecting the rentals since December, 1985 but that he has not objected or confronted them; and that he filed the complaint
because his sister, Agueda Savellano, urged him to do so.

- Twice respondent moved to dismiss his complaint (which were granted) on the grounds that he was actually instigated by his
sister to file the same; and that the parties have reached an amicable settlement after Atty. Balguma, Sr. paid him P2,500.00 as
full satisfaction of his claim. In granting his motions for reconsideration, the trial court was convinced that respondent did not sign
the motions to dismiss voluntarily because of his poor comprehension, as shown by the medical report of Dr. Annette Revilla, a
Resident Psychiatrist at the Philippine General Hospital.

- The trial court noted that respondent was not assisted by counsel in signing the said motions, thus it is possible that he did not
understand the consequences of his action. - The trial court set the case for pre-trial. The court likewise granted respondents
motion to appoint Agueda Savellano as his guardian ad litem.

- The trial court dismissed the complaint, holding that respondent failed to prove his causes of action since he admitted that: (1)
he obtained loans from the Balgumas; (2) he signed the Deed of Absolute Sale; and (3) he acknowledged selling the property
and that he stopped collecting the rentals.

- Court of Appeals reversed

ISSUE
WON the consent of Braulio Katipunan, Jr., in the sale of his property was vitiated rendering the Deed of Absolute sale voidable

HELD
YES
- A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and
upon the price. This meeting of the minds speaks of the intent of the parties in entering into the contract respecting the subject
matter and the consideration thereof.

Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. Under Article 1330 of the Civil
Code, consent may be vitiated by any of the following:
(a) mistake,
(2) violence,
(3) intimidation,
(4) undue influence, and
(5) fraud.

The presence of any of these vices renders the contract voidable. Respondent signed the deed without the remotest idea of
what it was.The circumstances surrounding the execution of the contract manifest a vitiated consent on the part of respondent.
Undue influence was exerted upon him by his brother Miguel and Inocencio Valdez (petitioners) and Atty. Balguma.

It was his brother Miguel who negotiated with Atty. Balguma. However, they did not explain to him the nature and contents of the
document. Worse, they deprived him of a reasonable freedom of choice. It bears stressing that he reached only grade three.
Thus, it was impossible for him to understand the contents of the contract written in English and embellished in legal jargon. His
lack of education, coupled with his mental affliction, placed him not only at a hopelessly disadvantageous position vis- -vis
petitioners to enter into a contract, but virtually rendered him incapable of giving rational consent. To be sure, his ignorance and
weakness made him most vulnerable to the deceitful cajoling and intimidation of petitioners.

- A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation
is not void ab initio but only voidable and is binding upon the parties unless annulled by proper Court action. The effect of
annulment is to restore the parties to the status quo ante insofar as legally and equitably possible-- this much is dictated by
Article 1398 of the Civil Code. As an exception however to the principle of mutual restitution, Article 1399 provides that when the
defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any
restitution, except when he has been benefited by the things or price received by him.

Thus, since the Deed of Absolute Sale between respondent and the Balguma brothers is voidable and hereby annulled, then the
restitution of the property and its fruits to respondent is just and proper. Petitioners should turn over to respondent all the
amounts they received starting January, 1986 up to the time the property shall have been returned to the latter. - Article 24 of the
Civil Code enjoins courts to be vigilant for the protection of a party to a contract who is placed at a disadvantage on account of
his ignorance, mental weakness or other handicap, like respondent herein. We give substance to this mandate.

UY SOO LIM V TAN UNCHUAN

FISHER; September 7, 1918

APPEAL from a judgment of the CFI of Cebu

FACTS
- In this case, the legitimate children (Francisca and Concepcion), the legal wife (Candida Vivares) and the second wife (Chan
Quieg) of the deceased Santiago Pastrano Uy Toco are questioning the fairness and legality of the lion's share received by Uy
Soo Lim, the illegitimate child of the deceased. Santiago, in his last will and testament gave the 7/9 share of his large estate to
Uy Soo Lim, leaving his legal heirs with so litte to enjoy.

- The court issued an order requiring Benito Tan Unchuan, as executor of the testamentary estate of Santiago pastrano, to
deliver to Basilio Uy Bundan, guardian of minors Francisca, Concepcion, Uy Soo Lim, the property .

- The abovementioned heirs opposed the distribution of the property in accordance with what was stipulated in the will. At the
end, an agreement was reached between Choa Tek Hee (lawyer of the plaintiff) and the the plaintiff, of the one part, and Tan
Unchuan and Del Rosario, an attorney of Cebu, representing the interest of Candida, Francisca and Concepcion, on the other,
to submit the entire matter in dispute to the judgment of three respectable Chinese merchants/lawyers designated.

- These advisers came to the conclusion that the sum of P82,500 should be accepted by plaintiff in full satisfaction and
relinquisment of all his right, title, and interest in and to the estate of the deceased Santiago Pastrano, and this recommendation
was accepted by Choa Tek Hee and plaintiff and by Tan Unchuan and Del Rosario.

- Candida and Concepcion later sold their shares to Francisca. But after the agreed amount was paid in installments by the
Francisca and after the plaintiff spent most of it, Uy Soo Lim, three (3) years after attaining the age of majority, commenced this
present action to rescind and annul the contract by which he had sold and trasferred to Francisca Pastrano his interest in the
estate of Santiago Pastrano.

ISSUE
WON the plaintiff might have the right to rescind this contract on the ground of minority

HELD
NO. The right of the minor to rescind, upon attaining his majority, a contract entered into during his minority is subject to to the
conditions
(1) that the election to rescind must be made within a reasonable time after majority and
(2) that all of the consideration which was in the minor's possession upon his reaching the majority must be returned.
The disposal of any part of th econsideration after the attainment of majority imports an affirmance of the contract.

Reasoning Because, with full knowledge of his rights in the premises, he failed to disaffirm his contract within a reasonable time
after reaching majority; and Because he not only failed to tender, or offer, to produce and pay the consideration in esse when he
reached majority, and when he filed his action, but proceeded, after such events, to demand, collect and dispose of such
consideration, when according to his own statement under oath he had no other funds with which to make reimbursement.

Disposition The judgment of the trial court is without erro and it is therefore, AFFIRMED.

IGLESIA FILIPINA INDEPENDIENTE vs HEIRS of BERNARDINO TAEZA

FACTS:

Iglesia Filipina Independiente (IFI) was the owner of a parcel of land (Lot 3653) subdivided into four. From 1973-1976, Suprme
Bishop Rev. Macario Ga, sold one lot to Bienvenido de Guzman and two lots to Bernardino Taeza.

Taeza registered the subject parcels of land and transfer certificates were issued in his name. He then occupied a portion of the
land.

In January 1990, IFI filed for annulment of sale annulment of the subject parcels of land against Rev. Ga and the defendant
Bernardino Taeza on the ground that Rev. Ga was not authorized to sell. The RTC rendered judgment in favor of IFI. The CA
reversed such decision. It ruled that IFI being a corporation sole, validly transferred ownership over the land in question through
its Supreme Bishop, who was at the time the administrator of all properties and the official representative of the church. It further
held that [t]he authority of the then Supreme Bishop Rev. Ga to enter into a contract and represent the plaintiff-appellee cannot
be assailed, as there are no provisions in its constitution and canons giving the said authority to any other person or entity.

ISSUE: W/N the deed of sale with mortgage is null and void or unenforceable?

HELD: The issue boils down to the question of whether then Supreme Bishop Rev. Ga is authorized to enter into a contract of
sale in behalf of petitioner.

Petitioner maintains that there was no consent to the contract of sale as Supreme Bishop Rev. Ga had no authority to give such
consent. It emphasized that Article IV (a) of their Canons provides that "All real properties of the Church located or situated in
such parish can be disposed of only with the approval and conformity of the laymen's committee, the parish priest, the Diocesan
Bishop, with sanction of the Supreme Council, and finally with the approval of the Supreme Bishop, as administrator of all the
temporalities of the Church." It is alleged that the sale was done without the required approval mentioned in the Canons;

The Trial court also found that the laymen's committee indeed made its objection to the sale known to the Supreme Bishop but
the latter still executed the contract of sale despite such opposition. He clearly acted beyond his powers: This case clearly falls
under the category of unenforceable contracts mentioned in Article 1403, paragraph (1) of the Civil Code, which provides, thus:

Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or
who has acted beyond his powers;

Petition Granted. IFI is the rightful owner of subject lots.

Asia Production co Inc v Judge Pano

We thus rule that an action by a withdrawing party to recover his partial payment of the consideration of a contract, which is
otherwise unenforceable under the Statute of Frauds, by reason of the failure of the other contracting party to comply with his
obligation, is not covered by the Statute of Frauds.

Western Mindanao Lumber vs Medalle

An agreement creating an easement of right-of-way is not one of those contracts covered by the statue of frauds since
it is not a sale of property or of an interest therein
Facts: In 1955, Western Mindanao Lumber (Western), a logging company, obtained a right-of-way over a property owned by
Hernandez. Medalle, the new owner of the property, notified Western that he will close the road running through his property
through which Western's trucks pass in hauling logs. Western's filed a complaint for injunction praying that a writ of preliminary
injunction be issued restraining Medalle from closing the said road, and after hearing, make the injunction permanent.
Medalle filed a motion to dismiss the complaint upon the ground that the claim on which the action or suit is founded is
unenforceable under the provisions of the Statute of Frauds and special law, in that the first page of the said road right-of-way
agreement was not signed by both parties and their instrumental witnesses; page two thereof is not dated, and the signature of
the plaintiffs corporate agent does not appear; and that said agreement is not acknowledged before a person authorized to
administer oaths. Western opposed the motion, stating that the agreement between Western and Hernandez is not one of those
agreements specified in the Statute of Frauds. The trial court granted the motion to dismiss. Hence, Western appealed.

Issue: Whether statute of frauds is applicable to agreements creating a right of way

Held: The Statute of Frauds refers to specific kinds of transactions and cannot apply to any that is not enumerated therein.
Obviously, an agreement creating an easement of right-of-way is not one of those contracts covered by the statue of frauds
since it is not a sale of property or of an interest therein. The trial court therefore, erred in dismissing the case upon the
defendants' claim that the road fight-of-way agreement in question is unenforceable under the statute of frauds. (Western
Mindanao Lumber vs Medalle, G.R. No. L-23213, October 28, 1977)

Note: Also, the Statute of Frauds is applicable only to executory contracts, not to contracts that are totally or partially performed.
Here, the verbal agreement with respect to the right of way had already been totally executed.

LIMKETKAI V COURT OF APPEALS

MELO; December 1, 1995

FACTS
- May 14, 1976 Philippine Remnants Co., Inc. constituted BPI as its trustee to manage, administer and sell its real estate
property. This includes the disputed parcel of land in Bagong Ilog, Pasig.

- June 23, 1988 Revilla, a licensed broker, was given the authority by BPI to sell the land for P1000 per square meter.

- Lim of Limketkai Milling agreed to buy the property and by July 1988, Lim and Limketkai visited BPI to confirm the sale. - They
were entertained by BPI VP Albano and AVP Aromin. Limketkai requested that the price be lowered to P900 per square meter
while Albano said that the price was P1100 per square meter. They finally agreed to the price of P1000 per square meter and
that the payment be given in cash.

- Lim requested if it was possible to draw up payment terms, despite the previous agreement to pay in cash. The BPI officials
responded by saying that it would be all right to try to apply for payment terms but if the said payment terms were to be
disapproved, payment would have to be in cash.

- July 11, 1988 Albano dictated the terms through which the installment payment would be approved. Lim wrote BPI through
Albano, embodying the initial payment at 10% and the remaining 90% payable within 90 days.

- Lim later learned that his offer to pay on terms had been frozen.

- July 18, 1988 Lim went to BPI to pay the total amount (P33,056,000) in cash to Albano but Albano refused to accept it,
saying that he no longer had the authority to sell the property. Lim then went to VP Bona who also would not accept the
payment.

- Aug. 25, 1988 Limketkai filed an action for specific performance with damages.

- BPI already issued a deed of sale for the land to National Bookstore. - Trial court ruling:

- Declare the deed of sale to NBS null and void - Ordered BPI to issue deed of sale in favor or Limketkai

- Ordered BPI and NBS to pay actual and consequential

damages to Limketkai - The CA reversed the decision of the trial court thus the appeal.

Petitioners Claim - The contract to sell and to buy was perfected on July 11, 1988 when its top officials and broker Revilla
finalized the details with BPI Vice-Presidents Merlin Albano and Rolando V Aromin at the BPI offices,

Respondents Comments - What transpired on this date were part of continuing negotiations to buy the land and not the
perfection of the sale. - Vice-Presidents Aromin and Albano had no authority to bind BPI on this particular transaction. - The
subsequent attempts of petitioner to pay under terms instead of full payment in cash constitutes a counter-offer which negates
the existence of a perfected contract.

ISSUES
1. WON the contract between BPI and Limketkai had been perfected
2. WON the bank officials were authorized to transact and enter into such contract
3. WON competent evidence is available to support the contention that the contract was indeed perfected
4.WON the sale of the land to NBS pending litigation was effected in good faith

HELD
1. YES.

The contract had already been perfected.

Ratio A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to
the time the contract is concluded (perfected).

The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is
consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on
the object and on the cause thereof.

Reasoning The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to sell the lot,
followed by
(a) the authority given by BPI and confirmed by Philippine Remnants to broker Revilla to sell the property,
(b) the offer to sell to Limketkai,
(c) the inspection of the property and finally
(d) the negotiations with Aromin and Albano at the BPI offices.

- The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and Alfonso Lim with Albino
Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there
was the earlier agreement between petitioner and the authorized broker. There was a concurrence of offer and acceptance, on
the object, and on the cause thereof.

- The fact that the deed of sale still had to be signed and notarized does not mean that no contract had already been perfected.

2. YES The bank officials were authorized to transact with Limketkai for the sale of the parcel of land.

Ratio Accordingly a banking corporation is liable to innocent third persons where the representation is made in the course of its
business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate a fraud upon his principal or some other person for his own ultimate benefit.

Reasoning Revilla (the broker) was authorized by BPI to transact business in their stead.

- If Revilla were given the authority, it would be senseless to doubt whether or not the bank officials were given the same
authority. Aromin had been with the bank for a relatively long period of time (since 1969) and had handled real estate matters
since 1985.
- There is no proof that Aromin was acting for his own benefit.

3. YES The evidence presented was substantial.

Ratio Any document or writing which satisfies the requirements of a statute as to content and signature can be regarded as a
memorandum or a note.

4. YES The sale of the land to NBS was done in bad faith.
Ratio It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly negates any allegation of
good faith on the part of the buyer.

Instead of the vendee insisting that the vendor guarantee its title to the land and recognize the right of the vendee to proceed
against the vendor if the title to the land turns out to be defective as when the land belongs to another person, the reverse is
found in the deed of sale between BPI and NBS. Any losses which NBS may incur in the event the title turns out to be vested in
another person are to be borne by NBS alone. BPI is expressly freed under the contract from any recourse of NBS against it
should BPI's title be found defective.

Reasoning NBS ignored the notice of lis pendens when it bought the lot.
- NBS and BPU conspired to prevent Limketkai from acquiring the property.
- The sale was supposed to be done by a broker but top BPI officials took over when a close friend became interested.
- BPI Senior VP Barcelon admitted that he and NBS President Ramos were friends.
- Feliciano, in behalf of NBS, tried to pay off Limketkai so that the latter would drop the case

Bienvenido Babao vs. Florencio Perez

(Article 1324; statute of fraud)

Held: Contracts which by their terms are not to be performed within one year, may be taken out of the statute through
performance by one party thereto. All that is required in such case is complete performance within the year by one party,
however many tears may have to elapse before the agreement is performed by the other party. But nothing less than full
performance by one party will suffice, and it has been held that, if anything remains to be done after the expiration of the year
besides the mere payment of money, the statute will apply. It is not therefore correct to state that Santiago Babao has fully
complied with his part within the year from the alleged contract in question.
Having reached the conclusion that all the parol evidence of appellee was submitted in violation of the Statute of Frauds, or of
the rule which prohibits testimony against deceased persons, we find unnecessary to discuss the other issues raised in
appellants' brief.

The case is dismissed, with costs against appellee.

Facts: Santiago Babao married the niece of Celestina Perez. 1924, Santi and Celestina allegedly had a verbal agreement where
Santi was bound to improve the land of Celestina by leveling, clearing, planting fruits and other crops; that he will act as the
administrator of the land; that all expenses for labor and materials will be at his cost, in consideration of which Celestina in turn
bound herself to convey to Santi or his wife of the land,, with all the improvements after the death of Celestina. But, shortly
before Celestinas death, she sold the land to another part. Thus, Santi filed this complaint alleging the sale of the land as
fraudulent and fictitious and prays to recover the land or the expenses he incurred in improving the land.

Issue: whether or not the verbal agreement falls within the Stature of Frauds

Sanchez vs. Rigos (contracts;acceptance)

Held: The SC affirmed the decision appealed from, with costs against Severina Rigos.
1. Option to purchase not a contract to buy and sell
The option did not impose upon Sanchez the obligation to purchase Rigos property. The contract denominated as Option to
Purchase is not a contract to buy and sell, it merely granted Sanchez an option to buy, and both parties so understood it, as
indicated by the caption given by them to said instrument. Under the provisions thereof, Rigos agreed, promised and
committed herself to sell the land therein described to Sanchez for P1,510.00, but there is nothing in the contract to indicate that
her aforementioned agreement, promise and undertaking is supported by a consideration distinct from the price stipulated for
the sale of the land.

2. Article 1354 applicable to contracts in general, Article 1479 refers to sales in particular
Relying upon Article 1354 of the Civil Code, which provides that when the offerer has allowed the offeree a certain period to
accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is
founded upon consideration, as something paid or promised, the lower court presumed the existence of a consideration distinct
from the price. It must be noted however that Article 1354 applies to contracts in general, whereas the second paragraph of
Article 1479 refers to sales in particular, and, more specifically, to an accepted unilateral promise to buy or to sell. In other
words, Article 1479 is controlling in the present case. Article 1479 provides that A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable. 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.

. Article 1479 imposes condition for a unilateral promise to be binding; Burden of proof
In order that a unilateral promise may be binding upon the promisor, Article 1479 requires the concurrence of a condition,
namely, that the promise be supported by a consideration distinct from the price. Accordingly, the promisee can not compel the
promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words,
the promisee has the burden of proving such consideration. In the present case, Sanchez has not even alleged the existence
thereof in his complaint.

4. Implied admission of the truth of the other partys averment if party joins in the petition for a judgment based on the pleadings
without introducing evidence

In the case of Bauermann v. Casas (14 March 1908), it was held that one who prays for judgment on the pleadings without
offering proof as to the truth of hie own allegations, and without giving the opposing party an opportunity to introduce evidence,
must be understood to admit the truth of all the material and relevant allegations of the opposing party, and to rest his motion for
judgment on those allegations taken together with such of his own as are admitted in the pleading. (La Yebana Company vs.
Sevilla, 9 Phil. 210). This view was reiterated in Evangelista V. De la Rosa and Mercys Incorporated v. Herminia Verde. In the
present case, Rigos explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for
her promise to sell and, by joining in the petition for a judgment on the pleadings, Sanchez has impliedly admitted the truth of
said averment in Rigos answer.

5. Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. case
The Court in the Southwestern Sugar case held that under article 1479 of the new Civil Code an option to sell, or a promise to
buy or to sell, as used in said article, to be valid must be supported by a consideration distinct from the price. This is clearly
inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by
a consideration. In other words, an accepted unilateral promise can only have a binding effect if supported by a consideration,
which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Here it is
not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by
appellee. The Court held that the general rule regarding offer and acceptance under Article 1324 must be interpreted as
modified by the provision of article 1479, which applies to a promise to buy and sell specifically. In short, the rule requires that a
promise to sell to be valid must be supported by a consideration distinct from the price.

6. Atkins, Kroll and Co. v. Cua Hian Tek

In the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, decided later than Southwestern Sugar & Molasses Co. v. Atlantic Gulf
& Pacific Co., the Court saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a
unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not
binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and
sale upon acceptance.

7. Option is unilateral
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option
within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to
buy. He is free either to buy or not to buy later. In the present case, however, upon accepting Rigos offer a bilateral promise to
sell and to buy ensued, and Sanchez ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently
to buy or not to buy. It was not a mere option then; it was bilateral contract of sale.

8. Option without consideration is a mere offer of a contract of sale, which is not binding until accepted
If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If,
however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not
supported by a sufficient consideration. . . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and cases
cited.) It can be taken for granted that the option contract was not valid for lack of consideration. But it was, at least, an offer to
sell, which was accepted by latter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The
concurrence of both acts the offer and the acceptance could at all events have generated a contract, if none there was
before (arts. 1254 and 1262 of the Civil Code; Zayco vs. Serra, 44 Phil. 331.) In other words, since there may be no valid
contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending
notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a
perfected contract of sale.

9. Proper construction of conflicting provisions of the same law; Harmonize to implement the same principle rather than to create
exceptions
In line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code,
such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same.
Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or
position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & pacific Co., holding that Art. 1324 (on
the general principles on contracts) is modified by Art. 1479 (on sales) of the Civil Code, in effect, considers the latter as an
exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as
said 2 articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option
or promise supported by or founded upon a consideration, strongly suggests that the 2 provisions intended to enforce or
implement the same principle.

10. Atkins, Kroll & Co. case modifies or abandons Southwestern Sugar case insofar as to inconsistencies
Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in
the Atkins, Kroll & Co. case, and that, insofar all inconsistent therewith, the view adhered to in the South western Sugar &
Molasses Co. case should be deemed abandoned or modified.

Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an instrument, entitled Option to Purchase, whereby
Mrs. Rigos agreed, promised and committed . . . to sell to Sanchez, for the sum of P1,510.00, a parcel of land situated in the
barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in TCT NT-12528
of said province, within two (2) years from said date with the understanding that said option shall be deemed terminated and
elapsed, if Sanchez shall fail to exercise his right to buy the property within the stipulated period. Inasmuch as several tenders
of payment of the sum of P1,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on 12 March 1963, the
former deposited said amount with the CFI Nueva Ecija and commenced against the latter the present action, for specific
performance and damages. On 11 February 1964, after the filing of defendants answer, both parties, assisted by their
respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on 28 February 1964, the lower court rendered
judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the
requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorneys fees, and the costs. Hence,
the appeal by Mrs. Rigos to the Court of Appeals, which case was the certified by the latter court to the Supreme Court upon the
ground that it involves a question purely of law.

Reiss et.al vs Memije

15 Phil 350, Gr No. 5447, March 1, 1910

FACTS: Memije entered into a contract with a certain Kabalsa for the repair of a house. The repair of the house was delayed
because the contractor was unable to secure a credit for the lumbers to be used in the repairs. The plaintiff, whom he was
dealing, did not allow any lumber to leave their yard without paying in advance. Thus, Memije accompanied the contractor to the
plaintiffs promising to satisfy their financial obligation. Then, they came out into an agreement whereby the lumber will be
delivered to the contractor for the repair of the house.
Upon delivery, an action was filed with the court. The judgment was rendered in favor of plaintiffs wherein it was proven
that there was still unpaid balance of the purchased lumber. Defendant contended that the court erred in its findings that the
former assumes the responsibility for the payment of the lumber delivered to the contractor or if so, he merely guaranteed
payment and such was not made into writing, hence inadmissible as evidence and he was not bound to pay.

ISSUE: WON defendant is bound to pay the unpaid balance for the purchased lumber.
HELD: Yes. If goods are sold upon the sole credit and responsibility of the party who make the promise, then, even though they
be delivered to a third person, there is no liability of the third person to which that of the party promising can be collateral, and
consequently such a promise to pay does not require a memorandum in writing; and on the same principle it has been held that
when one advances money at the request of another (on his promise to repay it) to pay the debt of a third party, as the payment
creates no debt against such third party, not being made at all upon his credit, the liability of the party on whose request and
promise it was made is original and not collateral, and not with the Statute of Frauds. In such cases, the defendant is said to
come in aid to procure the credit to be given to the principal debtor, and the question, therefore, ultimate is "upon whose credit
the goods were sold or the money advanced, or whatever other thing done which the defendant by his promise procured to be
done;" and where the defendant stands in the relation to the third party of surety to principal "if any credit at all be given to the
third party, the defendant's promise is required to be in writing as collateral." But it must be clearly recognized that these
principles are applicable only where the parties are liable in the same way to do the same thing, one as principal and the other
as surety, for if the credit is given to both jointly, since neither can be said to be surety for the other to the creditor, their
engagement need not be in writing.

Villanueva vs CA
G.R. No. 107624

Subject: Sales
Doctrine: meeting of the minds as to price is essential

Facts:
This is a petition assailing the decision of the CA dismissing the appeal of the petitioners. CA rendered that there was no
contract of sale.

In 1985, Gamaliel Villanueva (tenant) of a unit in the 3-door apartment building owned by defendants-spouses (now private
respondents) Jose Dela Cruz and Leonila dela Cruz located at Project 8, Quezon City.

About February of 1986, Dela Cruz offered said parcel of land with the 3-door apartment building for sale and plaintiffs, son
and mother, showed interest in the property.

Because said property was in arrears(overdue) in the payment of the realty taxes, dela Cruz approached Irene Villanueva and
asked for a certain amount to pay for the taxes so that the property would be cleared of any incumbrance.
Irene Villanueva gave P10,000.00 on two occasions. It was agreed by them that said P10,000.00 would form part of the sale
price of P550,000.00.

Dela Cruz went to plaintiff Irene Villanueva bringing with him Mr. Ben Sabio, a tenant of one of the units in the 3-door
apartment building and requested Villanueva to allow said Sabio to purchase one-half (1/2) of the property where the unit
occupied by him pertained to which the plaintiffs consented, so that they would just purchase the other half portion and would be
paying only P265,000.00, they having already given an amount of P10,000.00 used for paying the realty taxes in arrears.

Accordingly the property was subdivided and two (2) separate titles were secured by defendants Dela Cruz. Mr. Ben Sabio
immediately made payments by installments.

March 1987 Dela Cruz executed in favor of their co-defendants, the spouses Guido Pili and Felicitas Pili, a Deed of
Assignment of the other one-half portion of the parcel of land wherein plaintiff Gamaliel Villanuevas apartment unit is situated,
purportedly as full payment and satisfaction of an indebtedness obtained from defendants Pili.

the Transfer Certificate of Title No. 356040 was issued in the name of defendants Pili on the same day.

The plaintiffs came to know of such assignment and transfer and issuance of a new certificate of title in favor of defendants
Pili.

plaintiff Gamaliel Villanueva complained to the barangay captain of Bahay Turo, Quezon City, on the ground that there was
already an agreement between defendants Dela Cruz and themselves that said portion of the parcel of land owned by
defendants Dela Cruz would be sold to him. As there was no settlement arrived at, the plaintiffs elevated their complaint to this
Court through the instant action.

RTC rendered its decision in favor of Dela Cruz. CA affirmed.

ISSUE: WON there was a perfected sale between Villanueva and Dela Cruz.

HELD:
Petitioners contend that private respondents counsel admitted that P10,000 is partial or advance payment of the property.
Necessarily then, there must have been an agreement as to price, hence, a perfected sale. They cite Article 1482 of the Civil
Code which provides that (w)henever earnest money is given in a contract of sale, it shall be considered as part of the price and
as proof of the perfection of the contract.

Private respondents contradict this claim with the argument that (w)hat was clearly agreed (upon) between petitioners and
respondents Dela Cruz was that the P10,000.00 primarily intended as payment for realty tax was going to form part of the
consideration of the sale if and when the transaction would finally be consummated. Private respondents insist that there was
no clear agreement as to the true amount of consideration.
 Dela Cruz testimony during the cross-examination firmly negated any price agreement with petitioners because he and his
wife quoted the price of P575,000.00 and did not agree to reduce it to P550,000.00 as claimed by petitioner.

Villanueva on cross-examination: After the Deed of Sale relative to the purchase of the property was prepared, Mr. dela Cruz
came to me and told me that he talked with one of the tenants and he offered to buy the portion he was occupying if I will agree
and I will cause the partition of the property between us. Villanueva said that he agreed and that the price 550,000 was to be
divided into two. (Sabio and Villanueva) *The contract which the appellant is referring to was not presented to the court and the
appellant did not use all effort to produce the said contract.

SC: The price of the leased land not having been fixed, the essential elements which give life to the contract were lacking. It
follows that the lessee cannot compel the lessor to sell the leased land to him. The price must be certain, it must be real, not
fictitious. A contract of sale is not void for uncertainty when the price, though not directly stated in terms of pesos and centavos,
can be made certain by reference to existing invoices identified in the agreement. In this respect, the contract of sale is
perfected. The price must be certain, otherwise there is no true consent between the parties. There can be no sale without a
price.

In the instant case, however, what is dramatically clear from the evidence is that there was no meeting of mind as to the price,
expressly or impliedly, directly or indirectly.

Sale is a consensual contract. He who alleges it must show its existence by competent proof. Here, the very essential element
of price has not been proven.
Lastly, petitioners claim that they are ready to pay private respondents is immaterial and irrelevant as the latter cannot
be forced to accept such payment, there being no perfected contract of sale in the first place.

PHILIPPINE NATIONAL BANK V PHILIPPINE VEGETABLE OIL CO.

MALCOLM; January 14, 1927
NATURE
Appeal from a judgment of the CFI of Manila
FACTS
- In 1920, Phil Vegetable was in debt to the extent of around P30M. PNB was the largest creditor, w/ Phil Vegetable owing it
P17M. The PNB loan was secured by a real and chattel mortgage for P3.5M. Phil Vegetable executed another chattel mortgage
in favor of the bank on its vessels to guarantee around P4M.

- Bankruptcy was imminent. Phil Vegetable General Manager Whitaker made his first offer to pledge certain private properties to
secure creditors of Phil Vegetable. A creditors meeting was held and a receiver for the Phil Vegetable was appointed by the
CFI.

- During the period when receiver was in control of Phil Vegetables property, an agreement was perfected by Phil Vegetable,
Whitaker, and some creditors whereby creditors transferred to Whitaker a part of their claims against Phil Vegetable. PNB was
not a direct party to the agreement though the officials had full knowledge of its accomplishment and its GM placed his OK at the
end of the final draft.

- The next move of PNB was to obtain a new mortgage fr Phil Vegetable. (2/20/1922) - Receivership for Phil Vegetable was
terminated. Phil Vegetables plant was definitely closed.

- PNB filed action to foreclose its mortgage on Phil Vegetables property. Phil Vegetable countered with special defenses.

ISSUES

1. WON mortgage was null bec at time of its execution all the properties of Phil Vegetable was under receiver and neither the
approval of the receiver nor the court had been obtained
2. WON PNB failed to comply w/ contract that it was alleged to have celebrated w/ Phil Vegetable that it would furnish funds to
the company so that it could continue operating its factory and WON Whitaker has established his right to recover damages fr
PNB by reason of the latters alleged refusal to finance the operation of Phil Vegetable

HELD
1. NO (It is merely voidable or valid until annulled) - PNB challenged the right of Whitaker as intervenor. PNB is right. Phil
Vegetable is the defendant, the corporation has not appealed. Whitaker was one of the largest individual stockholders. It was he
who asked for appointment of receiver. It was he who was the leading figure in the negotiations. It was he who pledged own
property to assist in rehab of Phil Vegetable. Whitaker is more vitally interested in case than Phil Vegetable. If the mortgage had
been the free act of Phil Vegetable, it could not be heard to allege its own fraud, and only a creditor could take advantage of
fraud to intervene to avoid conveyance.

- Mssrs. Wilson and Cuaderno, PNB Directors, were serving as Phil Vegetable Directors after Wilson suggested reorganization
of Phil Vegetable so that the bank might have close working relationship w/ Phil Vegetable. Wilson became Pres of Phil
Vegetable.

- Mortgage was not ratified before notary public until 3/8/22 and was not recorded in registry of property until 3/21/22. In other
words, mortgage was executed by PNB thru its GM and another corp before the termination of receivership of the said corp, but
was not acknowledged or recorded until after termination of the receivership.

- It must be evident that PNB could secure no new mortgage while the prop of Phil Vegetable was in custodia legis. Phil
Vegetable was then inhibited fr giving mortgage on its property. The receiver was not a party to the mortgage. Court had not
authorized receiver to consent to the execution of a new mortgage. The Court would want to protect rights of all creditors and not
just one particular creditor.

- While the mortgage could not have been executed w/o dissolution of the receivership, dissolution was apparently secured
through representations that PNB would continue to finance the operations of Phil Vegetable. Instead of so doing, the bank
within less than 2 mos after the mortgage was recorded, withdrew its support.

- Another reason is that the mortgage was accomplished when PNB was an influence in affairs of Phil Vegetable thru Wilson and
Cuaderno. On one hand was PNB in person and on the other hand was PNB by proxy. It is unconscionable to allow the bank
after the hands of the creditors were tied, to appropriate to itself all the property of Phil Vegetable.

- The setting aside of this mortgage does not mean PNB is left w/o security. Even before the receivership, PNB already had 3
mortgages on property of Phil Vegetable. Theyre still in effect and can be foreclosed. 2. NO

- As disclosed in docs such as minutes of mtgs, there has been no promise made by PNB to continue indefinitely its backing of
the Phil Vegetable. - Whitaker was in no way personally responsible for obligations of Phil Vegetable. Nevertheless, he signed in
creditors agreement. Now the creditors have large amt of his property. The Court sympathizes with him but said that sympathy
cannot be transmuted into legal authoritativeness.

SEPARATE OPINION
AVANCEA AND VILLAMOR [concur & dissent] - The alleged fraud in the mortgage is unsupported by the record. Fraud is
never presumed.
JOHNSON [dissent] - The mortgage is a valid and subsisting contract. - PNB promised to furnish sufficient funds.
STREET [concur & dissent]
- Intervenor cant recover damages fr PNB. - I agree w/ CJ that judgment of foreclosure should be affirmed

CARBONNEL V PONCIO
CONCEPCION; May 12,1958 APPEAL from an order of the Court of First Instance of Rizal.
Caluag, J.

FACTS
- Plaintiff Rosario Carbonnel filed this case with the Court of First Instance of Rizal alleging that on January 27, 1955, she
purchased from defendant Jose Poncio, at P9.50 a square meter, a parcel of land of about 195 square meters, more or less,
located in San Juan del Monte, Rizal. Plaintiff allegedly paid P247.26 on account of the price and assumed Poncio's obligation
with the Republic Savings Bank amounting to P1,177.48, with the understanding that the balance would be payable upon
execution of the corresponding deed of conveyance. Poncio however allegedly refused to convey the title to the plaintiff and
conveyed the same property to defendants Infante spouses who knew of the first sale to plaintiff.

- Plaintiff prayed, therefore, that she be declared owner of the land in question; that the sale to the Infantes be annulled; that
Poncio be required to execute the corresponding deed of conveyance in plaintiff's favor; that the Register of Deeds of Rizal be
directed to issue the corresponding title in plaintiff's name; and that defendants be sentenced to pay damages. Defendants
moved to dismiss said complaint upon the ground that plaintiff's claim is unenforceable under the Statute of Frauds, and that
said pleading does not state facts sufficient to constitute a cause of action. The motion was denied, "without prejudice to
considering, when this case is decided on the merits, whether the same falls under the Statute of Frauds."

- As the case came up for trial, on February 23, 1956, plaintiff introduced the testimony of one Constancio Meonada, who
corroborated the existence of a document written in Ivatan (Batanes language) purporting to effect the sale, which was
translated as follows: "From this date, January 27, Jose Poncio may stay in this lot that I bought from him until one year without
payment. After that one year and he cannot find any place where to transfer his house, he can also stay in this lot and he will
pay according to agreement.

- Then, taking the witness stand, plaintiff testified that she has known Poncio since childhood, he being related to her mother;
that Poncio's lot adjoins her lot, in San Juan, Rizal; that one day Poncio told her that he wanted to sell his property; that, after
both had agreed on its price, he said that his lot is mortgaged to the Republic Savings Bank; and that, at noon time, on the same
clay, he came back stating that both would "go to the bank to pay the balance in arrears." At this juncture, defense counsel
moved to strike out the statement of the witness, invoking, in support of the motion, the Statute of Frauds. Later on, the lower
court issued an order dismissing plaintiff's complaint, without costs, upon the ground that her cause of action is unenforceable
under the Statute of Frauds. The counterclaims were, also, dismissed.

- Hence, this appeal by plaintiff with the theory that the Statute of Frauds cannot be invoked by respondents because it only
applies to executory contracts. As borne by the evidence, there was already partial performance. The nature of the contract in
this case is therefore no longer covered by the term executory.

ISSUE
WON the lower court erred in holding that the Statute of Frauds bars the plaintiffs cause of action.

HELD
YES

Ratio The Statute of Frauds is applicable only to executory contracts not to contracts that are totally or partially performed.

Reasoning It is well settled in Great Britain and in this country, with the exception of a few states, that a sufficient part
performance by the purchaser under a parol contract for the sale of real estate removes the contract from the operation of the
statute of frauds." (49 Am. Jur. 722-723.)

- In the words of former Chief Justice Moran: "The reason is simple. In executory contracts there is a wide field for fraud because
unless they be in writing there is no palpable evidence of the intention of the contracting parties. The statute has precisely been
enacted to prevent fraud." (Comments on the Rules of Court, by Moran, Vol. 111 [1957 ed.], p. 178.) However, if a contract has
been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the
defendant to keep the benefits already derived by him from the transaction in litigation, and, at the same time, evade the
obligations, responsibilities or liabilities assumed or contracted by him thereby.

- For obvious reasons, it is not enough for a party to allege partial performance in order to hold that there has been such
performance and to render a decision declaring that the Statute of Frauds is inapplicable. But neither is such party required to
establish such partial performance by documentary proof before he could have the opportunity to introduce oral testimony on the
transaction. Indeed, such oral testimony would usually be unnecessary if there were documents proving partial performance.
Thus, the rejection of any and all testimonial evidence on partial performance, would nullify the rule that the Statute of Frauds is
inapplicable to contracts which have been partly executed, and lead to the very evils that the statute seeks to prevent.

- The true basis of the doctrine of part performance according to the overwhelming weight of authority, is that it would be a fraud
upon the plaintiff if the defendant were permitted to escape performance of his part of the oral agreement after he has permitted
the plaintiff to perform in reliance upon the agreement. The oral contract is enforced in harmony with the principle that courts of
equity will not allow the statute of frauds to be used as all instrument of fraud. In other words, the doctrine of part performance
was established for the same purpose for which the statute of frauds itself was enacted, namely, for the, prevention of, and
fraud, and arose from the necessity of preventing, the statute from becoming an agent of fraud for it could not have been the
intention of the statute to enable any party to commit a fraud with impunity." (49 Am. Jur., 725-726; italics supplied.)

- When the party concerned has pleaded partial performance, such part is entitled to a reasonable chance to establish by parol
evidence the truth of this allegation, as well as the contract itself. "The recognition of the exceptional effect of part performance
in taking an oral contract out of the statute of frauds involves the principle that oral evidence is admissible in such cases to prove
both the contract and the part performance of the contract" (49 Am. Jur., 927).

- Upon submission of the case for decision on the merits, the Court should determine whether said allegation is true, bearing in
mind that parol evidence is easier to concoct and more likely to be colored or inaccurate than documentary evidence. If the
evidence of record fails to prove clearly that there has been partial performance, then the Court should apply the Statute of
Frauds, if the cause of action involved falls within the purview thereof. If the Court is, however, convinced that the obligation in
question has been partly executed and that the allegation of partial performance was not resorted to as a devise to circumvent
the Statute, then the same should not be applied.

- Apart from the foregoing, there are in the case at bar several circumstances indicating that plaintiff's claim might not be entirely
devoid of factual basis. Thus, for instance, Poncio admitted in his answer that plaintiff had offered several times to purchase his
land. The fact that Poncios bank book is with the plaintiff should be also clarified in a full trial.

- Without expressing any opinion on the merits of plaintiff's claim, it is clear, therefore, that she is entitled, legally as well as from
the viewpoint of equity, to an opportunity to introduce parol evidence in support of the allegations of her second amended
complaint. Wherefore, the order appealed from is hereby set aside, and let this case be REMANDED to the lower court for
further proceedings not inconsistent with this decision, with the costs of this instance against defendants- appellees. It is so
ordered.

First Philippine International Bank vs Court of Appeals

In 1987, the a manager of First Philippine International Bank (FPIB), Mercurio Rivera, entered into a contract of sale with
Demetrio Demetria and Jose Janolo for the purpose of selling lands owned by the bank to Demetria and Janolo. FPIB at that
time is already under conservatorship and the conservator assigned was Leonida Encarnacion. Later, Demetria and Janolo sold
the land they bought to Carlos Ejercito. Later however, Encarnacion sought the repudiation of the contracts entered into by
Rivera. She asserted that the bank is already in conservatorship hence the contracts are done without authority; that as
conservator, she is the one empowered to dispose the assets of the bank.

ISSUE: Whether or not the real property sales contracts entered into by a property manager, like Rivera, are valid for being
entered into with apparent authority.

HELD: Yes. Rivera was acting with apparent authority. This can be gleaned from the fact that Rivera has been advertised by the
bank as the go-to guy as far as disposition of assets is concerned. Rivera is the manager of the property management
department of the bank and as such is in charge of the assets of the bank. Therefore, the fact that there is already a
conservator is of no moment. Rivera has been the active participant in all the transactions involving the lands subject of the
contracts. He was advertised as such. The buyers therefore are not expected to know Rivera is not supposed to be in charge of
the selling of the properties.
*Excerpt from Full Text
The Third Issue: Is the Contract Enforceable?
The petition alleged:[42]
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28 September 1987,
and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987, the contract produced
thereby would be unenforceable by action there being no note, memorandum or writing subscribed by the Bank to evidence
such contract. (Please see Article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p. 14) stated:
x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance of the price on
September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of the fact that a
contract of sale was perfected between the parties, such contract being binding in whatever form it may have been entered into
(case citations omitted). Stated simply, the banks letter of September 1, 1987, taken together with plaintiffs letter dated
September 30, 1987, constitute in law a sufficient memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications commenced not only from September 1, 1987 but from
Janolos August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient memoranda since they
include 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.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a new offer
which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by reason of the failure of
petitioners to object to oral testimony proving petitioner Banks counter-offer of P5.5 million. Hence, petitioners by such utter
failure to object are deemed to have waived any defects of the contract under the statute of frauds, pursuant to Article 1405 of
the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure to object to the