CASE DIGEST

ISABEL R. ALCASID, petitioner

versus

THE HONORABLE COURT OF APPEALS and RUFINA F. LIM, respondents.

GR No. 104751, 7 October 1994

FACTS :

Private respondent Lim offered to purchase a parcel of land owned petitioner Alcasid and
several other co-owners. Petitioner was willing to sell her share for 4.5 million pesos only if all
the other co-owners would sell their respective shares.

Petitioner engaged the services of Atty. Fernandez to negotiate the sale, without knowing
that he is also representing private respondent.

Atty. Fernandez confirmed to the petitioner that all her co-owners were already willing to
sell their shares to private respondent, promting the latter to signed the deed of sale prepared by
the former. Subsequently, petitioner learned that the co-owners did not really agree to sell their
shares.
 Petitioner filed a complaint for annulment of contract based upon fraud, mistake, and
undue influence which vitiated her consent. According to her, were it not for the
misrepresentation of private respondent and Atty. Fernandez that here co-owners had agreed to
sell their share to private respondent, petitioner would not have agreed to sell hers.

ISSUE :

Whether or not there is error and undue influence to vitiate the consent.

RULING :

The Supreme Court denied the petition.

To invalidate consent, the error must be real and not one that could have been avoided by
the party alleging it. The error must arise from facts unknown to him. He cannot allege an error
which refers to a fact known to him or which he should have known by ordinary diligent
examination of the facts. An error so patent and obvious that nobody could have made it, or one
which could have been avoided by ordinary prudence, cannot be invoked by the one who made it
in order to annul his contract.

Here, petitioner could have avoided the alleged mistake had she exerted efforts to verify
from her co-owners if they really consented to sell their respective shares.

As to the matters of undue influence, Article 1337 provides:

“There is undue influence when a person takes improper advantage of his power over the
will of another, depriving the latter of a reasonable freedom of choice . . .”

Undue influence, therefore, is any means employed upon a party which, under the
circumstances, he could not well resist and which controlled his volition and induced him to give
his consent to the contract, which otherwise he would not have entered into. It must in some
measure destroy the free agency of a party and interfere with the exercise of that independent
discretion which is necessary for determining the advantages or disadvantages of a proposed
contract (Tolentino, supra at p. 501).
 Here, petitioner executed the contract of her own free will and choice, and not from
duress. This fact is fully supported by the evidence.

Dumasug v. Modelo
G.R. No. L-10462, 16 March 1916
FACTS:

Petitioner Andrea Dumasug alleged that respondent Felix Modelo persuaded her to sign a document
by falsely and maliciously making her believe that it contained an engagement on petitioner`s
obligation to pay a certain sum of money. Such obligation pertains to the advances and expenses
incurred by the respondent in protecting and aiding her in the proceeding of her case wherein the
petitioner was the plaintiff. Petitioner does not know how to write, hence, she only affixed her mark
as her signature believing in good faith that respondent herein was telling her the truth.

Three months after the execution of such document, the respondent took possession of a carabao
and of two parcels of land owned by the petitioner on the ground that the latter had conveyed such
properties to him by an Absolute Sale in consideration to the expenses he incurred in aiding the
petitioner on the proceedings of her case. Petitioner herein seeks for the recovery of the above
properties. 

ISSUE:

Whether or not the instrument of purchase and sale of two parcels of land and a plow carabao is null
and void.

RULING:

Yes.In the case at bar, it was inconceivable that respondent herein incurs such big amount as he
allegedly spent in the proceedings of the lawsuit involving petitioner. The evidence discloses that the
only great expense which Andrea Dumasug could have incurred was the sum that as fees she had
to pay the attorney Andres Jayme for filing a demurrer in the Court of First Instance. Said attorney
testified that he received from Andrea Dumasug only P80 or P90, the only large sum which the latter
had to expend.

The lower court held that the statements of Andrea Dumasug were well worthy of credence, and,
taking into consideration the merits of the case, reached the conclusion that the sole document
which plaintiff signed which she acknowledged she was owing to Felix Modelo, and not to the sale of
all her properties. The record shows plaintiff to have stated that she received an offer to sell her
carabao, but that she did not wish to sell the animal as she only rented it and it is her only means of
livelihood.

It is, then, perfectly evident that the document, by means of which defendant made himself the
owner of the properties in question is not the instrument of debt which Andrea Dumasug had signed,
and if it is the same one its contents were not duly and faithfully explained to plaintiff in the act of its
execution. In either case, the consent said to have been given by Andrea Dumasug in said
document is null and void, as it was given by mistake. This error invalidates the contract, because it
goes to the very substance of the thing which was the subject matter of said contract, for, had the
maker thereof truly understood the contents of said document, she would neither have accepted nor
authenticated it by her mark.

The consent given by plaintiff being null and void, the document is consequently also null, void, and
of no value or effect. Article 1303 of the Civil Code is therefore, applicable, which prescribes that:
“When the nullity of an obligation has been declared, the contracting parties shall restore to each
other the things which have been the object of the contract with their fruits, and the value with its
interest.”

For the foregoing reasons, whereby the errors assigned to the judgment appealed from are deemed
to have been refuted, petition granted.

TEODORA GONZALES BUNYI, petitioner,

vs.
SABINA REYES, LUZ JOAQUIN, ELVIRA JOAQUIN, ROSENDO JOAQUIN, JR., LUALHATI
JOAQUIN and LOIDA VIVO and the HONORABLE COURT OF APPEALS, respondents.

The main facts are undisputed. On September 24, 1935, Gil Joaquin executed a deed of "Venita con
Pacto de Retro", whereby for and in consideration of the sum of P100.00 paid to him. by petitioner,
he ceded and transferred to petitioner the land then titled in his name, expressly excluding the house
or houses built thereon, with the right of repurchasing the same within two years thereafter, and
assuming the payment of the land taxes and agreeing to pay an annual rental of P12.00 as lessee
thereof during the stipulated period of redemption.

On July 5, 1941, after Gil Joaquin had failed to repurchase the land, petitioner executed an affidavit
of consolidation of ownership and Joaquin's title was accordingly cancelled and a new certificate of
title issued on July 7, 1941 in petitioner's name.

Petitioner in turn filed this appeal, which the Court finds meritorious.

1. The appellate court's error was in applying Article 1332 of the New Civil Code and declaring that
thereunder petitioner had the burden which she failed to discharge as defendant — of showing that
the Joaquin spouses fully understood the contents of the "Venta con Pacto de Retro", when the
pertinent factual basis for application of said Article 1332 had not been duly established.

Article 1332, which was designed for the protection of illiterates and of a party to a contract who "is a
disadvantage on account of his ignorance, mental weakness or other handicap," provides that: 5

Art. 1332. When one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained to
the
former. (n)

For the proper application of said article to the case at bar, it has first to be established convincingly
by respondents that Gil Joaquin could not read or that the contract was written in a language not
understood by him. This factual basis was far from shown. On the contrary, the trial court duly found
— and the appellate court made in contrary finding — that "Gil Joaquin, ... had been vice mayor of
Muntinglupa; he spoke and understood Spanish; it is hard to believe that he signed the document
Exhibit A-1 without understanding its contents." The appellate court still made mention of another
relevant factor testified to by petitioner — not mentioned by the trial court — that "it was Gil Joaquin
who 'asked the preparation of that document', Exhibit A, "by the notary public, who translated the
contents into tagalog before the Joaquin spouses signed the same — which completely relieved
petitioner of any burden of proof, since the further presumption arose that the deed was prepared in
accordance with Gil's understanding and instructions, since he caused its preparation.

The trial court, therefore, properly ruled that it was respondents, as plaintiffs, who failed to overcome
by clear, strong and convincing evidence the positive value and effect of the notary's certificate that
the Joaquin spouses duly executed the "Venta con Pacto de Retro" and acknowledged the fact of its
execution of their sworn and free will before him.

2. The appellate court merely concluded that petitioner had consolidated ownership of the land on
July 7, 1941 in a "surreptitious manner" on the assumption, without reference to the evidence of
record, that petitioner's ownership of the land was not reflected in the municipality's tax roll "until
August 28, 1961, as per annotation on TD-947, Exhibit D-1, when plaintiffs' TD was cancelled and
that petitioner "allowed plaintiffs to continue in Possession of the lot after 1941 despite said change
of ownership." These assumptions of the appellate court are not supported by the evidence of record
cited 'in the trial court's decision that petitioner "had been paying the real estate taxes for the land as
shown by her documents, Exhibits 3 and 4, and that the land had been registered in her name for
taxation purposes since 1949 (Exh. 5);" and that on the other hand, "Plaintiff Sabina Reyes failed to
produce any receipt tending to prove her claim that she had regularly paid the interests and the
alleged `loan' since 1935 up to the filing of the complaint. She declared that she had religiously paid
the taxes for the land, yet she failed to substantiate her testimony with the best evidence. The
records show that she paid the real estate taxes for the years 1949 to 1959 on December 22, 1960
only (Exhs. C and C-1), that is, five months before the filing of the complaint." Petitioner's brief
further cites as to the fact of possession that "it was admitted by Luz Joaquin herself (one of the
respondents and daughter of Gil Joaquin) that after World War II, she removed her house from the
same lot, (S. T. N. of August 1962 p. 8 and S. T. N. of February 27, 1963, p. 2) while one of the
daughters of the petitioner, Fortunata Bunyi has a house on the same lot since 1959 (S. T. N. of
October 26, 1962, pp. 3 & 7) which was not even denied by the respondents," which citation of the
record is not denied in respondent's brief.

3. The final error of the appellate court flowed from its erroneous conclusion that "the consent of
spouses Gil Joaquin and Sabina Reyes to the document, Exhibit A, is null and void," hence "it
follows that the present action may be treated as one for declaration of the inexistence of the
contract which does not prescribe." The sale at bar is governed by the provisions of the old civil
code, and as was appointed out by Mr. Justice Reyes in one case , "(U)nder Article 1509 of the old
6

Code, the vendee irrevocably acquires ownership over the thing sold upon failure of the vendor to
redeem — i.e. ownership is consolidated in the vendee by operation of law." The court's
jurisprudence has been uniform in support of petitioner's submittal that the rights vested in her as
vendee under the provisions of the old Code could not be impaired by the provisions of the new Civil
Code which took effect only in 1950. 7

On the question of prescription of action, the Court, per Mr. Justice Reyes, in Fernandez vs.
Fernandez,  has held that "the right of action to question the nature of the original transaction as well
8

as any action to recover the land, if any such rights ever existed, were extinguished by prescription
ten years after the appellant consolidated his ownership in 1936." Respondents' right to question the
nature of the deed and to seek reconveyance must be held therefore to have prescribed in 1951, ten
years after petitioner's consolidation of ownership of the land on July 7, 1941, when a new certificate
of title was issued in her favor and that of Gil Joaquin was cancelled, and the filing of the present
action almost twenty years after such consolidation is barred by prescription.

ACCORDINGLY, the judgment of the Court of Appeals appealed from is hereby reversed and set
aside. Without cost

JOSE VALES, plaintiff-appellee,
vs.
SIMEON A. VILLA, FELIPE S. SILVESTRE, and MARIA GUIA GARCIA, defendants-
appellants.

Lawrence, Ross and Block and Manuel Torres for appellants.

Haussermann, Cohn and Fisher and Orense and Gonzalez Diez for appellee.

MORELAND, J.:

FACTS

This is an action to set aside certain transfers of real estate from the plaintiff to one of
the defendants and to require that defendant to recover by good and sufficient
conveyance the title to such properties; to refund to the plaintiff a certain sum paid by
plaintiff for the recovery of certain other real estate; and for an accounting by the
defendants of the rents, issues and profits of certain real estate during a certain period;
and for P25,000 damages.

It appears that the defendant Felipa Silvestre is a widow, 70 years of age, and is the
aunt of the defendant Maria Guia Garcia, wife of the defendant Simeon A. Villa.

With regard to the Salsipuedes and Padre Faura properties the plaintiff claims that they
were obtained from him and that he was induced to execute conveyances therefor in
favor of the defendant Maria Guia Garcia under the threat that, if he did not do so, the
defendants would not reconvey to him the properties described in the conveyance of the
22d of March 1909; that is, that they would repudiate the verbal agreement which
plaintiff alleges was attached to that conveyance.

That fact however must be alleged and proved and relied upon before it can be utilized
by the person asserting its existence. It was not alleged or proved in this case and
plaintiff does not rely upon it in his brief in this court. His consent was not obtained by
deceit in any of the transactions. There did not exist in any one of the transactions
complained of a condition where “by words and insidious machinations on the part of
one of the contracting parties the other is (was) induced to execute a contract which,
without them, he would not have made.”

ISSUE

Whether or not it is valid to annul a series of real estate transactions on the ground of
duress.

HELD

The same may be said with greater force of a case where a person’s own voluntary act,
uninfluenced by another, has put him in a disadvantageous position — a position which
another may unjustly make use of to his injury. The failure to reduce a contract to
writing, or to have witnesses present when a verbal agreement is made, or to record an
instrument, or to exclude from the operation of its terms things verbally agreed to be
excluded, etc., may place a person in a disadvantageous position with respect to
another; and the demand that he pay to secure his extrication is not illegal, and a
payment made pursuant to such demand is not necessarily voidable. He pays for his
lack of foresight. While the demand may be reprehensible morally, it is not illegal’ and of
itself is not ground for relief.

There must, then, be a distinction to be made between a case where a person gives his
consent reluctantly and even against his good sense and judgment, and where he, in
reality, gives no consent at all, as where he executes a contract or performs an act
against his will under a pressure which he cannot resist. It is clear that one acts as
voluntarily and independently in the eye of the law when he acts reluctantly and with
hesitation as when he acts spontaneously and joyously. Legally speaking he acts as
voluntarily and freely when he acts wholly against his better sense and judgment as
when he acts in conformity with them. Between the two acts there is no difference in
law. But when his sense, judgment, and his will rebel and he refuses absolutely to act
as requested, but is nevertheless overcome by force or intimidation to such an extent
that he becomes a mere automation and acts mechanically only, a new element enters,
namely, a disappearance of the personality of the actor. He ceases to exist as an
independent entity with faculties and judgment, and in his place is substituted another
— the one exercising the force or making use of intimidation. While his hand signs, the
will which moves it is another’s. While a contract is made, it has, in reality and in law,
only one party to it; and, there being only one party, the one using the force or the
intimidation, it is unenforceable for lack of a second party.

From these considerations it is clear that every case of alleged intimidation must be
examined to determine within which class it falls. If it is within the first class it is not
duress in law, if it falls in the second, it is.
But into whichever class it falls the party coerced may, as we have seen, waive his right
to annul the contract and to recover damages. He may do this expressly or impliedly.
He may expressly accept the agreement as it stands, or in a modified from, and live up
to it as thus accepted. Or, he may compromise by paying something to be relieved from
its effects or to have its terms changed. Or, he may accept benefits under the contract.
In any one of which cases, and there are others not now necessary to mention, he
renounces and waives his defense of intimidation and thereby eliminates that element
as one having any influence on the case thereafter.

Article 1265 of the Civil Code tells us when duress exists: “Consent given by error,
under violence, by intimidation, or deceit shall be void.” Article 1267 provides that
“violence exists when, in order to exact consent, irresistible force is used;” and the
“intimidation exists when one of the contracting parties is inspired with a reasonable and
well-grounded fear of suffering an imminent and serious injury to his person or
property. . . .” Article 1268 declares the effect of violence and intimidation on the
contract. It provides:

Violence or intimidation shall annul the obligation, even if it should have been employed
by a third person who did not take part in the contract.

There is no question of error or violence in this case; and we have already disposed of
that of deceit. Intimidation resulting from the fear of losing his property, if he did not
comply with defendants’ demands, is the element relied on.

First, then, applying the principles already enunciated: Was there intimidation in this
case under the facts as related by plaintiff himself, leaving out of account the
conclusions drawn and stated in the brief of counsel? Summing up the whole case
under these facts, it is clear that all that defendants did was to refuse to live up to their
verbal agreement with the plaintiff unless he gave them an additional consideration
therefor. Plaintiff had his choice. He could refuse to pay again for the right which he had
paid for once, and go into court for relief, or he could pay the price asked. His judgment
operated upon the situation thus presented and he concluded that, from his point of
view, his interests would be best subserved by paying the additional consideration. But
having paid it, he found himself in precisely the situation he was before. The verbal
agreement to reconvey, which he claims he had twice paid for, was still verbal, and he
was no better off than before. He took no receipt showing the purpose of the payment;
he required no writing to protect himself from the very trap into which he had once
fallen; but, instead, with the very persons who had refused to live up to their original
agreement because it was verbal, he not only made another verbal agreement but also
paid them, without a scrap of paper to show for it or specify its object, the sum of
P10,000 on that agreement. Not only this, but he did the same thing a second time. The
defendants having refused to fulfill the second verbal agreement and having refused to
give him credit for the P10,000 paid, he entered into a third agreement under which he
paid them P15,000. But still the agreement was verbal. Still there was no receipt, no
writing, nothing but the naked word that had twice before been repudiated. Again, for
the tried time, there was a refusal to fulfill and the plaintiff, to obtain the very thing which
had been the subject-matter of these prior verbal contracts, paid a fourth consideration
of P6,800. This time he succeeded. On the payment of the fourth consideration he
secured in black and white the title to the property which had so eluded him.

But, even though it should be found that the execution of the conveyance of the
Salsipuedes and Padre Faura properties and the payment of the consideration of
P6,800 for the recovery of the properties described in the original conveyance
remaining unsold, together with all the other acts of the plaintiff which militate against
his interest, were obtained and procured by means of intimidation, still we believe that
the plaintiff would not be entitled to recover on the record. His acts in general not only
contradicted the most material portions of his testimony, but he must be held to have
ratified the conveyances, payments, and acts referred to and to have renounce the right
o interpose the defense which intimidation originally offered him.

G.R. No. L-32066 August 6, 1979

MANUEL LAGUNZAD, petitioner,
vs.
MARIA SOTO VDA. DE GONZALES and THE COURT OF
APPEALS, respondents.
Facts:
A Licensing Agreement was entered into by and between Lagunzad and
Gonzales, which contract petitioner claims to be null and void for having been
entered into by him under duress, intimidation and undue influence.
Sometime in August, 1961, petitioner Manuel Lagunzad began the production
of a movie entitled “The Moises Padilla Story”. It was based mainly on the
copyrighted but unpublished book of Atty. Ernesto Rodriguez, Jr., entitled
“The Long Dark Night in Negros” subtitled “The Moises Padilla Story,” the
rights to which petitioner had purchased from Atty. Rodriguez in the amount of
P2,000.00. The book narrates the events which culminated in the murder of
Moises Padilla. Although the emphasis of the movie was on the public life of
Moises Padilla, there were portions which dealt with his private and family life
including the portrayal in some scenes, of his mother, Maria Soto Vda. de
Gonzales, private respondent herein, and of one “Auring” as his girlfriend.

On October 3, 1961, petitioner received a telephone call from one Mrs. Nelly
Amante, half-sister of Moises Padilla, objecting to the filming of the movie and
the “exploitation” of his life. Shown the early “rushes” of the picture, Mrs.
Amante and her sister, Mrs. Gavieres, objected to many portions thereof
notwithstanding petitioner’s explanation that the movie had been supervised
by Ernesto Rodriguez, Jr., based on his book “The Long Dark Night in
Negros.” On October 5, 1961, Mrs. Amante, for and in behalf of her mother,
private respondent, demanded in writing for certain changes, corrections and
deletions in the movie. Petitioner contends that he acceded to the demands
because he had already invested heavily in the picture to the extent of
mortgaging his properties, in addition to the fact that he had to meet the
scheduled target date of the premiere showing.

On the same date, October 5, 1961, after some bargaining as to the amount
to be paid, which was P50,000.00 at first, then reduced to P20,000.00,
petitioner and private respondent, represented by her daughters and Atty.
Ernesto Rodriguez, at the law office of Jalandoni and Jamir, executed
a “Licensing Agreement”.
Petitioner takes the position that he was pressured into signing the Agreement
because of private respondent’s demand, through Mrs. Amante, for payment for
the “exploitation” of the life story of Moises Padilla, otherwise, she would “call a
press conference declaring the whole picture as a fake, fraud and a hoax and
would denounce the whole thing in the press, radio, television and that they were
going to Court to stop the picture.”
On October 10, 1961, petitioner paid private respondent the amount of
P5,000.00 but contends that he did so not pursuant to their Agreement but
just to placate private respondent.

On October 14, 1961, the filming of the movie was completed. The movie was
shown in different theatres all over the country.

Because petitioner refused to pay any additional amounts pursuant to the

Agreement, on December 22, 1961, private respondent instituted the present
suit against him praying for judgment in her favor ordering petitioner 1) to pay
her the amount of P15,000.00, with legal interest from the filing of the
Complaint; 2) to render an accounting of the proceeds from the picture and to
pay the corresponding 2-1/2% royalty therefrom; 3) to pay attorney’s fees
equivalent to 20% of the amounts claimed; and 4) to pay the costs.

Traversing the Complaint, petitioner contended in his Answer that the

episodes in the life of Moises Padilla depicted in the movie were matters of
public knowledge and occurred at or about the same time that the deceased
became and was a public figure; that private respondent has no property right
over those incidents; that the Licensing Agreement was without valid cause or
consideration and that he signed the same only because private respondent
threatened him with unfounded and harassing action which would have delayed
production; and that he paid private respondent the amount of P5,000.00 in
October, 1961, only because of the coercion and threat employed upon him. By
way of counterclaim, petitioner demanded that the Licensing Agreement be
declared null and void for being without any valid cause; that private
respondent be ordered to return to him the amount of P5,000.00; and that he
be paid P50,000.00 by way of moral damages, and P7,500.00 as attorney’s
fees.
Private respondent duly filed her Answer to Counterclaim alleging that the
transaction between her and petitioner was entered into freely and voluntarily.

RTC rendered a decision, holding that the Licensing Agreement was valid,
and ordering Lagunzad to pay the plaintiff. CA affirmed the judgment.

In his appeal, petitioner assailed the validity of the Licensing Agreement, alleging
that: 1) it was null and void for having lack of, or having an illegal cause or
consideration of contract, petitioner having previously obtained the authority
purposely granted to him by respondent under said licensing agreement; and 2)
it was null and void because the respondent had no property rights over the
incidents in the life of Moises Padilla who was a public figure; and; 3) it was null
and void because the petitioner’s consent was procured by means of duress,
intimidation, and undue influence.
Issue:
Whether or not the Licensing Agreement entered into by the petitioner and
respondents is valid.
Held:
YES. The Licensing Agreement is valid. (For the copy of the Licensing
Agreement, see full text of the case).
SC did not agree with petitioner’s submission that the Licensing Agreement is
null and void for lack of, or for having an illegal cause or consideration. While it
is true that petitioner had purchased the rights to the book entitled “The
Moises Padilla Story,” that did not dispense with the need for prior consent
and authority from the deceased heirs to portray publicly episodes in said
deceased’s life and in that of his mother and the members of his family. As
held in Schuyler v. Curtis, “a privilege may be given the surviving relatives of a
deceased person to protect his memory, but the privilege exists for the benefit
of the living, to protect their feelings and to prevent a violation of their own
rights in the character and memory of the deceased.”
Petitioner’s averment that private respondent did not have any property right
over the life of Moises Padilla since the latter was a public figure, is neither
well taken. Being a public figure ipso facto does not automatically destroy in
toto a person’s right to privacy. The right to invade a person’s privacy to
disseminate public information does not extend to a fictional or novelized
representation of a person, no matter how public a figure he or she may be. In
the case at bar, while it is true that petitioner exerted efforts to present a true-
to-life story of Moises Padilla, petitioner admits that he included a little
romance in the film because without it, it would be a drab story of torture and
brutality.

SC also found it difficult to sustain petitioner’s posture that his consent to the
Licensing Agreement was procured thru duress, intimidation and undue
influence exerted on him by private respondent and her daughters at a time
when he had exhausted his financial resources, the premiere showing of the
picture was imminent, and “time was of the essence.” As held in Martinez vs.
Hongkong & Shanghai Bank, it is necessary to distinguish between real duress
and the motive which is present when one gives his consent reluctantly. A
contract is valid even though one of the parties entered into it against
his own wish and desires, or even against his better judgment. In legal
effect, there is no difference between a contract wherein one of the
contracting parties exchanges one condition for another because he
looks for greater profit or gain by reason of such change, and an
agreement wherein one of the contracting parties agrees to accept the
lesser of two disadvantages. In either case, he makes a choice free and
untrammelled and must accordingly abide by it. The Licensing
Agreement has the force of law between the contracting parties and
since its provisions are not contrary to law, morals, good customs,
public order or public policy (Art. 1306, Civil Code), petitioner should
comply with it in good faith

De Leon v CA (Obligations and Contracts)

De Leon v CA 

GR No. 80965 

June 6, 1990  

FREEDOM OF STIPULATION OF CONTRACTS  

FACTS: 

(1) On October 18, 1969, private respondent Jose Vicente De Leon and petitioner Sylvia Lichauco De Leon were
united in wedlock before the Municipal Mayor of Binangonan, Rizal. On August 28, 1971, a child named Susana L.
De Leon was born from this union. 

(2) Sometime in October, 1972, a de facto separation between the spouses occured due to irreconcilable marital
differences, with Sylvia leaving the conjugal home. 

(3) Sometime in March, 1973, Sylvia went to the United States where she obtained American citizenship. 

(4) On November 23, 1973, Sylvia filed with the Superior Court of California, County of San Francisco, a petition
for dissolution of marriage against Jose Vicente. In the said divorce proceedings, Sylvia also filed claims for support
and distribution of properties. It appears, however, that since Jose Vicente was then a Philippine resident and did not
have any assets in the United States, Sylvia chose to hold in abeyance the divorce proceedings, and in the meantime,
concentrated her efforts to obtain some sort of property settlements with Jose Vicente in the Philippines. 

(5) On March 16, 1977, Sylvia succeeded in entering into a Letter-Agreement with her mother-in-law, private
respondent Macaria De Leon, 

(6) On the same date, Macaria made cash payments to Sylvia in the amount of P100,000 and US$35,000.00 or
P280,000.00, in compliance with her obligations as stipulated in the aforestated Letter-Agreement. 

(7) On March 30, 1977, Sylvia and Jose Vicente filed before the then Court of First Instance of Rizal a joint petition
for judicial approval of dissolution of their conjugal partnership  

Applicable Laws:  

(1) Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
(1255a)  

(2) Article 1409. The following contracts are inexistent and void from the beginning:  

(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; 

(2) Those which are absolutely simulated or fictitious; 

(3) Those whose cause or object did not exist at the time of the transaction; 

(4) Those whose object is outside the commerce of men; 

(5) Those which contemplate an impossible service; 

(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; 

(7) Those expressly prohibited or declared void by law.  

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.  

(3) Article 52. Marriage is not a mere contract but an inviolable social institution. Its nature, consequences and
incidents are governed by law and not subject to stipulation, except that the marriage settlements may to a certain
extent fix the property relations during the marriage. (n)  

(4) Article 191. The husband or the wife may ask for the separation of property, and it shall be decreed when the
spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction, or has been declared
absent, or when legal separation has been granted.  

In case of abuse of powers of administration of the conjugal partnership property by the husband, or in case of
abandonment by the husband, separation of property may also be ordered by the court, according to the provisions
of articles 167 and 178, No. 3.   

In all these cases, it is sufficient to present the final judgment which has been entered against the guilty or absent
spouse. (1433a)  The husband and the wife may agree upon the dissolution of the conjugal partnership during the
marriage, subject to judicial approval. All the creditors of the husband and of the wife, as we l as of the conjugal
partnership shall be notified of any petition for judicial approval or the voluntary dissolution of the conjugal
partnership, so that any such creditors may appear at the hearing to safeguard his interests. Upon approval of the
petition for dissolution of the conjugal partnership, the court shall take such measures as may protect the creditors
and other third persons.  

After dissolution of the conjugal partnership, the provisions of articles 214 and 215 shall apply. The provisions of
this Code concerning the effect of partition stated in articles 498 to 501 shall be applicable. (1433a)  

(5) Article 221.The following shall be void and of no effect:  

(1) Any contract for personal separation between husband and wife; 

(2) Every extra-judicial agreement, during marriage, for the dissolution of the conjugal partnership of gains or of the
absolute community of property between husband and wife; 

(3) Every collusion to obtain a decree of legal separation, or of annulment of marriage; 

(4) Any simulated alienation of property with intent to deprive the compulsory heirs of their legitime.  

(6) Article 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or
fraud is voidable. (1265a)  

(7) Article 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is
the object of the contract, or to those conditions which have principally moved one or both parties to enter into the
contract. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity
or qualifications have been the principal cause of the contract.  

A simple mistake of account shall give rise to its correction. (1266a)  

(8) Article 1414. When money is paid or property delivered for an illegal purpose, the contract may be repudiated by
one of the parties before the purpose has been accomplished, or before any damage has been caused to a third
person. In such case, the courts may, if the public interest will thus be subserved, allow the party repudiating the
contract to recover the money or property.  

(9) Article 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity. (1288)  

(10)  Article 1335. There is violence when in order to wrest consent, serious or irresistible force is employed.   

There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an
imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or
ascendants, to give his consent.  

To determine the degree of intimidation, the age, sex and condition of the person shall be borne in mind.  

A threat to enforce one's claim through competent authority, if t he claim is just or legal, does not vitiate consent.
(1267a) 

RTC:  WHEREFORE, it is hereby declared that the conjugal partnership of the Spouses is DISSOLVED  

ISSUE: Whether or not the Letter-Agreement is valid  

HELD: The letter-agreement is invalid.  

The cause or consideration for the intervenor Macaria De Leon in having executed Exhibits 'E' to 'E-2' was the
termination of the marital relationship between her son Jose Vicente De Leon and Sylvia Lichauco de Leon. 

Intervenor's undertaking under Exhibit 'E' premised on the termination of marital relationship is not only contrary to
law but contrary to Filipino morals and public Policy. As such, any agreement or obligations based on such unlawful
consideration and which is contrary to public policy should be deemed null and void.  

... the agreement nevertheless is void because it contravenes the following provisions of the Civil Code:
Art. 221. The following shall be void and of no effect:
(1) Any contract for personal separation between husband and wife;
(2) Every extra-judicial agreement, during marriage, for the dissolution of the conjugal partnership of gains or of the
absolute community of property between husband and wife; 

Article 1414 of the Civil Code, which is an exception to the pari delicto rule, is the proper law to be applied. It
provides:
When money is paid or property delivered for an illegal purpose, the contract may be repudiated by one of the
parties before the purpose has been accomplished, or before any damage has been caused to a third person. In such
case, the courts may, if the public interest wig thus be subserved, allow the party repudiating the contract to recover
the money or property.
Since the Letter-Agreement was repudiated before the purpose has been accomplished and to adhere to the pari
delicto rule in this case is to put a premium to the circumvention of the laws, positive relief should be granted to
Macaria. Justice would be served by allowing her to be placed in the position in which she was before the
transaction was entered into. 

OTHER NOTES: 

(1) Applying the foregoing to the present case, the claim of Macaria that Sylvia threatened her to bring Jose Vicente
to court for support, to scandalize their family by baseless suits and that Sylvia would pardon Jose Vicente for
possible crimes of adultery and/or concubinage subject to the transfer of certain properties to her, is obviously not
the intimidation referred to by law.    

In order that intimidation may vitiate consent and render the contract invalid, the following requisites must concur:  

(1) that the intimidation must be the  determining cause of the contract, or must have caused the consent to be
given; 

(2) that the threatened act be unjust or unlawful;  

(3) that the threat be real and serious, there being an evident disproportion between the evil and the resistance which
all men can offer, leading to the choice of the contract as the lesser evil; and  

(4) that it produces a reasonable and well-grounded fear from the fact that the person from whom it comes has the
necessary means or ability to inflict the threatened injury.   
Martinez v. Hongkong and Shanghai Bank
G.R. No. L-5496, 19 February 1910

FACTS:

Plaintiff seeks to annul a contract on the ground that her consent was obtained under duress. Under
the contract, she agreed to convey several properties to Aldecoa & Co. and HSBC as a settlement of
their claims against her and her husband, who fled the country. It was established at the trial that
during the period of negotiation, representations were made to her by the defendants and concurred
in by her lawyers, that if she assented to the requirements of the defendants, the civil suit against
herself and her husband would be dismissed and the criminal charges against the latter withdrawn,
but if she refused, her husband must either spend the rest of his life abroad or be criminally
prosecuted.

ISSUE:

WON there was duress which would invalidate the contract.

RULING:

No. There is no duress that will invalidate the contract.

Article 1335 of the Civil Code in its last paragraph provides that: “A threat to enforce one’s claim
through competent authority, if the claim is just or legal does not vitiate consent”.

In order that this contract can be annulled it must be shown that the plaintiff never gave her consent
to the execution thereof. It is, however, necessary to distinguish between real duress and the motive
which is present when one gives his consent reluctantly. A contract is valid even though one of the
parties entered into it against his wishes and desires or even against his better judgment. Contracts
are also valid even though they are entered into by one of the parties without hope of advantage or
profit. A contract whereby reparation is made by one party for injuries which he has willfully inflicted
upon another is one which from its inherent nature is entered into reluctantly by the party making the
reparation. He is confronted with a situation in which he finds the necessity of making reparation or
of taking the consequences, civil or criminal, of his unlawful acts. He makes the contract of
reparation with extreme reluctance and only by the compelling force of the punishment threatened.
Nevertheless, such contract is binding and enforceable. Petition is dismissed.
Songco Vs. Sellner, 37 PHIL. 254 –
ARTICLE 1340
April 23, 2017cdizonblog

Thos. D. Aitken for appellant.

Perfecto Gabriel for appellee.
Facts:
Both Defendant, George C. Sellner and the plaintiff, Lamberto Songco owned a farm
which was contiguous to each other’s land. Both properties had the sugar cane ready
to be cut. The Defendant bought the plaintiff’s cane for P12,000 and executed three
promissory notes of P4,000 each. Two of these notes were paid; and the third was was
instituted to recover. From a judgement rendered in favor of the plaintiff, the
defendant has appealed.

The defendant denied all the allegations of the complaint. He said that the promissory
note was obtained from him by means of certain false and fraudulent representations
therein specified.

It is claimed that the plaintiff estimated that this cane would produce 3,000 piculs of
the sugar and that the defendant bought the crop believing this estimate to be
substantially correct. As the crop turned out it produced 2,017 piculs, gross, and after
the toll for milling was deducted the net left to the defendant was very much less. The
court believed it is fairly shown that the plaintiff knew at the time he made the
representation exaggerated the probable produce of his fields, and it is impossible to
believe that his estimate honestly reflected his true opinion. He knew what these same
fields had been producing over a long period of years; and he knew that, judging from
the customary yield, the harvest of this year should fall far below the amount stated.

Issue: 
Whether or not the plaintiff was guilty of fraudulent representation of his cane.

Held:
No. Misinterpretation upon a mere matter of opinion is not an actionable deceit, nor is
it a sufficient ground for avoiding a contract as fraudulent. The law allows
considerable latitude to seller’s statements, or dealer’s talk; and experience teaches
that it is exceedingly risky to accept it at its face value.
Assertions concerning the property which is the subject of a contract of sale, or in
regard to its qualities and characteristics, are the usual and ordinary means used by
defendant to obtain a high price and are always understood as affording to buyers no
ground for omitting to make inquiries. A man who relies upon such an affirmation
made by a person whose interest might so readily prompt him to exaggerate the value
of his property does so at his peril, and must take the consequences of his own
imprudence.

CASE : Asiain; petitioners, (Art 1343 JN Robillon)

vs.
Jalandoni , respondents.
G.R. No. L-34697   March 26, 1932 (Villamor) 45 Phil 296)

FACTS PETITIONER:  Luis  Aisain,  Appellants,

RESPONDENT:  Benjamin Jalandoni; Appellee
The parties agreed upon the sale of the land there in question, they had in mind
chiefly the area and quality of the land, the subject of the contract, as will be seen
from the letter of Asiain dated May 6, 1920, in which, among other things, Purchase
of land of Mr. Luis Asiain and his wife Maria Cadenas, by B. Jalandoni, containing
25 hectares more or less of land bounded by property of the purchaser, with its
corresponding crop, estimated at 2,000 piculs, the total value of which is 55
thousand. The price is to be paid by paying 30 thousand at the signing of the
document, and 25 thousand within one year with interest at the rate of 10 per cent.”
In accordance with the foregoing memorandum the deed of sale was executed in the
City of Iloilo, the parties stipulating among other things, the following:

“(1) That Luis Asiain does hereby promise and bind himself to sell to Benjamin
Jalandoni a parcel of land of the hacienda “Maria” of the aforesaid Luis Asiain,
situated in the municipality of La Carlota, Province of Occidental Negros, P.I.
“(2) That Benjamin Jalandoni does hereby promise and bind himself to purchase the
aforesaid parcel of land in the sum of P55,000 upon certain conditions specified in a
memorandum signed by the parties which is in the hands of Attorneys Padilla &
Treñas.”

Jalandoni then took possession of the land, milled the cane at La Carlota Central,
from which he realized 800 piculs and 23 cates of the centrifugal sugar. And after
he had secured from Asiain the certificate of title, he had a surveyor measure the
 land, which was found to contain only 18 hectares, 54 centares, and 22 centares.
Jalandoni had paid P30,000 leaving an unpaid balance of P25,000 of the purchase
price of P55,000 stipulated in the contract. Asiain sued to recover the balance from
Jalandoni.
The competent court declared the deed of sale void, absolved the defendant from
paying P25,000 and ordered the parties to return what they had received under
the contract.Upon appeal to the Supreme Court, the judgment was affirmed on the
ground that both parties had acted by a mutual mistake.

Whether or not  the seller and buyer  misrepresented each other or committed an
ISSUE/S error?

Article 1343 Misrepresentation made in good faith is not fraudulent but may
LAWS constitute error

1 The judgment was affirmed on the ground that both parties had acted by a mutual
mistake.
2. The vendor undertook to deliver to the vendee a parcel of land some 25 hectares
in area and of such a quality as to be able to produce 2,000 piculs of centrifugal
sugar. The vendee, in turn, agreed to buy said parcel of land with the understanding
that it contained that area and was of the quality guaranteed by the vendor. Inasmuch
as the land had neither the area nor the quality the vendor had assured the vendee it
had, it is clear the latter was entitled to rescind the contract, upon the strength of the
authorities cited in the opinion of the court. We believe that Jalandoni was entitled
to rescind that contract, inasmuch as the vendor did not deliver a parcel of land of
the area and quality stipulated in the contract.

3. the judgment appealed from is reversed, and it is held that the contract between
the parties is valid and binding upon them. Wherefore, the defendants are absolved
from the complaint
HOLDING
S

Woodhouse v Halili
July 31, 1953, 93 Phil. 526

FACTS:
On November 29, 1947, plaintiff Woodhouse entered into a written agreement with defendant Halili
for a partnership for the bottling and distribution of Mission soft drinks, plaintiff to act as industrial
partner or manager, and the defendant as a capitalist. The plaintiff was to secure the Mission Soft
Drinks franchise for and in behalf of the proposed partnership and that the plaintiff was to receive 30
per cent of the net profits of the business.

Prior to the agreement, plaintiff had informed the Mission Dry Corporation that he had interested a
prominent financier who was willing to invest in the bottling and distribution of the said beverages,
and requested, in order that he may close the deal with him, that the right to bottle and distribute be
granted him for a limited time under the condition that it will finally be transferred to the corporation.
Pursuant to this request, plaintiff was given thirty days option on exclusive bottling and distribution
rights.

Plaintiff prayed for the execution of the contract of partnership; accounting of profits and share
thereof of 30 percent with damages. The Defendant on the other hand claims that the defendant’s
consent to the agreement, was secured by false representation of plaintiff that he was the owner, or
was about to become owner of an exclusive bottling franchise. Further, he contended that plaintiff
did not secure the franchise but was given to defendant himself. He also filed a counterclaim for
damages.

ISSUE:

WON false representation, if it existed, annuls the agreement to form the partnership

RULING:

No. Article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the causal fraud,
which may be ground for the annulment of a contract, and the incidental deceit, which only renders
the party who employs it liable for damages only. The Supreme Court has held that in order that
fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo
incidente) inducement to the making of the contract.

If ever the plaintiff was guilty of a false representation, this was not the causal consideration that led
plaintiff to enter into the partnership agreement. The main cause that induced defendant to enter into
the partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to
bottle and distribute for the defendant or for the partnership.

GONZALES V. TRINIDAD
67 PHIL 682 (1939)

FACTS: In November 1931, respondent Trinidad executed in favor of petitioner Gonzales a

deed of sale of a parcel of land in Manila for the amount of P10,000. Since the property was
mortgaged to the Bureau of Lands for P6,500, Gonzales assumed the encumbrance.
 1. However, the sale was allegedly simulated since the supposed vendors did not receive the
alleged price since the sale was only effected to save the property from attachment from
Dr. Ramon Papa, who executed a credit of P4,000 in favor of Primitivo Trinidad.
2. Before the loan could be paid, Dr. Papa died and the credit represented by the note was
adjudicated to Carmen Papa.
3. Primitivo Trinidad, then, had an agreement with Carmen Papa that he would pay the
latter as soon as he had the money.
4. Respondent Trinidad filed a complaint against the petitioners Gonzales. CFI declared the
deed of sale null and void and dismissed the action of the plaintiffs and counterclaim of
the defendants, citing Art. 1305 and Art 1306 Civil Code (Now Art. 1411 and Art. 1412
NCC). CA reversed the same.

ISSUE: WON THE CA ERRED IN ITS DECISION IN DECLARING ART. 1305 AND 1306
NOT APPLICABLE IN THIS CASE

HELD: No, CA did not err in reversing the CFI decision. Art 1305 and 1306 Civil Code are not
applicable to the contract entered into by the parties because said provisions refer to contracts
with an illegal consideration or subject matter, whether the facts constitute an offense or
misdemeanor or whether the consideration is only rendered illegal. The contract of sale, being
onerous, has for its cause or consideration the price of P10,000; and both this consideration
as well as the subject matter, namely, the parcel of land, are lawful and not penalized by
law. However, since the contract was in itself fictitious and the simulated prince, the
consideration being thus lacking, said contract is null and void per se or non-existent. The
object of the contracting parties or the motives which the vendors had in entering into the
simulated contract should not be confused with the consideration which was lacking in this case.

Manresa makes the following distinction: The notion of consideration as it applies to

contracts, is the why of the contract, the essential reason which moves the contracting
parties to enter into the contract. In this sense, the consideration is related to the personal
element of the contract, because it represents the demand of reasonable and legal motives
for the determination of wills which concur in consent. In a contract of sale, the thing and the
price are the subject matter of the contract but in consideration thereof, the consideration for the
purchaser and the vendor is determined as indicated by the first of the definitions contained in
Art. 1274 (Now Art 1350: In onerous contracts the cause is understood to be, for each
contracting party, the prestation or promise of a thing or service by the other)
VILLAROEL vs ESTRADA G.R. No. 47362 December 19,
1940

FACTS:
On May 9, 1912, Alejandro Callao, mother of Juan Villaroel, obtained a loan of P1,000 from spouses
Mariano Estrada and Severina payable after seven years.

Alejandra died, leaving Juan Villaroel as sole heir, Spouses Mariano Estrada and Severina also died,
leaving Bernardino Estrada as sole heir.

On August 9, 1930, Juan Villaroel signed a document in which he declared to pay the debt of his
deceased mother in the amount of P1,000 with legal interest of 12% per annum.

The Court of First Instance of Laguna ordered Juan Villaroel to pay the amount of P1,000 with an interest
of 12% per annum since August 9, 1930 until full payment

Villaroel appealed.

ISSUE: Whether or not the right to prescription may be waived or renounced.

HELD: Yes, right to prescription may be waived or renounced. As a general rule, when a debt has already
prescribed, it cannot be imposed by the creditor. However, a new contract which recognizes and
assumes the prescribed debt is an exception, for it would be valid and enforceable. Hence, a person who
acknowledges the correctness of the debt and promises to pay it despite knowing that the debt has
already prescribed, such as the case at bar, waived the benefit of the prescription

Liguez v. CA
G.R. No. L-11240, 18 December 1957
FACTS:

Conchita Liguez filed a complaint against the widow and heirs of Salvador Lopez to recover a parcel
of 51.84 hectares of land in Davao. She averred to be its legal owner, pursuant to a deed of donation
executed in her favor by Salvador. At the time the deed was executed, Conchita was 16. She had
also been living with Salvador’s parents for barely a month. The deed of donation recites that the
donor Salvador, “for and in consideration of his love and affection” for Conchita, and “also for the
good and valuable services rendered to [Salvador] by [Conchita], does by these presents, voluntarily
give, grant and donate…”

The donation was made in view of Salvador’s desire to have sexual relations with Conchita.
Furthermore, Conchita’s parents would not allow Conchita to live with him unless he first donated the
subject land. The donated land originally belonged to the conjugal partnership of Salvador and his
wife, Maria Ngo. The deed of donation was inoperative, and null and void because: (a) Lopez had no
right to donate conjugal property to Conchita; and (b) the donation was tainted with illegal  causa or
consideration. 

ISSUE:

Whether or not the conveyance was predicated on illegal causa.

RULING:

Yes. Conchita Liguez entitled to so much of the donated property as may be found, upon proper
liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership or the
legitimes of Salvador’s forced heirs. Under the cited Art. 1274, liberality of the donor is
deemed causa only in contracts that are of “pure” beneficence, or contracts designed solely and
exclusively to procure the welfare of the beneficiary, without any intent of producing any satisfaction
for the donor.

In this case, Salvador was not moved exclusively by the desire to benefit Conchita, but also to
secure her cohabiting with him, and so that he could gratify his sexual impulses. This is clear from
Salvador’s confession to two witnesses that he was in love with her but her parents would not agree
unless he donated the land in question to her. Actually, therefore, the donation was but one part of
an onerous transaction (at least with Conchita’s parents) that must be viewed in its totality. Thus
considered, the conveyance was clearly predicated upon an illicit causa. Lopez would not have
conveyed the property in question had he known that Conchita would refuse to cohabit with him. The
cohabitation was an implied condition to the donation and being unlawful, necessarily tainted the
donation.

Moreover, the CA erred in applying the pari delicto rule. It cannot be said that both parties had equal
guilt. Salvador was a man advanced in years and mature experience, and Conchita was only 16
when the donation was made. Her acceptance of the deed does not imply knowledge of conditions
and terms not set forth therein. Witnesses testified that it was Conchita’s parents who insisted on the
donation. The rule that parties to an illegal contract, if equally guilty, will not be aided by the law but
will both be left where it finds them, has been interpreted by this Court as barring the party from
pleading the illegality of the bargain either as a cause of action or as a defense. But where the
plaintiff can establish a cause of action without exposing its illegality, the vice does not affect the
right to recover.