RESCISSIBLE CONTRACTS

Peralta v. Raval
G.R. No. 188467, March 29, 2017

Facts:
The Spouses Arzaga, as lessors, entered into a Contract of Lease with Peralta, as lessee,
over the subject lots and the improvements thereon. Spouses Arzaga and Peralta agreed on a
lease term of 40 years. Peralta was to construct on the leased land a building that should become
property of the Spouses Arzaga upon lease termination. 
Flaviano Arzaga, Jr. (Flaviano Jr.), being an adopted son and heir of the Spouses Arzaga,
filed a complaint for annulment of lease contract, against Peralta, who allegedly breached in his
obligations under the contract of lease.
Raval came into the picture after Flaviano Jr. assigned to him, via a Deed of Assignment,
the subject properties. Peralta refused to recognize the validity of the assignment to Raval,
prompting him to still deposit his rental payments for the account of Flaviano Jr.
Beginning August 1995, Raval demanded from Peralta compliance with the lease
contract's terms and conditions. Raval's father and counsel, Atty. Castor Raval (Castor), wrote a
letter to Peralta demanding the removal of the structures that the latter built on a portion of lot, as
he claimed that it was not covered by the lease agreement. This demand was reiterated by Castor
by which he also sought access to the residential house's second floor and an updated accounting
of rentals already paid. Peralta's refusal to heed to the demands of Castor prompted the latter to
send several other demand letters and, eventually, to refer the matter to barangay for conciliation.
When the parties still failed to settle the issue, Castor sent another letter to Peralta on
June 14, 1996, informing the latter that a lessee was to occupy the second storey of the house and
demanding that the area be cleared for that purpose. Castor again pointed out to Peralta the
structures on Lot No. 9128-B that were allegedly not part of the lease agreement. He claimed that
Peralta had become a builder in bad faith, such that the improvements made were to be already
considered as properties of Raval.
Raval's complaint ended with a prayer for the rescission of the lease agreement, an order
upon Peralta to vacate the subject properties, payment of back rentals, and award of moral,
exemplary and nominal damages, plus attorney's fees and costs of suit.
Peralta opposed the complaint and sought its dismissal, as he insisted that Raval was not
his lessor, and thus was not a real party-in-interest to the case. The supposed assignment between
Flaviano Jr. and Raval was allegedly void considering that he was not consulted thereon and his
prior approval thereto was not obtained. Moreover, notwithstanding an assignment, Raval did not
have the right, power and authority to seek the rescission of the contract of lease that was
executed 24 years prior to the filing of the complaint. Peralta had also faithfully complied with
his obligations under the lease.

Issue:
Is the rescission proper?

Ruling:
Yes.
 Considering that the subject contract of lease provided for a 40-year term and was
executed in 1974, the agreement had already terminated in 2014. The issue of whether or not the
lease should be ordered rescinded at this point in time, to the end that it would be declared of no
further effect, is thus already moot and academic. As a rule, courts decline jurisdiction over such
case, or dismiss it on ground of mootness. 
The Court, nonetheless, still finds it needed to address other matters that are intertwined
with the issue of rescission, especially as the termination of the lease is not the only necessary
consequence of rescission. These other issues include the allegations of prescription, the award
of unpaid rentals plus moral damages, and Peralta's counterclaim against Raval.
In a previous case, this Court has held that Article 1389: applies to rescissible contracts,
as enumerated and defined in Articles 1380 and 1381. We must stress however, that the
"rescission" in Article 1381 is not akin to the "rescission" in Article 1191 and Article 1592. In
Articles 1191 and 1592, the rescission is a principal action which seeks the resolution or
cancellation of the contract while in Article 1381, the action is a subsidiary one limited to cases
of rescission for lesion as enumerated in said article.
The prescriptive period applicable to rescission under Articles 1191 and 1592, is found in
Article 1144, which provides that the action upon a written contract should be brought within ten
years from the time the right of action accrues.
The same prescriptive period of 10 years, counted from the time that the right of action
accrues, applies in the case at bar. Raval's cause of action did not refer to Article 1389, yet one
that was based on a written contract. Thus, contrary to Peralta's insistent claim, the action for
rescission had not yet prescribed at the time of its filing in 1998. Raval's cause of action accrued
not on the date of the lease agreement's execution in 1974, but from the time that there was a
violation and default by Peralta in his obligations under the lease agreement.
On this matter, Raval's complaint specified the violations that were allegedly committed
by Peralta as a lessee, specifically, rescission was sought because of Peralta's alleged refusal to
render an accounting of unpaid monthly rentals, to vacate the second storey of the house, to
remove the improvements constructed on the areas not covered by the lease, to operate and
provide a water system and to refund the taxes paid by Flaviano Jr. These violations happened
either immediately prior to Raval's repeated extrajudicial demands that began in August 1995; or
after Peralta's refusal to heed to the demands. There was no indication that the violations dated
back from the first few years of the lease agreement's effectivity in the 1970s. Clearly, the filing
of the action for rescission in 1998 was within the 10-year prescriptive period that applies to the
suit.

Fernando v. Wesleyan
G.R. No. 207970, January 20, 2016

Facts:
From January 9, 2006 until February 2, 2007, the petitioner, a domestic corporation
dealing with medical equipment and supplies, delivered to and installed medical equipment and
supplies at the respondent's hospital. According to the petitioner, the respondent paid only P67,3
57,683.23 of its total obligation of P123,901,650.00, leaving unpaid the sum of P54,654,195.54.
However, on February 11, 2009, the petitioner and the respondent entered into an
agreement whereby the former agreed to reduce its claim to only P50,400,000.00, and allowed
the latter to pay the adjusted obligation on installment basis within 36 months.
 In the letter dated May 27, 2009, the respondent notified the petitioner that its new
administration had reviewed their contracts and had found the contracts defective and rescissible
due to economic prejudice or lesion; and that it was consequently declining to recognize the
February 11, 2009 agreement because of the lack of approval by its Board of Trustees and for
having been signed by Maglaya whose term of office had expired.
On June 24, 2009, the petitioner sent a demand letter to the respondent. Due to the
respondent's failure to pay as demanded, the petitioner filed its complaint for sum of money in
the RTC.
The respondent moved to dismiss the complaint upon the following grounds, namely: (a)
lack of jurisdiction over the person of the defendant; (b) improper venue; (c) litis pendentia; and
(d) forum shopping. In support of the ground of litis pendentia, it stated that it had earlier filed a
complaint for the rescission of the four contracts and of the February 11, 2009 agreement in the
RTC in Cabanatuan City; and that the resolution of that case would be determinative of the
petitioner's action for collection.
After the RTC denied the motion to dismiss on July 19, 2009, the respondent filed its
answer. On September 28, 2011, the petitioner filed its Motion for Judgment Based on the
Pleadings, stating that the respondent had admitted the material allegations of its complaint and
thus did not tender any issue as to such allegations. The respondent opposed the Motion for
Judgment Based on the Pleadings, arguing that it had specifically denied the material allegations
in the complaint.
At the hearing, the RTC issued an Order denying the Motion for Judgment Based on the
Pleadings considering that the allegations stated on the Motion are evidentiary in nature. The
Court, instead of acting on the same, sets the case for pre-trial, considering that with the Answer
and the Reply, issues have been joined.
On July 2, 2013, the CA promulgated its decision. Although observing that the
respondent had admitted the contracts as well as the February 11, 2009 agreement, the CA ruled
that a judgment on the pleadings would be improper because the outstanding balance due to the
petitioner remained to be an issue in the face of the allegations of the respondent in its complaint
for rescission in the RTC in Cabanatuan City.

Issue:
Did the Court of Appeals commit an error in going outside of the respondent's answer by
relying on the allegations contained in the latter's complaint for rescission?

Ruling:
The Court of Appeals erred in going outside of the respondent's answer by relying on the
allegations contained in the latter's complaint for rescission. In order to resolve the petitioner's
Motion for Judgment Based on the Pleadings, the trial court could rely only on the answer of the
respondent filed in Civil Case No. 09-122116. Under Section 1, Rule 34 of the Rules of Court,
the answer was the sole basis for ascertaining whether the complaint's material allegations were
admitted or properly denied. As such, the respondent's averment of payment of the total of
P78,401,650.00 to the petitioner made in its complaint for rescission had no relevance to the
resolution of the Motion for Judgment Based on the Pleadings. The CA thus wrongly held that a
factual issue on the total liability of the respondent remained to be settled through trial on the
merits. It should have openly wondered why the respondent's answer in Civil Case No. 09-
122116 did not allege the supposed payment of the P78,401,650.00, if the payment was true, if
only to buttress the specific denial of its alleged liability. The omission exposed the respondent's
denial of liability as insincere.

Doctrine:
The trial court may render a judgment on the pleadings upon motion of the claiming party
when the defending party's answer fails to tender an issue, or otherwise admits the material
allegations of the adverse party's pleading. For that purpose, only the pleadings of the parties in
the action are considered. It is error for the trial court to deny the motion for judgment on the
pleadings because the defending party's pleading in another case supposedly tendered an issue of
fact.

Poon v. Prime Savings

G.R. No. 183794, June 12, 2016

Facts:
The petitioners owned a commercial building. They executed a 10-year contract of lease
over building with respondent Prime Savings Bank for the latter to use it as a branch office. They
agreed to a fixed monthly rental with an advance payment. The contract also provided:

“Should the lease[d] premises be closed, deserted or vacated by the LESSEE, the
LESSOR shall have the right to terminate the lease...
The LESSOR shall thereupon have the right to enter into a new contract with another
party. All advanced rentals shall be forfeited in favor of the LESSOR.:

Three years later, the BSP placed respondent under receivership of the PDIC and
eventually ordered its litigation. The respondent vacated petitioner’s building and PDIC then
demanded return of the advance rentals. Petitioners refused to return the advanced rentals. Thus
respondent commenced this case for rescission of contract and recovery of sum of money.
The RTC ruled in favor of Petitioners and ordered the partial rescission of the contract
insofar as the advance payment was forfeited. It held that the PDIC’s closure of their business
was a fortuitous event. The CA affirmed but applied Art. 1229 instead.

Issue:
May respondent avail of the remedy of rescission?

Ruling:
Respondents are entitled to rescission. The legal remedy of rescission is by no means
limited to the situations covered in Arts. 1381 and 1382. The New Civil Code actually uses the
term “rescission” in two different contexts.
The first refers to breach of contract under Art. 1191, also known as the remedy of
“resolution”; the second is rescission by reason of lesion or economic prejudice under Art. 1381.
The first is a principal action based on breach of a party, while the second is a subsidiary
action. From the allegations of the complaint, it is clear that respondent’s right of action rests on
the alleged abuse of petitioner’s right under the contract on the theory that petitioner tenaciously
enforced their right to forfeit the advanced rentals which was in bad faith since they knew that
respondent was already insolvent. IN other words, respondents are seeking rescission under Art.
1191.

Doctrine:
Differentiating “rescission” as described under Articles 1191 (remedy of resolution) and
1381 (rescission by reason of lesion or economic prejudice)

Pajares v. Remarkable
G.R. No. 212690, February 20, 2017

Facts:
Remarkable Laundry and Dry Cleaning filed a Complaint denominated as "Breach of
Contract and Damages" against spouses Romeo and Ida Pajares before the RTC of Cebu City.
Respondent alleged that it entered into a Remarkable Dealer Outlet Contract with petitioners
whereby the latter, acting as a dealer outlet, shall accept and receive items or materials for
laundry which are then picked up and processed by the former in its main plant or laundry outlet;
that petitioners violated Article IV (Standard Required Quota & Penalties) of said contract,
which required them to produce at least 200 kilos of laundry items each week, when they ceased
dealer outlet operations on account of lack of personnel; that respondent made written demands
upon petitioners for the payment of penalties imposed and provided for in the contract, but the
latter failed to pay; and, that petitioners' violation constitutes breach of contract. The RTC
dismissed the case for lack of jurisdiction
Respondent filed its Motion for Reconsideration to Court of Appeals. And the CA
rendered the assailed Decision setting aside the Order of the RTC and remanding the case to the
court a quo for further proceedings.
Petitioners sought to reconsider, but were denied. Hence, appealed the Petition.

Issue:
Did the CA commit an error in declaring that the RTC had jurisdiction over respondent's
Complaint which, although denominated as one for breach of contract, is essentially one for
simple payment of damages?

Ruling:
The Court grants the Petition. The RTC was correct in categorizing Civil Case as an
action for damages seeking to recover an amount below its jurisdictional limit.
In ruling that respondent's Complaint is incapable of pecuniary estimation and that the
RTC has jurisdiction, the CA comported itself with the following ratiocination: A case for breach
of contract [sic] is a cause of action either for specific performance or rescission of contracts. An
action for rescission of contract, as a counterpart of an action for specific performance, is
incapable of pecuniary estimation, and therefore falls under the jurisdiction of the RTC.
Then in Administrative Circular No. 09-94 this Court declared that "where the claim for
damages is the main cause of action, or one of the causes of action, the amount of such claim
shall be considered in determining the jurisdiction of the court." In other words, where the
complaint primarily seeks to recover damages, all claims for damages should be considered in
determining which court has jurisdiction over the subject matter of the case regardless of whether
they arose from a single cause of action or several causes of action.

Doctrine:
Breach of contract may give rise to an action for specific performance or rescission of
contract. It may also be the cause of action in a complaint for damages filed pursuant to Art.
1170 of the Civil Code. In the specific performance and rescission of contract cases, the subject
matter is incapable of pecuniary estimation; hence jurisdiction belongs to the Regional Trial
Court (RTC). In the case for damages, however, the court that has jurisdiction depends upon the
total amount of the damages claimed

VOID CONTRACTS

Vitug v. Abuda
G.R. No. 201264, January 11, 2016

Facts:
Abuda loaned P 250, 000 to VItug and his wife, Narcissa. As security for the loan, Vitug
mortgaged to Abuda hi property. The property was then subject of a conditional Contract to Sell
between the National Housing Authority and Vitug. That, upon consummation and completion of
the sale by the NHA of said property, the title-award thereof, shall be received by the Mortgagee
by virtue of a Special Power of Attorney, executed by Mortgagot in her favour. The parties
executed a “restructured” mortgaged contract on the property to secure the amount of P600K
representing the original P250K loan, additional loans, and subsequent credit accommodations
given by Abuda to Vitug with an interest of five (5) percent per month. By the, the property was
covered by Transfer Certificate of Title under Vitug’s name. Spouses Vitug failed to pay their
loans despite Abuda’s demands.
Abuda filed a Complaint for Foreclosure of Property before the RTC of Manila. The RTC
promulgated a Decision in favour of Abuda. On, appeal, the RTC ruled in favour of Abuda and
ordered Vitug to pay the principal sum with interest and upon default of the defendant to fully
pay the aforesaid sums, the subject mortgaged property shall be sold at public auction to pay off
the mortgage debt. The judgement was affirmed with the modification as to the payment of
interest. Petitioner argues that not all the requisites of a valid mortgage are present. He contends
that a mortgagor must have free disposal of the mortgaged property. That the existence of a
restriction clause in this title means that he does not have free disposal of his property.

Issue:
Does the restriction clause render the real estate mortgage invalid?

Ruling:
All the elements of a valid mortgage contract were present. For a mortgage contract to be
valid, the absolute owner of a property must have free disposal of the property. Petitioner's
undisputed title to and ownership of the property is sufficient to give him free disposal of it. As
owner of the property, he has the right to enjoy all attributes of ownership including jus
disponendi or the right to encumber, alienate, or dispose his property "without other limitations
than those established by law.”
Petitioner's claim that he lacks free disposal of the property stems from the existence of
the restrictions imposed on his title by the National Housing Authority. The National Housing
Authority's restrictions were provisions in a contract it executed with petitioner. This contract
bound petitioner to certain conditions before transferring or encumbering the property. These
restrictions do not divest petitioner of his ownership rights. They are mere burdens or limitations
on petitioner's jus disponendi.

Doctrine:
Contracts entered into in violation of restrictions on a property owner's rights do not
always have the effect of making them void ab initio. (Camiling v. Lopez, 99 Phil. 187)

Fullido v. Grilli
G.R. No. 215014, 29 February 2016

Facts:
Grilli, an Italian national, met Fullido in Bohol and courted her. Grilli decided to build a
residential house where he and Fullido would to stay whenever he would be vacationing in the
country. Grilli financially assisted Fullido in procuring a lot from her parents which was
registered in her name On the said property, they constructed a house, which was funded by
Grilli. Upon completion, they maintained a common-law relationship and lived there whenever
Grilli was on vacation in the Philippines twice a year. Grilli and Fullido executed a contract of
lease a memorandum of agreement and a special power of attorney to define their respective
rights over the house and lot.
The lease contract stipulated, among others, that Grilli as the lessee, would rent the lot,
registered in the name of Fullido, for a period of fifty (50) years, to be automatically renewed for
another fifty (50) years upon its expiration; and that Fullido as the lessor, was prohibited from
selling, donating, or encumbering the said lot without the written consent of Grilli. The MOA, on
the other hand, stated, among others, that Grilli paid for the purchase price of the house and lot;
that ownership of the house and lot was to reside with him; and that should the common-law
relationship be terminated, Fullido could only sell the house and lot to whomever Grilli so
desired.
Lastly, the SPA allowed Grilli to administer, manage, and transfer the house and lot on
behalf of Fullido. Initially, their relationship was harmonious, but it turned sour after 16 years of
living together. Both charged each other with infidelity. They could not agree who should leave
the common property, and Grilli sent formal letters to Fullido demanding that she vacate the
property, but these were unheeded. Grilli filed a complaint for unlawful detainer with prayer for
issuance of preliminary injunction against Fullido The MCTC dismissed the case after finding
that Fullido could not be ejected from their house and lot. The MCTC opined that she was a co-
owner of the house as she contributed to it by supervising its construction. RTC reversed and set
aside the MCTC decision CA upheld the decision of the RTC emphasizing that in an ejectment
case, the only issue to be resolved would be the physical possession of the property. Hence, this
petition.
Issue:
Does Grilli have the right to possess the property?

Ruling:
No. The lease contract and the MOA circumvent the constitutional restraint against
foreign ownership of lands. Hence, it is null and void. Under Section 1 of Article XIII of the
1935 Constitution, natural resources shall not be alienated, except with respect to public
agricultural lands and in such cases, the alienation is limited to Filipino citizens.
Concomitantly, Section 5 thereof states that, save in cases of hereditary succession, no
private agricultural land shall be transferred or assigned except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain in the Philippines. The
prohibition, however, is not limited to the sale of lands to foreigners. It also covers leases of
lands amounting to the transfer of all or substantially all the rights of dominion. Where a scheme
to circumvent the Constitutional prohibition against the transfer of lands to aliens is readily
revealed as the purpose for the contracts, then the illicit purpose becomes the illegal cause
rendering the contracts void.
Thus, if an alien is given not only a lease of, but also an option to buy, a piece of land by
virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for
50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby
the owner divests himself in stages not only of the right to enjoy the land but also of the right to
dispose of it — rights which constitute ownership.
If this can be done, then the Constitutional ban against alien landholding in the
Philippines, is indeed in grave peril. Based on the above-cited constitutional, legal and
jurisprudential limitations, the Court finds that the lease contract and the MOA in the present
case are null and void for virtually transferring the reigns of the land to a foreigner.

Doctrine:
A void contract cannot be the source of any right; it cannot be utilized in an ejectment
suit.

UNENFORCEABLE CONTRACTS

University of Mindanao v. BSP

G.R. No. 194964-65, January 11, 2016

Facts:
University of Mindanao is an educational institution. For the year 1982, its Board of
Trustees was chaired by Guillermo B. Torres. His wife, Dolores P. Torres, sat as University of
Mindanao's Assistant Treasurer.
Before 1982, Guillermo B. Torres and Dolores P. Torres incorporated and operated two
(2) thrift banks: (1) First Iligan Savings & Loan Association, Inc. (FISLAI); and (2) Davao
Savings and Loan Association, Inc. (DSLAI).
Guillermo B. Torres chaired both thrift banks. He... acted as FISLAI's President, while
his wife, Dolores P. Torres, acted as DSLAI's President and FISLAI's Treasurer.
 Bangko Sentral ng Pilipinas issued a P1.9 million standby emergency credit to FISLAI.
The release of standby emergency credit was evidenced by three (3) promissory notes
University of Mindanao's Vice President for Finance, Saturnino Petalcorin, executed a
deed of real estate mortgage over University of Mindanao's property in Cagayan de Oro City... in
favor of Bangko Sentral ng Pilipinas.
"The mortgage served as security for FISLAI's PI.9 Million loan[.]"[9] It was allegedly
executed on University of Mindanao's behalf.
As proof of his authority to execute a real estate mortgage for University of Mindanao,
Saturnino Petalcorin showed a Secretary's Certificate. MSLAI failed to recover from its losses
and was liquidated on May 24, 1991. On June 18, 1999, Bangko Sentral ng Pilipinas sent a letter
to University of Mindanao, informing it that the bank would foreclose its properties if MSLAI's
total outstanding obligation of P12,534,907.73 remained unpaid.
Gloria E. Detoya, denied that University of Mindanao's properties were mortgaged. It
also denied having received any loan proceeds from Bangko Sentral ng Pilipinas.
Petitioner argues that the execution of the mortgage contract was ultra vires. As an
educational institution, it may not secure the loans of third persons. Securing loans of third
persons is not among the purposes for which petitioner was established.
Respondent argues that petitioner's act of mortgaging its properties to guarantee FISLAI's
loans was consistent with petitioner's business interests, since petitioner was presumably a
FISLAI shareholder whose officers and shareholders interlock with FISLAI. Respondent points
out that petitioner and its key officers held substantial shares in MSLAI when DSLAI and
FISLAI merged. Therefore, it was safe to assume that when the mortgages were executed in
1982, petitioner held substantial shares in FISLAI.
Petitioner argues that it did not authorize Saturnino Petalcorin to mortgage its properties
on its behalf. There was no board resolution to that effect. Thus, the mortgages executed by
Saturnino Petalcorin were unenforceable.

Issues:
Were the mortgages unenforceable?

Ruling:
The relationship between a corporation and its representatives is governed by the general
principles of agency. Article 1317 of the Civil Code provides that there must be authority from
the principal before anyone can act in his or her name. Hence, without delegation by the board of
directors or trustees, acts of a person—including those of the corporation’s directors, trustees,
shareholders, or officers—executed on behalf of the corporation are generally not binding on the
corporation. The effect of a lack of authority is that under Art. 1317 and 1403, the contract
becomes unenforceable.
In this case, the trial courts found that the Secretary’s Certificate and board resolution
were either non-existent or fictitious and that a board meeting giving the powers never occurred.
The court is bound by the findings of fact of the trial courts.
VOID/INEXISTENT CONTRACTS

Heirs of Alido v. Campano

G.R. No. 226065, July 29, 2019
Facts:
Alido was able to register the said parcel of land under her name. Flora Campano
(respondent) was able to take possession of the land and the owner's duplicate of the OCT,
and paid its realty taxes. Allegedly, Alido had sold the property to her.
Alido died leaving behind her children. The heirs of Alido (petitioners) executed a
Deed of Adjudication of the property and sought to register the property in their names. As
such, they needed to retrieve the OCT, but respondent refused to do so. Thus, they were
constrained to file a verified petition before the RTC for respondent to surrender the owner's
duplicate of the title.
The RTC granted petitioners' petition and ordered respondent to surrender the owner's
duplicate of the OCT. The trial court ruled that since Alido is the registered owner of the
property, respondent cannot assert any right over the same and that the payment of realty
taxes does not prove ownership over the property. It explained that as registered owner of the
land, Alido's right cannot be defeated by prescription. The RTC also expounded that the
purported sale between Alido and respondent was not valid because it was an oral sale. The
trial court posited that the law requires that the sale of real property must appear in a public
instrument. It expounded that the delivery of the certificate of title did not create a valid sale.
Undeterred, respondent appealed to the CA. The CA granted respondent's appeal and
dismissed the verified petition of petitioners. The appellate court explained that an oral
sale of real property is not void, but only unenforceable under the Statute of Frauds.
Nevertheless, it elucidated that it was only applicable to executory contracts and not to
partially or completely executed contracts. The CA highlighted that the oral sale of the
subject parcel of land between respondent and Alido had been executed. The appellate court
noted that respondent possessed the owner's duplicate of the title, she had paid the realty
taxes, and was in peaceful possession of the land.
However, the CA observed that the sale between Alido and respondent was void
because it violated the terms of the former's free patent application. The appellate court noted
that the free patent was issued on March 17, 1975 while the sale took place in 1978 —
violating the five-year restriction of alienating lands subject of a free patent.
Nonetheless, the CA postulated that petitioners cannot seek redress because their
action had been barred by laches. The appellate court pointed out that respondent had
possessed the property and had custody of the OCT without Alido ever questioning her
occupation over the property. In addition, it noted that petitioners waited for 14 more years
before they filed their verified petition against respondents.

Issue:
Was there a valid sale between Alido and Respondent?
Ruling:
The Court agrees with the observations of the CA that the Statute of Frauds is
inapplicable in the present case as the verbal sale between respondent and Alido had been
executed.
Doctrine:
Contracts which have all essential requisites for their validity are obligatory
regardless of the form they are entered into, except when the law requires that a contract be in
some form to be valid or enforceable.

Cruz v. City of Manila

G.R. No. 210894, September 12, 2018

Facts:
Petitioner Noemi Cruz and her husband, Hermenegildo T. Cruz, were the registered
owners of a 124.38-square meter condominium unit, Unit 407, Cityland Condominium 10,
Tower II, 146 H.V. Dela Costa Street, Makati City (subject property) which was levied upon by
the respondent City of Makati for non-payment of real property taxes thereon after their
designated employee-representative failed to remit the entrusted tax payments amounting to
P201,231.17 to the city and appeared to have absconded with the money instead. Eventually, the
subject property was auctioned off and sold to respondent Laverne Realty and Development
Corporation (Laverne) as the highest bidder for P370,000.00.
In 2007, Cruzes filed before Makati RTC Branch 62 Civil Case No. 07- 1155, a
Complaint for annulment of the Laverne sale with prayer for injunctive relief and damages and
costs. Cruzes alleged that the levy and sale by the respondent city to Laverne were null and void
because the notice of billing statements for real property were mistakenly sent to Unit 1407
instead of Unit 407; no warrant of levy was ever received by them; the notice of delinquency sale
was not posted as required by the Local Government Code (LGC); the Makati Treasurer's Office
did not notify Cruzes of the warrant of levy as required by the LGC; and respondents did not
remit the excess of the proceeds of the sale to Cruzes as required by the LGC.
Cruzes failed to redeem the subject property, prompting Laverne to file in 2009, before
the Makati RTC Branch 148, LRC Case No. M-5237 a petition to surrender the owner's duplicate
copy of the title to the subject property (Condominium Certificate of Title No. 44793).
The Makati City government and the City Treasurer filed their answer, and Cruzes filed
their reply. Cruzes sought to declare Laverne and the Makati Registrar of Deeds in default for
failure to file their respective responsive pleadings.
On November 18, 2011, Cruzes filed an Omnibus Motion to consolidate Civil Case No.
07-1155 with LRC Case No. M-5237 and to declare Laverne in default. Laverne opposed the
motion.
On November 25, 2011, the Makati RTC Branch 62 issued an Order giving Cruzes the
opportunity to inform the court if there are any developments in their motion for consolidation
filed before the Makati RTC Branch 148, in LRC Case No. M-5237
On March 29, 2012, the Makati RTC Branch 62 issued an Order denying Cruzes' motion
to consolidate and to declare Laverne in default.

Issue:
Did the CA commit reversible error in dismissing the complaint for annulment of sale
considering the gross and inexcusable negligence of their erstwhile counsel which led to the
dismissal of their case and consequent deprivation of their property without due process of law?
Ruling:
The premise is that no presumption of regularity exists in any administrative action which
results in depriving a taxpayer of his property; due process of law must be followed in tax
proceedings, because a sale of land for tax delinquency is in derogation of private property and
the registered owner's constitutional rights.
The public auction of land to satisfy delinquency in the payment of real estate tax
derogates or impinges on property rights and due process. Thus, the steps prescribed by law are
mandatory and must be strictly followed; if not, the sale of the real property is invalid and does
not make its purchaser the new owner. Strict adherence to the statutes governing tax sales is
imperative not only for the protection of the taxpayers, but also to allay any possible suspicion of
collusion between the buyer and the public officials called upon to enforce the laws.
Under Section 254 of the LGC, it is required that the notice of delinquency must be
posted at the main hall and in a publicly accessible and conspicuous place in each barangay of
the local government unit concerned. It shall also be published once a week for two (2)
consecutive weeks, in a newspaper of general circulation in the province, city, or municipality.
Section 258 of the LGC further requires that should the treasurer issue a warrant of levy,
the same shall be mailed to or served upon the delinquent owner of the real property or person
having legal interest therein, or in case he is out of the country or cannot be located, the
administrator or occupant of the property. At the same time, the written notice of the levy with
the attached warrant shall be mailed to or served upon the assessor and the Registrar of Deeds of
the province, city or municipality within the Metropolitan Manila Area where the property is
located, who shall annotate the levy on the tax declaration and certificate of title of the property,
respectively.
Section 260 of the LGC also mandates that within thirty (30) days after service of the
warrant of levy, the local treasurer shall proceed to publicly advertise for sale or auction the
property or a usable portion thereof as may be necessary to satisfy the tax delinquency and
expenses of sale. Such advertisement shall be effected by posting a notice at the main entrance of
the provincial, city or municipal building, and in a publicly accessible and conspicuous place in
the barangay where the real property is located, and by publication once a week for two (2)
weeks in a newspaper of general circulation in the province, city or municipality where the
property is located.

Doctrine:
A fundamental characteristic of void or inexistent contracts is that the action for the
declaration of their inexistence does not prescribe; nor may the right to set up the defense of their
inexistence or absolute nullity be waived or renounced. Void contracts are equivalent to nothing
and are absolutely wanting in civil effects; they cannot be validated either by ratification or
prescription.

Guillermo v. Philippine Information Agency

G.R. No. 223751, March 15, 2017

Facts:
 On December 10, 2010, Miguel "Lucky" Guillermo (Guillermo) and AV Manila Creative
Production, Co. (AV Manila) filed a Complaint for a sum of money and damages before the
Regional Trial Court of Marikina City
Guillermo and AV Manila alleged that then Acting Secretary of the Department of Public
Works and Highways Victor Domingo (Acting Secretary Domingo) consulted and discussed
with Guillermo and AV Manila the urgent need for an advocacy campaign.
Guillermo and AV Manila formally submitted in a letter-proposal dated February 26,
2010 the concept of "Joyride," a documentary film showcasing milestones of the Arroyo
Administration. Acting Secretary Domingo signed a marginal note on the letter-proposal, which
read, "OK, proceed!" Guillermo and AV Manila allegedly worked on "Joyride" on a tight
schedule and submitted the finished product on April 4, 2010. "Joyride" was aired on NBN-
Channel4 on April 5, 2010.
Petitioners alleged that they, working with the Department of Public Works and
Highways' production team, committed to the following deliverables: (a) reproduction and
distribution of a revised, expanded, and more comprehensive "Joyride" documentary, for
distribution to the Department of Foreign Affairs, the Department of Transportation and
Communication, Philippine consulates and embassies, and for showing to various transport
sectors, as well as to the audience of the Independence Day rites on June 12, 2010 at the Quirino
Grandstand in Rizal Park; (b) production and distribution of a "Joyride" coffee table book; (c)
production of "Joyride" comics; (d) production of a "Joyride" infomercial entitled "Sa Totoo
Lang!" in the form of a 45-second advertisement, which captured the essence of the full length
film; and (e) production of a "Joyride" infomercial entitled "Sa Totoo Lang-GFX"
Petitioners further alleged that Acting Secretary Domingo informed them that the total
consideration of P25,000,000.00 for their services and deliverable items was acceptable and
approved.
A Memorandum of Agreement dated April 30, 2010 was entered into by the Road Board
and respondent Philippine Information Agency.
The Road Board was to provide P15,000,000.00 to be released to the Philippine
Information Agency for the "Joyride" materials, and AV Manila was the preferred production
agency.
Thus, the Philippine Information Agency instructed Guillermo to send billings directly to
the Philippine Information Agency. Thereafter, petitioners delivered 10,000 "Joyride" comics to
the Department of Public Works and Highways, and subsequently billed the Philippine
Information Agency P15,000,000.00. No funds were released by the Philippine Information
Agency.
After all the deliverables had been delivered, petitioners followed up on the payment
from the Philippine Information Agency. Despite several demands, no payments were made.
Petitioners said that they made demands through letters dated August 19, September 20, and
October 12, 2010, to various officials of the Philippine Information Agency, under the
Administration of Former President Benigno Aquino III. However, respondents refused and
failed to pay the amount of P25,000,000.00.
The Office of the Solicitor General moved to dismiss the Complaint for failure to state a
cause of action and for failure to exhaust administrative remedies.
The Regional Trial Court of Marikina granted the Office of the Solicitor General's
Motion to Dismiss, finding that, although a contract existed between petitioners and Acting
Secretary Domingo, this contract was not binding on the government of the Philippines.
 The Court of Appeals affirmed the Regional Trial Court Order dismissing petitioners'
Complaint. The Court of Appeals found that the Complaint sought to enforce a legal right based
on a contract. However, petitioners failed to prove the existence of a contract

Issues:
Was the complaint properly dismissed for failure to state a cause of action?
Ruling:
A complaint states a cause of action if it sufficiently avers the existence of the three (3)
essential elements of a cause of action, namely: (a) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (b) an obligation on the part of the named
defendant to respect or not to violate such right; and (c) an act or omission on the part of the
named defendant violative of the right of the plaintiff or constituting a breach of the obligation of
defendant to the plaintiff for which the latter may maintain an action for recovery of damages. If
the allegations of the complaint do not state the concurrence of these elements, the complaint
becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.
To sufficiently state a cause of action, the Complaint should have alleged facts showing
that the trial court could grant its prayer based on the strength of its factual allegations.
Assuming that the Complaint's factual allegations are true, they are not sufficient to
establish that the Regional Trial Court could grant its prayer. The Complaint attempts to
establish a contract that involves expenditure of public funds. As pointed out by respondents,
contracts involving the expenditure of public funds have additional requisites to be valid.
The Complaint, however, completely ignored the foregoing requisites for the validity of
contracts involving expenditure of public funds. Thus, the Regional Trial Court could not order
the enforcement of the alleged contract on the basis of the Complaint, and the Complaint was
properly dismissed for failure to state a cause of action.

Doctrine:
In PNR v. Kanlaon, the SC held that contracts that do not comply with requirements set
forth in Sections 46, 47 and 48 of the Administrative Code (Contract that involves expenditure of
public funds) are void.