CD assignments: OBLI Cases.

xlsx

B. Essential requisites In general

1.In General

Clarin v. Rulona, 127 SCRA 512 ✅

Topic: Essential requisites in general

Contract/Document in question: the contract was perfected based on exhibits A&B

FACTS:

A case that reviewed whether there exists a perfected contract between Clarin and Rulona with
regard to the ten hectare land (2.5K value ) in Carmen, Bohol.

The conditions of the sale were: that Rulona is required to pay 1K (800 + 200 he later on
deposited) and then the rlemaining 1.5K in monthly installments. According to the Clarins, it was
also subject to the consent of the co-heirs, and that should they refuse to give consent, the
contract will be discontinued.

There were two documents executed. First, the surveyor document showed that Clarin’s
property was being surveyed on behalf of Rulona (ex. A). Second, Albert Rulona paid P800 as
initial payment (exhibit B).

The Sps Clarin returned, by their own volition and w/o consent of the plaintiff, the amount of
P1,100. This, despite the repeated demands for the sale to continue. The Clarins said that
anyway Rulona knew about the conditions before making the payment, and now that the co-
heirs are refusing, they are returning the same.

CA agrees with RTC stating that there was a perfected contract of sale, as the terms of the
agreement (Exh. A) were clearly drafted in an equivocal manner (leaving no room for
interpretation other than those terms contained), the real substance of which satisfied all the
elements and requisites of a contract.

That though exhibit A is merely an authority to survey, there’s no price, person, money involved,
a contract is still binding upon the contracting parties need not be notarized. Neither should it
specify the manner of payment of the consideration nor should it specify the manner of payment
of the consideration nor should it contain the proper heading.

Clarin argued that the two documents in evidence were not public documents and that it was
impossible to sell a property that arose from a legal impossibility (the co-heirs not agreeing).
ISSUE: Whether or not indeed the contract was perfected.
‘
RULING: It was perfected.

While it is true that documents A & B are not contracts of sale, Clarin it is clear that a contract
has been perfected between the Clarins and Rulona and that such has been partially fulfilled
and executed. A contract is after all, a meeting of minds upon the thing which is the object of the
contract and upon the price. Regardless of form, this is binding.

With documents as shown in exhibit A (authority to survey) and B (the payment of 800) it was
clear that there was an agreement to sell and buy the 10hec land in Carmen, Bohol. The P2.5k
has been agreed, and initial down payment has been made. Clarin accepted the payment
thereby precluding him from rejecting the binding effect.

Was he forced to accept payment? No. It is highly improbable that Rulano would give different
sums of payment without binding assurance of the lot sold to him.

Moreover, the sale has been perfected, and it did not depend on co-owners needing to agree to
the sale. A contract is still valid even though one of the parties entered into it against his
better judgment. As co-owner, only his share will be disposed of according to Art 493 Civil
Code:

Art. 493. Each co-owner shall have the full ownership of his part and the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage,
with respect to the co-owners, shall be limited to the portion which may be alloted to him in the division
upon the termination of the co-ownership.

s/n: the book says the Court forgot that definite part of a co-ownership cannot be sold (?)

Heirs of P. Escanlar v. CA, 281 SCRA 176 ✅

Topic: Essential requisites in general

Contract/Document in question: the deed of sale which was not yet approved by the CFI

FACTS: Spouses Guillermo and Victoriana died without issue in 1924 and 1938. Each of their
successors succeeded their estates. Nombre and Carian are one of the heirs which executed a
Deed of sale of rights, interests, and participation.

The deed of sale specifically stipulated that the contract of sale of rights, interest and
participations shall become effective only upon the approval by the Honorable Court of First
Instance of Negros Occidental.
Escanlar and Holgado, the vendees, were concurrently the lessees of the lots referred in the
Deed of sale stipulated that the balance of the purchase price P225,000 shall be paid on or
before May 1979 in a deed of agreement executed by the parties.

Escanlar and Holgado were unable to pay the Cari-an heirs individual’s shares, amounting to
55,000.00 each, by the due date.

On September 16,1982, the probate court approved a motion filed by heirs of Carian and
Nombre to sell their shares to other person (Chua spouses).

Carian instituted this case for cancellation on the grounds that Escalanta and Holgado failed to
pay the purchased price before the stipulated time (May 31, 1979).

RTC resolved the case in favor of the cancellation because it was not approved by the probate
court as required in the deed of sale of rights interest and participation and because the
Carian’s was not fully paid on or before May 1979.

Issue: Whether or not RTC erred on its decision.

Held: contractual stipulation (requiring court approval should be considered as the law between
the parties. However, the presence of the two factors militate against his conclusion.

1. The intention of the parties are contrary to the mandatory character of the said stipulation; the
original objective of the parties was to give effect to the deed of sale which is as stipulated shall
be paid on or before May 1979 However, they still keep accepting payments from the
balance of the purchase price.

2. It was only after they sold the party to another that they filed for cancellation of the contract.
(nganong karon pa na hagbay ra wa ni bayad)

The sellers gave the buyers until May 1979 to pay the balance but after the buyer failed to
pay, the seller did not make any judicial demand for rescission nor execute any demand.
They even continued accepting payments which they accepted. This is presumed that the
sellers had waived and are now estopped from exercising said right to rescind.

2. Consent
Tan v. Planters Products, Inc., 550 SCRA 287 (ZAMBRANO) ✅

Respondent: Planter’s Product’s Inc. (lessee)

Petitioner: Conchita Tan doing business under the name Marman Trading (lessor)

Facts:
Lessor and Lessee entered into a contract of Lease of sulfuric acid tanks and ammonium tanks
in Limay, Bataan for a period of 10 years (contracts for both tanks have identical stipulations on
renewal of the lease at the expiration of the ten-year term).
“The LESSEE has the option to renew his leasehold interest in the leased premises for an additional ten
(10) years at the expiration of the term of his lease under such terms and conditions as may be agreed
upon by the parties provided that the LESSEE shall give the LESSOR, prior to the expiration of the term
of this Lease, 180 days notice, in writing, of his desire to procure such new Lease. ”

1. Marman manifested to PPI its intention to renew the lease contracts. (Two months later,
Marman communicated to PPI its proposed terms for the renewal of the lease.)
2. PPI replied with a counter offer which included, among others, lessening the period of the lease and
increase in the variable fee, escalation rate and minimum required volume per year.
3. Marman urged PPI to adhere to the ten year renewal period under the original
lease contracts. Marman also manifested its willingness to discuss the other points raised by PPI in the counter
offer.
4. PPI stood firm on its counter offer and informed Marman of additional items that it wanted clarified and
completed prior to renewal, namely:

A. Proposed repair plan, estimated cost and timetable of completion of the middle dock,

b. Proposed relocation plan of sulfuric acid pipelines and timetable of completion duly approved by PPI, and

c. Payment of past due accounts.

5. In a meeting of both parties, Marman acknowledged the terms of the counter offer and
manifested that new lease contracts will be executed only upon reaching mutual
agreement on all its terms and conditions. (In the meeting, Marman agreed to the
commercial terms of the counter offer however NO AGREEMENT WAS reached on
the non-commercial terms.)
6. PPI wrote a letter to Marman expressing its inclination not to renew the lease
contracts because of alleged violations of the original contracts of lease, but
manifested that it was giving utmost consideration to a possible renewal but it stands
firm on all its proposed counter offer terms. At that time, the original lease contract had
expired.

Marman prayed that PPI execute new lease contracts for ten years pursuant to its option under
Section 1 of the original contracts of lease.

PPI answered alleging, as affirmative defenses, lack of jurisdiction and failure to state a cause of
action. It also raised as counterclaim the payment of unpaid rent, cost of repair of the middle
dock facility and damages.

Marman filed a motion for summary judgment. PPI countered by filing a motion for preliminary
hearing of its affirmative defenses, which was treated as a motion to dismiss.

RTC ruled in favor of Marman and ordered PPI to honor and recognize the lease contracts had
been renewed for another 10 years.

CA reversed the RTC decision citing that there was no perfection of new lease agreements
because some points on the contracts were not agreed by the parties.

Issue: Whether or not the CA committed reversible error when it ruled that the parties had not
yet agreed on the substantial portions of the lease contracts.

Ruling:
NO. The CA did not commit reversible error when it ruled that the parties had not yet agreed on
the substantial portions of the lease contracts.

The essence of consent is the agreement of the parties on the terms of the contract, the
acceptance by one of the offer made by the other. It is the concurrence of the minds of the
parties on the object and the cause which constitutes the contract. The area of agreement must
extend to all points that the parties deem material or there is no consent at all (Leonardo v.
Court of Appeals).

In this case, the Court interpreted the interpretation of the pertinent renewal provision of the
lease contracts. Section 1 of the lease contracts provide:

The LESSEE has the option to renew his leasehold interest in the leased premises for an additional ten (10) years at
the expiration of the term of his lease under such terms and conditions as may be agreed upon by the parties
provided that the LESSEE shall give the LESSOR, prior to the expiration of the term of the term of this Lease, 180
days notice, in writing, of his desire to procure such new Lease.

It is clear that the renewal of the lease is not automatic. The parties will still negotiate and
bargain on the terms and conditions of the new contract. The only term that cannot be
negotiated or bargained under the new contract is the period of renewal of the lease which is
fixed in the original lease at ten years. All other terms and conditions are subject to negotiation.

Mere notice by Marman to PPI does not automatically result in a new lease contract. If the
parties fail to agree on all terms and conditions of the new contract, there is no perfected new
contract as between them. This means that there must be an agreement on both the
commercial and non-commercial terms of the new lease contracts.

PPI only accepted the counter offer of PPI with respect to the commercial terms of the new
lease. It did not accept the other non-commercial terms and conditions of the new contract,

Thus, the CA correctly ruled that PPI cannot be compelled to execute a new lease contract in
favor of Marman

Notes;
RTC Ruling: - (pwede ra ni dli iapil ug discuss, in case lang mag-ask si Gob)

RTC ruled in favor of Marman and ordered PPI to honor and recognize that the lease contracts had been renewed for
another ten (10) years from their original expiration, and ordering defendant to execute the written contract of renewal
of the lease contracts for another ten (10) years from their expiration, the rental rate to be determined by applying the
agreed escalation rate of 7.75% to the rental rate last paid by plaintiff.

The RTC finds that the plaintiff is entitled to the renewal of the lease contracts under the commercial terms mutually
agreed upon for an additional period of ten years, counted from the time of the expiration of the original contracts.
First of all, the length of the term is already stated in the lease contracts, thus can no longer be altered by one party
without the consent of the other. The terms of the renewal provisions cannot be disregarded - ten years is ten years
no matter how you look at it. Thus, the intent of the parties when the contracts were perfected should stand.
Furthermore, this Court finds that the shortening of the term despite the increased rental rates and minimum volume
constitutes unreasonable and exorbitant terms that would leave one party unable to recoup its investments while
leaving the other party unjustly enriched at the expense of plaintiff. This Court cannot permit such an injustice to take
place.
CA Ruling:

Reversed the decision of the RTC. Complaint of Marman was dismissed.

The CA reversed the RTC order compelling PPI to execute written contracts of renewal of lease.

The appellate court reasoned that mere acceptance by Marman of the commercial terms of the counter offer of PPI
(i.e., rents, variable fee and minimum escalation volume) did not result in the perfection of new lease contracts absent
agreement on other terms of the counter offer, thus:

As We see it, as far as the provisions granting an option to renew are concerned, the only term on which there has
been a clear agreement is the period of the renewed contract, i.e., ten (10) years. The provisions are silent as to the
other terms and conditions as these were still subject to agreement by both PPI and Marman.

While Article 1319 of the New Civil Code prescribes that 'consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract,' this rule does not apply to a situation
like the one before us, wherein one or both parties consider that other matters or details, in addition to the subject
matter and consideration, should be stipulated and agreed upon. In that case, the area of agreement must extend to
all points that the parties deem material or there is no contract.

If there is no declaration that agreement on an accessory or subordinate matter is necessary, the contract will be
perfected as soon as there is concurrence on the object and the cause. The regulation of the accessory points will
then be determined by future agreement, and, if there is no agreement thereon, by the general rules established by
law for the particular case in the absence of agreement, such as the place of performance, expenses for the delivery
of the thing, etc.

In the present case, the intention of both PPI and Marman is clearly to have an agreement on all the points being
discussed before there can be a renewal. This is evident from Marman's letter to PPI dated November 8, 2002
wherein it was explicitly stated that both parties had agreed that there must be a concurrence on all the points being
discussed in the negotiations, including the points that the trial court found irrelevant, before there can be a renewal,
x x x.

Commercial terms: (rents, variable fee and minimum escalation volume).

Non Commercial terms: (relocation of ammonia tanks and pipelines and the immediate repair of the middle dock
facilities).

Luxuria Homes, Inc. v. CA, 302 SCRA 315

Topic: CONSENT
Respondents: JAMES BUILDER CONSTRUCTION and/or JAIME T. BRAVO - private
respondents
Contract/Doc in question: Aida-Bravo transactions, with Luxuria Homes being involved as
alter ego

Facts:
Aida and her 2 minor children co-owned a 1.6 hectare property in Sucat, Muntinlupa which was
occupied by squatters. Aida then contracted Bravo regarding the development of the property
and to negotiate with the squatters. 7 months later, Aida and her children assigned the property
to Luxuria Homes, Bravo was a witness to the execution of the deed of assignment and the
articles of incorporation of Luxuria.
Then in 1992, the relationship between Aida and Bravo turned sour, which resulted to Bravo
demanding payment for services rendered in connection with the development of the land. Aida,
refuses to pay. Thus, James Builder and Bravo initiated a complaint against Aida and Luxuria
Homes.

The trial court declared Aida in default and ordered Aida, jointly and in solidum with Luxuria to
pay Bravo. Aggrieved, Aida appealed to the CA. The CA then modified the decision of the trial
court and deleted the award of moral damages on the ground that James Builder is a
corporation and hence could not experience physical suffering and mental anguish.

Issue: Can petitioner Luxuria Homes be held liable to private respondents for the transactions
supposedly entered into between Aida and Bravo?

Ruling:
We hold that the CA committed a reversible error in making Luxuria Homes liable. It cannot be
said that the incorporation of Luxuria Homes and eventual transfer of the subject property to it
were in fraud of private respondent as such were done with full knowledge of Bravo himself.

To disregard the separate juridical personality of a corporation, the wrong doing must be clearly
and convincingly established. It cannot be presumed.

2.A Offer

Korean Air v. Yuson, G.R. No. 170369 ✅

Topic: Offer

Document/Contract inQ: Signed retirement pay as provided by law.

Facts: Yuson is an employee of Korean Air. Korean air suffered great loss on its sales which
lead them to reduced their budget for 2001. In order to cut costs, Korean air offered Early
retirement program (ERP). In a Memorandum regarding the said offer, it stated that only the
applications of eligible employees shall be forwarded to the head office for approval.

Yuson applied for the ERP program but was excluded from the said program.

Issue: WON the acceptance of the offer of Yuson obliges Korean Air to fulfill it.

Held: A contract is perfected by mere consent, there is no contract when there is no consent,
object certain, and cause or consideration.

A consent which is manifested by the meeting of the offer and acceptance upon the thing and
the cause of it. The offer must be certain and the acceptance is absolute.

In this case, the offer was not certain: (1) the August 2001 Memorandum states that “MNLSM
Management, on its discretion, is hereby offering the said early retirement program to its staff;
(2) applications for the ERP are forwarded to the head office for approval; (3) the intention of the
memo was to prevent further losses.

The approval of ERP is within Korean Air’s prerogative. It is clear that Korean Air did not
intended to approve all applications for the ERP which was not prohibited by law.

Rosenstock v. Burke, 46 Phil 217 (CLOMATA) ✅

Topic: Offer
Document/Contract IQ:

Facts:
The defendant Edwin Burke owned a motor yacht, known as Bronzewing, which he intends to
sell. The yacht was mortgaged with Asian Banking Corp to secure a payment of 100,000 debt.
Plaintiff Elser, began negotiations with the defendant for the purchase thereof. The plan of the
plaintiff was to organize a yacht club and sell it afterwards for 120,000 so he can gain 20,000
commission and the 100,000 to be paid to the defendant.

Plaintiff proposed a voyage to the defendant with prominent businessmen to make an

advantageous sale. To make the yacht seaworthy the yacht needed repairs. The cost of repairs
was P6,972.21, which was already paid by the plaintiff, plus P1,730.84 due to the Cooper
Company which remains unpaid, plus P832.93, due to the plaintiff, which also remains unpaid.

The defendant had no funds to make the repair, the plaintiff almost paid all the amount. Also, it
has been stipulated that the plaintiff will not pay anything for the use of the yacht. As a result of
the voyage, the plaintiff believed that it is convenient to replace the engine of the yacht costing
20,000. Plaintiff negotiated with Mr. Avery (manager of ABC) for another loan to purchase a new
engine. The loan was denied and the plaintiff asked the defendant to negotiate with Mr. Avery.
Mr. Avery and the defendant on Apr 1, arrived at an agreement about the sale of the yacht to
the plaintiff to which the plaintiff declined to accept the proposition. On Apr 3, parties spoke and
as a result plaintiff in the presence of the defendant wrote a letter addressed to the latter as
follows:

In connection with the yacht Bronzewing, I am in position and am willing to entertain the
purchase of it under the following terms..... Signed by both parties.

Since Mr. Avery is not inclined to grant the loan, the plaintiff sent a letter to the defendant that it
was impossible for him to take charge of the boat and made delivery for its return. The
defendant answered that the plaintiff already accepted the offer of purchase of the yacht and
demands the performance thereof.

The trial court rendered judgment sentencing the defendant to pay the plaintiff the sum of
P6,139.28 with legal interest thereon at the rate of 6 percent from April 18, 1922, and to pay the
intervenor, the Cooper Company, the sum of P1,730.84 with legal interest at 6 percent from
May 19, 1922.

Both parties appealed.

Issue:
WON there was an offer certain which could compel the plaintiff to buy the yacht?

Held:
No, there is no certain or definite offer.

To convey the idea of a resolution to purchase, a man of ordinary intelligence and common
culture would use these clear and simple words: ‘I offer to purchase,’ I want to purchase,’ ‘I am
in position to purchase…’ It must be presumed that a man in his transactions in good faith used
the best means of expressing his mind that his intelligence and culture so permit as to convey
and exteriorize his will faithfully and unequivocally. The word ‘entertain’ applied to an act does
not mean the resolution to perform said act. It was not a definite or certain offer, but a mere
invitation to a proposal being made to him, which might be accepted by him or not.”

In the case here, circumstances which show that in writing this letter it was really not the
intention of the plaintiff to make a definite offer. The plaintiff never thought of acquiring the yacht
for his personal use, but for the purpose of selling it to another or to acquire it for another,
thereby obtaining some gain from the transaction, and it can be said that the only thing the
plaintiff wanted in connection with this yacht was that the defendant should procure its sale,
naturally with some profit for himself. For this reason the original idea of the plaintiff was to
organize a yacht club that would afterwards acquire the yacht through him, realizing some gain
from the sale. This is clearly stated in the letter containing the option that the defendant gave
him on February 12, 1922. This accounts for the fact that the plaintiff was not in a position to
make a definite offer to purchase, he being sure to be able to resell the yacht to another, and
this explains why he did not say in his letter of the 3d of April that he was in position to purchase
the yacht, but only to entertain this purchase.

Thus, there is no certain or definite offer.

Note: if two are offered, but they are independent of each other (such as a sale of a parcel of
land, and the lease of an automobile), acceptance of one does not imply acceptance of the
other. BUT if one contract depends upon another, like a contract of loan provided it is secured
by a contract or mortgage, it is essential that there be an agreement on BOTH transactions.
Otherwise, there can be as yet no meeting of the minds.

Johannes Schuback & Sons v. CA, Philippine Industrial Trading 227 SCRA 717
Hernandez, Velicaria, Vibar & Santiago for petitioner.
Ernesto M. Tomaneng for private respondent.

Topic: Offer

Facts:
Sometime in 1981, the defendant established a contract with the plaintiff through the Philippine
Consulate General in Hamburg, West Germany, because he wanted to purchase MAN bus
spare parts from Germany. Plaintiff communicated with its trading partner, JOHANNES
SCHUBACK & SONS PHILIPPINE TRADING CORPORATION (Schuback Hamburg) regarding
the spare parts defendant wanted to order. Defendant submitted to plaintiff a list of the parts he
wanted to purchase with specific part numbers and description. Plaintiff sent to defendant a
letter dated 25 November, 1981, enclosing its offer on the items listed by defendant.

Plaintiff submitted its formal offer containing the item number, quantity, part number,
description, unit price and total to defendant. On December, 24, 1981, defendant informed
plaintiff of his desire to avail of the prices of the parts at that time.

Plaintiff immediately ordered the items needed by defendant from Schuback Hamburg to
enable defendant to avail of the old prices. Schuback Hamburg in turn ordered the items from
NDK, a supplier of MAN spare parts in West Germany. On January 4, 1982, Schuback
Hamburg sent plaintiff a proforma invoice to be used by defendant in applying for a letter of
credit. Said invoice required that the letter of credit be opened in favor of Schuback Hamburg.

On October 18, 1982, Plaintiff again reminded the defendant of his order and advised that the
case may be endorsed to its lawyers. Defendant replied that he did not make any valid
Purchase Order and that there was no definite contract between him and plaintiff. Plaintiff
sent a rejoinder explaining that there is a valid Purchase Order and suggesting that defendant
either proceed with the order and open a letter of credit or cancel the order and pay the
cancellation fee of 30% of F.O.B. value, or plaintiff will endorse the case to its lawyers.

Consequently, petitioner filed a complaint for recovery of actual or compensatory damages,

unearned profits, interest, attorney’s fees and costs against private respondent.

In its decision dated June 13, 1988, the trial court ruled in favor of petitioner by ordering private
respondent to pay petitioner, among others, actual compensatory damages in the amount of DM
51,917.81, unearned profits in the amount of DM 14,061.07, or their peso equivalent.

Thereafter, private respondent elevated his case before the Court of Appeals. On February 18,
1992, the appellate court reversed the decision of the trial court and dismissed the complaint of
petitioner. It ruled that there was no perfection of contract since there was no meeting of the
minds as to the price between the last week of December 1981 and the first week of January
1982.
Issue:
Whether or not a contract of sale has been perfected between the parties

Held:
Yes. Article 1319 of the Civil Code states: "Consent is manifested by the meeting of the offer
and acceptance upon the thing and the cause which are to constitute the contract. The offer
must be certain and the acceptance absolute. A qualified acceptance constitutes a counter
offer."

The facts presented to us indicate that consent on both sides has been manifested. The offer by
petitioner was manifested on December 17, 1981 when petitioner submitted its proposal
containing the item number, quantity, part number, description, the unit price and total to private
respondent. On December 24, 1981, private respondent informed the petitioner of his desire to
avail of the prices of the parts at that time and simultaneously enclosed its Purchase Order. At
this stage, a meeting of the minds between vendor and vendee has occurred, the object of the
contract: being the spare parts and the consideration, the price stated in petitioner's offer dated
December 17, 1981 and accepted by the respondent on December 24, 1981.

a. Acceptance
Batangan v. Cojuangco, 78 Phil 481 (DINAMPO) ✅

Summary: Batañgan wanted to purchase a mortgage property from Mrs. Cojuangco but failed to
conclude acceptance from his end as he was not able to pay on time (he paid after final judgement) and
he was not able to comply with the conditions of the payment of P1,508.28 (he only paid P800). His late
payment means he is not interested in the sale (as acceptance or denial of contracts can be inferred from
actions of the parties).

Facts:

This is a third appeal by the appellant (Batañgan) to compel appellee (Cujuangco) to sell the
mortgaged property even with the decision of the court that the motion to order the appellee to
comply with his offer has already been denied due to being filed after the entry of judgement.

The appellee stated that she is not interested in owning the mortgage property but she was
forced due to the lack of anyone buying it during the auction and she is willing to sell the said
property to Batañgan for P 1,508.28 cash. The decision of the court that the appellant has no
right to redeem the property sold due to the foreclosure of the mortgage thereon. Once this
decision was promulgated, Atty. Lontok (Batañgan’s counsel) sent three postal payments of
P800 to Cojuangco stating that this was in accordance with their agreement and was to be paid
in the shortest possible time. This was rejected by Mrs. Cojuangco as she did not know of such
an agreement. Atty Lontok then sent a similar payment of P800 and P708.30 to the counsel of
Mrs. Cojuangco but was rejected, as well. Atty. Lontok then went to court to comply Mrs.
Cojuangco to accept the payment as agreed between her and Batañgan. But the court denied
this motion as it was lodged after entry of final judgement.

Issue: W/N Batañgan can compel Mrs. Cojuangco to receive payment for the mortgaged
property even if he sent the payments after the foreclosure of the property.

Held:

No. Batañgan cannot compel Mrs. Cojuangco to sell the mortgaged property.

Batañgan was not able to accept the offer on time set by Mrs. Cojuangco which gives him no
right to purchase the mortgaged property.

An offer must be accepted within a reasonable time and acceptance or rejection of an

offer of compromise may be inferred from circumstances. The failure of Batañgan to act on
the offer of Mrs. Cojuangco before the final judgement was set meant that he was not interested
in the mortgaged property (ang term sa kaso kay: creditor’s liberal concession. Don’t know what
this means lol). A compromise has for its purpose the avoidance or termination of a lawsuit.
With the rendition of judgment the reason which induced the appellee to make her proposition
ceased to exist. Also, an acceptance in order to conclude the agreement must in every
respect meet and correspond with the terms and conditions of the offer. The appellant
was not able to provide the sum of P 1,508.28 but instead offered P800.00 which terminates the
said agreement.

Laudico v. Arias, 43 Phil 270 (FLORES) ✅

Topic: Acceptance by agent
Ponente: Avancena

Facts:
Arias ang Agent
Arias, with his codefendants owned building Nos. 205 to 221 on Carriedo Street. Arias, on his
behalf of his co-owners, wrote a letter to the plaintiff, Laudico. The letter was a tentative contract
which gave Laudico the option to lease the building to a third person, and contained the
conditions upon which the lease should be made.

Later on both parties negotiated on the stipulations of the contract through correspondence
(letter) and interviews. Some conditions were added, counter-propositions were made, and
certain points were clarified. Laudico advised Arias that all his propositions, as amended and
supplemented, were accepted.

The letter of acceptance was received by Arias by special delivery at 2:53 pm of March 6. On
that same day, at 11:25 am, Arias had written a letter withdrawing the offer of lease to Laudico's
office.
Laudico prays that Arias be compelled to execute the contract of lease of the building.

Issue: WON Laudico may compel Arias to execute the contract of lease.

Ruling:
No, because the contract was not yet perfected.

Under article 1262, par 2, of the Civil Code, an acceptance by letter does not have any effect
until it comes to the knowledge of the offerer. Therefore, before he learns of the acceptance, the
latter is not yet bound by it and can still withdraw the offer.

When Arias wrote Laudico, withdrawing the offer, he had the right to do so, inasmuch as he had
not yet receive notice of the acceptance. And when the notice of the acceptance was received,
it no longer had any effect because the offer has already been withdrawn. There was no
meeting of the minds, through offer and acceptance, which is the essence of the contract. While
there was an offer, there was no acceptance, and when the acceptance was made and could
have a binding effect, the offer was then lacking. Though both the offer and the acceptance
existed, they did not meet to give birth to a contract.

Express or Implied.
Lopez v. Bodega City, 532 SCRA 56 (HO)

● Respondents are Bodega City (corporation) and Andres Torres-Yap (owner/manager)

ATY
● Petitioner, Lolita Lopez, is the “lady keeper” of Bodega manning it's ladies’ comfort room
for many years.
● Petitioner is in concessionaire agreement with the respondent for the past 3 years.
● ATY requested the Lolita Lopez to explain why their concessionaire agreement should
not be terminated for the hostile manner she has acted against a lady customer who
informed respondent that she was sleeping while on duty.
● Subsequently, Yap informed the petitioner that the agreement between them is already
terminated because of the incident.
● In the Arbitration Branch of NLRC, petitioner filed a complaint for illegal dismissal
without due process.
● Respondent contends they had no employer-employee relationship because of the
concessionaire agreement.
● Labor Arbiter found the petitioner was an employee and there was an illegal dismissal.
● Petitioner contends that she could not have entered into the said concessionaire
agreement with respondents because she did not sign the document evidencing the
same.

Issue

● Whether or not there is implied acceptance done by the petitioner in the concessionaire
agreement? Yes. (Main Topic)
 ● Whether or not there was a termination of employment. No. (Only if asked and this will
help you determine the relationship of respondent and petitioner)

Ruling:

(1) Yes, while petitioner did not affix her signature to the document evidencing the subject
concessionaire agreement, the fact that she performed the tasks indicated in the said
agreement for a period of three years without any complaint or question only goes to show that
she has given her implied acceptance of or consent to the said agreement.

Settled is the rule that contracts are perfected by mere consent, upon the acceptance by the
offeree of the offer made by the offeror. For a contract, to arise, the acceptance must be made
known to the offeror. Moreover, the acceptance of the thing and the cause, which are to
constitute a contract, may be expressed or implied as can be inferred from the
contemporaneous and subsequent acts of the contracting parties. A contract will be upheld as
long as there is proof of consent, subject matter and cause; it is generally obligatory in whatever
form it may have been entered into

Petitioner is likewise estopped from denying the existence of the subject concessionaire
agreement. She should not, after enjoying the benefits of the concessionaire agreement with
respondents, be allowed to later disown the same through her allegation that she was an
employee of the respondents when the said agreement was terminated by reason of her
violation of the terms and conditions thereof.

The principle of estoppel in pais applies wherein -- by one's acts, representations or

admissions, or silence when one ought to speak out -- intentionally or through culpable
negligence, induces another to believe certain facts to exist and to rightfully rely and act on such
belief, so as to be prejudiced if the former is permitted to deny the existence of those facts.

(2) No. It has been established that there has been no employer-employee relationship between
respondents and petitioner. Their contractual relationship was governed by the concessionaire
agreement embodied in the 1992 letter. Thus, the petitioner was not dismissed by respondents.
Instead, as shown by the letter of Yap to her dated February 15, 1995, their contractual
relationship was terminated by reason of respondents' termination of the subject concessionaire
agreement, which was in accordance with the provisions of the agreement in case of violation of
its terms and conditions.

Perez v. Pomar, 2 Phil 682 (Laguna)

Topic: Acceptance

FACTS:

Perez filed a complaint asking the Court to determine the amount due to him for services
rendered as an English interpreter for Pomar and the Tabacalera Company. He was assured he
would be paid for his service thus causing him to abandon his soap business and suffered
damages in the sum of $3,200.

Pomar, on his part, denied having sought the services of Perez. He contended that Perez had
acted as interpreter of his own free will without any offer of payment and therefore no legal
relation between them existed.

ISSUE: Whether or not consent has been given by the other party.

RULING: Yes, there was consent given by Pomar by accepting the interpretation services, so
he is obligated to pay the services rendered by Perez.

Although, it does not appear that any written contract was entered into between the parties for
the employment of the plaintiff as interpreter, or that any other innominate contract was entered
into, but whether the plaintiff’s services were solicited or whether they were offered to the
defendant for his assistance, inasmuch as these services were accepted and made use
of by the latter, there was a tacit and mutual consent as to the rendition of services.
Thus, the person who benefited from the services has the obligation to pay the
reasonable value of the services rendered upon the implied contract of lease of service
(Art. 1689-1731), unless it is shown that the service was rendered gratuitously.

**Pomar has the duty to pay Perez just compensation therefore by virtue of the innominate
contract of facio ut des implicitly established.

***The tacit agreement and consent of both parties with respect to the service rendered by
Perez, and the reciprocal benefits accruing to each, are the best evidence of the fact that there
was an implied contract sufficient to create a legal bond, from which arose enforceable rights
and obligations of a bilateral character. Pomar, on various occasions consented to accept an
interpreter’s services, rendered in his behalf and not gratuitously, it is just that he should pay a
reasonable remuneration because it is a well-known principle of law that no one should be
permitted to enrich himself to the damage of another.

Aldaba v. CA, 27 SCRA 263 (Mag-aso)

Topic: Acceptance

Facts: Two lots owned by Belen Aldaba are being disputed in this case. Petitioners Dr. Vicente
Aldaba and Jane Aldaba, father and daughter, lived with Belen Aldaba for 10 years and took
care of her until her death. Belen had presumptive heirs her surviving husband Estanislao
Bautista, and her brother Cesar Aldaba (represented as the respondents in this case.) After the
death of Belen, the respondents asked the petitioners to leave the premises and upon their
refusal, the former instituted an ejectment case. The petitioners argue that Belen really intended
to donate the property to them as evidence by the note written by Belen to them which reads,
“Huag kayong umalis diyan. Talagang iyan ay para sa inyo. Alam nila na iyan ay sa inyo.”
They argue that the property was for compensation of their services. The respondents contend
that the letter no way proves a donation.

Issue: WON what is relied upon as a consideration had been knowingly accepted by the parties
as a consideration

Ruling: No. The issue is a question of fact. It has not been found that the lots were given to
petitioners in consideration of the services rendered by them to Belen.

An acceptance may be express or implied, but it should be clear how said agreement
was implied and from what facts.

The note is vague. It could not be interpreted as referring to the lots in question, or that which
was given therein was given for a valuable consideration. We have not come across in the
record even a claim that there was an express agreement between petitioners and Belen
Aldaba that the latter would give the property in question in consideration of the services of
petitioners. All that petitioners could claim regarding this matter was that "it was impliedly
understood" between them. How said agreement was implied and from what facts it was
implied was not made clear.

S/n: main issue of the case is w/n there was a disposition of the property in question made by the
deceased Belen Aldaba in favor of petitioners - no.
Belen expressed only the intention to donate. When a person does not expect to be paid for his services,
there cannot be a contract implied in fact to make compensation for said services unless the party
furnishing the services then expected or had reason to expect the payment of compensation by the other
party, and have been accepted by the latter with knowledge of that expectation. Even if it is assumed for
the sake of argument that the services constituted a demandable debt, We still have to ask whether this
was the consideration for which the deceased made the (alleged) disposition of the property to the
petitioners.

b. Option Contract
Sanchez v. Rigors, 45 SCRA 368

Facts:
On April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an
instrument entitled “Option to Purchase,” whereby Mrs. Rigos " agreed, promised and
committed ... to sell" to Sanchez the sum of P1,510.00, a parcel of land situated in the barrios of
Abar and Sibot, municipality of San Jose, province of Nueva Ecija. The said option shall be
deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the property"
within the stipulated period, which is 2 years. Several tenders of payment of the sum of
Pl,510.00 were made by Sanchez within said period but were rejected by Mrs. Rigos, so
Sanchez deposited said amount with the Court of First Instance of Nueva Ecija and commenced
against the latter the present action, for specific performance and damages. Rigos alleged, as a
special defense, that the contract between the parties "is a unilateral promise to sell, and the
same being unsupported by any valuable consideration, by force of the New Civil Code, is null
and void".

On February 28, 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to
accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of
conveyance.

Issue:
Whether or not the “option to purchase” contract is null and void for being unsupported by any
valuable consideration.

Ruling:
No.

The court reiterates the doctrine laid down in the Atkins, Kroll & Co. case where a unilateral a
unilateral promise to sell similar to the one sued upon here was involved, treating such promise
as an option which, although not binding as a contract in itself for lack of a separate
consideration, nevertheless generated a bilateral contract of purchase and sale upon
acceptance.

Speaking through Associate Justice, later Chief Justice, Cesar Bengzon, this Court said:

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

Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities
hold that:
"If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until
accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though
the option was not supported by a sufficient consideration. ... . (77 Corpus Juris Secundum, p. 652. See also 27
Ruling Case Law 339 and cases cited.)

"It can be taken for granted, as contended by the defendant, that the option contract was not valid for lack of
consideration. But it was, at least, an offer to sell, which was accepted by letter, and of the acceptance the offerer had
knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the acceptance — could at
all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code)." (Zayco vs.
Serra, 44 Phil. 331.)

In other words, since there may be no valid contract without a cause or consideration, the
promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if
accepted, results in a perfected contract of sale.

In this case, since the offer was accepted before its withdrawal, the “option to purchase”
contract is valid and is a perfected contract of sale.

Adelfa Properties, Inc. v. CA, 240 SCRA 565 ✅

Facts

Private respondents were the co-owners of a parcel of land with their two brothers, Jose and
Dominador Jimenez. Jose and Dominador Jimenez sold the east portion of the lot to petitioner
accompanied by an extrajudicial partition of the property with the west portion allotted to private
respondents. After the sale, Petitioner and private respondents entered into an “Exclusive
Option to Purchase” in favor of the former over the west portion of the land. In the said contract,
petitioner paid Php50,000.00 as option money, but the stipulation states that it would form part
of the purchase price.

The owner’s duplicate of the title was lost so they initiated reconstitution proceedings
represented by the petitioner's lawyer. Pursuant to this, the reconstituted title remained in the
possession of the lawyer.

The nieces and nephews of the Jimenezes filed an action to annul the sale of the east portion of
the land to petitioner. Pursuant to this, petitioner suspended the payment of the full purchase
price because of the vindicatory action filed by the niece and nephews which it duly informed
the private respondents.

The suit however was dismissed. After the dismissal, the petitioner sent a letter to private
respondents conveying its intention to pay the full price. However, the private respondents
ignored the offer since it already sold the said lot to another person. The private respondents
sought the recovery of the title of the land from the petitioner but the latter did not comply, the
former filed an action to recover the same.

The Petitioner alleged that they were justified to suspend the payment of the price since there
was a valid vindicatory action under Art 1590 of the Civil Code. On the other hand, private
respondents countered, saying that the contract was a mere option contract and thus Art 1590
is not applicable.

The RTC ruled in favor of private respondents. The CA affirmed in toto.

Issue

Whether or not the contract was a mere option contract.

Ruling

No. SC ruled that it was not an option contract but a contract to sell.

An option, is a continuing offer or contract by which the owner stipulates with another that the
latter shall have the right to buy the property at a fixed price within a certain time, or under, or
in compliance with, certain terms and conditions, or which gives to the owner of the property the
right to sell or demand a sale. It is also sometimes called an "unaccepted offer." An option is not
of itself a purchase, but merely secures the privilege to buy.

Contract to sell, title is retained by the vendor until the full payment of the price, such payment
being a positive suspensive condition and failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective.

In this case, the records show that private respondents accepted the offer of the petitioner to
buy their property under the terms of their contract. At the time the petitioner made its offer,
private respondents suggested that their transfer certificate of title be first reconstituted, to which
petitioner agreed. Petitioner was supposed to pay the same on November 25, 1989, but it later
offered to make a down payment with the balance to be paid on or before November 30, 1989.
Private respondents agreed. As a result, the so-called exclusive option to purchase was
prepared by petitioner and was subsequently signed by private respondents, thereby creating a
perfected contract to sell between them.

Bible Baptist Church v. CA, 444 SCRA 399 (ORTEGA)

Petitioner: Bible Baptist Church and Pastor Reuben Belmonte

Private respondent: Mrs. Elmer Tito Medina Villanueva

Topic: Option Contract

Facts:

1. On June 7, 1985, the Bible Baptist Church entered into a contract of lease with Option to
Buy with Mr. & Mrs. Elmer Tito Medina Villanueva who are the registered owners of a
property located at Leon Guinto St., Malate, Manila.

2. The pertinent stipulation of the lease contract at controversy provides:

8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the lease.
If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One Million Eight
Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down payment agreed upon by both
parties. C) The balance of the selling price may be paid at the rate of One Hundred Twenty Thousand
Pesos (P120,000.00), Philippine Currency, per year.

3. Hence, petitioner Baptist Church seeks to buy the leased premises from the spouses
Villanueva, under the option given to them.
 4. Petitioner’s arguments:

a) it agreed to advance the large amount needed for the rescue of the property but,
in exchange, it asked the Villanuevas to grant it a long term lease and an option
to buy the property for P1.8 million

b) the consideration supporting the option was their agreement to pay off the
Villanueva's P84,000 loan with the bank, thereby freeing the subject property
from the mortgage

c) the Baptist Church would not have agreed to advance such a large amount as it
did to rescue the property from bank foreclosure had it not been given an
enforceable option to buy that went with the lease agreement.

5. Private respondent’s argument:

a) the amount of P84,000 has been fully exhausted and utilized by their occupation
of the premises and there is no separate consideration to speak of which could
support the option.

6. RTC and CA DISMISSED the petition based on this provision of the Civil Code:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price is

binding upon the promissor if the promise is supported by a consideration distinct
from the price.

Issue: WON the option to buy given to the Baptist Church is founded upon a consideration.

Ruling:

NO, the option to buy given to the Baptist Church is NOT founded upon a consideration.

The second paragraph of Article 1479 provides for the definition and consequent rights and
obligations under an option contract. For an option contract to be valid and enforceable
against the promissor, there must be a separate and distinct consideration that supports
it.

Petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas' property
from the mortgage should be deemed the separate consideration to support the contract of
option. It must be pointed out that said amount was in fact apportioned into monthly
rentals spread over a period of one year, at P7,000 per month. Thus, for the entire period of
June 1985 to May 1986, petitioner Baptist Church's monthly rent had already been paid for,
such that it only again commenced paying the rentals in June 1986.

In fact, the amount of P84,000 has been fully exhausted and utilized by their occupation of the
premises and there is no separate consideration to speak of which could support the option.
To summarize the rules, an option contract needs to be supported by a separate consideration.
The consideration need not be monetary but could consist of other things or
undertakings. However, if the consideration is not monetary, these must be things or
undertakings of value, in view of the onerous nature of the contract of option.
Furthermore, when a consideration for an option contract is not monetary, said consideration
must be clearly specified as such in the option contract or clause.

Having found that the option to buy granted to the petitioner Baptist Church was not founded
upon a separate consideration, and hence, not enforceable against respondents, this Court
finds no need to discuss whether a price certain had been fixed as the purchase price.

Thus, private respondent Villanuevas cannot be compelled to sell their property to petitioner
Baptist Church.

Asuncion v. CA, 238 SCRA 602 ✅

Topic: Option Contracts

FACTS:

Ang Yu Asuncion et al were tenants of commercial and residential space in Binondo. On several
occasions, Bobby Unjieng and Jose Tan told the tenants that they are offering to sell the
premises, and that they are given priority to acquire the same.

Negotiations started, and counter-offers were made as they settled with P5M. The owners put
their offer in writing, and the tenants replied asking for the specific terms and conditions. The
owners however never reverted after.

It was only until they heard that the owners were selling the property to another party, hence the
tenants filed a complaint for specific performance against Bobby Cu Unjieng and Jose Tan
(owners) to compel them to sell the property to them (tenants).

The Court dismissed this on the grounds that there was no meeting of the mind as there were
no terms and conditions agreed with between tenants and owner. The Deed of Sale was
already executed to Buen Realty Dvlpt Corporation for P15M. Hence, Buen Realty asked the
tenants to move out.

Tenants replied that the property bought by Buen Realty was in lis pendens.

Lis pendens- formal document recorded with the county against a specific real property that
provides notice to the public of your lawsuit.

The Court found that there was no meeting of the minds, and the contract did not go through the
necessary stages: preparation, negotiation, perfection, and consummation, the tenants did not
have a hold on the property. After all, a contract must have a juridical tie as it is of the essential
elements of a contract.

However, in its dispositive issue, the RTC resolved that the tenants be given the option of first
refusal, and that the property be offered to them first if it costs P11M below. CA agreed, but
modified stating that due to mercurial and uncertain forces in the market, let the tenants be
given the option to purchase the property first even if it does cost P11M above.

ISSUE:
Hence the issue is whether or not the prior agreement of the tenants with owners could be
considered an option contract.

OPTION CONTRACT: A preparatory contract in which one party grants to the other, for a fixed
period, the option to decide whether or not to enter into a principal contract. (Art. 1324)

RULING

Yes the prior agreement is an option contract, one that could not be set aside without being
subjected to damages (as provided for in Art 19 civil code).If there is withdrawal, it must be
clearly communicated.

In cases of an accepted unilateral promise specifying a thing to be sold and the price to be paid,
when coupled with a valuable consideration distinct and separate from the price, is considered
to be a perfected contract of option.

Contract of options are legally binding in sales (Art 1479). However, the option is not the
contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option
is exercised timely, i.e, the offer is accepted before a breach of the option, a bilateral promise to
sell and to buy ensues and both parties are then reciprocally bound to comply with their
respective undertakings.

For example, a negotiation is formally initiated by an offer (imperfect promise is merely an

offer).As these are not yet perfected, either party may at any time stop the negotiations. The
offer is withdrawn at this stage, and effective immediately upon its manifestation such as
by mailing (not as in this case where they knew about the Buen Realty buying the
property).

Rules in option contracts:

Where a period is given to the offeree within which to accept the offer:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is
still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has
been made, before the offeror’s coming to know of such fact, by communicating that
withdrawal to the offeree . The right to withdraw must not be arbitrary.

(2) If the period has a separate consideration, a contract of “option” is deemed perfected, and it
would be a breach of that contract to withdraw the offer during the agreed period. The
option, however, is an independent contract by itself, and it is to be distinguished from the
projected main agreement (subject matter of the option) which is obviously yet to be concluded.
If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option)
by the optionee-offeree, the latter may not sue for specific performance on the proposed
contract (“object” of the option) since it has failed to reach its own stage of perfection. The
optioner-offeror, however, renders himself liable for damages for breach of the option. In these
cases, care should be taken of the real nature of the consideration given, for if, in fact, it has
been intended to be part of the consideration for the main contract with a right of withdrawal on
the part of the optionee, the main contract could be deemed perfected; a similar instance would
be an “earnest money” in a contract of sale that can evidence its perfection

In the law on sales, note that the right of first refusal is an innovative juridical relation, but it is
not deemed perfection of contract of sale. In a right of first refusal, while the object might be
made determinate, the exercise of the right, however, would be dependent not only on the
grantor’s eventual intention to enter into a binding juridical relation with another but also on
terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at
best be so described as merely belonging to a class of preparatory juridical relations.

Hence in this case, though the right of first refusal was in favor of the tenants, the remedy is not
writ of execution on the judgment (evicting Buen Realty) since there was none to execute in the
first place (property was not theirs to begin with). They must file this in a proper forum.

s/n: Buen Realty could not also be evicted from their ownership because w/n they acted in bad
faith, they must be impleaded in an appropriate proceeding.

Tuazon v. Del Rosario-Suarez, 637 SCRA 728 ✅

Topic: Option Contract

Facts: Respondent (Lourdes) owns a parcel of land which was leased by Petitioner (Roberto)
under a contract of leased.

During the effectivity of the lease, Lourdes sent a letter to Roberto where she offered to sell to
the latter subject parcel of land. She specified the amount of the property and gave 2 years to
decide on the offer.
Four months after the expiration of the Contract Lourdes sold the land to her child, son in law
and grandsons evidenced in deed of sale.

The new owners ordered Roberto to vacate the premises. MTC rendered a decision ordering
Roberto to vacate the property for non payment of rentals and expiration of the contract.

RTC ruling: declared the deed of sale as binding and valid. The offer of Lourdes to Roberto did
not ripen into a contract to sell because the price offered by Lourdes was not acceptable to
Roberto.

Issue: WON the letter of Lourdes to Roberto involved an option contract or a right of first refusal.

Held: An option contract is constituted if a fixed period and a determined price is present. Lack
of these two essential requisites constitutes only a right of first refusal.

In this case, Lourdes gave a letter to Roberterto stating that “I am offering you to buy my land
for 37,541,000…. You have all the time to decided when you can, but not for 2 years or more”

The law provides that when the offerer has allowed the offerree a certain period to accept, the
offer may be withdrawn at any time before the acceptance by communicating such withdrawal.

S/N: An agreement in writing to give a person the option to purchase lands within a given time
at a named price is not a sale nor an agreement to sell. It is simply a contract by which the
owner of property agrees with another person that he shall have the right to buy his property at
a fixed price within a certain time.

c. Advertisements
Santamaria v. CA, 187 SCRA 186 (SKIPPED)

Caugma v. People, 486 SCRA 611 ✅

Facts:

Bid Condition No. 8 of the Invitation to Bid) to provide that the "bidder agrees to pay, in
addition to the award price, taxes, duties and other costs such as berthing fees,
cost of publication of the bid, etc. and levies which may be imposed by law.

Quick facts: BFAR auctioned a vessel which was to be sold no less than P86,917.60.
That in or about and during the period from November Caugma further declared that on November 21,
21, 1985 to November 28, 1985 and/or prior or 1985, she explained to Galler, Jr. and Dr. Peras
subsequent thereto in Quezon City, Philippines, and that the berthing fees referred to in the Invitation
within the jurisdiction of this Honorable Court, accused to Bid were those due from the publication of the
Marietta T. Caugma, Amiana Abella and Rosauro Invitation to Bid up to the
Martinez, all public officers being then the Chairman,
Vice-Chairman and member respectively, of the final award. The berthing fees from January 1,
Disposal Committee of the Bureau of Fisheries and 1984 to October 31, 1985 were not for the
Aquatic Resources (BFAR), while in the account of the bidder.
discharge/exercise of their official administrative
functions conspiring and confederating with accused
EDUARDO S. GALLER, JR., a private individual and
representative of V.L. Shipyard of Navotas, did then
and there willfully and unlawfully through evident bad
faith cause undue injury to the BFAR/Government by
then and there proceeding with a public bidding for the
disposal of BFAR' fishing vessel M/V Malasugui held
on November 28, 1985 when only EDDIE S. GALLER,
JR. was present and submitted his bid and thereafter
accused public officers acted favorably on the itemized
bid offer of EDDIE S. GALLER, JR. in spite of their
knowledge that said bid offer is in violation of condition
no. 8 of the Invitation to Bid and that the
BFAR/Government will only get the

amount of THIRTY THREE THOUSAND THREE

HUNDRED EIGHTY EIGHT PESOS AND SIXTY
CENTAVOS (P33,388.60), Philippines (sic) Currency,
which is very much below the Appraised value of M/V
Malasugui in the

amount of P86,917.60, thereby causing damage or

injury to the BFAR/Government in the sum of
P53,529.00.
Galler: His impression was that since the vessel
was being sold on an "as is where is" basis, the

other charges were not part of the bid and had

to be separately paid. As far as he knew, the
only interest of the BFAR was to recover the
value of the vessel.

Galler: Condition No. 8 of the Condition of Sale

pertained to all charges in connection with the
sale of the vessel and were to be paid by the
bidder, not as part of but in addition to the bid
price of P138,900.00.

(1) they were denied their right to equal

protection of the law; and (2) the prosecution
failed to prove that they acted in evident bad
faith in awarding the sale of the vessel to the

Corporation and that the BFAR suffered

damage/injury in the amount of P53,529.00

Petitioners likewise posit that the conditions set

forth in the invitation to bid were complied with.
They maintain that the Committee's
determination of the award is merely
recommendatory and is not in itself a contract.

The costs referred to in Condition No. 8 of the

Condition of Sale pertained to all charges in
connection with the sale of the vessel and were
to be paid by the bidder, not as part of but in
addition to the bid price of P138,900.00.
 OSP: The Office of the Special Prosecutor (OSP), for
its part, avers that petitioners' contention that their role
in the public bidding was recommendatory in nature is
baseless; such argument was proffered in order to
evade responsibility for the unjust and
disadvantageous sale which prejudiced the interest of
the government. The subsequent issuance by the
BFAR Director of the certificate of award to the winning
bidder is only a formality. What consummates the sale
is the Committee's declaration of the winning bidder.
When a qualified bidder is declared as such, it follows
that such winning bidder will be awarded the contract
or certificate of award;

otherwise, taking part in the said bidding would be a

meaningless exercise.

OSP: The OSP maintains that when the subject fishing

vessel was advertised for sale, the act of selling the
property had begun as there was already an offer.
After complying with the requirements on publication
and invitation to

bid, the Committee proceeded with the sale and the

Corporation was declared the winning bidder. The
contract was perfected at that moment, as there was
already a meeting of the minds between the seller and
the buyer.

Issue:

Whether the fulfilment of the invitation to bid and winning the bid result in a perfected contract

Ruling:

We agree with petitioners' contention that the recommendation of the Committee to the Ministry
to approve the award of the sale was not in itself a contract of sale in favor of the Corporation.
The sale of the vessel was perfected only upon notice to said Corporation that the sale of the
vessel had been awarded to it.

Article 1318 of the New Civil Code provides that there is no contract
 unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. An offer is the manifestation of willingness to enter
into a bargain in such a way as to justify the other process in understanding that an assessment
will conclude the agreement. An offer ripens into a contract when it is accepted. The offer must
be certain and the acceptance absolute.

Thus, a bid at an auction constitutes an offer to buy. Where, as in this case, the seller reserved
the right to refuse to accept any bid made, a binding sale is not perfected until the seller accepts
the bid. The seller may exercise his right to reject any bid even after the auctioneer has
accepted a bid. The mere determination of a public official bound to accept the offer or a
proposal of a bidder does not constitute a contract.

The awardee is not obliged to make payment for the property bid until after notice to the
awardee. It is only when the awardee receives the notice of award that a contract of sale is
perfected between the bidder and the seller.

In this case, the Corporation was notified of the award only after February 28, 1986. It was only
upon its receipt of the notice of award that a contract of sale had been perfected between the
government, as seller, and the Corporation a buyer. The Committee had no involvement in the
sale of the vessel to the Corporation apart from its recommendation on the November 28, 1986
bidding, and yet, the Ombudsman indicted only petitioners, excluding the BFAR Director,
Resident Auditor and Assistant Minister of Agriculture and Food.

We agree with petitioners' contention that the crime of violation of Section 3(e) of Rep. Act No.
3019 was not committed when the Committee conducted the bidding on November 28, 1985
and resolved to recommend to the Minister, through the BFAR Director, to award the sale of the
vessel to the Corporation; neither was it committed when the award was made by the BFAR
Director to the Corporation. This is so because there was as yet no evidence that the
government sustained a loss of P53,529.60. The crime would have been committed if the
Corporation had remitted to the National Treasurer the P138,900.00, and the P103,111.40 was
applied by way of setoff against Bureau's account to said Corporation for Bill Nos. 1529 and
1589.

The prosecution failed to prove beyond reasonable doubt that the government lost P53,529.00
in the sale of the vessel. The only evidence presented is the Corporation's bid and the Report of
Villa Bernaldo on June 18, 1986. The Prosecution offered no competent and sufficient evidence
to prove the actual damages caused to the government.
On the other hand, the BFAR Director declared that the vessel was sold to the Corporation for
P138,900.00, which accepted and remitted the amount to the national treasury, as full payment
of the vessel. The government receipted the amount "as proceeds of the sale" of the vessel. 92
To reiterate, there is no evidence on record that, after the Corporation had remitted the
P138,900.00 on February 28, 1986, P103,111.40 thereof was applied to the Bureau's account
under Bill Nos. 1529 and 1589 by way of set off. In fact, on January 6, 1986, before the sale of
the vessel was awarded to the Corporation, the government had already remitted the
P69,653.60 to it in payment of Bill No. 1589. The government did not even apply a portion of the
P138,900.00 as payment of its account of P33,388.60 under Bill No. 1529, and instead paid the
amount to the Corporation on May 12, 1986.

Thus, the full amount of the bid price, P138,900.00, which the Corporation remitted to the
national treasury was intact as Bernaldo stated in her June 18, 1986 Report; yet, petitioners
were prosecuted and convicted of violation of Section 3(e) of Rep. Act No. 3019.

Osmena v. Abaya, 781 SCRA 1 ✅

GR No. 211737
January 13, 2016
Topic: Advertisements ( Art 1325 and 1326)

Facts:
MCIA Project consists of the construction of a new passenger terminal with all associated
infrastructure facilities.

Pre-qualification, Bids and Awards Committee (PBAC) caused the publication of the invitation to
pre-qualify and bid
GMR-Megawide Consortium submitted their bid and was awarded as the winning bidder

Petitioner:
Osmena Contends GMR as unqualified bidder ( conflict of interest and financial situation).
And that Court should exercise its solemn constitutional duty to nullify the award of the MCIA
Project to GMR and avert serious damage to a project.

Respondents:
Petition assails matters which require to be left to the sole determination of the executive
department, particularly the PBAC and DOTC, and thus is beyond judicial cognizance

It was settled that there was no conflict of interest and GMR’s financial situation can sustain
handling the project.

Issue: w/n the Courts can interfere with executive or legislative discretion exercised within those
boundaries.
Ruling:
No

In an "invitation to bid, there is a condition imposed upon the bidders to the effect that the
bidding shall be subject to the right of the government to reject any and all bids subject to its
discretion.

The discretion to accept or reject a bid and award contracts is vested in the Government
agencies entrusted with that function. The discretion given to the authorities on this matter is of
such wide latitude that the Courts will not interfere therewith, unless it is apparent that it is used
as a shield to a fraudulent award.

In the case at bar, the government has made its choice and unless an unfairness or injustice
is shown, the losing bidders have no cause to complain nor right to dispute that choice.

d. Incapacity
Heirs of Ingjug-Tiro v. Sps. Casals, 363 SCRA 435 (CLOMATA) ✅

Topic: Incapacity

FACTS:
This petition for review arose from the dismissal of the case in the CA which affirmed the
decision of the trial court that dismissed the same on the ground of prescription and laches on
the 5,354 square meter parcel of land in Opon, Cebu. The petitioners alleged that they have
been deprived of their successional rights through fraud and misrepresentation. The vendees,
herein respondents, claimed to have acquired the property for value and in good faith.

The subject parcel of land was originally titled in the name of Mamerto Injung who died in 1963
and left the same to his five children – Romana, Francisco, Francisca, Luisa and Maria during
the second world war. Two decades later, Luisa, Maria, Eufemio (husband of Ramona) and
Guillerma (granddaughter) sold the parcel of land to the respondents. The vendors allegedly
represented themselves as the only surviving heirs of Mamerto Ingjug. The sale was evidenced
by a Deed of Sale of Unregistered Land and an Extrajudicial Settlement and Confirmation of
Sale.

On August 10, 1992, the heirs of one of Mamerto’s children- Romana Ingjug challenged the
respondents’ ownership of the property by filing a complaint for Partition, Recovery of
Ownership and Possession, Declaration of Nullity of the Deed of Sale of Unregistered Land and
the Extrajudicial Settlement and Confirmation of Sale to the extent of the petitioners’ shares in
the property.
Issue:

1. WON death of a person terminates contractual capacity?

2. WON the petitioners’ right to institute a complaint for partition and reconveyance is effectively
barred by prescription?

Held:
1. Yes, Death of a person terminates contractual capacity.

Contracting parties must be juristic entities at the time of the consummation of the contract.

In the case here, the claim that Francisco Ingjug died in 1963 but appeared to be a party to the
Extrajudicial Settlement and Confirmation of Sale executed in 1967 would be fatal to the validity
of the contract, if proved by clear and convincing evidence. Stated otherwise, to form a valid and
legal agreement it is necessary that there be a party capable of contracting and a party capable
of being contracted with. Hence, if any one party to a supposed contract was already dead at
the time of its execution, such contract is undoubtedly simulated and false and therefore null
and void by reason of its having been made after the death of the party who appears as one of
the contracting parties therein. The death of a person terminates contractual capacity.

Thus, Death of a person terminates contractual capacity.

2. No. The petitioners’ right to institute a complaint for partition and reconveyance is not barred
by prescription.

Art 1410 provides that "the action or defense for the declaration of the inexistence of a contract
does not prescribe."

In the case at bar, from February 9, 1965 to October 10, 1992 when the instant action was filed
in court is 27 years and from February 2, 1967, the time the title was transferred to defendants
to October 10, 1992 when plaintiffs initiated the instant case is 25 years. While an action for
reconveyance based on implied or constructive trust prescribes in ten years counted from the
date when an adverse title is asserted by the possessor of the property". The positive mandate
of Art. 1410 of the New Civil Code conferring imprescriptibility to actions for declaration of the
inexistence of a contract should pre-empt and prevail over all abstract arguments based only on
equity. Certainly, laches cannot be set up to resist the enforcement of an imprescriptible legal
right, and petitioners can validly vindicate their inheritance despite the lapse of time.

Thus, the petitioners’ right to institute a complaint for partition and reconveyance is not barred
by prescription.
Note: Here are the assailed issues that why the case was remanded to RTC to try the facts of
the case and reverse the decision to outrightly dismiss the case due to prescription.

1. That petitioners were the coheirs and co-owners of the inherited property;
2. That their coheirs-co-owners sold their hereditary rights thereto without their knowledge and
consent;
3. That forgery, fraud and deceit were committed in the execution of the Deed of Extrajudicial
Settlement and Confirmation of Sale since Francisco Ingjug who allegedly executed the deed in
1967 actually died in 1963, hence, the thumbprint found in the document could not be his;
4. That Eufemio Ingjug who signed the deed of sale is not the son of Mamerto Ingjug, and
therefore not an heir entitled to participate in the disposition of the inheritance;
5. That respondents have not paid the taxes since the execution of the sale in 1965 until the
present date and the land in question is still declared for taxation purposes in the name of
Mamerto Ingjug, the original registered owner, as of 1998;
6. That respondents had not taken possession of the land subject of the complaint nor
introduced any improvement thereon; and seventh, that respondents are not innocent
purchasers for value.

Also----
Neither could laches be invoked in the case at bar. Laches is a doctrine in equity and our courts
are basically courts of law and not courts of equity. Equity, which has been aptly described as
“justice outside legality,” should be applied only in the absence of, and never against, statutory
law. Aequetas nunguam contravenit legis.

Almeda v. Heirs of P. Almeda, 839 SCRA 630 ✅

Topic: Incapacity

Facts:
Spouses Venancio Almeda and Leonila Laurel-Almeda were the parents of nine children. A
power of attorney was executed by Venancio and Leonila, who were then 80 & 81-year-old
respectively, granting Ponancio, among others, the authority to sell a parcel of land Leonila
inherited from her parents. Petitioners claimed that Ponancio, taking advantage of his being the
eldest child and his close relationship with their parents, caused the simulation and forgery of
certain Deed of Absolute Sale. By virtue of the deed of absolute sale, TCT was issued to
Ponancio.

According to petitioners, their parents did not sign the October 3, 1978 Deed in favor of
Ponancio and their signatures may have been forged. They also averred that their parents did
not receive due consideration for the transaction, and if Ponciano succeeded in making them
sign said Deed, they did so without knowledge of its import.
Issue:
WON the parents of petitioners execute the 1978 Deed in favor of Ponciano with full consent?

Held:
Yes.
Petitioners have not satisfactorily shown that their parents’ mental faculties were impaired as to
deprive them of reason or hinder them from freely exercising their own will or from comprehend
the provisions of the sale in favor of Ponancio.

Petitioners assert that their parents were “ulyanin” or forgetful, of advanced age and at times
sickly during the time of the execution of the Deed in favor of Ponancio. Meet forgetfulness,
however, without evidence that the same has removed from a person the ability to intelligently
and firmly protect his property rights, will not by itself incapacitate a person from entering into
contracts.

Minors.
Mercado, et al. vs. Espiritu, 37 Phil 215 (DINAMPO) ✅

Summary: The sale was questioned as it was entered into by minors. But SC said, it’s valid
because any fraudulent misrepresentation will not affect the validity of the contract.

Facts:
The case was about the contract made by Luis Espiritu (father of Jose Espiritu, the defendant)
and the heirs of his sister Margarita Mercado; Domingo and Josepha Mercado, who pretended
to be of legal age to give their consent into the contract of sale of the land they inherited from
their deceased mother Margarita Mercado (sister of Luis Mercado). The siblings Domingo et. al.,
sought for the annulment of contract asserting that Domingo and Josepha were minors during
the perfection of contract.

Issue: W/N the deed of sale is valid, when the minors presented themselves of legal age, at the
time of the perfection of the contract.

Held:

Yes. The contract is valid.

Whenever a party has, by its own declaration, act or omission, intentionally and deliberately led
another party to believe a particular thing to be true, and to act upon such belief, he cannot, in
any litigation arising out of such declaration, cannot be permitted to falsify it (based on
provisions on law on estoppel and Rule 123, Section 6 paragraph A).

Furthermore, the sale of real estate made by a minor who pretends to be of legal age, when in
fact he is not, is VALID, and he will not be permitted to excuse himself from the fulfillment of the
obligations contracted by him or to have it annulled. The judgment that holds such sale to be
valid and absolves the purchaser from the complaint filed against him does not violate the laws
relative to the sale of minor’s property, nor the judicial rules established in consonance
therewith.

In the given case, annulment of the sale cannot be invoked on the ground of minority, since at
the time of the perfection of the contract; Domingo and Josefa presented themselves to be of
legal age.

Bambalan vs. Maramba and Muerong, 51 Phil 417 (FLORES) ✅

Topic: Incapacity
Ponente: Romualdez

Facts:
Isidro Bambalan was the owner of the land in question and plaintiff is his sole heir. Maramba
alleged that Balamban sold the land to them. They presented a document to prove of transfer of
ownership. They also allege that they already paid for the land. Balamban alleges his mother
was threatened by Muerong with imprisonment. And even if Balamban signed the document, he
asserts that he did because his mother intimidated him to sign it.

Issue:
WON Balamban sold the land in question to the defendants.

Ruling:
No, the document is vitiated because it was executed when Balamban was a minor.

The document is vitiated for the reason that the Bambalan, at the time he signed it, was a minor.
Bambalan's minority is clearly shown by the record and it does not appear that it was his real
intention to sell the land. What is deduced from the record is, that Bambalan's mother loaned
money (P350) from Muerong in 1915. Muerong having learned later that the land had a Torrens
title issued in favor of the Bambalan's father, of which the Bambalan is the only heir and caused
the him to sign a conveyance of the land. Also no amount was actually given as payment for the
land.

There were cases wherein the minor was held to be estopped from contesting the contract
executed by him pretending to be age. In the case now before us the Bambalan did not pretend
to be of age. His minority was well known to the purchaser, the defendant, who was the one
who purchased the plaintiff's first cedula used in the acknowledgment of the document.

Braganza vs. de Ville Abrille, 105 Phil 456 (HO) ✅

Topic: Restriction on capacity to act. 1. Minority

Petitioners: Rosario Braganza

Respondents: Fernando Abrille

Facts:

● Rosario Braganza and her sons loaned from De Villa Abrille P70,000 in Japanese war
notes.
● Rosario’s sons were consignors of the loan and are minors at the time the contract was
consummated.
● In consideration thereof, promised in writing to pay him P10,000 + 2% per annum in
legal currency of the Philippines 2 years after the cessation of the war. Because they
have not paid, Abrille sued them in March 1949.
● The Manila court of first instance and CA held the family solidarily liable to pay according
to the contract they signed.
● The family petitioned to review the decision of the CA whereby they were ordered to
solidarily pay De Villa Abrille P10,000 + 2% interest, praying for consideration of the
minority of the Braganza sons when they signed the contract.
● They also averred that Guillermo and Rodolfo were minors when they signed the
promissory note.
● Court of Appeals found them liable pursuant because the two appellants did not make it
appear in the promissory note that they were not yet of legal age. If they were really honest
to their creditor, they should have appraised him on their incapacity, and if the former, in
spite of the information relative to their age, parted with his money, then he should have
contended with the consequence of his act.
● CA relied on the Mercado case (refer to Mercado digest prior to this) where the minor
actively misrepresented himself.

Issue:

Whether or not the minors are liable for the promissory note.

Ruling:

No, in order to hold them liable, the fraud must be actual and not constructive. It has been
held that their mere silence when making a contract as to their age does not constitute a fraud
which can be made the basis of an action of deceit.

Minority of the consigners is a personal defense of the minors. However, such defense will
benefit Rosario to the extent of the shares for which such minors may be responsible.
The fraud of which an infant may be held liable to one who contracts with him in the belief that
he is of full age must be actual, not constructive, and mere failure of the infant to disclose his
age is not sufficient.

However, the boys, though not bound by the provisions of the contract, are still liable to pay
the actual amount they have profited from the loan.

Minority is set up only as a defense to an action, without the minors asking for any positive relief
from the contract. For one thing, they have not filed in this case an action for annulment.

In the Mercado case, the minor was guilty of active misrepresentation - stated that they are in
the age of majority; whereas in this case, if the minors were guilty at all, which we doubt it is of
passive (or constructive) misrepresentation.

(1301) Minority is set up only as a defense to an action, without the minors asking for any
positive relief from the contract. For one thing, they have not filed in this case an action
for annulment. They merely interposed an excuse from liability. Upon the other hand, these
minors may not be entirely absolved from monetary responsibility.

Even if their written contract is unenforceable because of non-age, they shall make
restitution to the extent that they have profited by the money they received. (1340)

Insanity.
Carillo v. Jaojoco, 46 Phil 957 (Laguna) ✅

FACTS: On Nov. 13, 1918 – Adriana was confined in Hospital de San Juan de Dios for cerebral
hemorrhage with hemiplegia (Paralysis affecting one side of the body). According to the doctor,
the hemiplegia did not affect Adriana’s head but only one half of her body. Marcos Jaojoco and
his father Justiniano (defendant-appellees), nephew and brother-in-law of Adriana, were the
ones who took her to the hospital and cared for her.

On Dec. 18, 1918 – Adriana left the hospital and called a notary public to execute the sale of
land (11 parcels of land in the barrio of Ulong-Tubig, municipality of Carmona, province of
Cavite at the price of P4000) to Marcos Jaojoco. Nine days later, Adriana was declared by the
CFI as mentally incapactitated and later on she died. Miguela (sister of Adriana) was appointed
judicial administrator of said estate and brought action to the CFI Cavite for the annulment of the
document because her sister was declared mentally incapacitated nine days after the
transaction.

ISSUE: WON Adriana was mentally incapacitated at the time of the execution of the contract
RULING: NO, Adriana was not mentally incapacitated at the time of the execution of the
contract.

The court held that if there is no sufficient proof that Adriana was mentally incapaciated
at the time the document was executed, her capacity must be presumed. For a contract
to be annulled, the insanity must exist at the time of contracting. Unless proved otherwise,
a person is presumed to be of sound mind at any particular time and the condition is presumed
to continue to exist.

Thus, the mere fact that Adriana was judicially declared mentally incapacitated nine (9) days
after the execution of the deed of sale does not prove conclusively that she was incapacitated
when the contract was executed, and in the absence of sufficient proof that she was suffering
from mental alienation at the specified time, the declaration does not warrant the annulment of
said contract. After all, this can perfectly be explained by saying that her disease became
aggravated subsequently.

Dumaguin v. Reynolds, 92 Phil 66 (Mag-aso) ✅

Topic: Incapacity

Facts: Paulino Dumaguin was a manager of a mining company. In 1929, he was admitted to
the Insular Psychopathic Hospital since he was said to be suffering from paranoia. In the
same year, he was discharged from the hospital. In 1931, his brother Fructuoso helped him
get employed by the defendants A.I. Reynolds and E.J. Harrison. Paulino was employed not
only to relocate mining claims but also to stake and locate new mining claims. The brothers
were able to stake and locate ten mining claims with Paulino listed as the locator of such claims.
Paulino transferred the rights to these claims to the defendants by executing deeds of
transfer. The defendants sold 9 of the claims to Big Wedge Mining Company by executing a
deed of sale. Paulino filed a complaint and alleged that when he executed the deeds of
transfer he was under guardianship and did not possess the mental capacity to contract.
During the filing of the first complaint in 1934, no defense was raised with regard to the alleged
incapacity of Paulino. It was not until 1939 that the lawyers raised such defense.

Issue: WON the insanity of Paulino invalidate the transfer of claims to the defendants

Ruling: No. The insanity of Paulino did not invalidate the transfer of claims.

Article 1328 of the Civil Code states that “Contracts entered into during a lucid interval
are valid.”

In this case, it took 5 years before the lawyers raised the issue of their client’s insanity.
Moreover, Paulino’s brother, the defendants and the other employees of Reynolds and
Harrison, had no reason to suspect and did not take notice of any behavior of Paulino that
would deem him as mentally incapacitated. With this, it may be inferred that Paulino was a
sane, responsible and mentally capable individual during the time he transferred the mining
claims to the defendants thereby validating the transfer of the claims to the defendants.

VICES OF CONSENT

Vales v. Villa, 35 Phil 789 (MARAMARA) ✅

Plaintiff-appellee: JOSE VALES

Defendants-appellants: SIMEON A. VILLA, FELIPA S. SILVESTRE, and MARIA GUIA

GARCIA (wife of simeon, niece of FELIPA S. SILVESTRE)

Facts:

Jose Vales owned multiple properties.

[(a) Two houses of strong materials, known and designated as Nos. 37 to 47 (now 105-
113) Calle Nebraska, district of Ermita, together with the lots whereon said buildings are
erected, said houses and lots having an assessed valuation of P23,644 Philippine currency;

(b) one house of strong materials, known and designated as No. 49 (now 303-311) Calle
Mercado, district of Ermita, together with the lot whereon the same is erected;

(c) one house of strong materials, known and designated as No. 45 (now 221-225) Calle
Mercado, district of Ermita, consisting of 11 doors or posesiones, together with the lots wherein
the same is erected;

(d) two houses of strong materials situated upon the private street known and
designated as Callejon Maria Paz, and numbered 47a, 47b, and 11, 13, 15 and 17, respectively,
together with the lots wherein the same are erected.]

He was in debt to the defendant Felipa Silvestre in the sum of P20,000. In 1904 he
executed to her a conveyance of his properties in consideration of the debt, the
conveyance containing a clause giving to the vendor the right to repurchase the
premises within one year from the date of the conveyance by a payment to the vendee
of the consideration stated in the conveyance. Vales did not repurchase.

In March 22, 1909, having become indebted to Felipa Silvestre in an additional sum of
P5,000, he, on that day, conveyed the premises to the defendant Maria Guia Garcia, at
the request of Felipa Silvestre. The consideration for the transfer was the debt of
P20,000, the purchase price named in the conveyance of 1904, and P5,000, the
additional debt which had been created during the time intervening between the two
conveyances.
Plaintiff, Vales contends that there was a parol agreement between him and the
defendants entered into at the time the conveyance was executed and delivered, giving
him the right to repurchase the premises so conveyed at any time on paying the vendee
the P25,000 named as the consideration for the transfer.

Defendants denied the existence of such a parol agreement.

Shortly after the conveyance of March 22, 1909, on parcel of the property described in
that conveyance was sold to Judge Jocson, and still later a second parcel, the
defendant Maria Guia Garcia appearing in both conveyances as the vendor of the
properties. Still later another parcel of the property described in said conveyance was
sold to one Garchitorena, Maria Guia Garcia being the vendor in that conveyance.

In 1911, the plaintiff conveyed to the defendant Maria Guia Garcia for P7,580 certain
property, also the subject of this action, but not a part of the property described in the
conveyance of the 22d of March, 1909, located on Calle Salsipuedes; and in 1913 a
parcel of land adjoining the Salsipuedes property for P752. In 1911, plaintiff also
conveyed to the defendant Maria Guia Garcia a house and lot located on Padre Faura
Street for P8,000.

On the 4th day of April, 1913, the defendant Maria Guia Garcia conveyed to plaintiff the
properties described in the conveyance of March 22, 1909, remaining unsold, for the
consideration of P6,800, plaintiff thereby receiving on payment that which he claims he
was entitled to receive for nothing under the alleged verbal agreement, he claiming that
he had paid long before the full sum of P25,000 which entitled him to the reconveyance
without further consideration.

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. He asserts that the consideration paid
by the defendant for these properties was grossly inadequate and that, as stated, he
was induced to accept such considerations and to make the conveyances by reason of
the threat aforesaid. The defendants deny, as we have seen, that such verbal
agreement existed and also specifically deny that such threat or any threat was made or
that the conveyances of the property referred to were obtained by virtue thereof.

Issue:

(1) Whether or not plaintiff’s consent was obtained by deceit.

(2) Whether or not his consent to the conveyance was obtained by intimidation.

Ruling
(1) No, there was no fraud in this case.

It is well recognized, that a mere failure to live up to a contract is not

fraudulent or deceitful. The furthest the authorities have gone along this line,
and not all have gone that far, is to declare that if, at the time a contract is made,
one of the parties has present in his mind the purpose and intent to break it, after
getting all he can out of the other party, and that purpose and intent enter into a
the contract as the main element or consideration thereof on his part, there is
fraud and deceit, the authorities holding that the state of mind of the party is a
fact entering into the consideration of the contract without which it would not
have been made; and that, by virtue of that state of mind, the other party was
deprived of property. That fact however must be alleged and proved and relied
upon before it can be utilized by the person asserting its existence.

In this case, plaintiff’s 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." In none of the transactions was there a
misrepresentation of an existing or past fact; and the plaintiff went into each
one of them knowing all of the facts as well as the defendants. There was
no deception. This is a necessary deduction not only form the fact that there was
no misrepresentation but also from the fact that plaintiff knew precisely what he
was doing — was fully acquainted with the facts; and, knowing them, again and
again accepted the verbal promises of the defendants to reconvey. Under his
own statement and according to his own theory the defendants did no more than
break their verbal contract with him with respect to all subsequent transactions
as they had with respect to the first. That was not fraud, although it was done
again and again, unless the mere failure to fulfill the various verbal contracts can
be said to constitute fraud or deceit.

(2) No.

A threat to refuse to comply with the terms of a contract without an

additional consideration is not, of itself, intimidation. It is an offer to make a
new contract, to establish new relations, with a statement from the one making
the offer that he will no longer abide by the old contract. Such an act does not put
the other party in the power or under the control of the one making the threat. He
 is still free to act as he pleases. He can still exercise judgment and will; he has
still a refuge from the evil threatened' he still remains free to secure the same
redress which every other person can obtain who is injured by a breach of
contract. There is nothing in this which can produce intimidation. There is nothing
which can engender a well-grounded fear of imminent and serious injury to
person or property — which destroys volition and chains the will.

In this case, the court declared that it is impossible, for plaintiff, after having been
deprived of property by intimidation, to recover that property through a voluntary
agreement between him and those who intimidated him, and then repudiate not
only the transactions in which he was deprived of that property, but also the very
transaction by which he recovered it. By his repurchase of the remaining
properties in April, 1913, he accepted everything as it stood at that time and
elected to take from the defendants a conveyance of the remaining properties as
a final termination of all their relations in connection therewith. Even if there was
intimidation, the plaintiff has placed himself in a position where he was not
entitled to urge it as a defense.

Martinez v. Hongkong and Shanghai Bank, 14 Phil 252 (NAPOLES) ✅

NATURE

An action to annul a contract on the ground that plaintiff’s consent thereto was obtained under duress

FACTS

Under the contract, Mercedes Martinez agreed to a conveyance of several properties to

Aldecoa & Co. and the Hong Kong and Shanghai Bank (HSBC) as settlement of their claims
against her and her husband who in order to escape criminal charges had escaped to Macau, a
territory not covered by any extradition treaty. 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 in Macao or be
criminally prosecuted.

ISSUE

WON there was duress, which would invalidate the contract.

RULING

No.
In order that this contract be annulled it must be shown that the plaintiff never gave her consent
to the execution thereof. If a competent person has once assented to a contract freely and fairly,
he is bound.

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 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.

In this case, it is disputed that the plaintiff was fully informed by her attorneys of the facts and
consequences. Plaintiff was unwilling to relinquish certain rights which she claimed to have in
certain property, the fact that she did relinquish them upon such consideration and under such
condition does not of itself constitute duress or intimidation, nor does it destroy the obligatory
effect and force of her consent. She must have acted from fear and not from judgment . Her
husband had been guilty of embezzlement and misappropriation in the management of the
business of Aldecoa & Co. and that if prosecuted therefore, he would be convicted. She was
confronted with a situation in which she finds the necessity either of making reparation or of
taking the consequences, civil or criminal, of the unlawful acts of her husband. She made the
contract of reparation with extreme reluctance and only by the compelling force of the
punishment threatened. Nevertheless, such a contract is binding and enforceable. She acted
according to the dictates of good business judgment rather than from duress and undue
influence.

Therefore, the court is convinced that the plaintiff executed the contract in suit of her own free
will and choice and not from duress is fully sustained by the evidence.

Geraldez v. CA, 230 SCRA 320 ✅

Topic: Contract of Adhesion

Petitioner: Lydia L. Geraldez

Private Respondent: Kenstar Travel Corporation

Facts:

1. Lydia L. Geraldez [Geraldez] filed an action for damages by reason of contractual

breach against Kenstar Travel Corporation [KTC].

2. Geraldez learned about KTC from numerous advertisements in newspapers of general

circulation regarding tours in Europe.

3. Geraldez then contacted KTC and was given brochure for the tour with the offered
European tours.

4. Geraldez chose the classification denominated as "VOLARE 3" covering a 22-day tour
of Europe for $2,990.00 and paid the total equivalent amount of P190,000.00.
 5. However, Geraldez claimed that, during the tour, she was very uneasy and disappointed
when it turned out that, contrary to what was stated in the brochure, there was no European
tour manager for their group of tourists, the hotels in which she and the group were bullited
were not first-class, the UGC Leather Factory which was specifically added as a highlight of
the tour was not visited, and the Filipino lady tour guide by private respondent was a first
timer, that is, she was performing her duties and responsibilities as such for the first time.

6. RTC’s decision:

Ordered private respondent to pay petitioner P500.000.00 as moral damages, P200,000.00 as

nominal damages, P300,000.00 as exemplary damages, P50,000.00 as and for attorney's fees,
and the costs of the suit.

7. CA’s decision:

Deleted the award for moral and exemplary damages, and reduced the awards for nominal
damages and attorney's fees to P30,000.00 and P10,000.00, respectively. However, ruled that
no malice or bad faith could be imputed to private respondent, hence there is no
justification for the award of moral and exemplary damages. Furthermore, it held that while
petitioner is entitled to nominal damages, the amount awarded by the trial court was
unconscionable since petitioner did not suffer actual or substantial damage from the breach of
contract, hence the reduction of the award.

Issue: Whether or not KTC acted in bad faith or with gross negligence in discharging its
obligations under the contract.

Ruling: YES, KTC committed misrepresentations amounting to bad faith, to the prejudice of
petitioner [Geraldez] and the members of the tour group.

The reliance of KTC in the delimitation of its responsibility as printed on the face of its brochure
on the Volare program 3, which provides –

RESPONSIBILITIES: KENSTAR TRAVEL CORPORATION, YOUR TRAVEL AGENT,

THEIR EMPLOYEES OR SUB-AGENTS SHALL BE RESPONSIBLE ONLY FOR
BOOKING AND MAKING ARRANGEMENTS AS YOUR AGENTS. Kenstar Travel
Corporation, your travel Agent, their employees or sub-agents assume no
responsibility or liability arising out of or in connection with the services or lack
of services, of any train, vessel, other conveyance or station whatsoever in the
performance of their duty to the passengers or guests, neither will they be
responsible for any act, error or omission, or of any damages, injury, loss,
accident, delay or irregularity which may be occasioned by reason (of) or any
defect in . . . lodging place or any facilities . . . .

While, generally, the terms of a contract result from the mutual formulation thereof by the parties
thereto, it is of common knowledge that there are certain contracts almost all the provisions of
which have been drafted by only one party, usually a corporation. Such contracts are called
contracts of adhesion, because the only participation of the party is the affixing of his
signature or his "adhesion" thereto.
In situations like these, when a party imposes upon another a ready-made form of contract, and
the other is reduced to the alternative of taking it or leaving it, giving no room for negotiation and
depriving the latter of the opportunity to bargain on equal footing, a contract of adhesion results.
While it is true that an adhesion contract is not necessarily void, it must nevertheless be
construed strictly against the one who drafted the same. This is especially true where the
stipulations are printed in fine letters and are hardly legible as is the case of the tour contract
involved in the present controversy.

On the foregoing considerations, CA erred in deleting the award for moral and exemplary
damages. Moral damages may be awarded in breaches of contract where the obligor acted
fraudulently or in bad faith. From the facts narrated, private respondent can be faulted with fraud
in the inducement, which is employed by a party to a contract in securing the consent of the
other.

Asiain v. Jaladoni, 45 Phil 296 ✅

Topic: By Mistake

Summary: two hacienderos Asiain and Jalandoni; important concept on the use of ‘more or less’ in the
declaration of the hectares as per memorandum of agreement. The use of this phrase in designating
quantity covers only a reasonable excess or deficiency, not gross deficiency. Mutual mistake of the
contracting parties to sale in regard to the subject-matter of the sale which is so material as to go to the
essence of the contract, is a ground for relief and rescission. Innocent and mutual mistake alone are
sufficient grounds for rescission.

Facts: This case involved two hacienda owners, with their MOA in its focal point. Luis Asiain
owned the 106-hectare Hacienda Maria in La Carlota, Negros Occidental. Benjamin Jalandoni is
the owner of the adjoining hacienda of Asiain. In May 1920, Luis met Benj to sell a portion of his
hacienda Maria for P55,000 (25-30 hectares). When Luis doubted the scope of the area thinking
that it was overestimated, Benj replied in a letter stating there is no intention to deceive one
another. Hence in July 1920, they drafted a MOA stating:

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.

Mr. Asiain is under obligation to take care of all the plantation until the planting is finished and in case the crop exceeds
2,000 piculs, all the excess will belong to Mr. Asiain.

The adjacent landowner on the north and the west is the vendor himself, on the east, B. Jalandoni, and on the south, B.
Jalandoni and the widow of Abdon Ferrer.

The purchaser is under obligation to answer for all the rights and obligations of the land with the central of Inchausti.

After the planting of the cane is completely finished, Mr. Asiain shall vacate the parcel sold to the purchaser.

The expenses for taking care of said plantation until the planting is completely finished will be for the account of the
vendor Mr. Asiain.
 (Sgd.) "LUIS ASIAIN
"BENJAMIN JALANDONI"

Once Benjamin Jalandoni came into possession of the land, he had a surveyor estimate the
property, which turned out to be an area of 18 hectares, 54 acres, and 22 centiares (which
produced 800 picules of sugar). 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.

Issue: W/n there had been misrepresentation on both parties or that they had committed a
mistake in their agreement.

Ruling:

They both had a mistake. A case where there is error in quantity.

Asiain promised to deliver to the Jalandoni 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. Jalandoni, 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.

[The intention of the parties and the option of purchaser to rescind the contract is emphasized.
The general rule is, the vendor is bound to deliver all that is within the boundaries stated
although it may exceed the area or number expressed in the contract; in case he cannot deliver
it, the purchaser shall have the right to reduce the price proportionately to what is lacking of the
area or number, or rescind the contract at his option.]

In this case, if the land shall be sold within boundaries with an expression of the area and if the
area is grossly deficient, the vendee, Jalandani in this case, has an option, either to have the
price reduced proportionately or to ask for the rescission of the contract. Though the term ‘ more
or less ‘ in the MOA is acceptable, it must be one that is not so grossly deficient, or in excess.
The scope of the land is an essential consideration in the purchase of the property. Without
such mistake the agreement would not have been made and since this is true, the agreement is
inoperative and void.

The mistake of fact here was disclosed not alone by the terms of the contract but by the
attendant circumstances, which now becomes the ‘efficient cause of the concoction’. Though
looking closely, it is not exactly a case of over reaching on the plaintiff's part, or of
misrepresentation and deception, or of fraud, but is more nearly akin to a bilateral mistake for
which relief should be granted. Specific performance of the contract can therefore not be
allowed at the instance of the vendor.
Hence SC affirmed the lower court’s decision and ordered both parties to return everything to
each other, placing the parties back in exactly their respective positions before negotiations
started.

Atilano v. Atilano, 28 Phil 231 ✅

Topic: Mistake

Facts: Eulogio Atilano I purchased lot No. 535 from Gerardo Villanueva. The lot was
subdivided into five parts, Lots Nos. 535-A, 535-B, 535-C, 535-D and 535-E. Atilano
sold Lot No. 535 – E to his brother Eulogio Atillano II. The three lots were sold to other
persons and left Lot No. 535-A for himself.

Upon his death, the lot was passed to Ladislao Atilano.(herein defendant)

When Eulogio Atilano II became a widow, the land (535-E), he and his children wanted
to subdivide the lot and upon surveying, they found out that the lot they were actually
occupying was Lot. 535-A and not 535-E as referred in the Deed of sale before between
Eulogio Atilano I and his brother (Atillano II).

Atillano II, wanted to get the real lot he bought and so he and his children voluntarily
surrendered the lot and demanded Ladislao Atilano (defendant, successor of Atillano I)
but Ladislao refused to give the lot.

Issue: WON the error can still be corrected by exchange of lot which was done by
mistake.

Held:

*argument favoring the defendant, no need to say it unless Gobiebells asks* When one
sells or buys real property – a piece of land for example – one sells or buys the property
as he sees it, in its actual setting and by its physical metes and bounds, and not by
mere lot numbers assigned in the title.

The mistake was discovered after so many years already where they already built their
residences.

The mistake did not vitiate the consent of the parties, or affect the validity and binding
effect of the contract between them. Although the law provides that when there is a
mistake in a contract the parties may seek reformation, this does not apply here in this
case.

The remedy of reformation only applies when there have been meeting of the minds of
the parties to a contract, their true intention is not expressed in the instrument
purporting to embody the agreement by reason of mistake, fraud, inequitable conduct
on accident.
The deed of sale here need no longer be reformed. The parties have retained
possession of their properties conformably to the real intention of the parties during the
sale, and all they should do is to execute mutual deeds of conveyance.

Alcasid v. CA, 237 SCRA 419 ✅

Topic: MISTAKE

Petitioner: Isabel Rubio Alcasid (assisted with her husband Domingo A. Alcasid)
Private Respondent: Rufina Lim

Ponente: Quiason, J

Facts:
Private respondent Lim offered to purchase a parcel of land owned from 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
latter was also representing the private respondent.

Atty. Fernandez confirmed to the petitioner that all her co-owners were already willing to sell
their shares to private respondent, prompting 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.

Private respondent claimed that the complaint was in the nature of malpractice suit against the
lawyer, and not against her.

Though it was contended by the petitioner that she did not know that the lawyer was also
representing the private respondent, a letter sent by Atty. Fernandez to the petitioner
stated otherwise. (Please see content of letter below:)

March 4, 1990

TO: Mrs. Isabel R. Alcasid &

Mrs. Mila A. Marcos (daughter) (←petitioners)

For and in behalf of my client, Miss Rufina L. Lim (← private respondent) of Bucal, Calamba, Laguna, I, Atty.
Antonio A. Fernandez hereby confirm that the selling price of One Million One Thousand Seven Hundred Fifty

Pesos (P1,0001,750.00) is NET Purchase price and full payment of Lot Nos. 44-10-A-4 & 199 New-A-4.
My client, Miss Rufina Lim, the vendee, hereby assumes the full payment of BIR capital gain tax and transfer fee.
Likewise, my said clients shall shoulder Register of Deed's registration and transfer fees, including all the
documentary & science stamps. Attorney's fees and back taxes and other related fees shall be exclusively paid by
the vendee, Miss Lim.

In payment for the said purchase price, the full amount is represented by PNB DEMAND DRAFT NO. ________
issued on

March ___, 1990.

This arrangement is also true to other vendors, namely Ignacio Rubio, Felix Rubio, Heirs of Eufrosina Laygo, Heirs of
Luz Rubio & Heirs of Amador Rubio.

ANTONIO A. FERNANDEZ

Counsel for Miss Rufina Lim

(Rollo, p. 7; Emphasis supplied)

(KLARO na nag-inform si Atty Fernandez na client sad niya si respondent, kalimot guro si
petitioner...hehehe)

Issue:
Whether or not the contract(deed of sale) could be annulled based upon mistake.

Ruling:

No. The deed of sale could not be annulled based upon mistake.

Article 1331 of the Civil Code provides that “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.”

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. One 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 (Tolentino, supra at pp. 486-487).

In the case, petitioner was willing to sell her share for 4.5 million pesos only if all the other co-
owners would sell their respective shares (condition). And she signed the deed on sale
upon advice of Atty. Fernandez that all her co-owners were already willing to sell their shares to
private respondent. She could not argue that there was a mistake because if only she had
exerted efforts to verify from her co-owners if they really consented to sell their
respective shares, she could have avoided the alleged mistake.

The Supreme Court denied the petition.

Cebu Windland v. On Siao Hua, 588 SCRA 120 ✅
Topic: Consent - Mistake

Petitioner: Cebu Winland Corp – Seller

Respondent: On Siao Hua – Buyer

Facts

While the Cebu Winland Tower Condominium (herein petitioner) was under
construction, petitioner offered to sell to respondent (On Siao Hua) condominium units at
promotional prices. As an added incentive, petitioner offered a 3% discount provided 30% of the
purchase price is paid as down payment and the balance paid in 24 equal monthly installments.
EcDSHT

On January 6, 1995, respondent accepted the offer of petitioner and bought two
condominium units designated as Unit Nos. 2405 and 2406, as well as four parking slots
designated as slots 91, 99, 101 and 103 (subject properties). The area per condominium unit as
indicated in petitioner's price list is 155 square meters and the price per square meter is
P22,378.95. The price for the parking slot is P240,000 each. Respondent, therefore, paid
P2,298,655.08 as down payment and issued 24 postdated checks in the amount of
P223,430.70 per check for the balance of the purchase price in the total amount of P5,362,385.

After the purchase price was fully paid with the last check dated January 31, 1997,
respondent requested petitioner for the condominium certificates of title evidencing ownership of
the units. Petitioner then sent to respondent, for the latter's signature, documents denominated
as Deeds of Absolute Sale for the two condominium units. Upon examination of the deed of
absolute sale of Unit No. 2405 and the identical document for Unit No. 2406, respondent
was distressed to find that the stated floor area is only 127 square meters contrary to the
area indicated in the price list which was 155 square meters. Respondent caused a
verification survey of the said condominium units and discovered that the actual area is
only 110 square meters per unit. Respondent demanded from petitioner to refund the amount
of P2,014,105.50 representing excess payments for the difference in the area.

Issue

Whether the mistake (misrepresentation of the size of the condo units) regarding the
object of the sale constitute a ground for rescission.

Ruling

No.

ART. 1330. A contract where consent is given through mistake, violence,

intimidation, undue influence, or fraud is voidable. (1265a)
 ART. 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.

We find that these articles are inapplicable to the case at bar. In order that mistake may
invalidate consent and constitute a ground for annulment of contract based on Article 1331, the
mistake must be material as to go to the essence of the contract; that without such mistake, the
agreement would not have been made. The effect of error must be determined largely by its
influence upon the party. If the party would have entered into the contract even if he had
knowledge of the true fact, then the error does not vitiate consent.

In the case at bar, the relief sought by respondent was for a refund and he continued to
occupy the subject properties after he found out that the same were smaller in area. All these
show that respondent did not consider the error in size significant enough to vitiate the contract.

Burden of proof. Bunyi v. Reyes, 39 SCRA 504 ✅

GR No. L-28845
June 10, 1971
Topic: Burden of Proof

Facts
1. Gil Joaquin owned a lot and executed a deed of Venita Con pacto de Retro in favor of
Teodora Bunyi.
a. In consideration of the sum of 100 pesos
b. Ceded and transferred the land title to Bunyi
c. With the right of repurchasing within 2 years
2. Gil Joaquin died and failed to repurchase the land, so Bunyi executed an affidavit of
consolidation of ownership, Joaquin’s title was cancelled and a new certificate was
issued.
3. The heirs ( wife- Sabina Reyes, daughter and grandchildren) contend that the contract
signed does not represent what was agreed
a. Gil Joaquin, were induced to sign the original of said document because of their
belief that they were merely mortgaging the land in question as security
b. And that the contract was in language they do not understand-- spanish
4. Bunyi contended that Gil Joaquin had been vice mayor of Muntinlupa and he spoke and
understood Spanish.
RTC ruled that Reyes failed to produce clear, strong and convincing evidence to prove that they
did not understand the contract.
CA reversed RTC saying that Art 1332 that burden was on Bunyi to prove that Joaquin and
Reyes understood the contract that BUnyi’s testimony was not sufficient to discharge the
burden. Contract is null and void.
Issue: WON the petitioner (Bunyi) has the burden of proof.

Ruling: NO

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.

In this case,it has

Based on facts, "Gil Joaquin, ... had been vice mayor of Muntinlupa; he spoke and understood
Spanish; it is hard to believe that he signed the document Exhibit A-1 without understanding its
contents." and 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.

• Sales v. CA, 211 SCRA 858 ✅

Topic: Mistake of Law.

FACTS:

Severo Sales owned an unregistered parcel of land in Bugallon, Pangasinan. Covered by Tax
Declaration No. 5861, the property had an area of 5,733 square meters more or less. On July 4,
1955, Sales mortgaged said property, together with two other parcels of land, to Faustina P.
Agpoon and Jose Agpoon to secure the payment of a loan in the amount of P2,240.00 payable
on or about July 4, 1956. On December 24, 1958, Sales, with the consent of his wife, Margarita
Ferrer, donated nine hundred (900) square meters of the same property in favor of their
daughter, petitioner Esperanza Sales Bermudez.

As a consequence of a case filed by Faustina P. Agpoon against Sales in the Court of First
Instance, in January 1959, the mortgaged property of Sales was set for foreclosure. To prevent
such foreclosure, Sales requested his friend, Ernesto Gonzales, to pay his total indebtedness of
P2,700 to the Agpoon spouses. Ernesto Gonzales acceded to the request and asked Sales and
his wife to sign a document transferring the mortgage to him. According to the Sales spouses,
who are both illiterate, they were not given a copy of said document.
In October 1968, Sales received a photostat copy of the deed of sale appearing to have been
signed by him and his wife on January 29, 1959 before ex-officio Notary Public Arturo Malazo in
San Manuel, Tarlac. The document stated that the Sales spouses had sold the land described
under Tax Declaration No. 5861 in consideration of the amount of P4,000 to Leonilo Gonzales,
son of Ernesto Gonzales.

Sales and his daughter, Esperanza filed in the CFI of Tarlac, a complaint for annulment of the
deed of sale between Sales and Gonzales on the ground of fraud. On October 27, 1969, the
CFI rendered a decision finding that the allegation of fraud was not supported by convincing
evidence. CA affirmed the decision thus, this case.

ISSUE:
WON the Deed of Sale is not valid considering that Sales is an unschooled executor of the
contract?

RULING:

No, the Deed of Sale is Valid.

Art. 1332 of the Civil Code which provides that when one of the parties to a contract 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."

In the case here, Sales contend that respondent Gonzales failed to prove that the contents of
the deed of sale were ever explained to Sales, an illiterate. The court held that it is the party
invoking the benefits of Art. 1332 or Sales, who has the burden of proving that he really is
unable to read or that English, the language in which the deed of sale was written, is
incomprehensible to him. Only after sufficient proof of such facts may the burden of proving that
the terms of the contract had been explained to the disadvantaged party be shifted to the party
enforcing the contract, who, in this instance, is Leonilo Gonzales. Records also show that
although Sales did not go to school and knew only how to sign his name, he and his wife had
previously entered into contracts written in English: first, when Sales mortgaged his property to
Faustina P. Agpoon and second, when he donated a portion of the property involved to his
daughter, petitioner Esperanza Sales Bermudez. The court below also noted the fact that the
signatures of the Sales spouses in the deed of sale showed the "striking features of the
signatures of intelligent" individuals. Coupled with this is the fact that in court, the Sales spouses
themselves admitted that the signatures on the deed of sale "looked like" their signatures. The
fact that the deed of sale itself, specifically the notarial acknowledgement thereof, contains a
statement that its executors were known to the notary public to be the persons who executed
the instrument; that they were "informed by me (notary public) of the contents thereof" and that
they acknowledged to the notary public that the instrument was freely and voluntarily executed.
The stark denial of the petitioners, specially Sales, that he executed the deed of sale pales in
the face of Malazo's testimony because the testimony of the notary public enjoys greater
credence than that of an ordinary witness.

Thus, the Deed of Sale is Valid.

Risk. Martinez v. CA, 56 SCRA 647 ✅

Topic: Mistake under Vices of consent

Facts:

The spouses Romeo Martinez and Leonor Suarez are the registered owners of two (2) parcels
of land located in Lubao, Pampanga. The disputed property was originally owned by one
Paulino Montemayor, who secured a "titulo real" over it way back in 1883. After the death of
Paulino Montemayor the said property passed to his successors-in-interest, Maria Montemayor
and Donata Montemayor, who in turn, sold it, as well as the first parcel, to a certain Potenciano
Garcia.

Because Potenciano Garcia was prevented by the then municipal president of Lubao, Pedro
Beltran, from restoring the dikes constructed on the contested property, Garcia filed a civil case
with the Court of First Instance against Beltran to restrain the latter in his official capacity from
molesting him in the possession of said second parcel, and on even date, applied for a writ of
preliminary injunction, which was issued against said municipal president. The Court declared
permanent the preliminary injunction.

On April 17, 1925. Potenciano Garcia applied for the registration of both parcels of land in his
name, and the Court of First Instance of Pampanga, sitting as land registration court, granted
the registration.

Thereafter, the ownership of these properties changed hands until eventually they were
acquired by the spouses.

To avoid any untoward incident, the disputants agreed to refer the matter to the Committee on
Rivers and Streams, which, after conducting an ocular inspection, reported that the parcel was
not a public river but a private fishpond owned by the herein spouses.

The Secretary of Public Works and Communications, ordered another investigation of the said
parcel of land, directing the spouses to remove the dikes they had constructed, threatening that
the dikes would be demolished should the spouses fail to comply therewith within 30 days.

Issue:

Whether the spouses are purchasers for value and in good faith on the parcel alleged to be a
public river.

Held:

No, they are not.

There is no weight in the spouses' argument that, being a purchaser for value and in good faith
of Lot No. 2, the nullification of its registration would be contrary to the law and to the applicable
decisions of the Supreme Court as it would destroy the stability of the title which is the core of
the system of registration. Appellants cannot be deemed purchasers for value and in good faith
as in the deed of absolute conveyance executed in their favor.

Before purchasing a parcel of land, it cannot be contended that the spouses did not
know exactly the condition of the land that they were buying and the obstacles or
restrictions thereon that may be put up by the government in connection with their
project of converting Lot No. 2 in question into a fishpond. Nevertheless, they willfully
and voluntarily assumed the risks attendant to the sale of said lot. One who buys
something with knowledge of defect or lack of title in his vendor cannot claim that he
acquired it in good faith.

The ruling that a purchaser of a registered property cannot go beyond the record to make
inquiries as to the legality of the title of the registered owner, but may rely on the registry to
determine if there is no lien or encumbrances over the same, cannot be availed of as against
the law and the accepted principle that rivers are parts of the public domain for public use and
not capable of private appropriation or acquisition by prescription.

(Mistake of Law) Luna v. Linatoc, 74 Phil 15 ✅

TOPIC: MISTAKE (MISTAKE OF LAW)

FACTS:

The wife, who acted as an agent of the husband (De Luna), sold a portion of their conjugal
property during the subsistence of their marriage (The land was under the name of the husband
only because they already partitioned the parcel of land). Under the law, a conjugal property
cannot be partitioned during the subsistence of a marriage unless there was a judicial
separation of property. Such sale was prohibited by Art 1432 because partitioning the conjugal
property during marriage can only be done if there was a judicial separation of property, or else
it would be illegal and void. The sale can only be valid if the land was sold under the name of
the conjugal partnership and not of the husband only.

The spouses, claiming ignorance of the said prohibition, wanted to assail the sale of the land to
Jose Linatoc. The court DID NOT ALLOW such a petition.

ISSUE: W/N The sale of the land is void as assailed by the spouses under the law of conjugal
partnership?

HELD:

No.
Mistake of law does not make a contract voidable, because ignorance of the law does not
excuse anyone from its compliance (art. 2, Civil Code). That the petitioners did not know the
prohibition against partition of the conjugal partnership property during marriage (art. 1432, Civil
Code) is no valid reason why they should ask for the annulment of the sales made.

Moreover, there is the time-honored legal maxim that no man can take advantage of his own
wrong. To repudiate the sales in question, petitioners are setting up their own wrongful act of
partitioning their conjugal property, which violated article 1432 of the Civil Code. The prohibition
in said article affects public policy, as it is designed to protect creditors of the conjugal
partnership and other third persons. Petitioners shall not, therefore, be allowed to rest their
cause of action to recover the lands sold, upon the illegality of the partition which they attempted
to make. Otherwise, they would profit by their own unlawful act.

De Leon v. CA, 186 SCRA 365 (FLORES)

Topic: Violence or Intimidation

Facts:
Jose was married to Sylvia in Rizal. After 3 years, the spouses were separated de facto due to
irreconcilable marital differences. Sylvia left the conjugal home and went to the US where she
obtained American citizenship. Sylvia filed a petition for dissolution of marriage against Jose in
California.

Sylvia went back to the Philippines and executed a letter-agreement with her mother-in-law,
Macaria. The agreement contained the termination of Sylvia's marriage with Jose and the
termination of their property relations.

Sylvia and Jose then filed for the dissolution of their conjugal partnership. The main part of the
dissolution contained the stipulations of the letter-agreement. Some properties were made to
appear as conjugal properties but were actually owned by Macaria. Macaria filed for leave to
intervene alleging that she owned the properties in question. Macaria also assailed the validity
and legality of the Letter-Agreement.

The Trial Court declared the letter-agreement to be null and void. The court also dissolved the
conjugal partnership of Jose and Sylvia but excluded the properties owned by Macaria.

Sylvia alleges Macaria is in pari delicto when they executed the letter-agreement. Thus, Macaria
cannot recover what she has given by reason of the Letter-Agreement nor ask for the fulfillment
of what has been promised her.

On her part, Macaria raises the defenses of intimidation and mistake which led her to execute
the Letter-Agreement.

Issue:
WON the letter-agreement was executed through intimidation and mistake.

Ruling:
No, because the alleged threats were not the principal consideration why Macaria executed the
contract. The principal consideration was the dissolution of marital relations.

Article 1335 of the Civil Code provides:

xxx xxx xxx
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 the 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 the claim is just or legal,
does not vitiate consent.

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.

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. With respect to mistake as a vice of consent,
neither is Macaria's alleged mistake in having signed the Letter-Agreement because of her
belief that Sylvia will thereby eliminate inheritance rights from her and Jose Vicente, the mistake
referred to in Article 1331 of the Civil Code. It does not appear that the condition that Sylvia "will
eliminate her inheritance rights" principally moved Macaria to enter into the contract. Rather,
such condition was but an incident of the consideration thereof which, as discussed earlier, is
the termination of marital relations.

In case mag ask si Gob (in pari delicto)

Both parties were in pari delicto which refuses remedy to either party to an illegal agreement and leaves
them where they are. However, Art 1414 provides an exemption to in pari delicto.
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 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.

• Development Bank v. Perez, 442 SCRA 238

G.R. No. 148541 - Development Bank v. Perez, 442 SCRA 238 (HO)

Petitioner - DBP
Respondent - Bonita Perez & Alfredo Perez

● In April 1978, DBP approved Bonita's industrial loan of P214,000 for machinery,
equipment and capital and P21,000 to cover unforeseen price escalation.
● Come May 1978 - Respondents were made to sign 4 promissory notes covering the
P235,000 loan.
● September 1978 - Petitioner sent a letter to respondent about the terms for the payment
of the industrial loan.
● Respondents failed to comply with their amortization payments. Petitioner, DBP,
foreclose the mortgages.
● In October 1981, Bonita requested for a restructuring due to financial difficulties and was
approved by petitioners in April 1982.
● In May 1982, DBP restructured the loan to 231,000 at 18% interest per annum, payable
quarterly in 10 years.
● The Perez' were able to pay P35,000 after the restructuring and failed to meet again the
new amortization of the loan.
● Petitioner instituted a foreclosure proceeding on the mortgages.
● October 24, 1985 - the respondents filed a complaint for the nullification of the new
promissory note with damages and preliminary prohibitory injunction.
● The complaint alleged that the petitioner:
○ restructured the respondents’ obligation in bad faith by requiring them to sign
another promissory note for P231,000.00 without considering the total payments
made on the loan amounting to P224,383.43.failed to furnish them with a
disclosure statement as required by Rep. Act No. 3765, also known as the Truth
in Lending Act, prior to the consummation of the transaction
○ That transaction was usurious.
○ The new promissory note constituted a novation of the previous obligation
○ That the respondents admitted to having signed the new promissory note and
was the result of the mutual agreement of the parties.
 ● The petitioner denied the allegations and said that the claim for violation of the
disclosure requirement under Rep. Act No. 3765 was not within the jurisdiction of the
RTC and was barred by prescription.
● The petitioner prayed that the respondents be ordered to pay their obligation, plus
exemplary damages and costs.
● Respondents claim that the restructured loan proved disadvantageous to them belies
the petitioner’s claim that they voluntarily signed the new promissory note.
(meaning ang mga Perez nagthink nga di voluntary ilang pagsign kay usurious and
restructured contract and promissory notes)
● Petitioner seeks to reverse CA decision which favors the respondents and reinstate the
RTC decision.

Issue:

Whether or not there was mistake, undue influence, violence, fraud or intimidation which vitiated
the respondents’ consent.

Ruling:

No, there was no evidence showing that the respondents signed the new promissory note
through mistake, violence, intimidation, undue influence, or fraud. The respondents merely
alleged that they were forced to restructure their loan for fear of having their mortgaged
properties foreclosed. However, it is axiomatic that this would not amount to vitiated consent.
The last paragraph of Article 1335 of the New Civil Code specifically states that a threat to
enforce one’s claim through competent authority, if the claim is just or legal, does not vitiate
consent. Foreclosure of mortgaged properties in case of default in payment of a debtor is a legal
remedy afforded by law to a creditor. Hence, a threat to foreclose the mortgage would not, per
se, vitiate consent.

Respondents’ allegation that they had no "choice" but to sign is tantamount to saying that DBP
exerted undue influence upon them. The Court is mindful that the law grants an aggrieved party
the right to obtain the annulment of a contract on account of factors such as mistake, violence,
intimidation, undue influence and fraud which vitiate consent. However, the fact that the
representatives were "forced" to sign the promissory notes and mortgage contracts in order to
have respondents’ original loans restructured and to prevent the foreclosure of their properties
does not amount to vitiated consent.

The court agrees with petitioner that the respondents’ claim of having been forced to sign the
restructured note for fear of having their mortgaged property foreclosed cannot serve as legal
basis to conclude that the respondents did not voluntarily sign the new promissory note.

------------
Only when asked about the Usury thing:

Yes, we agree with the ruling of the CA. It is elementary that the laws in force at the time the
contract was made generally govern the effectivity of its provision. We note that the new
promissory note was executed on May 6, 1982, prior to the effectivity of CB Circular No. 905 on
January 1, 1983. At that time, The Usury Law, Act No. 2655, as amended by Presidential
Decree No. 116, was still in
force and effect.

Under the Usury Law, no person shall receive a rate of interest, including commissions,
premiums, fines, and penalties, higher than twelve percent (12%) per annum or the maximum
rate prescribed by the Monetary Board for a loan secured by a mortgage upon real estate the
title to which is duly registered.

In this case, by specific provision in the new promissory note, the restructured loan continued to
be secured by the same mortgage contract executed on May 18, 1978 which covered the real
and personal properties of the respondents. We, therefore, find the eighteen percent (18%)
interest rate plus the additional interest and penalty charges of eighteen percent (18%) and
eight percent (8%), to be highly usurious.

In usurious loans, the entire obligation does not become void because of an agreement for
usurious interest; the unpaid principal debt still stands and remains valid, but the stipulation as
to the usurious interest is void. Consequently, the debt is to be considered without stipulation
as to the interest.38 In the absence of an express stipulation as to the rate of interest, the legal
rate at twelve percent (12%) nper annum shall be imposed

Court decision:

Court affirmed the CA decision with modification. Case is remanded to trial court to determine
total amount of respondent's obligation according to reduced interests of 12% annum.

It ruled that the restructured promissory note which was prepared by the petitioner alone was a
contract of adhesion which violates the rule on mutuality of contracts.

• Laperal v. Rogers, 13 SCRA 27 (Laguna)

TOPIC: Violence or intimidation

Facts:

Roberto Laperal sold his property to the Japanese Military Controlled Republic of the Philippines for the
sum of P500,000 in Japanese Military War notes. When Japanese occupation was over, Laperal filed an
action for recovery of his property with the alien property custodian alleging that the sale took place
during the Japanese regime and was made under duress and the consideration was grossly inadequate.
The trial court ruled in favor of Laperal.

Laperal’s contention:

The main allegations of the complaint were that appellee executed the deed of sale of April 12,
1944 in favor of the occupation Republic of the Philippines under duress and due to the threats
employed by the representatives of the Japanese Military Administration, and that the
consideration of P500,000.00 in Japanese Military notes was grossly inadequate.

Issue:

WON the deed of sale executed under duress can be nullified?

Held:

YES, it can be nullified because it was proven (in trial court) that Laperal was inspired by
reasonable and well-grounded fear of suffering an imminent and serious injury to his
person or property, including his family.

The transaction involved in this case is not covered by the theory of "collective" or "general"
duress, according to which, the general feeling of fear which Filipinos felt for the Japanese during the
years of occupation, unaccompanied by any particular coercive action on the part of the latter, does not
invalidate a contract.

It was common knowledge during WWII that refusal of demands from Japanese Army Authority (even
from a mere soldier) could result in the invader's committing inhuman and barbaric acts. Thus, inspiring
a well-ground fear to Filipinos when ordered or demanded. In this case, it was a general and two high
ranking officers who warned Laperal that his refusal to sell his property constituted a hostile act and that
non-cooperation is bad. This gave the plaintiff an inkling of what would happen to him and his family if he
showed non-cooperation.

Thereby, the COS can be nullified

_____

Why is the petitioner’s case not considered as a collective or general fear?

“In the case of plaintiff, he was dealing not with an ordinary Japanese soldier but, first, with a group
of Japanese soldiers headed by a Japanese officer noted for their arrogance and ruthlessness, and
who cowed him to go to the Office of the Japanese Military Administration, and once in that Office,
he was in contact with two high-ranking Japanese officers, who were equally overbearing and who
warned Laperal that his refusal to sell his property constituted a hostile act; and, lastly, with General
Wachi, who reminded Laperal that non-cooperation was bad.”

Martinez v. HSBC, 15 Phil 252

Plaintiff – Mercedes Fernandez
Defendants – HSBC/Hongkong & Shanghai Banking Corp.

Facts:
Alejandro S. Macleod was for many years the managing partner of the house of
Aldecoa & Co. in the city of Manila until the 31st day of December, 1906. In April, 1907, the
HSBC began a civil action against Alejandro S. Macleod, his wife, Mercedes Martinez, Aldecoa
& Co., et.al. In the bank's complaint it was alleged that a certain undertaking in favor of
Aldecoa & Co. had been hypothecated to the bank to secure the indebtedness of Aldecoa &
Co., but that this obligation had been wrongfully transferred by Alejandro S. Macleod into an
obligation in favor in his wife, Mercedes Martinez, to the prejudice of the bank. In May, 1907,
Aldecoa & Co. began a civil action against Alejandro S. Macleod and others for the recovery of
certain shares of stock and for damages.

The attorneys for the respective parties were engaged in negotiations for the
settlement and compromise. Aldecoa & Co. and the bank, as a consideration for such
settlement, insisted upon the conveyance not only of all the property of Alejandro S. Macleod
but also of at least a portion of the property claimed by his wife, Martinez. The plaintiff,
Martinez, as stated by her attorney Mr. Fisher and to her attorney-in-fact, Mr. William Macleod,
objected to the conveyance required of her, maintaining that the property which she was asked
to transfer was her separate and exclusive property and not liable for the debts of her
husband.

Counsel for both Aldecoa & Co. and the plaintiff, requested one of the attorneys for the
bank to act as intermediary between the parties and to suggest means by which a settlement
could be obtained. At that interview, it was agreed that a full explanation of the condition of
affairs should be made to Mr. Kingcome, a son-in-law of the plaintiff. The explanation was
made by Mr. Stephen, manager of HSBC. It appears that Mr. Kingcome got the impression from
that interview that Mr. Stephen thought unless the settlement were consummated additional
and mortifying misfortunes wound fall upon Mr. Macleod's family.

Mr. William Macleod, a nephew and close friend of plaintiff and her husband, and
plaintiff's attorney-in-fact, as well as Mr. Kingcome, seems to have been persuaded by what
he was told that the consequences of plaintiff's continued refusal to make the settlement
would be disastrous to Alejandro S. Macleod and his family and would be an exhibition of very
bad judgment in every way.
 On August 9, 1907, the prosecuting attorney filed a second complaint against
Alejandro S. Macleod.

Plaintiff was informed by her attorney, her son-in-law, and her attorney-in-fact that if
she assented to the requirements of Aldecoa & Co. and the bank the civil suits against herself
and her husband would be dismissed and the criminal charges against him withdrawn, while if
she refused her husband must either spend the rest of his life in Macao or be criminally
prosecuted on the charged already filed and to be filed. Plaintiff refused to accede to the terms
of settlement.

On the 12th of August, the plaintiff acceded to the terms proposed by the defendants
and authorized Mr. William Macleod to execute the contract of settlement on her behalf. On
the 14th of August, it was ratified by the plaintiff, who executed the same in person.

After Adecoa & Co. and the bank had taken possession of the property of plaintiff and
her husband, the civil suits were dismissed, the criminal charges withdrawn.

The plaintiff had a surveyor divide the property in Malate, of which she had conveyed a
half interest, into two equal parts. She negotiated for apartition of the land on the basis of this
survey. She joined in the motion for the dismissal of the civil action to which she had been a
party and in the motion in the Court of Land Registration for the recording in the name of the
grantees of a half interest in the Malate land.

On December 3, 1907, the plaintiff filed her complaint in the present action, and, after
the joining of issue and the hearing of evidence, judgment was rendered in favor of defendants
on the 29th day of May, 1909. Plaintiff appealed.

Issue:
Whether or not plaintiff’s consent was given under undue influence.

Ruling:
No.

In order that this contract be annulled it must be shown that the plaintiff never gave her
consent to the execution thereof. If a competent person has once assented to a contract freely
and fairly, he is bound. Contracts which are declared void and of no force upon the ground that
they were obtained by fraud, duress, or undue influence are so declared for the reason that the
complaining party never really gave his consent thereto.
 Not every contract executed by a wife, even though made solely to save her husband
from the consequences of his crimes, is voidable. Solicitation, importunity, argument, and
persuasion are not undue influence and a contract is not to be set aside merely because one
party used these means to obtain the consent of the other. Influence obtained by persuasion or
argument or by appeals to the affection is not prohibited either in law or morals and is not
obnoxious even in courts of equity. Such may be termed "due influence." The line between due
and undue influence, when drawn, must be with full recognition of the liberty due every true
owner to obey the voice of justice, the dictates of friendship, of gratitude and of benevolence,
as well as the claims of kindred, and, when not hindered by personal incapacity or particular
regulation, to dispose of his own property according to his own free choice.

In this case, under the advice of her counsel, the situation was so presented to her that
it was evident that in signing the agreement of the 14th of August she had all to gain and
nothing to lose, whereas, in refusing to sign said agreement, she had all to lose and nothing to
gain. In the one case she would lose her property and save her husband. In the other, she
would lose her property and her husband too. The argument thus presented to her by her
attorneys addressed itself to judgment and not to fear. It appealed to reason and not to
passion. It asked her to be moved by common sense and not by love of family. It spoke to her
own interest as much as to those of her husband. The argument went to her financial interest
as well as to those of the defendants. It spoke to her business judgment as well as to her
wifely affections. From the opinions of her attorneys, as they were presented to her upon facts
assumed by all to be true, we do not well see how she could reasonably have reached a
conclusion other than that which she did reach. It is of no consequence here whether or not her
lawyers, as matter of law, she would have been deprived of her alleged interests in the
properties mentioned in the manner described and advised by her attorneys. The important
thing is that she believed and accepted their judgment and acted upon it. The question is not
did she make a mistake, but did she consent; not was she wrongly advised, but was she
coerced; not was she wise, but was she duressed.

Therefore, the plaintiff executed the contract in suit of her own free will and choice and
not from duress.

• Lacson v. Granada, 1 SCRA 876 (Mag-aso)

Topic: Violence or Intimidation

Facts: Hacienda San Jose was originally owned by Santiago Granada’s father. It has been
purchased by Arache who leased the same to Granada with the option to repurchase for P60K
in PH currency.

Arache sold it to Balbenita and Josefita de Lacson who accepted the sale and assumed the
obligations thereunder.

Exercising his option, Granada repurchased it by paying the Lacsons the sum of P60K
Japanese military notes. On the same day, Granada sold it to Victorino Floro with the option to
repurchase it.

It is claimed that the Lacsons’ consent to the contract was vitiated by the fear that their
refusal to accept the military notes being tendered by Granada would endanger their
lives and those of their families.

Balbenita de Lacson filed a complaint for the annulment, lack of consideration, and lack of
consent with respect to Josefita, of the deed of sale.

Issue: WON the Lacsons’ consent to the contract was vitiated.

Ruling: No.

In order to cause the nullification of acts executed during the occupation, the duress or
intimidation must be more than the “general feeling of fear” on the part of the occupied over the
show of might by the occupant. Aside form such “general” or “collective apprehension”,
there must be specific acts or instances of such nature and magnitude as to have, of
themselves, inflicted fear or terror upon the subject thereof that his execution of the
questioned deed or act can not be considered voluntary.

In this case, no specific act of duress was cited - and none could be found.

Martinez v. HSBC, 15 Phil 252,

• Banez v. CA, 59 SCRA 15

Facts

In 1956, Pio Arcilla occupied a lot owned by the People's Homesite and Housing Corporation
(PHHC). He made improvements to said lot, however, he was not able to purchase said lot
because the promises made to him by PHHC employees became naught. Nevertheless, his
occupancy was made in record by PHHC.
Sometime in 1960, notwithstanding the occupancy of Arcilla, said lot was awarded to Cristeta
Laquihon. However, she died and was survived by his father, who was adjudicated in his favor
for the rights for the said lot. Her father, Basilio Laquihon, nonetheless acknowledged Cristeta’s
indebtedness to Aurea Bañez and thus adjudicated his rights over said lot to Bañez as a matter
of payment of said debt. The transfer of rights was then approved by the Sales Supervisor and
PHHC board of directors.

Respondents argued that the approval of the transfer of the rights to the lot to petitioners was
due to the intercession of the then Senator Estanislao Fernandez. Although said letter was
written on stationery bearing the letterhead of the then Senator Fernandez, it does not
conclusively follow that it was Senator Fernandez himself who wrote the letter.

Issue

WON there was an undue influence

Ruling

No.

Assuming that the letter was written by Senator Fernandez, it cannot be implied from the facts
of the case that the transfer of rights from Basilio Laquihon to petitioners herein was approved
solely on the strength of such letter, for the approval of the transfer was recommended as
"extremely meritorious" by the Head Executive Assistant and by the Homesite Sales Supervisor.
Neither can it be said that the approval of the transfer by the Board of Directors was vitiated by
undue influence or that it was illegal. That letter, even if it was written really by Senator
Fernandez, could not destroy the free agency of the PHHC Board of Directors, and it could not
have interfered with the exercise of Board's independent discretion. The Court said that
solicitation, importunity, argument and persuasion are not undue influence, and a
contract is not to be set aside merely because one party used these means to obtain the
consent of the others. Influence obtained by persuasion or argument or by appeals to the
affections is not prohibited either in law or morals, and is not obnoxious even in courts
of equity. Such may be termed "due influence."

Loyola v. CA, G.R. No. 115734

Topic: Undue Influence

RUBEN LOYOLA, CANDELARIA LOYOLA, LORENZO LOYOLA, FLORA LOYOLA, NICANDRO LOYOLA,
ROSARIO LOYOLA, TERESITA LOYOLA and VICENTE LOYOLA, petitioners,
vs.

THE HONORABLE COURT OF APPEALS, NIEVES, ROMANA, ROMUALDO, GUILLERMO, LUCIA,

PURIFICACION, ANGELES, ROBERTO, ESTRELLA, all surnamed ZARRAGA and THE HEIRS OF JOSE
ZARRAGA, namely AURORA, MARITA, JOSE, RONALDO, VICTOR, LAURIANO, and ARIEL, all surnamed
ZARRAGA, respondent.

Facts:

Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are sisters of Gaudencia and Mariano.
Victorina died on October 18, 1989, while Civil Case No. B-2194 was pending with the trial
court. Cecilia died on August 4, 1990, unmarried and childless. Victorina and Cecilia were
substituted by petitioners as plaintiffs. Private respondents, children of Mariano excepting those
denominated as the "Heirs of Jose Zarraga," are first cousins of petitioners. Respondents
designated as the "Heirs of Jose Zarraga" are first cousins once removed of the petitioners.
Private respondents allege that they are the lawful owners of Lot 115-A-1, the one-half share
inherited by their father, Mariano and the other half purchased from their deceased aunt,
Gaudencia. Transfer Certificate of Title No. 116067 was issued in their names covering Lot 115-
A-1.

The present controversy began on August 24, 1980, nearly three years before the death of
Gaudencia while G.R. No. 59529 was still pending before this Court. On said date, Gaudencia
allegedly sold to private respondents her share in Lot 115-A-1 for P34,000.00. The sale was
evidenced by a notarized document denominated as "Bilihang Tuluyan ng Kalahati (1/2) ng
Isang Lagay na Lupa." Romualdo, the petitioner in G.R. No. 59529, was among the vendees.

Issue:

Whether or not the contract was simulated.

Or..

Whether or not the contract was entered with undue influence.

Ruling:

No. The Supreme Court ruled that Simulation is "the declaration of a fictitious will, deliberately
made by agreement of the parties, in order to produce, for the purposes of deception, the
appearances of a juridical act which does not exist or is different what that which was really
executed." The parties clearly intended to be bound by the contract of sale, an intention they did
not deny. The requisites for simulation are: (a) an outward declaration of will different from the
will of the parties; (b) the false appearance must have been intended by mutual agreement; and
(c) the purpose is to deceive third persons.

The rule on fraud is that it is never presumed, but must be both alleged and proved. For a
contract to be annulled on the ground of fraud, it must be shown that the vendor never gave
consent to its execution. If a competent person has assented to a contract freely and fairly, said
person is bound. There also is a disputable presumption, that private transactions have been
fair and regular. Applied to contracts, the presumption is in favor of validity and regularity. Also,
to prove that there is undue influence, the party assailing must prove a confidential relationship
from which undue influence may arise, the relationship must reflect a dominant, overmastering
influence which controls over the dependent person.

Undue influence depends upon the circumstances of each case and not on bare academic
rules. For undue influence to be established to justify the cancellation of an instrument, three
elements must be present: (a) a person who can be influenced; (b) the fact that improper
influence was exerted; (c) submission to the overwhelming effect of such unlawful conduct.

In the present case, petitioners failed to show that Romana used her aunt's reliance upon her to
take advantage or dominate her and dictate that she sell her land. Undue influence is not to be
inferred from age, sickness, or debility of the body, if sufficient intelligence remains.

Caram v. Laureta, 103 SCRA 7, February 24, 1981

Topic: Fraud

S/N: OCT= Original Certificate of Title; Laureta was the commanding officer of the 10th division USFIP operating in the
unoccupied areas of Northern Davao with its headquarters at Project No. 7; The case revolved around the double sale (property
name; OCT No 3019) of Marcos Mata to Claro Laureta and Fermin Caram. Col. Laureta here is in good faith, while Caram is in
bad faith. Mata was allegedly ignorant; Irespe - atty in fact of Caram.

FACTS: It was on June 10, 1945 when Marcos Mata conveyed a large agricultural land to a
certain Claro Laureta. The deed of absolute sale was drafted, but not publicly notarized. Since
that day, Laureta had been occupying the land and paid realty taxes until the time of the filing of
complaint (1959). Developments (P20K) were also introduced.

In May 5, 1947, Marcos Mata sold the same land to a certain Fermin Caram Jr (herein, the
second sale). This time, it was notarized by Atty. Aporadera. On May 22, 1947, the atty filed
with the CFI of Davao declaring the OCT lost during the evacuation in Tagum, Davao. The
duplicate title was re-issued. On December 09, 1947, the sale between them was also
registered with the Register of Deeds. Transfer certificate was done in favor of Caram.

In his response, Mata admitted the existence of a record of property allegedly signed by him to
Caram, and that the transaction between him and Laureta was one subjected to duress, threat
and intimidation. Mata denied signing a document though as he could never do so, due to his
illiteracy. Now Caram claimed that he had no knowledge that property OCT No. 3019 was
already transacted by Mata with Laureta. He also testified that he never met Mr. Mata, and that
he only transacted with Irespe and Atty. Aporadera.

Issue: whether or not though Atty Aporadera and Irespe, the second sale was made in bad faith

Ruling:
Yes, because there was every reason to believe that Irespe and Atty. Aportadera had known of
the sale of the property in question to Laureta on the day Mata and Irespe went to the atty’s
office for the sale of the same property to Caram, Jr.. They both had knowledge of
circumstances which ought to have put them an inquiry. Both of them knew that Mata's
certificate of title together with other papers pertaining to the land was taken by soldiers under
the command of Col. Claro L. Laureta. So why declare it as lost in Davao CFI?

Both should have investigated the nature of Laureta's possession. Hence, they must suffer the
consequence as they failed to exercise the ordinary care expected of a buyer of real estate. The
rule of caveat emptor is important as it requires the purchaser to be aware of the supposed title
of the vendor and one who buys without checking the vendor's title takes all the risks and losses
consequent to such failure.

Accordingly, it was found that both Irespe and Aportadera, acting as agents of Caram,
purchased the property of Mata in bad faith. Applying the principle of agency, Caram was also
deemed to have acted in bad faith. As it was in bad faith, therefore it is null and void and the first
sale in favor of Laureta prevails over the sale in favor of Caram.

s/n: they also discussed first possession in good faith. Will just add it here:

A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it. 20 Laureta was first in possession of the property. He is also a possessor in good faith. It is true that
Mata had alleged that the deed of sale in favor of Laureta was procured by force. Such defect, however, was cured
when, after the lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file an
action for annulment or to set up nullity of the contract as a defense in an action to enforce the same.

They also claimed that the second sale be declared a voidable contract because of fraud. In order that fraud can be
a ground for the annulment of a contract, it must be employed prior to or simultaneous to the consent or
creation of the contract. The fraud or dolo causante must be that which determines or is the essential cause
of the contract. Dolo causante as a ground for the annulment of contract is specifically described in Article
1338 of the New Civil Code of the Philippines as "insidious words or machinations of one of the contracting
parties" which induced the other to enter into a contract, and "without them, he would not have agreed to". In
this case however, Caram’s transaction was not voidable. They did not induce Mata to sell the land to Caram.

Strong v. Gutierrez, 6 Phil 680

Topic: Fraud

Facts: This action was brought to recover 800 share of the capital stock of the Philippine
Sugar Estates Dev. Company an anonymous society formed to hold the Dominican friar
lands.
The shares were the property of one of the plaintiff, Mrs. Strong. They were purchased
by the defendant through a broker who dealt with her agent named jones, who had
script in her possession and made a sale without the knowledge of the plaintiff.

The defendant was a director, managing agent and was in his own right the majority
stockholder of the society who was able to purchase shares through the agent of the
plaintiff.

Plaintiff asserted that the sale made by her agent was procured by fraud on the part of
the defendant.

Jones is a general agent managing all her business under a parol employment. He
however sold plaintiffs other stocks, understanding that he act was within the scope of
his general agency.

Issue: WON the sale made out of fraud is revocable.

Held: The law provides that consent gained by deceit shall be void and that there is
deceit when by “insidious machinations” a person is induced to execute a contract.

The machinations here which the defendant is charged consist in the suppression of his
identity while negotiating for the stock and were paying for it and also of his intention as
majority stockholder in the company to close the negotiation. Not because of the deceit,
the vendor would have refuse to sell.

ECE Realty and Development Inc. v. Mandap, 734 SCRA 76

G.R. No. 196182, 1 September 2014

Topic: Consent Fraud

Ponente: Peralta, J

FACTS:
Petitioner: ECE Realty - corporation engaged in the building and development of condominium units.

Respondent: Rachel Mandap - buyer of unit from the condominium project called Central Park Condominium

The petitioner started its construction of Central Park Condominium in Pasay City.
However, in their advertisement it provides that it is situated in Makati City. The
respondent in belief that the condo unit was in Makati City agreed to buy a unit by paying
reservation fee, downpayment and monthly installments. In their Contract to Sell it indicated
therein that the condo unit was in Pasay City.

More than two years after the execution of the contract, respondent demanded the return of her
payment on the ground that the unit was built in Pasay not in Makati.
When the petitioner, instead, sent her a written communication informing her that the unit was
ready for inspection and occupancy; the respondent filed a complaint with the Expanded
National Capital Region Field Office of the Housing and Land Use Regulatory Board seeking the
annulment of her contract with petitioner, the return of her payments, and damages.

(Pwede ra dli ni ninyo iapil sa facts, but refer lang dri kung mag-ask sya about ENCRFO and
HLURB’s dismissal, and CA’s reversal of the decision)

ENCRFO: respondent failed to show or substantiate the legal grounds that consist of a fraudulent or
malicious dealing with her by the petitioner, such as the latter’s employment of insidious words or
machinations which induced or entrapped her into the contract and which, without them, would not have
encouraged her to buy the unit.

HLURB: gave credence to the Contract to Sell executed by the parties, rights and duties were found into
the contract, neither parties cannot place a greater obligation than what the contract provides

CA: reversed the decision of ENCRFO and HLURB, petitioner employed fraud and machinations to
induce respondent to enter into the contract

Review for Certiorari of the CA’s reversal - present case

ISSUE:

Whether or not (1) the petitioner was guilty of fraud and if so, whether (2) such fraud is sufficient
ground to nullify its contract with respondent.

RULING:

The Civil Code provides the following provisions:

Article 1338 of the Civil Code provides that “[t]here is fraud when through insidious words or
machinations of one of the contracting parties, the other is induced to enter into a contract
which, without them, he would not have agreed to.

In addition, under Article 1390 of the same Code, a contract is voidable or annullable “where the
consent is vitiated by mistake, violence, intimidation, undue influence or fraud.”

Also, Article 1344 of the same Code provides that “[i]n order that fraud may make a contract
voidable, it should be serious and should not have been employed by both contracting parties.”

Jurisprudence has shown that in order to constitute fraud that provides basis to annul
contracts, it must fulfill two conditions.

First, the fraud must be dolo causante or it must be fraud in obtaining the consent of the
party. This is referred to as causal fraud. The deceit must be serious. The fraud is serious
when it is sufficient to impress, or to lead an ordinarily prudent person into error; that which
cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each
case should be considered, taking into account the personal conditions of the victim.
Second, the fraud must be proven by clear and convincing evidence and not merely by
preponderance thereof.

In the present case, the Supreme Court finds that the petitioner was guilty of false
representation of a fact. This is evidenced by its printed advertisements indicating that
its subject condominium project is located in Makati City when, in fact, it is in Pasay City.
(this was just condemned and was issued a stern warning that repetition of this act will be dealt
more severely next time)

However, insofar as the present case is concerned, the Court agrees with the Housing and
Land Use Arbiter, the HLURB Board of Commissioners, and the Office of the President, that
the misrepresentation made by petitioner in its advertisements does not constitute
causal fraud which would have been a valid basis in annulling the Contract to Sell
between petitioner and respondent.

1. Respondent failed to show that the essential or moving factor that led her to give
consent and agree to buy the unit was the project’s advantageous or unique
location in Makati City - to the exclusion of other places or city.

(Respondent failed to prove that the location of the said project was the causal
consideration or the principal inducement which led her into buying her unit)

2. Respondent still proceeded to sign the Contract to Sell despite information that
the Condo is in Pasay City. If she had issues, she should have not signed the
Contract. Also, it took her two years to demand the return on the payments
tendered.

Note that the Contract to sell was notarized. “Being a notarized document, it had in its favor the
presumption of regularity, and to overcome the same, there must be evidence that is clear,
convincing and more than merely preponderant; otherwise, the document should be upheld.
Mandap failed to overcome this presumption.

One who signs the Contract is presumed to know its contents has been applied. Affixing a
signature is an implied ratification.

Petitioner was dismissed by SC. CA’s reversal was set aside and reversed.

And I thank you!

Jaramil v. CA, 78 SCRA 420

Topic: Consent – Fraud

Petitioner: Jaramil – initially defendants – assert that they are the true owners and private
respondents fraudulently acquired the Original Title
Respondents: CA; Sotera Medrana – initially petitioners – widow of the landowner Isidro dela
Cruz

Facts

Private Respondent’s side:

The record shows that Sotera Medrana (widow of Isidro dela Cruz instituted in the Court
of First Instance of Pangasinan an action to recover possession of a parcel of land, Lot 1422,
embraced in Original Certificate of Title No. 49228 and for damages against the spouses
Faustino Jaramil and Filomena Cabinar.

The complaint alleged that Isidro dela Cruz was in life the owner of Lot 1422 located in
Umingan, Pangasinan, containing an area of 3,226 square meters, more or less, embraced in
Original Certificate of Title No. 49228; that sometime in 1935 the spouses Faustino Jaramil and
Filomena Cabinar were permitted by the registered owners to establish residence on the land
with the understanding that said spouses would vacate the premises upon demand; and that
despite a demand to vacate made on or about August 23, 1958, the defendants refused to leave
the land in question.

Petitioners’ side:

The defendants (herein petitioners) averred in their answer that they are the true
owners of the disputed lot and that if Isidro dela Cruz and Sotera Medrana were able to register
the property in their names, the registration must have been done through fraud and bad faith.
They said that their predecessor-in-interest Agustin Cabinar, have always been in possession of
the land; that Agustin Cabinar was the original owner and possessor of the land and
subsequently had given it to the petitioners-appellants as a donation by reason of marriage in
1924; that after acquiring the property in question, the petitioners-appellants constructed
thereon their own house of strong materials which was burned during the Japanese occupation;
that after liberation, they again constructed thereon their house of mixed materials which was
later demolished and replaced by the house now presently standing on the land;

Faustino Jaramil declared that when the cadastral survey of Umingan was being
undertaken, Isidro dela Cruz went to him and said that inasmuch as their lots adjoin each other,
Isidro dela Cruz would take care of the survey and represent Faustino Jaramil in the cadastral
proceedings, promising to deliver Faustino's title as soon as Isidro's title was obtained; that
upon the request of Isidro dela Cruz, Faustino Jaramil gave the former P50.00 to defray the
expenses; that in 1958 when the heirs of Isidro dela Cruz cause a relocation survey of the land
to be made and claimed it as their own, Faustino Jaramil discovered for the first time that the
property had been registered in the names of Isidro dela Cruz and Sotera Medrana.

The defendants (herein petitioner) interposed a counterclaim wherein they asked for
damages and for the reconveyance to them of the

Issue
 Whether the fraudulent title averred by the petitioner constitutes the cancellation of the
Original Certificate of Title.

Ruling

No.

Fraud is a question of fact which must be alleged and proved. Fraud is a serious charge
and to be sustained, it must be supported by clear and convincing proof.

There is no clear showing that Isidro dela Cruz had perpetrated fraud on Faustino
Jaramil. The contention that Faustino Jaramil was deceived by Isidro dela Cruz because after
having been entrusted the sum of P50.00 at the inception of the cadastral survey of Umingan,
upon the latter's promise that he would take care of the survey and secure the title for Faustino
Jaramil, the said Isidro dela Cruz caused the land in question to be registered in his name and
that of his wife, has no merit. It is a fact that neither during the lifetime of Isidro dela Cruz nor
after his death no inquiry had been made by Faustino Jaramil about the P50.00 and whether the
land had been registered in his name.

The preponderance of the evidence is that Isidro dela Cruz and Sotera Medrana did not
perpetrate fraud in having the title to the land in question registered in their names.

Woodhouse v. Halili, 93 Phil 526

GR No. L-4811
July 31, 1953
Topic: Fraud

Facts:
1. Woodhouse entered into a written agreement with defendant Halili for a
partnership for the bottling and distribution of Mission soft drinks
a. plaintiff to act as industrial partner or manager, and the defendant as a capitalist.
b. The plaintiff was to secure the Mission Soft Drinks franchise for and on
behalf of the proposed partnership and that the plaintiff was to receive 30
percent of the net profits of the business.
2. 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.
a. Pursuant to this request, plaintiff was given a thirty days option on exclusive
bottling and distribution rights.
3. Partnership was agreed on. The franchise agreement was entered into the Mission
Dry Corp.
 4. When the bottling plant was in operation, Woodhouse demanded that the
partnership be executed but the defendant keep on delaying the execution.
5. Plaintiff prayed for the execution of the contract of partnership
a. accounting of profits and share thereof of 30 percent with damages.
6. 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.
a. Further, he contended that the plaintiff did not secure the franchise but was given
to the 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.

In this case, The main cause that induced the 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 not because he has franchise for
himself.
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.

• Garcia v. People, 410 SCRA 582 (CLOMATA)

Topic: Fraud

Summary:

Petitioner Yolanda Garcia was found guilty beyond reasonable doubt of the crime of estafa by
the Regional Trial Court of Manila. Petitioner appealed her conviction to the Court of Appeals.
The appellate court affirmed the trial court's Judgment of conviction. Petitioner filed the present
petition alleging that her constitutional right to be informed of the nature and cause of the
accusation against her was violated because although she was charged with estafa under
Article 315, Section 2(a), of the Revised Penal Code, as amended, which penalizes false
manifestations or fraudulent representations in defraudation of another, she was instead
convicted of estafa under Article 315, Section 2(d), which penalizes the issuance of postdated
checks that were not funded or were insufficiently funded.
The Supreme Court affirmed her conviction. According to the Court, whether petitioner was
charged under either paragraph 2(a) or 2(d) of Article 315 of the Revised Penal Code, she
would still be guilty of estafa because damage and deceit, which are essential elements of the
offense, have been established with satisfactory proof. The fraudulent act was committed prior
to or simultaneous with the issuance of the bad check. The guaranty and the simultaneous
delivery of the checks by petitioner were the enticement and the efficient cause of the
defraudation committed against the complainant who suffered damage amounting to
P87,000.00 as a result of the fraud committed by petitioner in paying him underfunded checks
drawn by three different persons.

FACTS:

For more than a year, petitioner had been buying assorted vegetables from Dolores Apolonio in
Divisoria, Manila. Petitioner always paid in cash. However, in May 1995, petitioner thrice bought
vegetables from Apolonio using three checks: one postdated June 20, 1995 for P28,000.00,
drawn by her husband, Manuel Garcia; the second postdated July 25, 1995 for P34,000.00,
drawn by her daughter Gigi Garcia; and the third postdated August 15, 1995 forP25,000.00,
drawn by her nephew Jose Nadongga Jr. When the three checks amounting to P87,000.00
were presented for payment, they were all dishonored for insufficiency of funds (Drawn Against
Insufficient Funds). Hence, Apolonio instituted the aforesaid criminal case against petitioner.

In her defense, the petitioner claimed that the amounts of the checks were already paid and that
the same did not belong to her as they were only paid to her by her customers. She also
maintained she did not have any transaction with the complainant in May 1995.

RTC found the respondent guilty beyond reasonable doubt and decision was affirmed by CA
with modification.

ISSUE:

WON respondent committed Fraud and is guilty of estafa?

RULING:

Yes, Garcia committed fraud and is guilty of estafa.

Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all
acts, omissions, and concealment involving a breach of legal or equitable duty, trust, or
confidences justly reposed, resulting in damage to another, or by which an undue and
unconscientious advantage is taken of another. It is a generic term embracing all multifarious
means which human ingenuity can device, and which are resorted to by one individual to secure
an advantage over another by false suggestions or by suppression of truth and includes all
surprise, trick, cunning, dissembling and any unfair way by which another is cheated. Deceit is a
specie of fraud.
In the case here, Appellant's scheme is obvious. She wanted to get vegetables from Apolonio
for free. In order to escape from any criminal liability, she asked her husband, daughter and
nephew to issue the bouncing checks. And certainly, the scheme was deceitful. The appellant
could not have been unaware of the insufficient funds of her relativ0es to support the checks
they issued but she tendered the checks to Apolonio with the assurance that they were funded.
Appellant could have exerted efforts to settle her account upon notice of the dishonored checks
if she were in good faith. Damage and deceit, which are essential elements of the offense of
estafa, have been established with satisfactory proof. The fraudulent act was committed prior to
or simultaneous with the issuance of the bad check. The guarantee and the simultaneous
delivery of the checks by petitioner were the enticement and the efficient cause of the
defraudation committed against Apolonio who suffered damage amounting to P87,000.00 as a
result of the fraud committed by petitioner in paying him underfunded checks drawn by three
different persons.

Thus, Garcia committed fraud and is guilty of estafa.

Cacho v. Bonifacio, 476 SCRA 869

Topic: Fraud under Vices of Consent

Respondents, spouses Joaquin and Teresita Bonifacio, own a commercial building located
at the corner of Aguirre and El Grande Streets, Paranaque City. On August 4, 1988, they leased
three adjoining stalls of the building to Edira Food Corporation owned by the spouses David and
Evita David. The lease contracts provided for a total monthly rental of P17,000 for two years.
The leased premises were converted by the spouses David into a restaurant.

On May 7, 1991, respondents filed a complaint for unlawful detainer against Spouses David, the
complaint alleged non-payment, despite repeated demands, of rental arrearages in the
aggregate amount of P187,000. It was docketed as Civil Case No. 8100

Consequently, a new contract was executed over the same premises with petitioner Cacho
and David, as lessees and Spouses Bonifacio, as lessors. Pursuant to their agreement,
Cacho paid spouses Bonifacio the amount of P156K to cover unpaid rental rearrangements of
David. Thereafter, Cacho took over the management and operation of the restaurant.

In the meantime, judgment was rendered by the MTC against David in Civil Case No.
8100 on February 25, 1992. The Metropolitan Trial Court ruled in favor of Spouses Bonifacio
and ordered David to vacate the leased premises and return its possession to Spouses
Bonifacio. A writ of execution was then issued by the MTC and was implemented two days later
by sheriff Reynaldo T. Nepomuceno by serving the same on Cacho's son and levying upon the
personal properties found inside the leased premises that were sold to the Spouses Bonifacio
as the highest bidders.

Cacho then filed a complaint for annulment of the MTC decision against Spouses
Bonifacio. The complaint alleged that the decision and the subsequent writ of execution
were obtained by fraud, deceit, chicanery, malice, bad faith, unlawful intent, false
testimony, perjury, theft and other crimes, as a consequence of which Cacho suffered
damages. RTC declared the implementation of the writ of execution void as it was execution
implemented against Cacho in bad faith and ordered the Spouses Bonifacio to pay Cacho. The
CA affirmed the decision of the RTC with respect to the dismissal of the complaint for annulment
of the decision of the MTC but reversed and deleted the award of actual, moral, and exemplary
damages.

ISSUE:

Whether Spouses Bonifacio acted in a fraudulent manner, thereby causing damage to Cacho.

RULING:

Yes. The dismissal of the prayer for the annulment of the MTC decision was based on the
absence of extrinsic fraud, the kind of fraud necessary to annul a judgment. There was a
confusion about the kind of fraud that led to the dismissal of the prayer for annulment of
judgment and the fraud that justifies the liability of respondents for damages.This did not
mean, however, that Spouses Bonifacio committed no fraud at all. On the contrary, bad
faith and fraud on the part of Spouses Bonifacio resulting in damage to Cacho, were
sufficiently established.

The RTC found that respondents had the writ of execution implemented against
petitioner even if she was not a party in Civil Case No. 1800 and that, in doing so,
respondents acted in bad faith.

--

The appellate court itself found that respondents' (Bonifacio) act of reviving Civil Case No. 1800
without impleading petitioner (Cacho) (who, as respondents were very much aware, was the
one already occupying and actively managing the restaurant) was "very revealing of their
dishonest intention and bad faith that resulted to the prejudice and damage" of petitioner. The
appellate court also made the following findings: “the lease contract of August 12, 1991 is
binding and in force at the time [respondents] caused the execution of the judgment in the
ejectment case. ... [Respondents], fully cognizant of [petitioner's] contractual rights and her
active management of the leased premises, could have acted more prudently and, in
keeping with the dictates of fairness and justice, should have earlier informed [petitioner]
of the unilateral cancellation of the lease agreement of August 12, 1991 and should have
included her when they revived the ejectment case against Spouses David. But they
deliberately omitted mentioning the existence of the new lease contract which included
[petitioner] as additional lessee and ignoring the rights of the latter, they proceeded to
prosecute the ejectment action against David David alone, to the great prejudice and
damage of [petitioner].

Respondents committed various acts in bad faith and in deliberate disregard of their existing
contractual relationship with the petitioner. Petitioner was prejudiced and had incurred damages
as a consequence of the acts of respondents in bad faith, that is, acts which imported a
dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known
duty due to some motive or interest or ill-will that partook of the nature of fraud. In such a case,
the law is clear: those who in the performance of their obligations are guilty of fraud, negligence
or delay and those who, in any manner contravene the tenor thereof, are liable for damages.
Araneta v. De Paterno, 91 Phil 786
TOPIC: FRAUD
DOCTRINE: ART. 1459. The following persons cannot acquire by purchase, even at public or
judicial auction, neither in person nor by an agent:
2. Agents, the property the administration or sale of which may have been entrusted to
them.

FACTS:

Paz Tuason de Paterno, who is the registered owner of an approximately 40,703 square
meter land, obtained from Jose Vidal several loans totaling P90,098 and constituted a
first mortgage on the aforesaid property to secure the debt.

In January and April, 1943, she obtained additional loans of P30,000 and P20,000 upon the
same security. On each of the last-mentioned occasions the previous contract of mortgage was
renewed and the amounts received were consolidated. In the first novated contract the time of
payment was fixed at two years and in the second and last at four years.

In 1943 Paz Tuason decided to sell the entire property for the net amount of P400,000 to
Gregorio Araneta, Allegedly, Jose Araneta also acted as agent of Paz Tuason for the sale of the
latter’s land. Thus, the result of the negotiations was the execution on October 19, 1943, of a
contract called "Promesa de Compra y Venta" (Promise to Buy and Sell). This contract also
stated that Paz Tuason would sell to Gregorio Araneta, Inc. for the said amount of P400,000 the
entire estate except for the mortgage to Jose Vidal. Paz Tuason had offered to Vidal the check
for P143,150 in full settlement of her mortgage obligation, but the mortgagee had refused to
receive that check or to cancel the mortgage. A case was filed against Vidal but the action never
came on for trial and the record and the checks were destroyed during the war
operations in January or February 1945; and neither was the case reconstituted afterward.

After liberation, an instant action was begun by Gregorio Araneta, Inc. to compel Paz Tuason to
deliver to the plaintiff a clear title to the lots described free from all liens and encumbrances, and
a deed of cancellation of the mortgage to Vidal. Vidal came into the case in virtue of a summon
issued by order of the court, and filed a cross-claim against Paz Tuazon to foreclose his
mortgage. The lower court's judgment was that the deed of sale between Araneta and Tuason
was invalid., unless Vidal's mortgage was cancelled.

ISSUE:

W/N Jose Araneta acted as agent of Paz Tuason de Paterno.

HELD:

No. Jose Araneta did not act as agent of Paz Tuason. Even if Paz Tuason knows that Jose
Araneta is the same as Gregorio Araneta Inc. She would still go with sale of her property as
Jose Araneta did not by way of being an agent perform such act of being an agent for the sale
was between the corporation and not that of Jose. Otherwise, greed would have set in in the
heart of Jose, would Jose have been the agent as well as the purchaser of the property of Paz,
than to respect their trusted and respected relationship as principal and agent. Moreover, Jose
Araneta was not given any authority to make a binding contract. He was not given the
confidence to administer, and act on behalf of Paz so there was no betrayal of trust as Jose
acted only as a middle-man tasked only to look for a buyer and not to administer any sale
between any prospective buyers. Adding to this, Jose was not to make the terms of payment.
Therefore, Jose Araneta was left with no power or discretion whatsoever, which he could abuse
to his advantage and to the owner's prejudice. He is not entrusted as an agent for the agent’s
incapacity to buy principal’s property rests in the fact that the agent and principal form one
juridical person.

Tuason v. Marquez, 45 Phil 381 (FLORES)

Topic: Fraud

Facts
On 1913 or 1914, a franchise of 35 years was granted to Lucena Electric Company. Crisanto
Marquez became the owner of the company after a sheriff's sale on 1919. The company did not
function efficiently. Eventually Crisanto announced to the Public Utility Commissioner his
intention to give up the franchise. On March 29, 1921, the Public Utility Commissioner cancelled
the franchise acquired by Crisanto.

On March 5, 1921, Crisanto gave Tuason an option to purchase the plant for P14,400. Tuason
was permitted to operate the company pursuant to a special license which was to continue until
they obtained a new franchise. The new franchise was finally granted by the Public Utility
Commissioner with certain conditions, which amounted to a renovation of the entire plant. It was
then, following a knowledge of what was expected by the Government, and following the
execution sale, that Tuason conceived the idea of bringing action against Marquez for a
rescission of the contract.

Tuason alleges that the contract should be rescinded and that he should be allowed his
damages, on account of the misrepresentation and fraud perpetrated by the defendant in selling
an electric light plan with a franchise, when the defendant had already given up his rights to that
franchise.

Issue
WON the contract should be rescinded due to misrepresentation and fraud.

Ruling
NO. The franchise was not the determining cause of the purchase.

Either party of the contract could have easily ascertained the status of the franchise by applying
at the office of the Public Utility Commissioner. The innocent non-disclosure of a fact (give up
rights to franchise) does not effect the formation of the contract or operate to discharge the
parties from their agreement. The maxim caveat emptor should be recalled.
In the doctrine of "estoppel by laches," inexcusable delay in asserting a right and acceptance
without protest is a bar to legal action. The plaintiff operated the electric light plant for about
sixteen months without question; he made the first payment on the contract without protest; he
bestirred himself to secure what damages he could from the defendant only after the venture
had proved disastrous and only after the property had passed into the hands of a third party.

We find no proof of fraud on the part of the defendant and find the plaintiff in estopped to press
his action.

• Opinion. Songco v. Sellner, 37 Phil 254 (HO)

Topic: Voidable Contracts – Active Fraud - Opinion

Case Summary: Parties were sugar-cane farmers. Sellner bought the petitioner's sugar-cane
harvest, based on the Songco’s representation that it would yield a certain amount. Amount
was substantially lower than expected, thus Sellner refused to pay. Songco obtained a
favorable ruling ordering Sellner to pay. Led to appeal.

SC affirmed the lower court, ruling that not every misrepresentation constitutes actionable fraud.
In this case, usual exaggerations in trade made by Songco were not fraudulent.

Case is basically the jurisprudence which was codified into NCC 1340-1343

Petitioners: Lamberto Songco (Songco)

Respondents/defendant: George C. Sellner (Sellner)

Facts:

● Parties were owners of farms which cultivated sugar cane in Floridablanca, Pampanga.
● On Dec. 1915, both farms possessed a significant amount of sugar-cane ready to be
processed at a mill at a sugar central in Dinalupijan. At the time, Sellner desired to mill
his cane at this particular central but faced difficulties as the owners were not sure if they
could mill his cane and thus would not promise to take it. (Unspecified why exactly)
● As a response, Sellner decided to buy Songco’s harvest of sugar-cane in order to
process his own cane at the sugar central at the same time as that of Songco’s.
a. Another motive was that Sellner desired to get a right of way over Songco’s land
for conveying his own sugar to the central.
● In pursuit of this, Sellner bought Songco’s cane according to the following terms:
a. Total price of P12,000
b. Said price to be executed in (3) promissory notes, valued at P4,000 each.
 ● At the time of the sale, Songco assured Sellner that from his estimate, his crops would
produce 3,000 piculs of sugar. However, upon harvest the crop only produced 2,017
piculs gross.
● However, of these (3) notes only two were paid. Which led to an action for recovery for
the remaining unpaid note filed by Songco.
a. At the lower court (unspecified, so CFI siguro) Songco obtained a favorable
decision, leading to current appeal.

Petitioner’s Argument related to Doctrine:

● Sellner denied the allegations that the promissory note was unpaid.
○ Included a special defense that the promissory note in question was obtained by
means of false and fraudulent representations.
○ Sellner claims that Songco falsely represented the quantity of uncut cane
standing in the fields of Songco at the time of the purchase.
■ Songco provided an estimate of around 3,000 piculs of sugar but actual
harvest turned out to be 2,017 piculs.

Issue:

W/N Songco’s misrepresentation of his estimate for the total number of picul’s his crops would
yield is enough to void the contract? – NO

Held:

Under the law, not every false representation relating to the subject of the contract would render
it void. Only misrepresentations as to matters of fact that substantially affect the buyer’s interest
that are enough to render a contract void. Naturally, this does not extend to representations as
to matters of opinion, judgment, probability or expectation. (Long v. Woodman)

An exception to this would be when a party to a contract who is an expert or

possesses special knowledge takes advantage of the ignorance of another as to secure
the contract.

As applied to the present case, Songco’s misrepresentation as to the potential yield of his crops
is only a matter of opinion, and thus not actionable. This is because he was estimating the
potential yield of the yet unharvested cane.

Although it can be argued that Songco had better experience and better
information on which to form his own opinion it cannot be said that Sellner in turn was an
experienced farmer who had ample opportunity to inspect the crops himself.
The SC held that assertions concerning the properties of the object of a contract of sale are “the
usual and ordinary means used by sellers to obtain a high price and are always understood as
affording to buyers no ground for omitting to make inquiries”; Therefore, a buyer who relies
solely in such assertions when making purchases does so at their own peril, and if they do so
they alone must bear the consequences of their imprudence

• Misrepresentation. Hill v. Veloso, 31 Phil 160

TOPIC: Fraud - Misrepresentation

FACTS :

Maximina Veloso claimed that she was tricked by her son-in-law Domingo Franco into signing a blank
document, unknowingly binding her to a debt of P6,319 to Michael & Co. According to her, she was
made to sign to acknowledge an obligation to pay for the guardianship of the minor children of
Potenciano Veloso (her brother). She only learned of the true nature of the document (a promissory
note to Michael & Co which was endorsed to Hill) only after Franco’s death. Hill filed a complaint for
recovery of the sum plus interest. Velasco alleged in her answer that the signatures on the promissory
note were obtained by means of fraud.

ISSUE:

Whether or not the contract made through deceit by a third person even without connivance or
complicity with one of the contracting parties is valid?

HELD:

Granted there was deceit in executing the Promissory Note to Michael & Co., still the deceit and error
alleged could not annul the consent of Veloso nor exempt her from the obligation incurred. The
deceit, in order that it may annul the consent, must be that which the law defines as a cause. “There is
deceit when by words or insidious machinations on the part of one of the contracting parties, the other
is induced to execute a contract which without them he would not have made.”

Franco was not one of the contracting parties who may have deceitfully induced the other contracting
party, Michael & Co.,to execute the contract. The one and the other of the contracting parties, to whom
the law refers, are the active and passive subjects of the obligation, the party of the first part and the
party of the second part who execute the contract. The active subject and the party of the first part of
the Promissory Note in question was Michael & Co., and the passive subject and party of the second
part were Veloso and Franco.
Veloso and Franco, therefore, composed a single contracting party in contractual relation with or against
Franco, like any other person who might have induced Veloso into signing the Promissory Note under
the influence of deceit, would be but a third person. Under the Civil Code, deceit by a third person does
not in general annul consent. This deceit may give rise to more or less extensive and serious
responsibility on the part of the third person (Franco) and a corresponding right of action for the
contracting party prejudiced (Veloso). Veloso will probably just have to file an action against the estate
of Franco.

***(from book) A third person has no connection with a contract. Consequently, a misrepresentation by
him does not vitiate consent. A party should not be made to suffer for the imprudence of another in
believing the fraud of a third person. The presumption is that both contracting parties are acting in good
faith. However, if the misrepresentation by the third person has created substantial mistake and the
same is mutual, that is, it affects both parties, the contract may be annulled but principally on the
ground of mistake, even if the deceit was without the complicity with one of the parties. If the
misrepresentation has been employed by a third person in connivance with, or at least with
knowledge of the party benefited by the fraud, it is deemed to have been exercised by such party
upon the other contracting party.

• Effect. Geraldez v. CA, 230 SCRA 320 (Mag-aso)

Topic: Fraud - Effect (see Allen’s digest above for topic re: contract of adhesion)

Private respondent: Kenstar Travel Corporation

Facts: Kenstar Travel Corp offered a Europe tour advertised to have first class hotels, a
european tour manager, and to visit UGC leather factory which was one of the highlights of the
tour.

Lydia Geraldez availed for the tour with her sister. She filed a case against Kenstar for damages
by reason of contractual breach after the tour. Contrary to what Kenstar said, the hotels they
went to were allegedly not first class, they didn’t have a european tour manager, and they
visited the UGC leather factory when it was closed. Also, their filipino tour guide was a first
timer.

The trial court ordered Kenstar to pay Geraldez P500k as moral damages, P200k as nominal
damages, P300k as exemplary damages, P50k as and for atty’s fees, and the costs of the suit.

CA deleted the award for moral and exemplary damages and reduced the awards for nominal
damages and atty’s fees to P30k and P10k respectively.

Issue: WON respondent court erred in deleting the award for moral and exemplary damages
Ruling: Yes.

Kenstar can be faulted with fraud in the inducement, which is employed by a party to a contract
in securing the consent of the other.

This fraud or dolo which is present at the time of birth of a contract may either be dolo
causante or dolo incidente. The first, or causal fraud referred to in Article 1338, are those
deceptions or misrepresentations of a serious character employed by one party and
without which the other party would not have entered into the contract. Dolo incidente, or
incidental fraud which is referred to in Article 1344, are those which are not serious in
character and without which the other party would still have entered into the contract.
Dolo causante determines or is the essential cause of the consent, while dolo incidente refers
only to some particular or accident of the obligations. The effects of dolo causante are the
nullity of the contract and the indemnification of damages, and dolo incidente also
obliges the person employing it to pay damages.

In the belief that an experienced tour escort and a European tour manager would accompany
them, the petitioner was induced to join the tour instead of travelling alone. She likewise
suffered distress when the group was unable to visit the leather factory and when she did not
receive first-class accommodations in their lodgings which were misrepresented as first-class
hotels. These justify the award for moral damages, which are in the category of an award
designed to compensate the claimant for that injury which she had suffered, and not as a
penalty on the wrongdoer, an award of P100k is sufficient and reasonable.

When moral damages are awarded, especially for fraudulent conduct, exemplary damages may
also be decreed. Exemplary damages are imposed by way of example or correction for the
public good. An award of P50k is called for to deter travel agencies from resorting to
advertisements and enticements with the intention of realizing considerable profit at the
expense of the public, without ensuring compliance with their express commitments. While,
under the present state of the law, extraordinary diligence is not required in travel or tour
contracts, such as that in the case at bar, the travel agency acting as tour operator must
nevertheless be held to strict accounting for contracted services, considering the public interest
in tourism, whether in the local or in the international scene.

• Art. 1345 and 1346, Civil Code

• Rodriguez v. Rodriguez, 127 Phil 294

Facts

In 1929 Conception Felix, widow of Don Felipe Calderon whom she had one living child
with, married a Domingo Rodriguez, a widower who had four children named Geronimo,
Jose, Mauricio and Esmeralda. Before the marriage to Domingo, Conception Felix owned two
fishponds which she then sold to her daughter Conception Calderon. Conception Calderon
soon after transferred the said properties to her mother and stepfather which was registered
and notarized in the names of Domingo and Conception Felix Rodriguez.
Domingo Rodriguez then died intestate.

On March 16, 1953, the above-named widow, children and grandchildren of the deceased entered
into an extra-judicial settlement of his (Domingo's) estate, consisting of one-half of the properties
allegedly belonging to the conjugal partnership. The parties agreed that 1/2 of the fishpond
belongs to Concepcion Felix Vda. de Rodriguez, as her share in the conjugal property; and 3/4
of the remaining half are transferred in full ownership to Concepcion’s step children and 1/4 of
the said remaining half goes in equal shares to the grandchildren.

On July 2, 1954, the heirs ended their co-ownership by executing a deed of partition, dividing and
segregating their respective shares in the properties, pursuant to a consolidation and subdivision
plan. The Rodriguez children executed another document granting unto the widow lifetime usufruct
over one-third of the fishpond which they received as hereditary share in the estate of Domingo
Rodriguez, which grant was accepted by Concepcion Felix Vda. de Rodriguez.

Then, in a contract dated December 15, 1961, the widow appeared to have leased from the
Rodriguez children and grandchildren the fishpond for a period of 5 years. The relationship between
the widow and her stepchildren had turned for the worse. Thus, when she failed to deliver to them
the balance of the earnings of the fishponds, her stepchildren endorsed the matter to their lawyer
who sent a letter of demand to the widow for payment thereof.

The appellant wanted to declare invalid/null and void the transfer of the property to conjugal property
as she said that it was simulated and fictitious.

Issue

WON the transfer was simulated

Ruling

No.

The charge of simulation is untenable, for the characteristic of simulation is the fact that the
apparent contract is not really desired or intended to produce legal effects or in any way alter
the juridical situation of the parties.

In this case, the appellant contends that the sale by her to her daughter, and the subsequent
sale by the latter to appellant and her husband, the late Domingo Rodriguez, were done for the
purpose of converting the property from paraphernal to conjugal, thereby vesting a half interest
in Rodriguez, and evading the prohibition against donations from one spouse to another during
coverture (Civil Code of 1889, Art. 1334). The appellant and her daughter must have intended
the two conveyances to be real and effective; for the appellant could not intend to keep the
ownership of the fishponds and at the same time vest half of them in her husband. The two
contracts of sale then could not have been simulated, but were real and intended to be fully
operative, being the means to achieve the result desired. Also, it cannot be denied that plaintiff-
appellant had knowledge of the nullity of the contract for the transfer of her properties in 1934,
because she was even a party thereto. And yet, her present action was filed only in 1962 and
after the breaking up of friendly relations between her and defendants-appellees. Appellant's
inaction to enforce her right, for 28 years, cannot be justified by the lame excuse that she
assumed that the transfer was valid. Knowledge of the effect of that transaction would have
been obtained by the exercise of diligence. Ignorance which is the effect of inexcusable
negligence, it has been said, is no excuse for laches.
In the circumstances, appellant's cause has become a stale demand and her conduct placed
her in estoppel to question the validity of the transfer of her properties.

Gonzales v. Trinidad, 67 Phil 682

Topic: Simulation

On November 11, 1931, the plaintiffs executed in favor of the now petitioners a deed of sale of
an urban property situated in the City of Manila, for the sum of P10, 000. As the property was
mortgaged to the Bureau of Lands for P6, 500, the purchasers assumed the encumbrance. The
sale was simulated and the supposed vendors did not receive the alleged price, the idea being
to save the property, which was fictitiously sold, from attachment by Dr. Ramon Papa to whom
Lorenzo Perez had endorsed a note for P4, 000 executed and signed by Primitivo Trinidad. Dr.
Papa, however, died and the credit represented by the note was adjudicated to Carmen Papa
with when the said Primitivo Trinidad had a subsequent agreement to the effect that he would
pay the note as soon as he had the money. Thus the litigation and attachment which Primitivo
Trinidad feared were averted.

Issue:

Whether or not the contract, without consideration, is null and void.

Ruling:
YES. The contract was in itself fictitious and simulated and the supposed vendors did not
receive the stipulated price, the consideration being thus lacking, said contract is null
and void.

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 not present in the
transaction. The former, although illegal, neither determine nor take the place of the
consideration.

S/n:

Consideration - essential reason for the contract

Motive –particular reasons of a contracting party which do not affect the other party and which do not
preclude the existence of a different consideration

Borromeo v. Borromeo, 98 Phil 432,

GR No. L-7548. February 27, 1956

JOHANNA HOFER BORROMEO, Plaintiff - Appellant , vs. Dr. VENUSTIANO HJ BORROMEO,

DR. JOSE C. BORROMEO and ESTATE OF DR. MAXIMO BORROMEO, Defendants - Appellees
.

Topic: Simulation
s/n: A case involving the intestate proceedings of Vito Borromeo. Signature of an 82 year old man suffering from
paralysis wouldn’t have a firm signature. Blurred thumbmarks were not Vito’s.

FACTS: Johanna Borromeo (widow of the late Dr. Maximo Borromeo) alleged that her
husband brought conjugal properties in Cebu City, that in 1948 before his death and
when he was seriously ill and bedridden, her husband was made to sign a fictitious
deed of sale of said property in favor of Dr. Venustiano HJ Borromeo and Dr. Jose C.
Borromeo purporting to convey said property to them for P3,000.

s/n: property value was at P42,480 and had a market value of P80,000
That the said sale was fictitious as no payment of the stated price was made, and the
price stated was inadequate and because the doctors obtained the property in bad faith,
that such sale be declared null and void.

Defendants argued and said that Mrs. Borromeo does not have legal capacity to sue,
there is no cause of action in the complaint, and that such action is premature. Trial
Court agreed with this saying that Mrs. Borromeo only has a claim by the time the
conjugal properties are liquidated.

In this case, the sale is alleged to be fictitious because no payment of the stated price
was made. The sale therefore, was non-existent, because one of the elements, that of
consideration, was absent.
s/n: Any contract signed with false cause, do not confer rights nor can they have any legal effect, amd
that that "the simulation of a contract necessarily carries with it the falsehood of the cause of the same,
and can be claimed by all those who are interested, save the responsibility that in their case they
contract." This only translates that there exists absolute ineffectiveness, they serve to express the
relationship of the simulation with the false cause and to regulate the exercise of the nullity.

ISSUE: w/n the sale , without consideration, was deemed to be a simulated and
therefore null and void?

RULING:

Yes, as explained by SC, this was similar to the case in Pascual v Pascual, where in
that case the sale sought to be annulled by the wife was made by the deceased
husband during his lifetime without consideration.They ruled that as the sale is alleged
to be fictitious, with absolutely no consideration, it should be regarded as non-existent,
not merely annullable.

Jurisprudence declared that simulated contracts, that is, signed with false cause, do not
confer rights nor can they have any legal effect.

Can Borromeo still contest?

Mrs. Borromeo has the right to contest the sale, as the transaction was done without a
consideration.

Where the husband sells a conjugal property without consideration or fictitiously, the
wife may bring an action to annul the sale even before the liquidation of the conjugal
partnership.

It is not correct to hold that the right of the wife to assail its effectiveness is made to
depend only upon the outcome of the liquidation of the conjugal partnership. While the
husband as administrator may have the power to dispose of conjugal property under
onerous title without wife’s consent, it is also provided that the wife’s rights not be
prejudicated by such sale when the said assignment or agreement violates the
provisions of the Code or is in fraud of the rights of the wife.

s/n: it would be different if the sale was made under onerous title but was in fraud of the
wife.

s/n: The instances, therefore, to which said paragraph two refers are those cases of sales,
conveyances or assignments which have been made under onerous title in violation of the
provision of the Code or in fraud of the rights of the wife. Said contracts or agreements have the
three essential requirements of contracts, namely, consent of the parties, subject-matter and
consideration, although they are subject to annulment because they violate the provisions of the
Code or are in fraud of the rights of the wife. These kinds of conveyances or contracts must be
distinguished from those in which no consideration exists, as already pointed out above;in these
latter cases the contracts or agreements lack one of the essential elements for their validity,
namely, cause or consideration, and, therefore, they are considered as non-existent. It is under
this category (of non-existent contracts) that the fictitious sale, alleged in the case at bar to have
been executed by the husband without consideration or with false consideration, falls. In other
words, in accordance with the allegations of the complaint filed the simulated sale was non-
existent, because there was no consideration for the execution thereof. The sale executed by
the deceased husband was not sale by onerous title, executed in violation of the provisions of
the Code or in fraud of the rights of the wife;if it was not a sale or conveyance which suffers
from invalidity by reason of the violation of the provisions of the Code or of fraud to the rights of
the wife. It is, according to the allegations of the complaint, a non-existent contract which never
came into being or effect because of the express provision of Article 1261 of the Civil Code.

s/n:

Article 1261 of the Old Civil Code which provides:

“There is no contract unless the following requisites exist:

1. The consent of the contracting parties;

2. A definite object which is the subject-matter of the contract;

3. A consideration for the obligation established. "

The theory that the right of the widow to contest the simulated sale arises only after the
liquidation of the conjugal partnership, is based on Article 1413 of the old Civil Code,
which provides:
“In addition to his powers as manager the husband may for a valuable consideration
alienate and encumber the property of the conjugal partnership without the consent of
the wife.

"Nevertheless, no alienation or agreement which the husband may make with respect to
such property in contravention of this code or in fraud of the wife shall prejudice her or
her heirs."

Bravo Guerrero v. Bravo, 465 SCRA 244

Topic: Simulation

Facts: Mauricio and Simona owned 2 parcels of land. They had 3 childrean – Roland,
Cesar and Lily, but Cesar died. Lily got married with David and had 1 child David Jr.
Roland had 6 children – Lily Elizabeth, Edward, Roland Jr. Senia, Benjamind, and half
system Ofelia.

Simona authorize Mauricio to mortgage or sell and dispose of any and all of her
property.

Mauricio subsequently mortgaged the properties to PNB and DBP for 10k and 5k.

Muricio executed a deed of sale with assumption of real estate Mortgage conveying the
properties to Roland, Ofelia and Elizabeth.

The condition of the sale was only 1,000PHP and the assumption by the vendees of the
PNB and DBP mortgage over the properties.

Mauricio and Simona died. Edward, represented his wife Fatima, filed a action for the
judicial partition of the properties. He claimed that he and other grandchildren of
Mauricio and Simona are co owners of the properties by succession.

Issue: WON payment of P1,000 constituted simulation of the contract of sale between
Mauricio and Roland, Ofelia and Elizabeth.
Held: Simulation of contract and gross inadequacy of price are distinct legal concepts,
with different effects. Simulated contracts only happens when parties to an alleged
contract do not really intend to be bound by the contract. A simulated fictitious contract
has no legal effect because there is no real agreement between the parties.

When parties agree on a price as the actual consideration, the sale is not simulated
despite the inadequacy of the price.

Gross inadequacy does not result to a void contract and does not even affect the
validity of a contract of sale, unless it signifies a defect in the consent or that the parties
actually intended a donation or some contract. Inadequacy of cause will not invalidate a
contract unless there has been fraud, mistake or undue influence.

In this case, respondents failed to establish that the consideration paid is grossly
inadequate considering that in addition to the amount of 1000Php is the assumption of
the mortgage loan from PNB and DBP.

OBJECT

Blas v. Santos, 1 SCRA 899

Topic: Object
Plaintiffs-appellants: MARIA GERVACIO BLAS, MANUEL GERVACIO BLAS, LEONCIO GERVACIO BLAS and
LODA GERVACIO BLAS

Defendants-appellants: ROSALINA SANTOS, in her capacity as Special Administratrix of the Estate of the deceased
MAXIMA SANTOS VDA. DE BLAS, in Sp. Proc. No. 2524, Court of First Instance of Rizal, defendants-appellants.
MARTA GERVACIO BLAS and DR. JOSE CHIVI

Pontente: Labrador, J

Facts:

1. This action was instituted by plaintiffs to secure a judicial declaration that one-
half of the properties left by Maxima Santos Vda. de Blas, (the greater bulk of which
are set forth and described in the project of partition presented in the proceedings for the
administration of the estate of the deceased Simeon Blas), had been promised by the
deceased Maxima Santos to be delivered upon her death and in her will to the
plaintiffs, and requesting that the said properties so promised be adjudicated to
the plaintiffs. The complaint also prays for actual damages in the amount of P50,000.
2. The alleged promise of the deceased Maxima Santos was contained in a
document executed by Maxima Santos on December 26, 1936.
3. The complaint also alleged that the plaintiffs were entitled to inherit certain
properties enumerated in paragraph 3 thereof, situated in Malabon, Rizal and
Obando, Bulacan, but which properties have already been included in the inventory
of the estate of the deceased Simeon Blas and evidently partitioned and conveyed
to his heirs in the proceedings for the administration of his estate. Spouses
Simeon Blas and Marta Cruz have three children they also have grandchildren. One
year after Marta Cruz died, Blas married Maxima Santos but they don’t have children
 and the properties that he and his former wife acquired during the first marriage were not
liquidated. Simeon Blas executed a will disposing half of his properties in favor of
Maxima the other half for payment of debts, Blas also named a few devisees and
legatees therein.
4. Maxima executed a document whereby she intimated that she understood the will
of her husband; that she promised that she’d be giving, upon her death, one-half
of the properties she’ll be acquiring to the heirs and legatees named in the will of
his husband; that she can select or choose any of them depending upon the
respect, service, and treatment accorded to her by said heirs.
5. On 1937 Simeon Blas died while Maxima died on 1956 and Rosalina Santos became
administrator of her estate. In the same year, Maria Gervacio Blas, child of Simeon Blas
in his first marriage, together with three other grandchildren of Simeon Blas (heirs of
Simeon Blas), learned that Maxima did not fulfill her promise as it was learned that
Maxima only disposed not even one-tenth of the properties she acquired from
Simeon Blas.
6. The heirs are now contending that they did not partition Simeon Blas’ property
precisely because Maxima promised that they’ll be receiving properties upon her
death.

ISSUE:

Whether or not the heirs can acquire the properties that Maxima promised with them.

HELD:

Yes, they can acquire the properties that Maxima promised with them. It was stated in Art. 1347
that “No contract may be entered into upon future inheritance except in cases expressly
authorized by law.”

In this case, the SC ruled that Exhibit "A" was NOT a contract on future inheritance. It was
an obligation or promise made by the maker to transmit one-half of her share in the conjugal
properties acquired with her husband, which properties were stated or declared to be conjugal
properties in the will of the husband. The conjugal properties were in existence at the time of
the execution of Exhibit "A". As a matter of fact, Maxima Santos included these properties in her
inventory of her husband’s estate of June 2, 1937. The promise did not refer to any properties
that the maker would inherit upon the death of her husband. The document referred to
existing properties which she would receive by operation of law on the death of her
husband, because it was her share in the conjugal assets. That the kind of agreement or
promise contained in Exhibit "A" is not void under Article 1271 of the old Civil Code.

It would be noted that what was prohibited to be the subject matter of a contract under
Article 1347 of the Civil Code is "future inheritance." Future inheritance is any
property or right not in existence or capable of determination at the time of the
contract, that a person may in the future acquire by succession. The properties
subject of the contract Exhibit "A" are well-defined properties, existing at the time of the
agreement, which Simeon Blas declares in his testament as belonging to his wife as her
share in the conjugal partnership. Certainly his wife’s actual share in the conjugal properties
may not be considered as future inheritance because they were actually in existence at the time
Exhibit "A" was executed.

In this case the contract was authorized by law because the promise made by Maxima to their
heirs before she died was a valid reason and it should be enforceable upon her death and her
heirs can now acquire the succession of the properties in issue.

Defendant claimed that Exhibit "A" is a worthless piece of paper because it is not a will nor a
donation mortis causa nor a contract. The SC said that it is a compromise and at the same
time a contract with a sufficient cause or consideration.

SC declared that by Exhibit "A", a compromise to avoid litigation, Maxima Santos promised to
devise to the heirs and legatees of her husband Simeon Blas, one-half of the properties
she received as her share in the conjugal partnership of herself and her husband, which
share is specified in the project of partition submitted by herself on March 14, 1939 in the
settlement of the estate of her husband, and which is found on pages 195 to 240 of the record
on appeal and on pages 27 to 46 of the project of partition, submitted by Maxima Santos herself
before the Court of First Instance of Rizal in Civil Case No. 6707, entitled "Testamentaria del
Finado Don Simeon Blas, Maxima Santos Vda. de Blas, Administradora" ; and that she failed to
comply with her aforementioned obligation. (Exhibit "A").

Exhibit A:

The document which was thus prepared and which is marked as Exhibit "A" reads in Tagalog, thus:jgc:chanrobles.com.ph

"MAUNAWA NG SINO MANG MAKABABASA:

Na akong si MAXIMA SANTOS DE BLAS, nasa hustong gulang kasal kay SIMEON BLAS, taga bayan ng Malabon, Rizal,
Philippines, sa pamamagitan ng kasulatang ito ay malaya kong ipinahahayag:chanrob1es virtual 1aw library

Na aking nabasa at naunawa ang testamento at huling kalooban na nilagdaan ng aking asawa, SIMEON BLAS, at ipinahahayag ko
sa ilalim ng aking karangalan at sa harap ng aking asawa na igagalang at pagpipitaganan ang lahat at bawa’t isang bahagi ng
nabanggit na testamento at ipinangangako ko pa sa pamamagitan ng kasulatang ito na ang lahat ng maiiwang pag-aari at
kayamanan naming mag-asawa, na nauukol at bahaging para sa akin sa paggawa ko naman ng aking testamento ay ipagkakaloob
ko ang kalahati (1/2 sa mga herederos at legatarios o pinamamanahan ng aking nabanggit na asawa, SIMEON BLAS, sa kaniyang
testamento, na ako’y makapipili o makahihirang sa kahi’t kangino sa kanila ng aking pagbibigyan at pamamanahan sang-ayon sa
paggalang, paglilingkod, at pakikisama na gagawin sa akin.

SA KATUNAYAN NG LAHAT NG ITO, ay nilagdaan ko ang kasulatang ito ngayon ika 26 ng Diciembre ng taong 1936, dito sa San
Francisco del Monte, San Juan, Rizal, Philippines." (Exh. "A", pp. 29-30 Appellant’s brief).

(Fdo.) MAXIMA SANTOS DE BLAS

and which, translated into English, reads as follows:jgc:chanrobles.com.ph

"KNOW ALL MEN BY THESE PRESENTS:

"That I Maxima Santos de Blas, of legal age, married to Simeon Blas, resident of Malabon, Rizal, Philippines, voluntarily state:

That I have read and knew the contents of the will signed by my husband, Simeon Blas, (2) and I promise on my word of honor in
the presence of my husband that I will respect and obey all and every disposition of said will (3) and furthermore, I promise in this
document that all the properties my husband and I will leave, the portion and share corresponding to me when I make my will, I will
give one-half (1/2) to the heirs and legatees or the beneficiaries named in the will of my husband, (4) and that I can select or choose
any of them to whom I will give depending upon the respect, service and treatment accorded to me.

IN WITNESS WHEREOF, I signed this document this 26th day of December, 1936 at San Francisco del Monte, San Juan, Rizal,
Philippines." (Exh. `A’, pp. 30-31, Appellant’s brief).

(Sgd.) MAXIMA SANTOS DE BLAS

"Compromise is a contract by which each of the parties in interest, by giving, promising, or retaining
something avoids the provocation of a suit or terminates one which has already been instituted."
(Italics supplied.)

Uson v. Del Rosario, 92 Phil 530

Facts

According to the defendant, Maria Uson and her husband, the late Faustino Nebreda,
executed a public document whereby they agreed to separate as husband and wife and, in
consideration of their separation, Maria Uson was given a parcel of land by way of alimony and
in return she renounced her right to inherit any other property that may be left by her husband
upon his death as shown in the record.
Alimony - in divorce law, compensation owed by one spouse to the other for financial support after divorce. ... Alimony
aims at support of one spouse, not punishment of the other. In some places, the term means simply a property settlement
irrespective of future support.

However, plaintiff claims that when Faustino Nebreda died in 1945, his common- law wife Maria
del Rosario took possession illegally of said lands thus depriving her of their possession and
enjoyment.

Issue

Whether said lands were valid objects of the contract.

Ruling

No.
 Although the lawful wife has expressly renounced her right to inherit any future property
that her husband may acquire and leave upon his death, such renunciation cannot be
entertained for the simple reason that future inheritance cannot be the subject of a contract nor
can it be renounced.

Castro v. Longa, 89 Phil 581

GR Nos. L-2152 and L-2153

Jul 31, 1951

Topic: Object (Impossibility of Object)

Facts:

1. Simeona M. de Castro with other relatives owned Hacienda Biason

2. They entered into a contract of Lease with Jose Longa for Hacienda Biason
a. The contract was for 6 agricultural years
b. Payment of rentals was by means of quedans issued by Central de Bai
3. Jose Longa was able to pay the rentals due except for the year 1940-1945.
4. Petitioners seek to recover the rentals for such years.

Petitioner: argues that appellee cannot relieve himself from his liability under the contract
(1) because he bound himself to pay the rentals and fulfill the terms thereof in spite of war
or force majeure; and (2) because under the contract of lease he agreed to pay the rental
on the basis of the total quota assigned to Hacienda Biason

Respondent: responded that due to the recent war, or to the Japanese occupation, he was
unable to fulfill the terms of his lease contract and, consequently, should be excused from
complying with the same.

Issue: WON the defendant can allege war or force majeure as a defense to relieve himself
from his obligation

Ruling: Yes

Article 1272 of the Civil Code provides 'Impossible things or services cannot be the subject
matter of contracts.'

And article 1184 of the Code provides: 'The debtor shall also be relieved from obligations
which consist in the performance of an act if fulfillment of the undertaking becomes legally
or physically impossible.'
In this case, the failure of appellee to comply with the terms of the contract not only for the
crop year 1941-1942 but also for the other crop years covered by the enemy occupation is
due to war,the fact that to produce or mill sugar cane at that time was contrary to public
policy as it would be giving aid and comfort to the enemy, and was in violation of a specific
order emanating from our legitimate government to forestall any help that may be rendered
the enemy in his war effort it being an undisputed fact that sugar is essential not only to
feed the enemy but as raw material for fuel to bolster up his war machine

Cause

Raet v. CA, 295 SCRA 677

Topic: Cause
From my understanding, the cause if for Raet and Mitra to get GSIS Loan approval before they can enter
into a contract to sale for the housing units that did not materialized.

Facts:

In 1984, the petitioners, the spouses Raet and the spouses Mitra, negotiated with Amparo Gatus
concerning the possibility of buying the rights of the latter to certain units at a subdivision developed
by private respondent Phil-Ville Development and Housing Corporation (PVDHC) primarily for parties
qualified to obtain loans from the Government Service Insurance System (GSIS). The spouses Raet and
the spouses Mitra paid Gatus P40,000 and P35,000, respectively, and Gatus, as an agent of PVDHC,
issued receipts in her own name.

The spouses Raet and spouses Mitra looked for GSIS members who could act as accommodation parties
by allowing them to use their policies so that they can purchase the units in said subdivision. The
spouses Raet presented the GSIS policy of Ernesto Casidsid while the spouses Mitra that of Edna Lim.
The spouses Raet paid P32,653.00, while the spouses Mitra paid P27,000.00, to private respondent
PVDHC, on the understanding that these amounts would be credited to the purchase prices of the units
which will be determined after the approval of their loan applications with the GSIS.

Meanwhile, the spouses Raet were allowed to occupy the unit built on Lot 4, Block 67, Phase 4A of the
Las Villas de Sto. Niño Subdivision, while the spouses Mitra were given the unit 9on Lot 7, Block 61,
Phase 4A thereof. But the GSIS disapproved the loan applications of petitioners. ( Petitioners were
advised by private respondent PVDHC to seek other sources of financing but they were allowed to
remain in the subject premises. Petitioners failed to pay. PVDHC, in separate demand letters, asked
them to vacate the units they were occupying. Petitioners refused. PVDHC filed ejectment cases against
them in the MTC which ordered them on May 24, 1991 to surrender the units. This decision was
affirmed by the RTC and CA.Petitioners Raet filed complaints against PVDHC with the RTC for the
recovery of the supplemental costs they had paid but it was dismissed for lack of jurisdiction. The
petitioners then filed a complaint for specific performance and damages against Gatus and PVDHC
with the Housing and Land Use Regulatory Board (HLURB) which has exclusive competence to handle
cases involving disputes between subdivision buyers and developers. THE HLURB Arbiter decided in
petitioners’ favor. But the HLURB Board of Commissioners reversed the decision. Petitioners elevated
the case to the Office of the President but the latter sustained the decision of the Housing and Land Use
Arbiter. Respondent elevated the case to the CA which set aside the decision of the Office of the
President and dismissed petitioners’ action without prejudice to their right to proceed against Gatus.
Thus, this petition for review on certiorari by the petitioners.

Issue:
WON petitioners have a valid cause to enforce the contract of sale over the disputed housing units?

Ruling:
No, there is no valid cause as parties in this case had not reached any agreement with regard to the sale
of the units in question.

There are no written contracts to evidence the alleged sales. Petitioners dealt with Gatus. But Gatus
was not the agent of private respondent PVDHC. Gatus also did not remit the payment from
respondents to PVDHC. PVDHC had no knowledge of the figures Amparo Gatus gave to petitioners as
estimates of the costs of the units in question; it could not have ratified the same at the time the latter
applied for the purchase of the units. At any rate, private respondent PVDHC was to enter into
agreements concerning the subject units with petitioners only upon the approval of the latters loan
applications with the GSIS which, as mentioned earlier, failed to materialize. At best, only a proposed
contract to sell obtained which did not even ripen into a perfected contract due at the first instance to
private respondents inability to secure approval of their GSIS housing loans. As it were, petitioners and
private respondents have not hurdled the negotiation phase of a contract, which is the period from the
time the prospective contracting parties indicate interest on the contract to the time the contract comes
into existence - the perfection stage - upon the concurrence of the essential elements thereof.

NOTE:
With regard to the occupation by petitioners of the units in question for more than three years prior to
the ejectment case was merely by virtue of the forbearance of private respondent PVDHC. Since this
matter pertains to the issue of possession of the subject premises, the ruling on this point of the
Municipal Trial Court of Meycauayan, Bulacan in the ejectment case is conclusive. No presumption as to
the existence of any right that may have been acquired by virtue of such occupation can arise from this
circumstance.

PBC v. Luis She, 21 SCRA 52

Topic: Cause

FACTS:

● Justina Santos y Canon Faustina and Lorenza, her sister, owned a piece of land in Rizal Avenue.
In the said lot facing Florentino Torres were two residential houses where they lived. In it was
also Hen Wah Restaurant, which faced Rizal Avenue, where Wong Heng, a Chinese, and his
family, was a long-time lessee with a monthly rental of P 2,620.
 ● 1957, September 22
○ Lorenza dies; Justina solely inherits the property. She was however 90 years old, blind,
crippled, and invalid.
○ Wong and his family became the trusted caretakers of the estate.
● 1957, November 15
○ Justina Santos executed a 50-year lease with a right to withdraw anytime in favor of
Wong. The lease covered the original area leased to Wong plus another fronting
Florentino Torres Street. The monthly rental was for P 3,120.
● 1957, November 25
○ The contract was amended to cover the entire property, with an additional rental of P
1000.
○ For his part Wong undertook to pay out of the rental due from him an amount not
exceeding P1000 a month for the food of their dogs and the salaries of her maids.
● 1957, December 21
○ Another contract was executed to give Wong the option to buy the leased premises
for P120,000, payable within ten years at an installment of P1000/month. Wong was
also given the obligation to shoulder the costs of the dog food and the salaries of her
maids.
○ It was provided on the condition that Wong obtain Philippine citizenship.
○ The petition was withdrawn when it was discovered that he was not a resident of Rizal.
● 1958, October 28
○ Justina files a petition to adopt him and his children on the belief that adoption would
make them Philippine citizens. Discovering the error later on, the proceedings were
abandoned.
● 1958, November 18
○ Two other contracts were executed
■ one which extended the term of lease to 99 years
■ another which fixed the term of the option at 50 years.
● 1959, November 4
○ Believing that those contracts were made by her (Justina Santos) because of Wong’s
manipulations, she ordered her executor to pursue annulling the contracts.

ISSUE:

Whether the contracts are valid, despite evidence of Santos’ willful consent to the terms of the
contract?

Held:

No.

For the testimony just quoted while dispelling doubt as to the intention of Justina Santos, at the
same time gives the clue to what we view as a scheme to circumvent the Constitutional prohibition
against the transfer of land of aliens. "The illicit purpose then becomes the illegal cause rendering the
contracts void.
· Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, they
reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure,
a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real
property on condition that he is granted Philippine citizenship. As this said in Krivenko vs. Register of
Deeds:

● "[A]liens are not completely excluded by the Constitution from the use of lands for residential
purposes. Since their residence in the Philippines is temporary, they may be granted temporary
rights such as a lease contract which is not forbidden by the Constitution. Should they desire to
remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible
to acquire."

· But 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 (jus possidendi, jus utendi, jus fruendi
and jus abutendi) but also of the right to dispose of it (jus disponendi) — rights the sum total of which
make up ownership. It is just as if today the possession is transferred, tomorrow, the use, the next day,
the disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated
in an alien. And yet this is just exactly what the parties in this case did within this pace of one year, with
the result that Justina Santos’ ownership of her property was reduced to a hollow concept. If this can be
done, then the Constitutional ban against alien landholding in the Philippines, as announced in Krivenko
vs. Register of Deeds, is indeed in grave peril.

Saguid v. Security Finance, Inc., 477 SCRA 256 (DINAMPO)

Facts:
Security Finance Inc. seized the motor vehicles of Sps. Saguid for not complying with the
terms of a Promissory Note and chattel Mortgage. The promissory note states that if the
spouses could not pay the loans on time, the total amount is demandable at once. The Sps.
Saguid denied ever creating a promissory note with Security Finance Inc. They claimed
that they transacted with a salesman named Sonny Quijano for capital to buy another motor
vehicle to be turned into a taxicab. Rolando Saguid (husband) admitted that he did sign a
blank document with Sonny Quijano for preparation for application for loan only. Nora Saguid
(wife) claimed that the alleged signature on the promissory note could not be hers as she was in
Australia at the time of signing.

Issue: W/N there is a valid contract (of promissory note and chattel mortgage) between Sps.
Saguid and Security Finance Inc.

Held:
No. There is no valid contract between the two parties.
For a contract to exist, the basic requisites are as follows: (1) consent of the contracting parties;
(2) object certain which is the subject matter of the contract; and (3) cause of the obligation
which is established.

In this case, the cause is not established as Security Bank’s proof that the Sps. did enter into a
promissory note with them was not established. As Rolando Saguid did not enter into such
promissory note with Security Finance as he only signed a blank document IN PREPARATION
for loan. Toyota Balintawak (where the vehicles were purchased) also testified that the Sps.
paid in cash for the purchase of the first vehicle and that Security Finance Inc. is not an affiliated
financing agency with them which makes it impossible for the Sps. to be debtors of Security
Finance Inc. as they do not transact with the said company. The cause of the contract (loan)
was not established in this case.

Liguez v. CA 102 Phil 577 (FLORES)

Topic: Cause

Facts:
Lopez, a man of mature years, confessed his love to Liguez, who was 16 years old at that time. Liguez's
parents did not allow Lopez to live with Liguez unless Lopez executed a deed of donation on a
particular land. The land belongs to the conjugal relationship Lopez and his wife. Lopez executed a deed
of donation in view of his desire to have a sexual relationship with Liguez. After the donation, Liguez
lived together with Lopez until he died.

Now, Liguez filed a case to recover 51.84 hectares of land from the heirs of Lopez.
● Liguez alleges that she is its legal owner, pursuant to a deed of donation executed in her favor
by the late owner, Lopez.
● "in contracts of pure beneficence the consideration is the liberality of the donor", and that
liberality per se can never be illegal, since it is neither against law or morals or public policy.

The heirs of Lopez allege that the donation was null and void for
● having an illicit causa or consideration, which was the plaintiff's entering into marital relations
with Lopez, a married man; and
● that the property had been adjudicated to the appellees as heirs of Lopez by the court of First
Instance, since 1949.

Issue:
WON the deed of donation has an illicit consideration.
Ruling:
Yes, the donation has an illicit cause.

Here the facts as found by the Court of Appeals (and which we can not vary) demonstrate that in making
the donation in question, the late Lopez was not moved exclusively by the desire to benefit appellant
Conchita Liguez, but also to secure her cohabiting with him, so that he could gratify his sexual impulses.
This is clear from the confession of Lopez to the witnesses Rodriguez and Ragay, that he was in love with
appellant, 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 appellant's parents)
that must be viewed in its totality. Thus considered, the conveyance was clearly predicated upon an
illicit
causa

In the present case, it is scarcely disputable that Lopez would not have conveyed the property in
question had he known that appellant would refuse to cohabit with him; so that the cohabitation was an
implied condition to the donation, and being unlawful, necessarily tainted the donation itself.

Gonzales v. Trinidad, 67 Phil 682 (HO)

Topic: Cause of contracts: as distinguished from motive – Art. 1351

FACTS:

● In November 11, 1931, Primitivo Trinidad and Maria Ynares executed a deed of sale of
an urban property in Manila in favor of Amparo Gonzalez and Alfredo Trinidad for
10,000 pesos.
● This property was mortgaged in the Bureau of Land for 6,500 pesos, Gonzalez and
Trinidad assumed the encumbrance. However, this sale was simulated and Trinidad and
Ynares did not receive payment for the sale of the land.
● The sale was only to prevent property from attachment to Dr. Ramon Papa who has a
4,000- peso credit executed by Primitivo Trinidad.
● Before the credit was paid for, Ramon Papa died and the credit to be paid for was
adjudicated to Carmen Papa.
● Carmen and Primitivo agreed that Primitivo would pay her as soon as he had the money
to do so.
 ● After the attachment was prevented, Primitivo filed a suit against Alfredo and the CFI
ruled in favor of that the deed of sale is null and void and dismissed plaintif ’s action and
defendant’s counterclaim under Article 1305 and 1306 of the Civil Code.
● Primitivo appealed in the CA who reversed the ruling of the CFI declaring the deed of
sale null and void and ordering the cancellation of the transfer certificate of title by the
registrar of deeds of said city.
● Gonzalez and A. Trinidad filed a petition for certiorari for this ruling.

ISSUE:

Whether or not the Court of Appeals erred declaring Article 1305 & 1306 of the Civil Code
inapplicable in this case?

RULING:

NO. The CA did not err in their ruling to reverse the CFI’s decision because Article 1305 and
1306 are not applicable when the contract between parties due illegal consideration or subject
matter.

If the contract of sale was onerous and the consideration of 10,000 pesos was lawful and not
penalized by law, it would have been applicable. In this case, the contract was fictitious and the
sale was simulated, the consideration was lacking so the contract is null and void per se or
nonexistent.

Effect of Lack of Cause: It must also be noted that in applying the provision of Art. 1352
regarding the effect of an unlawful cause, it is always necessary to consider the provisions of
Arts. 1411 and 1412 of the Code. It must be observed that these provisions presuppose the
existence of an illicit or illegal cause which is determinative of the nullity of the contract.
Accordingly, they cannot be applied to simulated or fictitious transfers of property, where the
motive of the grantor may be either to defraud his creditors or to avert the possible attachment
of the property.

As stated in 1351, the cause of the contract should not be confused with the motive of the
contracting parties.
Further, Manresa creates a distinction between consideration and motive: But when the
notion of consideration is applied to contracts,..., the why of the contacts, the essential
reason which moves the contracting parties to enter into the contract.

In this sense, expressed in the provisions of the Code, 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 the wills which concur in consent.

In a contract like that of a 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 article 1274.

Additional Jurado Notes:

It must also be observed that the illegality must be with respect to the cause or the object of the
contract and not with respect to the motives of the contracting parties. Thus, if the plaintiff transfers to
the defendant a parcel of land by means of a fictitious deed of sale for the purpose of averting its
attachment by his creditors, it is clear that the principle, enunciated in Art. 1412 of the Civil Code is not
applicable, since what is illegal is the motive of the transferor and not the object or the cause of the
contract.

Velez v. Ramas, 40 Phil 787 (Laguna)

Topic: CAUSE
FACTS:

The defendant Roberto Quirante is the father of Restituta Quirante (wife of defendant Ramas).
Prior to the perfection (birth) of the contract, Teodoro Velez and wife, Hermenegilda Chiong Veloso
(plaintiffs), were the owners of a pawnshop and had employed Restituta Quirante. While employed,
Restituta Quirante abstracted various sum of money belonging to the plaintiffs, amounting altogether to
P 2,303.60, under conditions which supposedly constituted the offense of estafa.
To prevent said woman from being brought before the courts for the unlawful act she has
executed, the defendants subscribing the contract in question, have guaranteed to the said plaintiffs the
payment of the aforesaid sum plus an interest of 12% per annum to bring against Restituta Quirante.
Whereas, by virtue of the foregoing obligation, said Velez and Veloso agree to suspend the action they
intend to bring against Restituta Quirante.
Thus action was instituted in the Court of First Instance of the Province of Cebu by the plaintiff,
Teodoro Velez and his wife, to recover of the defendants, Salomon Ramas and Roberto Quirante, a sum
of money evidenced by a written obligation signed by said defendants on July 30, 1917, wherein they
acknowledged themselves to be jointly and severally bound for the payment to the plaintiff of the sum
of P 2,303.60. It is admitted that the defendant Ramas had paid P300 upon said obligation prior to the
institution of the suit, leaving a balance of P 2,003.60. Salomon Ramas answered the complaint,
admitting in effect the facts alleged therein, and stating as his sole ground of defense that the alleged
contract was illegal on its face. This defendant further interposed a counterclaim, seeking to recover P
300 which he had already paid. The defendant Roberto Quirante did not appear, and no defense was
made for him. When the case was submitted for decision the trial court sustained the defense, absolved
both the defendants from the complaint and gave judgment upon the counterclaim in favor of Salomon
Ramas jointly and severally against the plaintiffs for the sum of P 300, with interest at the legal rate from
the date the answer was filed. From this judgment the plaintiffs appealed.
ISSUE: WON Contract is valid

DECISION: NO, THE PURPOSE OF THE CONTRACT WAS TO PREVENT PROSECUTION OF CRIME. ARTICLE
1352 (Article 1275 of the Civil Code), “Contracts without cause, or with unlawful cause, produce no
effect whatever. The cause is unlawful if it is contrary to laws, morals, good customs, public order or
public policy.” As declared by the court, a contract based upon an unlawful consideration or designed to
promote an unlawful object is and always has been void ab initio by the common law, by the civil law,
moral law, and all laws whatsoever. It is immaterial whether the illegal character of the contract is
revealed in the matter of the consideration, in the promise as expressed in the agreement, or in the
purpose which the agreement, though legal in expression, is intended to accomplish. If the illegality
lurks in any element, or even subsists exclusively in the purpose of the parties , it is fatal to the validity of
the contract. The machinery for the administration of justice cannot be used for an unlawful purpose.

Liam Law v. Olympics Sawmill, 129 SCRA 449 (Mag-aso)

Topic: Cause

Facts: Liam Law loaned P10k w/o interest to Olympics Sawmill partnership and Elino Lee Chi, as the
managing partner. The loan became due but was not paid on the due date, with the debtors asking for
an extension of 3 months.

They executed another document where the payment of the P10k was extended to 3 months (April 30,
1960) but the obligation was increased by P6K.

Olympics Sawmill again failed to pay. Liam Law instituted the collection case. Olympics Sawmill admitted
the P10k principal obligation but claimed that the additional P6k constituted usurious interest.

Issue: WON the P6k obligation was illegal.

Ruling: No.

Under Article 1354 of the Civil Code, in regards to the agreement of the parties relative to the
P6,000.00 obligation, "it is presumed that it exists and is lawful, unless the debtor proves the
contrary". No evidentiary hearing having been held, it has to be concluded that defendants had not
proven that the P6,000.00 obligation was illegal. We view the P6,000.00 obligation as liquidated
damages suffered by plaintiff, representing loss of interest income, attorney's fees and incidentals.

S/n: main issue of the case is w/n the addtl P6k constituted usurious interest (no) - Section 9 of the Usury Law (Act 2655) “The
person or corporation sued shall file its answer in writing under oath to any complaint brought or filed against said person or
corporation before a competent court to recover the money or other personal or real property, seeds or agricultural products,
charged or received in violation of the provisions of this Act. The lack of taking an oath to an answer to a complaint will mean
the admission of the facts contained in the latter.”

The foregoing provision envisages a complaint filed against an entity which has committed usury, for the recovery of the
usurious interest paid. In that case, if the entity sued shall not file its answer under oath denying the allegation of usury, the
defendant shall be deemed to have admitted the usury. The provision does not apply to a case, as in the present, where it is the
defendant, not the plaintiff, who is alleging usury.

Moreover, for sometime now, usury has been legally non-existent. Interest can now be charged as lender and borrower may
agree upon. The Rules of Court in regards to allegations of usury, procedural in nature, should be considered repealed with
retroactive effect.

C. Forms of Contracts

1. Forms
Tan v. Lum, 296 SCRA 455

Petitioners:
- Marcelino Tan
- Flora et al.:
- Luz S. Briones
- Carlos D. Briones
- Conrado Briones
- Felicisimo Briones
- Flora Briones Jovellanos
Respondents:
- Spouses Jose Renato Lim and Cynthia Go
- Ambrocio, et al.
- Adoracion Reyes
- Purification Reyes
- Oscar Reyes
- Lilia Reyes
- Imelda Reyes
- Antonio Briones
- Ambrocio Briones
 - Felisa Briones
- Juanito Briones
- Arturo Biones
- Teofila Briones
- Virginia Briones
Facts:
Victoriano and Joaquin Briones owned a property with an area of 488 square meters. When
they died one-half (1/2) share of the property was inherited by Victoriano’s children, collectively
referred to in this case as Flora, et al. (petitioners) The other half of the property was inherited by
Joaquin’s side of the Briones family, referred to as Ambrocio, et al., (respondents).

The respondents Ambrocio, et al. (heirs of Joaquin) sold their interest in the property, consisting
of 244 square meters, to Jose Renato Lim. Some of the deeds of absolute sale described their interest
sold as "the undivided 1/18th/share southeastern portion" while the others referred to an attached
sketch to indicate the specific 1/18th portion sold. On the other hand, petitioners Flora, et al. (heirs of
Victoriano) leased to co-petitioner Marcelino Tan the remaining one-half (1/2) portion of the property,
for a period of three (3) years beginning January 1, 1983 to December 31, 1985.
In Civil Case No. 6518, Marcelino Tan filed a case for injunction and damages. Alleged in his
complaint that respondent Lim padlocked the gate of the portion he purchased from the other co-
owners of the land which is fronting Ancheta Street, thereby preventing and depriving petitioner his
only means of ingress and egress from the property leased to him.

In Civil Case No. 6521 for Legal Redemption, the plaintiffs Flora et. al., alleged in their complaint
that they, together with respondents, Ambrocio et. al., are co-owners in pro-diviso shares of the parcel
of land covered by TCT No. 95314 of the Registry of Deeds of Tarlac, Tarlac. They further alleged that on
July 15 and August 25, 1983, herein private respondents sold and conveyed their shares in that parcel of
land to their co-respondents, the spouses Renato Lim and Cynthia Go, as evidenced by deeds of
absolute sale which are subject to the provision of Article 1620 of the New Civil Code on Legal
Redemption.

The trial a quo, rendered a decision in favor of the plaintiffs Mercelino Tan in Civil Case No. 6518
and Flora et. al., in Civil Case No. 6521. The court found that:

“Ambrocio, et al., failed to comply with Article 1620 of the Civil Code when they did not give a
written notice to petitioners Flora, et al. of the sale of their respective undivided interest on the
property before and at the time the deeds of sale were executed in favor of their co-respondents
Jose Renato Lim and Cynthia Go. The trial court also found that at the time of sale, co-ownership
existed between respondents Ambrocio, et al. and petitioners Flora, et al. The trial court said this
is borne out by the language of the deeds of absolute sale which states that what were sold were
the vendors' (Ambrocio, et al.) undivided interest on the same property and because the said
interest of the vendors were not yet titled or registered in their respective names. The trial court
then concluded that it was necessary for respondents Ambrocio, et al. to have notified the other
 co-owners of the sale as prescribed under Article 1620 of the Civil Code.”

Renato Lim and Cynthia Go appealed to the Court of Appeals and the court reversed the
decision of the court a quo. The court of appeals recognized Lim’s evidence in Civil Case 6518. From said
evidence the facts were established that respondents and petitioners were able to secure the issuance
of TCT No. 95314 in their names, and that they agreed to partition the property with respondents
Ambrocio, et al. getting the interior half of the property and the petitioners Flora, et al. getting the
anterior portion. That the respondents Ambrocio, et al. were to be given a right of way towards Ancheta
Street. It was the back portion of the property that respondent Lim purchased from Ambrocio, et al. and
he received no complaint about this at the time of the sale.

Note: No document was drawn up to embody and evidence the oral partition of the land by
petitioners and respondents.

Petitioners in this case appealed and contended that there was no oral partition between the
heirs of Joaquin and the heirs of Victoriano on the property and argued that there is no note or
memorandum or any deed of partition offered in evidence by respondents Ambrocio to substantiate
the claim of partition.

Issue:
Whether or not there was a partition of the property and if there was, is the oral partition valid.

Ruling:
Yes, there was a partition of the property and the oral partition of the property by the
petitioners and respondents are valid. The contract of lease between petitioners Flora, et al. and
petitioner Tan covered exactly one-half (1/2) of the disputed lot. This would clearly indicate that there
was an oral partition of the property between the petitioners Flora, et al. and respondents Ambrocio, et
al.

The fact that petitioners Flora, et al. alone leased to petitioner Marcelino Tan one-half of the portion of
the property unerringly point to the fact that they exercised the right of ownership over the said portion, to the
exclusion of the respondents Ambrocio, et al., considering that the lease agreement was executed without the
consent of the latter. Notably, the lease of the specific portion of the property is for a period of more than one (1)
year, which is an act of strict ownership. Petitioner Flora Briones-Jovellanos likewise candidly admitted that the
lease rentals were paid exclusively to petitioners.

On the petitioners' argument that there is no note or memorandum or any deed of partition
offered in evidence by respondents Ambrocio to substantiate the claim of partition.

The SC ruled that Contracts are obligatory in whatever form they may have been entered into
provided all essential requirements are present. There is no note or memorandum necessary for the
enforceability of a contract of partition. Article 1403 of the Civil Code enumerates the limited
instances when written proof of a contract is essential for enforceability. A contract of partition is not
one of the contracts mentioned.

San Lorenzo Dev’t. Corp. v. CA, 449 SCRA 99 (NAPOLES)

SAN LORENZO DEVELOPMENT CORPORATION, Petitioner, v. COURT OF APPEALS, PABLO S. BABASANTA,
SPS. MIGUEL LU and PACITA ZAVALLA LU, Respondents.

Facts

On Aug. 20, 1986, Spouses Miguel Lu and Pacita Zavalla sold two parcels of land to
respondent Pablo Babasanta at P15/sq.meter. Downpayment worth P50,000 was made by
Babasanta as evidenced by a memorandum receipt issued by Pacita Lu. Babasanta paid a total of
P200,000.

In May 1989, Babasanta, in a letter, demanded the execution of a final deed of sale in his favor,
and has informed the spouses through the same letter that he received info that the spouses have
sold the same parcels of land to another without his knowledge and consent.

Pacita Lu responded through a letter that though she agreed to sell, when the balance became due
and when she refused the price reduction he requested, Babasanta backed out of the sale and
claimed that she returned the sum of P50,000 to Babasanta through Eugenio Oya.

Babasanta then filed before the RTC a complaint for specific performance and damages against
Spouses Lu claiming that the lands had been sold to him. Spouses Lu in their answer claimed
that Pacita had originally obtained loans from Babasanta and had transformed the loan into a
contract to sell without Miguel Lu’s knowledge and consent. They further claim that Babasanta
failed to pay the balance despite repeated demands, and when Babasanta’s request for price
reduction was denied, that he rescinded the contract.

San Lorenzo Development Corp filed a Motion for Intervention alleging that it has legal interest
in the subject because the subject lands were sold to it, with the Spouses Lu executing in its favor
an Option to Buy, and subsequently, a Deed of Absolute Sale after paying P632,320. The
certificates of title were then delivered to SLDC by the spouses.

The RTC upheld the sale of the property to SLDC and ordered the Spouses Lu to pay Babasanta
P200,000 with legal interest plus P50,000.

Babasanta and the Spouses Lu appealed said decision. The CA reversed the lower court’s decision, and
declared that the sale between Babasanta and the Spouses Lu was valid.
Issues

1. WON there was a perfected contract of sale between the spouses Lu and Babasant

2. Who is the rightful owner of the property

Ruling

An analysis of the facts obtained in this case, as well as the evidence presented by the parties, irresistibly
leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell
and not a contract of sale. The distinction between a contract to sell and a contract of sale is quite
germane. In a contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in
a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and
unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor
until the full payment of the price, such payment being a positive suspensive condition and failure of
which is not a breach but an event that prevents the obligation of the vendor to convey title from
becoming effective.

While there is no stipulation that the seller reserves the ownership of the property until full payment of
the price which is a distinguishing feature of a contract to sell, the subsequent acts of the parties would
tell that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment
of the purchase price. The perfected contract to sell imposed upon Babasanta the obligation to pay the
balance of the purchase price.

There being an obligation to pay the price, Babasanta should have made the proper tender of payment
and consignation of the price in court as required by law. Mere sending of a letter by the vendee
expressing the intention to pay without the accompanying payment is not considered a valid tender of
payment. Consignation of the amounts due in court is essential in order to extinguish Babasanta’s
obligation to pay the balance of the purchase price. Glaringly absent from the records is any indication
that Babasanta even attempted to make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired obligatory force.

Since SLDC acquired possession of the property in good faith in contrast to Babasanta, who neither
registered nor possessed the property at any time, SLDC's right is definitely superior to that of
Babasanta's.

Vda de Espiritu v. CFI of Cainta, 47 SCRA 3542 (ORTEGA)

Topic: Forms

MARIA SAN MIGUEL VDA. DE ESPIRITU, petitioner,

vs.

HON. COURT OF FIRST INSTANCE OF CAVITE, ANASTACIA TOPACIO, JOSEFA

JARDINIANO and REGISTER OF DEEDS FOR THE PROVINCE OF CAVITE, respondents.

S/n: CFI of Cainta naa sa syllabus ni Gob but CFI of Cavite ra ako nakita.

Facts:

1. Sometime in 1948, defendants (Topacio) had verbally sold to Vda. De Espiritu the two
parcels of land in question for Three Thousand (P3,000.00) Pesos and, in consequence,
delivery thereof together with the corresponding transfer certificates of title was made to her.

2. But no deed of sale was executed at the time because private respondents promised
they would do so as soon as the titles which were then in the name of their predecessor in
interest were transferred to their names.

3. Despite demands for the execution of such deed, said respondents, "without justifiable
cause therefor adamantly failed and refused — to comply with (such) just and valid
demand."

Arguments of the Defendants:

a. Denied that the transaction was a sale and alleged that it was merely a
contract of antichresis whereby petitioner had loaned to them P1,500.00, for
which she demanded the delivery of the lands in question and the titles
thereto as security, with the right to collect or receive the income therefrom
pending the payment of the loan.

*Antichresis is a contract for security between the debtor and his creditor; a transfer of
possession of the pledged real property from the debtor to the creditor, including the the
fruits or rent income therefrom, in lieu of payments on the loan, including interest, for any
such time period as is provided for in the contract.

b. Interposed (1) unenforceability by action of the alleged sale, under the statute of
frauds, and (2) prescription of petitioner's action, the same having allegedly accrued
in 1948.

Arguments of the Plaintiff:

a. Contends that an action to compel compliance to a promise to execute the

necessary public document of sale of real estate does not prescribe.

4. Court of First Instance favoured the Defendants’ formal motion to dismiss on the ground
of prescription.
Issue:

What is the nature of the contract entered into by the parties?

Ruling:

ORAL CONTRACT.

In a broad sense, at least, the nature of petitioner's action may be said to be one founded on an
oral contract, which, to be sure, cannot be considered as among those rendered unenforceable
by the statute of frauds.

The applicable provision here is Article 1145 which reads thus:

ART. 1145. The following actions must be commenced within six years:

(1) Upon an oral contract;

(2) Upon a quasi-contract.

Furthermore, assuming otherwise, the only other possibility is that petitioner's case comes
under Article 1149 providing:

ART. 1149. All other actions whose periods are not fixed in this Code or in other laws
must be brought within five years from the time the right of action accrues.

In either case, since the cause of action of petitioner accrued in 1948 and the present suit was
instituted in 1964 or sixteen years later, and none of the interrupting circumstances
enumerated in Article 1155 (Article 1155. The prescription of actions is interrupted when they
are filed before the court, when there is a written extrajudicial demand by the creditors, and
when there is any written acknowledgment of the debt by the debtor.) has been shown to have
intervened, it is unquestionable that petitioner's action filed in the court below has already
prescribed.

S/n: Most part of the case discussed prescription. Technically, since the agreement was founded upon an “oral contract”, the
plaintiff should have commenced the action within six years. Kindly note the “assuming otherwise”, in which the court is telling
nga pwedi ma consider sya under Art. 1149, but within 5 years dapat ang action. So maskin nag asa sya ma belong, ni prescribe
na gyud sya.

There were discussions also on whether or not na receive ba sa plaintiff or counsel for the plaintiff ang mga Order, which niana
ang Court nga dili clear ang respondent sa pag prove (since they alleged nga na receive) sa fact nga na receive gyud sa side sa
plaintiff.

P.S. I am confused about this case but something relevant sa ato topic is maybe on “Oral Contract” then in this case, connected
to prescription lang ang context. Also, I phrased the issue in a question form lang kay naglibog ko how. Then not sure also if I
phrased the question correctly. Pasensya and thank you.
Shaffer vs. Palma, 131 Phil 22 March 1, 1968
Full title: Eufemia Shaffer v Virginia Palma and Bonifacio Palma

FACTS (recits):
- This case focuses on the two complaints filed by Shaffer, seeking the Court’s intervention in
recovering the excess of the P150K she issued in favor of the respondents in order to pay the
existing loans and advances done by her late husband, Nicolas Lynevitche (managing director of
British American Engineering Company (BAEC). The respondents refused to do so, when in fact
what the late Nicolas only owed them was a total of P32, 000. The complaint also sought to
recover the 175 shares of stocks assigned to the respondents by late Nicolas as additional
guarantee. Now that it has been paid off, it was just right that the securities be returned.
- According to the facts, it was said that Lynevitche executed a deed of assignment, transferring
the rights from the corporation as beneficiary and into the favor of Shaffer and Virginia Palma.
As for the co-assignment of Palman, the intention was to only serve as additional security. This
was according to the filed complaint of Shaffer, to the knowledge of the Palmas. They knew the
intention of the arrangement and yet they decided not to follow it.
- Shaffer’s first complaint was dismissed on the grounds that she had no legal capacity to sue, that
it should have been BAEC complaining. She appealed and submitted her amended complaint
(full version below) and clarified that she had a legal interest to protect, seeking to recover what
was lawfully hers (excess of the P150k + 175 shares).

s/n: Lynevitche died in Tokyo, Japan. The insurance was thereon transferred by the insurance company

The amendment complaint contains (you don’t have to mention this in recits, this is only for your guide
in case Gobie asks):
That the plaintiff and the late Nicolas Lynevitche lived as husband and wife; that on March 27, 1962,
Nicolas Lynevitche had himself insured for P300,000.00 with the Great American Insurance Company of
New York against accidental death, designating the British American Engineering Corporation, in which
he was the managing director, the beneficiary; that the plaintiff and Nicolas Lynevitche had obtained
loans and advances from the defendants, totalling P32,000.00; that to secure the payment of the loans
and advances obtained by plaintiff and Nicolas Lynevitche from the defendants, Nicolas Lynevitche
delivered to the defendants 175 shares of stock of the British American Engineering Corporation; that
on April 17, 1962, Nicolas Lynevitche, as managing director of the British American Engineering
Corporation, executed a deed of assignment of the corporation's right as beneficiary in his life insurance
policy in favor of plaintiff Eufemia V. Shaffer and the defendant Virginia G. Palma, which deed of
assignment was ratified and confirmed by the board of directors of the British American Engineering
Corporation on May 10, 1962; that the defendants acknowledged and agreed with the plaintiff that
the interest of defendant Virginia G. Palma as co-assignee of the proceeds of the insurance policy of
Nicolas Lynevitche was to the extent of the total amount of the loans and advances made by the
defendants to Nicolas Lynevitche and the plaintiff during the lifetime of said Nicolas Lynevitche; that
on May 26, 1962, Nicolas Lynevitche died in Tokyo, Japan, in an accident, and by reason thereof the
Great American Insurance Company, on August 15, 1962, issued a check for P300,000.00 in favor of
Eufemia V. Shaffer and Virginia G. Palma as assignees of the proceeds of the insurance policy of Nicolas
Lynevitche; that confirming the agreement that the interest of defendant Virginia Palma in the proceeds
of the insurance policy was to the extent of the amount of the loans and advances which the defendants
had given to Nicolas Lynevitche and the plaintiff, the defendant Virginia Palma endorsed along with the
plaintiff the check for P300,000.00 and the plaintiff deposited the whole amount with the Hongkong and
Shanghai Banking Corporation in her name and credit, to await adjustment and determination of the
exact amount of the loans and advances which were obtained from the defendants by Nicolas
Lynevitche and the plaintiff which was payable out of the proceeds of the insurance that defendants,
availing of the plaintiff's feeling of gratitude towards them and manifesting their need for funds,
prevailed upon plaintiff to issue a check for P150,000.00 in favor of defendant Virginia G. Palma, upon
the condition that after the adjustment and accounting of the above-mentioned advances and loans the
excess of the amount stated in the check over the amount of the loans and advances would be refunded
to the plaintiff; that pursuant to said representation of the defendants, plaintiff issued a check in favor of
defendant Virginia G. Palma, and the latter endorse the check to her husband who in turn cashed the
same; that thereafter plaintiff requested the defendants to make adjustment and full accounting of the
loans and advances and to return to her the balance of the P150,000.00 and the 175 shares that were
given as security, which shares had been endorsed to plaintiff prior to the death of Nicolas Lynevitche;
that the plaintiff made repeated demands on the defendants to return the sum of P118,000.00 which
represented the excess over the loans and advances and also the 175 shares, but the defendants
refused to do so. The plaintiff in her amended complaint therefore, prayed that the defendants be
ordered to pay her, in solidum, the slim of P118,000.00 with legal interest from the date of filing of the
complaint and to return to her the 175 shares that were pledged to secure the payment of the loans and
advances, and also to pay P10,000.00 as attorney's fees, plus the costs of the suit.

ISSUE: w/n Shaffer has the legal capacity to sue in order to retrieve the excess of the P150K that she
provided to respondents

RULING: Yes, she has. It was present in the amendment complaint that the plaintiff is suing in the
capacity of ‘one who has an interest to protect’. The complaint was only to recover the excess of P150K
that she issued in favor of defendants, after the accounts have been adjusted. The extent of Virginia as
co-assignee was only limited to the total amount of the loans and advances obtained by Lynevitche. The
175 stocks of shares is rightly claimed as it was only provided as security. Thus there was no reason for
the trial court to dismiss the case of Shaffer, the first and second complaints are in essence the same in
form.

What can be learned from this case is that all pleadings must be liberally construed so as to do
substantial justice. This avoids multiplicity of suits, and the court can focus in resolving real
controversies. It is true that Article 1358 of the Civil Code provides that contracts involving more than
P500.00 must appear in writing but nothing is said therein that such requirement is necessary for their
validity or enforceability. It has been held that the writing required under Article 1358 is merely for
convenience and so the agreement alleged in the amended complaint in the present case can be
enforced even if it may not be in writing.

Hawaiian Phil. Co. v. Hernaez, 45 Phil 746

Full text: https://www.chanrobles.com/scdecisions/jurisprudence1924/feb1924/gr_l-21382_1924.php

Topic: Forms

Facts: Jose Hernaez executed a real estate mortgage upon a certain parcel of land to Alberto Kappeler
which kappeler also assigned it to Hawaiian Philippine company. Hawaiian alleges that Hernaez had
never paid any portion of the indebtedness which caused the company to file an action in court to
recover the 10,000 unpaid upon the mortgage plus interest at 10% per annum (year 1919-1922).
Another action was also filed to recover 404.28php for the land taxes.

As a defense Hernaez stated that on the occasion when he was to pay the interest due on the mortgage,
Mr. Gemperle the legal representative of Kappeler, agreed to extend the time for the payment of
10,000php for a term of two years. (until August 1, 1924)

Issue: WON mere verbal agreement is binding in this case.

Held: No. Although as a General Rule, writing it in a public instrument is not a requirement to create a
binding contract. The purpose of writing in a public instrument is only to insure its efficacy so that after
the existence of the act or contract has been admitted, the parties bound may be compelled to execute
the document. It is a form of extra assurance on the legitimacy and validity of the said agreement.

However, in this case, the land here mortgaged is a registered land, as the mortgage of kappeler and the
assignment to Hawaiian Phil. Company are noted as encumbrances (a burden or an impediment)
affecting the property and the plaintiff as a third party as well. The interest of the Philippines here will
be best served by a strict adherence to the provisions of the Land Registration Law.

Additional: it is a well settled rule that owners of registered land may mortgage the same by executing a
mortgage deed, and may be extended or otherwise dealt with by the mortgage at any form of deed or
instrument sufficient in law for the purpose.

Dauden v. delos Angeles, 137 Phil 900

Topic: FORMS
Ponente: Reyes, JBL, Acting CJ
POINT: In our contractual system it is not enough that the law should require that the contract be in
writing, as it does in Article 1358. The law must further prescribe that without the writing the contract is
not valid or not enforceable by action.

Article 1356. Contracts shall be obligatory, in whatever form they may have been entered into, provided all
the essential requisites for their validity are present. However, when the law requires that a contract be in
some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that
requirement is absolute and indispensable. In such cases, the right of the parties stated in the following
article cannot be exercised. (1278a)

Article 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment
of real rights over immovable property; sales of real property or of an interest therein are governed by
articles 1403, No. 2, and 1405;

(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of
gains;

(3) The power to administer property, or any other power which has for its object an act appearing or which
should appear in a public document, or should prejudice a third person;

(4) The cession of actions or rights proceeding from an act appearing in a public document.

All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a
private one. But sales of goods, chattels or things in action are governed by articles, 1403, No. 2 and 1405.
(1280a)

FACTS:
Petitioner: Marlene Dauden-Hernaez
Respondents: Hon. Walfrido De Los Angeles (Judge CFI QC), Hollywood Far East Productions, INc
(Private), Ramon Valenzuela (Private - Pres and GM of HFEPI)

Petitioner filed a complaint against private respondents to recover a balance (P14, 700) allegedly due
for her services as leading actress in two motion pictures produced by HFEPI, and to recover damages.

De Los Angeles dismissed the complaint citing that the claim was not evidenced by any written
document, either private or public, and that the complaint was defective on its face for violating
Articles 1356 and 1358 of the Civil Code.

Alleged violations
1356 - The contract sued upon was not alleged to be in writing
1358 - That “writing” was absolute and indispensable, because the amount involved exceeds
P500 (last paragraph Art 1358)

The court denied reconsideration and the leave to amend. A second motion was filed and was also
dismissed (pro forma - more or less the same as the first motion).
Instant Petition - writ of certiorari

Issue:
W/N the contract between petitioner and private respondents was invalid?

Ruling:
No. The contract was not invalid.

In general, contracts are valid and binding from the perfection from their perfection regardless of form
whether they be oral or written.

Article 1315 and 1356 provides:

Article 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping good faith, usage and law.

Article 1356 (first part). Contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity be present…
Note however that this general rule has exceptions, such as the second paragraph of Art 1356:
However, when the law requires that a contract be in some form in order that it may be valid or
enforceable…

Exceptions:
a. Contracts for which the law itself requires that they be in some particular form (writing)
in order to make them valid and enforceable (so-called solemn contracts) - donation
b. Contracts that the law requires to be proved by some writing (memorandum) of its
terms, as in those covered by the old Statute of Frauds. Contracts not being probable by
mere oral testimony, and are exceptional in requiring a writing embodying the terms
thereof for their enforceability by action in court.

In this case, the contract sued upon by petitioner (compensation for services) did not come under either
exceptions.

Though it appears that the contract sued was included in Article 1358, last clause, providing that "all
other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a
private one." Article 1358 nowhere provides that the absence of written form in this case will make the
agreement invalid or unenforceable. On the contrary, Article 1357 clearly indicates that contracts
covered by Article 1358 are binding and enforceable by action or suit despite the absence of writing.

ART. 1357. If the law requires a document or other special form, as in the acts and
contracts enumerated in the following article, the contracting parties may compel each other to
 observe that form, once the contract has been perfected. This right may be exercised
simultaneously with the action the contract.

It thus becomes inevitable to conclude that both the court a quo as well as the private respondents
herein were grossly mistaken in holding that because petitioner Dauden's contract for services was not
in writing the same could not be sued upon, or that her complaint should be dismissed for failure to
state a cause of action because it did not plead any written agreement.

The basic error in the court's decision lies in overlooking that in our contractual system it is not enough
that the law should require that the contract be in writing, as it does in Article 1358. The law must
further prescribe that without the writing the contract is not valid or not enforceable by action.

2. Reformation of Instruments
San Miguel Brewery v. Law Union and Rock, 40 Phil 674

Sarming v Dy
GR No. 133643 /383 SCRA 131
June 6, 2002
Topic: Reformation of Instruments

Facts:
Petitioner: Heirs of Silveria Flores
Respondents: Heirs of Alejandro Delfino

1. Valentina Unto Flores owned Lot 5734 and Lot 4163

a. Her three children : Jose, Venancio, Silveria took possession of Lot 5734
b. Then was passed down to children and grandchildren
2. The other Lot 4163 is under the name of Silveria, but was subdivided between
Jose and Silveria
a. Two rows of coconut trees planted in the middle of the lot as boundary line
3. The heirs of Jose sold their portion to Alejandra Delfino (½ of Lot 4163)
4. Before preparing the documents, Silveria declared she owned half of the lot and
the other half belonged to the vendors(heirs of Jose) and she was selling the
coconut trees.
5. She was asked to bring the title of Lot 4163 but by mistake she brought the title
of Lot 5734
6. Believing that the title was correct, they created a deed and so Title for Lot 5734
was transferred to Alejandra’s name.
7. Alejandra took possession of the other half of Lot 4163
 8. Two years later, Alejandra purchased the adjoining portion of the lot.
a. She discovered that what was designated in the deed was the wrong lot.
9. So she went to the lawyer and Silveria and inquired about the Registry of Deeds
about the status of Lot 4163, and found that it was still the same.
a. They proceeded to have the title released to Silveria who promised to give
it to the lawyer for reformation of the deed of sale.
10. But Silveria did not give it to them despite repeated demands.
11. Alejandra filed a complaint against Silveria for reformation of the deed of sale.

Petitioner: Silveria Flores claimed that she was the sole owner of Lot 4163 as shown by
OCT No. 3129-A and consequently, respondents had no right to sell the lot. According
to her, the contract of sale clearly stated that the property being sold was Lot 5734, not
Lot 4163. She also claimed that respondents illegally took possession of one-half of Lot
4163.

Issue:
(1) whether or not there is a cause of action for reformation of instrument against
Silveria Flores, and consequently the petitioners;
(2) whether or not reformation of the subject deed is proper by reason of mistake in
designating the correct lot number;

Ruling:

1. petitioners contend that there is no cause of action against them and their
predecessor-in-interest, Silveria Flores, because she and they were not parties to
the contract sought to be reformed.

However, a close perusal of the deed would show that Silveria Flores was a party to
the contract. She is not only the seller of the coconut trees worth P15 but she was also
one of the heirs entitled to the estate of Venancio and Maxima, one of the heirs of Jose
Flores. Her name did not appear as one of the sellers of one-half lot to Alejandra Delfino
because she never sold her share. What was sold was the one-half share of Jose
Flores, as represented by his heirs. It is also established that it was Silveria Flores
herself who delivered the subject lot to the vendee Alejandra Delfino.

Through her actions, Silveria Flores had made the parties to the deed believe that the
lot intended to be the object of the contract was the same lot described in the deed.
Thus, by mistake or accident, as well as inequitable conduct, neither she nor her
successors-in-interest could deny involvement in the transaction that resulted in a deed
that now ought to be reformed.
 2. petitioners contend respondents failed to show, specifically, a cause of action for
the reformation of the instrument in question.

Art. 1359. When, there having been a meeting of the minds of the parties to a contract,
their true intention is not expressed in the instrument purporting to embody the
agreement by reason of mistake, fraud, inequitable conduct or accident, one of the
parties may ask for the reformation of the instrument to the end that such true intention
may be expressed.

If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds
of the parties, the proper remedy is not reformation of the instrument but annulment of
the contract.

An action for reformation of instrument under this provision of law may prosper only
upon the concurrence of the following requisites:
(1) there must have been a meeting of the minds of the parties to the contact;
(2) the instrument does not express the true intention of the parties; and
(3) the failure of the instrument to express the true intention of the parties is due to
mistake, fraud, inequitable conduct or accident

All of these requisites, in our view, are present in this case.

(1)There was a meeting of the minds between the parties to the contract
(2)but the deed did not express the true intention of the parties
(3)due to a mistake in the designation of the lot subject of the deed. There is no dispute
as to the intention of the parties to sell the land to Alejandra Delfino but there was a
mistake as to the designation of the lot intended to be sold as stated in the Settlement
of Estate and Sale.

Dizon v. Gaborro, 83 SCRA 688 (CLOMATA)

Article 1359. When, there having been a meeting of the minds of the parties to a contract, their true
intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake,
fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument
to the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties,
the proper remedy is not reformation of the instrument but annulment of the contract.

Article 1360. The principles of the general law on the reformation of instruments are hereby adopted
insofar as they are not in conflict with the provisions of this Code.

Article 1361. When a mutual mistake of the parties causes the failure of the instrument to disclose their
real agreement, said instrument may be reformed.

FACTS:

Petitioner Jose P. Dizon was the owner of the three (3) parcels of land. He constituted a first mortgage
lien in favor of the Development Bank of the Philippines (DBP) in order to secure a loan in the sum of
P38,000.00 and a second mortgage lien in favor of the Philippine National Bank (PNB) to cure his
indebtedness to said bank in the amount of P93,831.91. Petitioner Dizon having defaulted in the
payment of his debt, DBP foreclosed the mortgage extrajudicially. Gaborro became interested in the
lands of Dizon. Dizon originally intended to lease to Gaborro the property which had been lying idle for
some time. But as the mortgage was already foreclosed by the DPB trial the bank in fact purchased the
lands at the foreclosure sale on May 26, 1959, they abandoned the projected lease.

They then entered into the DEED OF SALE WITH ASSUMPTION OF MORTGAGE

*** in consideration of the above premises and the amount of P131,831.91 in hand paid in cash by the
VENDEE unto the VENDOR, receipt whereof is hereby acknowledged by the VENDOR to his entire and
full satisfaction, and the assumption by the VENDEE of the entire mortgage indebtedness, both with the
Development Bank of the Philippines and the Philippine National Bank above mentioned, the VENDOR
does by these presents, sell,... transfer and convey, as he had sold, transferred, and conveyed, by way of
absolute sale, perpetually and forever, unto the VENDEE.

The second contract executed the same day, is called Option to Purchase Real Estate... the option of
repurchasing the following described properties. Said option shall be valid and effective within the
period from January, 1965 to December 3, 1970, inclusive, upon payment of the amount of P131,83 1.91
plus an interest of 8% per annum. The sum of P131,813.91 which purports to be the consideration of the
sale was not actually paid by Alfredo G. Gaborro to the Petitioner. The said amount represents the
aggregate debts of the petitioner with the Development Bank of the Philippines and the Philippine
National Bank.

After the execution of said contracts, Alfredo G. Gaborro took possession of the three parcels of land in
question. Herein Assignor (Dizon) does hereby transfer and assign to the herein Assignee (Gaborro), his
heirs, successors and assigns the aforesaid right to redeem the aforementioned properties above
described. That with this document the herein Assignor relinquishes any and all rights to the said
properties including the improvements existing thereon. After the execution of the conditional sale to
him, Gaborro made several payments to the DBP and PNB. He introduced improvements, cultivated the
lands, raised sugarcane and other crops and appropriated the produce to himself. He also paid the land
taxes thereon.

Jose P. Dizon through his lawyer, Atty. Leonardo Abola, wrote a letter to Gaborro informing him that he
is formally offering to reimburse Gaborro of what he paid to the banks but without, however, tendering
any cash, and demanding an accounting of the income... and of the property, contending that the
transaction they entered into was one of antichresis. Gaborro did not accede to the demands of the
petitioner. Dizon instituted a complaint in the Court of First Instance of Pampanga, against Gaborro,
alleging that the documents Deed of Sale With Assumption of Mortgage and the Option to Purchase
Real Estate did not express the true intention and agreement between the parties. Dizon contended that
their real agreement was not an absolute sale of the said parcels of land but merely an equitable
mortgage or conveyance by way of security for the reimbursement or refund by Dizon to Gaborro.

The trial court held that the true agreement between Jose P. Dizon, the plaintiff therein, and the
defendant Alfredo G. Gaborro is that the defendant would assume and pay the indebtedness of the
plaintiff to the Development Bank of the Philippines and the Philippine National Bank, and in
consideration therefor, the defendant was given the possession and enjoyment of the properties in
question until the plaintiff shall have reimbursed to defendant fully the amount of P131,831.91 plus 6%
interest per annum. The Court of Appeals affirmed the decision with the modification that the plaintiff-
appellant has the right to refund or reimburse the defendant-appellee the sum of P131,831.91 with
interest at 8% per annum. Said right to be exercised within one (1) year from the date the judgment
becomes final and if he fails to do so within the said period, then he is deemed to have lost his right over
the lands forever.

ISSUE:

WON the agreement in the instrument of Deed of Sale with Assumption of Mortgage and the Option to
Purchase Real Estate constituted executed by Dizon and Gaborro may be reformed?

HELD:

Yes, the agreement in the instruments may be reformed.

Mistake is a ground for the reformation of an instrument which there having been a meeting of the
minds of The parties o a contract, their true intention is not expressed in the instrument purporting to
embody the agreement, and one of the parties may ask for such reformation to the end that such true
intention may be expressed. (Art. 1359, New Civil code). When a mutual mistake of the parties causes
the failure of the instrument to disclose their real agreement, said instrument may be reformed. (Art.
1361, New Civil Code.)

In the case here, in light of the foreclosure proceedings and sale of the properties, the true intention of
the parties is that respondent Gaborro would assume and pay the indebtedness of petitioner Dizon to
DBP and PNB, and in consideration therefor, respondent Gaborro was given the possession, the
enjoyment and use of the lands until petitioner can reimburse fully the respondent the amounts paid by
the latter to DBP and PNB. To accomplish the following ends: (a) payment of the bank obligations; (b)
make the lands productive for the benefit of the possessor, respondent Gaborro, (c) assure the return of
the land to the original owner, petitioner Dizon, thus rendering equity and fairness to all parties
concerned. In view of all these considerations, the law and Jurisprudence, and the facts established. It
was a mistake for the parties to execute the Deed of Sale With Assumption of Mortgage and the Option
to Purchase Real Estate and stand on the literal meaning of the file and stipulations used therein. The
instruments must, therefore, be reformed in accordance with the intention and legal rights and
obligations of the parties — the petitioner, the respondent and the Banks. But in the sense that
petitioner Jose P. Dizon has the right to reacquire the three parcels of land within the one-year period
indicated below by refunding or reimbursing to respondent Alfredo G. Gaborro or the Judicial
Administratrix of his Estate whatever amount the latter has actually paid on account of the principal
only, of the loans of Dizon with the DBP and PNB, excluding the interests and land taxes that may have
been paid or may have accrued, on duly certified financial statements issued by the said banks.

Thus, the agreement in the instruments may be reformed.

City of Cabanatuan v. Lazaro, 39 SCRA 653

Topic: Reformation of Instruments

THE CITY OF CABANATUAN, represented by the City Mayor, plaintiff-appellant,

vs.

DR. JUAN S. LAZARO AND NIEVES MANINGAS, defendants-appellees.

Facts:

In its said complaint, plaintiff-appellant sought the reformation of an agreement pursuant to Article 1359
of the New Civil Code. The said lease was entered into on 28 December 1959 between plaintiff-
appellant, through its City Mayor, and defendants-appellees over a portion of Lot No. 1511 of
Cabanatuan Cadastre situated in the City of Cabanatuan which plaintiff-appellant owned, by specifically
deleting paragraph 6 thereof. The said paragraph gives the defendants-appellees an option to renew the
lease for another 10 years after the expiration of the original period, and reads:
 “6. That after the expiration of the ten (10) years from January 1, 1960, the party of the second
part may, at his option, choose to extend this lease for another period of ten years.”

It is alleged, among others, that due to mistake or accident, the aforesaid provision was inserted in
the agreement and that the same does not reflect the true intention of the parties. It is contended
that while Resolution No. 1030 of the Municipal Board of the City of Cabanatuan, authorizes the City
Mayor to enter into a contract of lease on its behalf "for a period of 10 years", it does not provide for
authority to extend the period.

Defendants-appellees moved for the dismissal of the complaint.

Plaintiff-appellant moved to have the order reconsidered.

Defendants-appellees opposed the motion. While the motion for reconsideration was pending,
defendants-appellees manifested to the court that plaintiff-appellant already sold the lot, subject matter
of the lease, to third persons. Since plaintiff-appellant is no longer the owner of the property,
defendant-appellees reiterated their prayer for the denial of the motion for reconsideration.

The motion for reconsideration was denied by the lower court in its order of 2 February 1968 for lack of
merit, hence this appeal.

Issue:

1. WON the action for reformation should be granted.

2. WON the action for reformation was filed prematurely.

Held:

1. Yes. Every party to a contract has a clear interest that the instrument bodying its terms should
conform to the actual and true agreement had by and between the contracting parties. Hence, if by
accident or mistake, as expressly pleaded in the complaint, the document does not conform to or
reflect the actual agreement, either party can ask for the reformation of the instrument as provided by
Articles 1359 of the Civil Code of the Philippines, to forestall future litigations on the true import of the
agreement. As stated by the Code Commission in its Report, page 56.

“The rationale of the doctrine is that it would be unjust and inequitable to allow the enforcement of a
written instrument which does not reflect or disclose the real meeting of the minds of the parties. The
rigor of the legalistic rule that a written instrument should be the final or inflexible criterion and
measure of the rights and obligations of the contracting parties is thus tempered, to forestall the
effect of mistake, fraud, inequitable conduct or accident.”

2. No. The fact that the lessee's option to renew the Contract for another term of 10 years (which is
alleged by appellant not to have been intended by the parties) was not yet exercisable when the suit for
reformation was instituted by the petitioner, does not render the action premature, for precisely its
purpose was to have such option embodied in the instrument declared ineffective as one not agreed
upon by the parties. No cogent reason exists with the plaintiff-appellant should wait for the lapse of
the first ten years before having the instrument reformed, when the inconsistency between it and the
true agreement existed right from the time the document was executed.

--

New purchaser:

The transferee of the property cannot maintain this action, for the plain reason that it was not a party to
the original agreement, and therefore, was not in a position to know what was the true contract agreed
to by and between the appellant and the appellee. Upon the other hand, success or failure of the action
for reformation necessarily reacts upon the extent of the City's obligations to its vendee, so the former's
interest still exists. If the trial court desired to find out the transferees' stand on the issue, the logical
action for it to take was to order the impleading or joinder of the purchaser, and thereby avoid future
multiplicity of actions.

WHEREFORE, the order of dismissal appealed from is reversed and set aside, without prejudice to the
impleading of the purchaser of the lot in question, and the records are ordered remanded for further
proceedings.

Emilio v. Rapal, G.R. No. 181855 (DINAMPO)

Topic: Reformation of Contract (Art. 1359)
*Full text here*
*Full text clickable*

Facts:
Flordeliza Emilio owned a land, which was awarded by NHA, in Caloocan City wherein she built
a house. A portion of this house was leased by Bilma Rapal. In 1996, Emilio borrowed P10, 000
pesos from Rapal and later on borrowed another P 60, 000 pesos with the condition that Rapal
is not to pay lease from February 1996- December 1998 as the payment of the loan will serve
as the advancement payment to Emilio. Atty. Balao-Ga executed a “Sale and Transfer of Rights
over a Portion of a Parcel of Land” which states that Emilio sold 27 sq. m. of lot together with
the part of the house for P 90,000 to Rapal.

Emilio later claimed that the deed was signed by her without knowing the contents, thereof and
that she files for an action of reformation of contract. Rapal moved to dismiss the complaint as
that of annulment of contract and not of reformation. The trial court sided with Emilio and
declared the contract null and void.

The Court of Appeals, however, ruled in favor of Rapal stating that the action is that of
reformation of contract but Emilio failed to present evidence that there was fraud when she
signed the deed.
Armi Munsayac, Emilio’s daughter, offered a Sinumpaang Salaysay stating that her mother
finished elementary only and that she did not intend to sell the land to Rapal.

Issue: W/N the action for reformation of instrument can prosper.

Held:

No.

For an action for reformation of instrument to prosper, the following requisites must concur: (1)
there must have been a meeting of the minds of the parties to the contract; (2) the instrument
does not express the true intention of the parties; and (3) the failure of the instrument to express
the true intention of the parties is due to mistake, fraud, inequitable conduct or accident.

In this case, fraud was not established as the burden of proof was not successfully presented by
Emilio. Notarized documents also have the presumption of regularity which can only be
overturned by clear, convincing proof which Emilio was not able to discharge.

Jayme v. Alampay, 62 SCRA 131 (FLORES)

Topic: Reformation of Instruments
Ponente: Teehanke

Facts:
Spouses Jayme and Ong entered into an agreement whereby they agreed that the plaintiffs will borrow
from the defendant the sum of P16,500.00 on the security of the parcel of land. The agreement reflects
a deed of sale but the true agreement of the parties was to constitute a mortgage. The deed of sale was
executed in favor of Ong with the spouses having an option to repurchase for 6 months.

Spouses Jayme filed a complaint in court for the reformation of the instrument. That the deed of
absolute sale be executed and replaced with a contract of mortgage.

Spouses Jayme allege that

● Since the purported sale, spouses Jayme continue to occupy part of the premises without paying
rentals to the defendant
● P16,500 is grossly inadequate for sale

Trial court dismissed the action for the reason that the proper remedy is annulment, which has already
prescribed, and that the existing mortgage over the property impairs the action for reformation.

Issue:
WON the trial court erred in holding that the remedy is annulment not reformation of the contract.
Ruling:
Yes, the proper remedy is reformation.

Such right to reformation is expressly recognized in Article 1365 of the Civil Code which provides that "If
two parties agree upon the mortgage or pledge of real or personal property but the instrument states
that the property is sold absolutely or with a right to repurchase, reformation of the instrument is
proper."

The complaint for reformation of instrument clearly alleged that the deed of sale did not express the
true agreement of the parties and should be reformed into the mortgage that it actually was and prayed
that petitioners be allowed to redeem the property by repaying the loan of P16,500.00 (the true value of
the property being much more, as evidenced by the mortgage loan forP100,000.00 which respondent in
turn secured on it). Such allegations are binding for purposes of the dismissal motion and therefore the
applicable prescription period for such actions based upon a written contract and for reformation
thereof as provided by law is ten (10 years as provided in Article 1144, Civil Code).

Dismissal order is set aside.

Ong Chua v. Carr, 53 Phil 975 (HO)

FACTS

Henry Teck and Magdalena Lim owns some land which they sold to Ong Chua, with the right to
repurchase within 4 years. The land was later sold by Ong to Edward Carr. In the deed of sale however,
the right to repurchase was removed, without the knowledge of Ong, in order for Carr to obtain a loan
using the land.

When the spouses Teck and Lim offered to repurchase the property, Carr refused, claiming that he has
absolute title to the property. Ong then filed a case for the reformation of the deed which was granted
by the lower court. Hence, this appeal.

ISSUE

Whether or not the reformation of the deed should be granted?

HELD

Yes. Carr’s conduct was tainted with fraud, which was established beyond a doubt and not by mere
preponderance of evidence. Hence, since there was mistake by one party, and fraud in the other, the
party who was mistaken has the right to demand the reformation of the contract.
Also, it is conclusive in the evidence that the plaintiff had no clear conception of the contents of the
deed. That he was anxious to protect the rights of redemption held by the parties who sold the land to
him, is very obvious; indeed, if he had failed to do so, he would have laid himself open to an action for
damages. But the deed was written in the English language, with which the plaintiff was unfamiliar, and
he had to rely on the statements of Moore as to the contents and effect of the deed and was told that
the document was sufficient. He had confidence in Moore, with whom he had previous business
relations, and it was but natural for him to believe Moore’s statement.

3. Interpretation of Contracts
General Rule. Heirs of Amparo del Rosario v. Santos, 108 SCRA 43 (Laguna)

● Through a Deed of Sale, Aurora Santos (defendant-appellant) conveyed to Amparo Del Rosario
(plaintiff-appellee) a parcel of land in Rizal in consideration of Php 2,000.00 with the condition
of (1) the release of the said property and (2) the approval of the subdivision plan by the Land
Registration Authority. (Deed of sale will be executed after fulfillment of conditions)

● Amparo Del Rosario filed a complaint against Spouses Andres and Aurora Santos for specific
performance and damages for alleged failure of the latter to execute a Deed of Sale of a piece of
land in Tanay, Rizal.

● Amparo died (Sept. 21, 1980) and was substituted by the heirs named in her will. Andres ( Sept. 5,
1980) also died and was substituted by his heir

● In defense, Santos argued that the Deed of Sale was only an accommodation to allay (alleviate)
the fears of Del Rosario over the failure of Erlinda Cortez to pay her debt to Del Rosario. Since
defendant Santos owed Cortez roughly the same amount of Php 2,000, defendant agreed to
transfer to Del Rosario their inexistent but expectant right over the said property. (Santos
--debt→ Cortez --debt→ Del rosario so.. Santos --DoS→ Del Rosario)

● However, since Cortez was able to pay her debt to Del Rosario, the defendants alleged that the
deed of sale had been extinguished. They characterized the said deed of sale as a mere tentative
agreement which was never intended nor meant to be ratified by and acknowledged before a
notary public.

● RTC and CA ruled in favor of del Rosario. Santos appealed.

ISSUE: WON the CA erred in holding that there are no other unwritten conditions except those written
in the Deed of Sale and that Erlinda Cortez' conformity is not required to validate the obligation of Santos
(I think ang pasabot sa defendants kay since ni bayad nas Cortez, wa na unta ang obligation. But ana ang
court nga tungod di siya written sa contract nga ma cease ang obligation sa deed of sale if ni bayad nas
Cortez, even though verbally agreed, di siya included sa contract so naa pa gihapon ang obligation(???))
RULING: NO, the court did not err.

While it is true, as Santos argue, that Article 1306 of the New Civil Code provides that "the
contracting parties may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided that they are not contrary to law, morals, good customs, public order, or public policy"
and that consequently, Santos and del Rosario could freely enter into an agreement imposing as conditions
thereof the following: that appellee secure the written conformity of Erlinda Cortez and that she render an
accounting of all collections from her, said conditions may not be proved as they are not embodied in the
deed of sale.

The only conditions imposed for the execution of the Deed of Confirmation of Sale by Santos in favor
of del Rosario are the release of the title and the approval of the subdivision plan. Thus, appellants may not
now introduce other conditions allegedly agreed upon by them because when they reduced their agreement
to writing, it is presumed that "they have made the writing the only repository and memorial of truth, and
whatever is not found in the writing must be understood to have been waived and abandoned."

Neither can appellants invoke any of the exceptions to the parol evidence rule, more particularly, the
alleged failure of the writing to express the true intent and agreement of the parties. Such an exception
obtains where the written contract is so ambiguous or obscure in terms that the contractual intention of the
parties cannot be understood from a mere reading of the instrument. In such a case, extrinsic evidence of the
subject matter of the contract, of the relations of the parties to each other, and of the facts and
circumstances surrounding them when they entered into the. contract may be received to enable the court
to make a proper interpretation of the instrumental.

In the case at bar, the Deed of Sale (Exh. A or 1) is clear, without any ambiguity, mistake or
imperfection, much less obscurity or doubt in the terms thereof. We, therefore, hold and rule that assigned
errors III and IV are untenable.

*****Parol evidence rule - any oral evidence of an agreement should be excluded when after all, the
existing agreement is already in writing. The ground that the written agreement fails to express the true
intent and agreement of the parties can only be invoked, as an exception, where the contract is so
ambiguous or obscure in terms that the contractual intention of the parties cannot be understood from
a mere reading of the instrument

Labasan v. Lacuesta, 86 SCRA 16 (Mag-aso)

Full title: ROBERTO LABASAN, AVELINO LABASAN, JOSEFINA LABASAN, and MARCELA COLOMA,
petitioners, vs. ADELA LACUESTA, DOMINGA LACUESTA and NORBERTO LACUESTA, respondents.
Topic: Interpretation of Contracts

Facts: On April 20, 1927, spouses Lacuesta executed a document transferring ownership of their
unregistered and irrigated land to spouses Labasan for an amount of 225 Php. The document stipulated
that the amount is for an urgent need for money and that within ten years from conveyance, the
vendor shall have the right to repurchase the land. In 1943, upon the lapse of the redemption period,
Lacuesta sought to repurchase the land but Labasan refused and claimed ownership. Hence, the
complaint. The trial court rules in favor of defendant Labasan due to petitioner’s failure to repurchase
within the stipulated time. However, the Court of Appeals reversed the lower court’s decision. Hence,
the petition.

Issue: WON the document executed was a pacto de retro sale or an equitable mortgage for a loan

Ruling: The document/contract was an equitable mortgage for a loan.

It is a basic fundamental rule in the interpretation of a contract that if the terms are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of the stipulation shall control,
but when the words appear to be contrary to the evident intention of the parties, the latter shall prevail
over the former. Article 1371, New Civil Code: In order to judge the intention of the contracting
parties, their contemporaneous and subsequent acts shall be principally considered. Article 1602, of
the New Civil Code expressly provides that in case of doubt, a contract purporting to be a sale with a
right to repurchase shall be construed as an equitable mortgage when the price or consideration of the
sale is unusually inadequate.

It is evident that the terms of the document are not clear and explicit on the real intent of the parties
when they executed the aforesaid document. For instance, the words or clauses, vis: "urgent necessity
for money," "selling the land," ownership," I will be responsible for all tenancy matters," "This receipt is
made as security," are sufficient to create a doubt as to what the document truly purports to be.

The Court through Justice Norberto Romualdez stated that while it was true that plaintiffs were aware of
the contents of the contracts, the preponderance of the evidence showed however that they signed
knowing that said contracts did not express their real intention, and if they did so notwithstanding
this, it was due to the urgent necessity of obtaining funds. "Necessitous men are not, truly speaking,
free men; but to answer a present emergency, will submit to any terms that the crafty may impose upon
them."

In the herein case, although the face of the document was that of a pacto de retro case, the reason for
obtaining the amount and the inadequacy of the price clearly shows that the intent of the vendor is
only to secure a loan for an urgent need and the land was a mere security. Such fact was corroborated
by the retention of the vendor’s possession and tenancy rights and the vendee’s failure to consolidate
the land in his name after the lapse of the redemption period.

Prisma Construction v. Pantaleon, G.R. No. 160545

Legal Basis:
Article 1956 - No interest shall be due unless it has been expressly stipulated in writing.

Petitioner:
 - Prisma Construction & Development Corporation
- Rogelio S. Pantaleon (President and Chairman of the Board of PRISMA)

Respondents:
- Arthur Menchavez

Facts:
On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA, obtained
a ₱1,000,000.00 loan from respondent, Arthur Menchavez, with a monthly interest of ₱40,000.00
payable for six months, or a total obligation of ₱1,240,000.00 to be paid within six (6) months.
To secure the payment of the loan, Pantaleon issued a promissory note that states:

“I, Rogelio S. Pantaleon, hereby acknowledge the receipt of ONE MILLION TWO HUNDRED FORTY THOUSAND PESOS
(P1,240,000), Philippine Currency, from Mr. Arthur F. Menchavez, representing a six-month loan payable according to the
following schedule:

January 8, 1994 …………………. ₱40,000.00

February 8, 1994 ………………... ₱40,000.00
March 8, 1994 …………………... ₱40,000.00
April 8, 1994 ……………………. ₱40,000.00
May 8, 1994 …………………….. ₱40,000.00
June 8, 1994 ………………… ₱1,040,000.00

The checks corresponding to the above amounts are hereby acknowledged.”

and six (6) postdated checks corresponding to the schedule of payments. Pantaleon signed the
promissory note in his personal capacity, and as duly authorized by the Board of Directors of PRISMA.

The petitioners failed to completely pay the loan within the stipulated six (6)-month period.

As of January 4, 1997, the petitioners had already paid a total of ₱1,108,772.00. However, the
respondent found that the petitioners still had an outstanding balance of ₱1,364,151.00 as of January
4, 1997, to which it applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed a
complaint for a sum of money with the RTC to enforce the unpaid balance, plus 4% monthly interest,
etc.

In their answer, the petitioners admitted the loan of ₱1,240,000.00, but denied the stipulation
on the 4% monthly interest, arguing that the interest was not provided in the promissory note.

Issue:
Whether or not the parties agreed to the 4% monthly interest on the loan. If so, does the rate of
interest apply to the 6-month payment period only or until full payment of the loan?
Ruling:
No. Interest due should be stipulated in writing; otherwise, 12% per annum.

Article 1956 of the Civil Code specifically mandates that "no interest shall be due unless it has
been expressly stipulated in writing." Under this provision, the payment of interest in loans or
forbearance of money is allowed only if: (1) there was an express stipulation for the payment of interest;
and (2) the agreement for the payment of interest was reduced in writing. The concurrence of the two
conditions is required for the payment of interest at a stipulated rate. Thus, we held in Tan v.
Valdehueza and Ching v. Nicdao that collection of interest without any stipulation in writing is prohibited
by law.

In this case, during the loan’s period, the loan shall earn an interest of ₱40,000.00 per month,
for a total obligation of ₱1,240,000.00 for the six-month period. The agreed sum can be computed at
4% interest per month, but no such rate of interest was stipulated in the promissory note; rather a
fixed sum equivalent to this rate was agreed upon, therefore the interest of ₱40,000.00 per month
corresponds only to the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as
agreed upon by the parties in the promissory note. Thereafter, the interest on the loan should be at the
legal interest rate of 12% per annum.

Doctrine of Estoppel not applicable

We cannot apply the doctrine of estoppel in the present case since the facts and circumstances, as established by the
record, negate its application. Under the promissory note, what the petitioners agreed to was the payment of a specific sum of
₱40,000.00 per month for six months – not a 4% rate of interest per month for six (6) months – on a loan whose principal is
₱1,000,000.00, for the total amount of ₱1,240,000.00. Thus, no reason exists to place the petitioners in estoppel, barring them
from raising their present defenses against a 4% per month interest after the six-month period of the agreement. The board
resolution, on the other hand, simply authorizes Pantaleon to contract for a loan with a monthly interest of not more than 4%.
This resolution merely embodies the extent of Pantaleon’s authority to contract and does not create any right or obligation
except as between Pantaleon and the board. Again, no cause exists to place the petitioners in estoppel.

Piercing the corporate veil unfounded

The doctrine of piercing the corporate veil applies only in three (3) basic instances, namely: a) when the separate
and distinct corporate personality defeats public convenience, as when the corporate fiction is used as a vehicle for the evasion
of an existing obligation; b) in fraud cases, or when the corporate entity is used to justify a wrong, protect a fraud, or defend a
crime; or c) is used in alter ego cases, i.e., where a corporation is essentially a farce, since it is a mere alter ego or business
conduit of a person, or where the corporation is so organized and controlled and its affairs so conducted as to make it merely
an instrumentality, agency, conduit or adjunct of another corporation. In the absence of malice, bad faith, or a specific
provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate
liabilities.

In the present case, we see no competent and convincing evidence of any wrongful, fraudulent or unlawful act on the
part of PRISMA to justify piercing its corporate veil. While Pantaleon denied personal liability in his Answer, he made himself
accountable in the promissory note "in his personal capacity and as authorized by the Board Resolution" of PRISMA. With this
statement of personal liability and in the absence of any representation on the part of PRISMA that the obligation is all its own
because of its separate corporate identity, we see no occasion to consider piercing the corporate veil as material to the case.
Martin vs. DBS Bank, G.R. No. 174632

Facts

1
Petitioners entered into a lease contract with the DBS Bank Philippines, Inc. (DBS), as lessee,
covering a commercial warehouse and lots that DBS was to use for office, warehouse, and parking
yard for repossessed vehicles. The lease was for five years, from March 1, 1997 to March 1, 2002.
DBS paid a deposit of ₱1,200,000.00 and advance rentals of ₱600,000.00.

Heavy rains flooded the leased property and submerged into water the DBS offices there along with
its 326 repossessed vehicles. As a result, on February 11, 1998 DBS wrote the Martins demanding
that they take appropriate steps to make the leased premises suitable as a parking yard for its
vehicles. DBS suggested the improvement of the drainage system or the raising of the property’s
ground level. In response, the Martins filled the property’s grounds with soil and rocks.

June 1998, DBS vacated the property but continued paying the monthly rents. On September 11,
1998, however, it made a final demand on the Martins to restore the leased premises to tenantable
condition on or before September 30, 1998, otherwise, it would rescind the lease contract.

On October 13, 1998 DBS demanded the rescission of the lease contract and the return of its
deposit. At that point, DBS had already paid the monthly rents from March 1997 to September 1998.
The Martins refused, however, to comply with DBS’ demand.

Issue

Whether or not the CA erred in holding that the Martins allowed the leased premises to remain
untenantable after the floods, justifying DBS’ rescission of the lease agreement between them .

Ruling
Unless the terms of a contract are against the law, morals, good customs, and public policy, such a
contract is law between the parties and its terms bind them.

Here, paragraph VIII of the lease contract between DBS and the Martins permitted rescission by
either party should the leased property become untenantable because of natural causes. Thus:

In case of damage to the leased premises or any portion thereof by reason of fault or negligence
attributable to the LESSEE, its agents, employees, customers, or guests, the LESSEE shall be
responsible for undertaking such repair or reconstruction. In case of damage due to fire, earthquake,
lightning, typhoon, flood, or other natural causes, without fault or negligence attributable to the
LESSEE, its agents, employees, customers or guests, the LESSOR shall be responsible for
undertaking such repair or reconstruction. In the latter case, if the leased premises become
untenantable, either party may demand for the rescission of this contract and in such case, the
deposit referred to in paragraph III shall be returned to the LESSEE immediately.

Paragraph VIII gave DBS and the Martins the right to rescind the agreement in the event the
property becomes untenantable due to natural causes, including floods, unless proper repairs and
rehabilitation are carried out. It is undisputed that the floods submerged the DBS offices and its 326
repossessed vehicles. The floods rendered the place unsuitable for its intended uses. And, while the
Martins did some repairs, they did not restore the place to meet DBS’ needs.

Intention of the Parties. Ramos v. Heirs of Ramos Sr., 381 SCRA 594

Topic: Interpretation of Contracts – Intention of the Parties

RAMON RAMOS, petitioner,

vs.

HEIRS OF HONORIO RAMOS SR.; namely, PUREZA N. RAMOS, HONORIO RAMOS JR. and GWENDOLYN
RAMOS-GARCIA, respondents.

Facts:

1. Lucio Ramos (died on May 31, 1974) and Salud Abejuela (died on September 17, 1966)
are spouses – having the following children: Juan Ramos, Honorio Ramos, Josefa Ramos
and Ramon Ramos.

2. During the lifetime of the spouses, they acquired real properties situated at Macasandig,
Cagayan de Oro City.

3. Sometime in September 1972, the above-named children and Lucio Ramos himself,
executed an Extrajudicial Settlement of the estate of the deceased Salud Abejuela.(Note:
nauna kamatay si Salud Abejuela).

4. However, on January 11, 1954, there appeared in the Notarial Register of Notary Public
Fausto Eugenio of Cagayan de Oro City a document denominated as a Deed of Absolute
Sale executed by Salud Abejuela in favor of Ramon Ramos married to Nena Villamil and
resident of Cagayan de Oro City. Subject of the sale was Lot No. 2961 of the Cagayan
Cadastral located at Macasandig, Cagayan de Oro City containing an area of 50,000 square
meters and an alleged exclusive property of said Salud Abejuela."

5. Thus, herein respondents filed with the Regional Trial Court (RTC) of Cagayan de Oro
City, a suit against petitioner for the conveyance of title and partition of Lot 2961 (subject lot
of the Deed of Sale).

Respondents’ arguments:

a. Being the heirs of Honorio Ramos Sr., they contend that Honorio Ramos Sr.,
co-owned the above-mentioned Lot 2961 with Ramon Ramos.

b. That the sale was simulated and fictitious, the purpose being only to enable
said Ramon Ramos to use the land as collateral security for a loan as he did use
it when he was granted a loan by the Philippine National Bank.

c. That the understanding and agreement with his parents Lucio and Salud
Ramos was that, Ramon Ramos should hold said land in trust for his brother,
Honorio and same should be divided between the two in equal shares;

Petitioner’s argument:

a. That it was executed with all the formalities and requirements of law; hence,
the document is vested with the presumption of regularity and can be impugned
only by strong, competent and conclusive proof.

RTC’s ruling:

The RTC rejected respondents’ contention that the sale of Lot 2961 was
simulated, because a clear intention to sell it was evident. No deed of resale
between petitioner and his mother, Salud, was ever executed; and no case for the
annulment of the sale was filed despite the passage of eleven years after the
latter’s death. Until their death, the parents of the petitioner stayed on the said lot
with him. Without any objection from respondents, he occupied the disputed lot
exclusively and continuously from the time their father died in 1974. More so,
respondents failed to prove the existence of co-ownership between Honorio Sr.
and petitioner.

CA’s ruling (REVERSED RTC):

 CA held that the Deed of Sale executed between petitioner and Salud Abejuela
had been tainted by several "badges of simulation” – Honorio Sr. would not have
been impleaded as petitioner’s co-defendant in the earlier partition case,
compromise agreement in the said case was not sufficient proof of petitioner’s
exclusive ownership of the disputed lot, estoppel did not bar respondents from
asking for such partition, the cause of action of the respondents did not prescribe.

Issue: Whether or not Deed of Absolute Sale executed by Salud Abejuela-Ramos on January
11, 1954 was real and genuine sale conveying ownership of the land in favor of the petitioner

Ruling:

YES, the executed Deed of Absolute Sale was real and genuine. (In other words, not
simulated).

The primary consideration in determining the true nature of a contract is the intention of the
parties. Such intention is determined from the express terms of their agreement as well as from
their contemporaneous and subsequent acts. When they have no intention to be bound at all,
the purported contract is absolutely simulated and void. When they conceal their true
agreement, it is not completely void and they are bound to their real agreement, provided it is
not prejudicial to a third person and is not intended for any purpose that is contrary to law,
morals, good customs, public order or public policy. A duly executed contract carries with it the
presumption of validity. The party who impugns its regularity has the burden of proving its
simulation.

After a careful examination of the records, we believe that the CA merely speculated on the
intentions behind the parties’ actions in the settlement case. The mere allegation that Honorio
Sr. and petitioner were co-owners did not confer co-ownership on them. Under Section 10, Rule
3 of the Rules of Court, a person whose consent as a co-plaintiff cannot be obtained may be
impleaded as a defendant. In the present case, co-ownership cannot be implied from the failure
of petitioner to expressly demand the delivery of Lot 2961 solely to him. He did not have to do
so, because he was already in possession of it.

In the present case, however, the evidence clearly shows that petitioner hired tenants to take
care of and to harvest coconuts from Lot 2961.25 Without any protest from Salud or
respondents, he declared the property for taxation and paid realty taxes on it in his name. His
actions negated respondents’ allegation that the parties never intended to be bound by the
assailed contract.

Thus, the Court finds no reason to declare the 1954 Deed simulated, because respondents
failed to discharge their burden of proving that it was indeed fictitious. Therefore, the
presumption of regularity and validity of the 1954 Deed of Sale stands.

Carceller v. CA, 302 SCRA 719 (PADUL)

Full title: JOSE RAMON CARCELLER, Petitioner, v. COURT OF APPEALS and STATE INVESTMENT
HOUSES, INC. (SIHI), Respondents.

Topic: Interpretation of Contracts;

FACTS:

Statement investment houses (SIHI) owns the two parcels of land in Bulacao Cebu City. In January 1985,
Jose Ramon Carceller and SIHI entered into a lease contract with an option to purchase in the period of
the lease. The monthly rental was pegged at P10K for 18 months.

s/n: size of land was a total of 9, 774 sqm

When the lease was to expire on Jan 30, 1986, three weeks prior SIHI already notified Carceller that the
lease contract was about to end. That they be advised of Carceller’s decision on or before 20th January.
On January 15, Carceller replied requesting that he be given the next six months to raise sufficient funds
to exercise the option. He already made significant improvements on the property, and he was
punctually meeting his monthly rentals. SIHI rejected this however, but still offered to lease the property
for 30k a month, for the next 1 year. SIHI also mentioned that the sale of property was open to the
general public.

When funds were available on Feb 18, Carceller expressed his interest to buy the property, with a down
payment of 360,000 immediately available as per the stipulation in the lease contract (please see
below):

The pertinent portion of the disputed lease contract refers to the exclusive right, option and privilege of Carceller to
purchase within the lease period, and thereon aggregate amount of around 1.8M.

"4. As part of the consideration of this agreement, the LESSOR hereby grants unto the LESSEE the exclusive right, option and
privilege to purchase, within the lease period, the leased premises thereon for the aggregate amount of P1,800,000.00 payable as
follows:

a. Upon the signing of the Deed of Sale, the LESSEE shall immediately pay P360,000.00.

b. The balance of P 1,440,000.00 shall be paid in equal installments of P41,425.87 over sixty (60) consecutive months
computed with interest at 24% per annum on the diminishing balance; Provided, that the LESSEE shall have the right to
accelerate payments at anytime in which event the stipulated interest for the remaining installments shall no longer be
imposed.

. . . The option shall be exercised by a written notice to the LESSOR at anytime within the option period and the document
of sale over the afore-described properties has to be consummated within the month immediately following the month
when the LESSEE exercised his option under this contract."

SIHI once again rejected this (OA ra kaayu sila huhu) stating that the option to purchase already lapsed,
and hence Carceller was asked to vacate the premises in 10 days. It was on Feb 28 when a complaint for
specific performance and damages was filed in the RTC to compel SIHI to honor its commitment. The
trial court ordered Carceller to pay this 1.8M one time big time.

Court of Appeals affirmed RTC's decision, but modified that the purchase price must be based on the
market price in Bulacao Cebu.

When it was submitted to the Supreme Court for review, SC declared that the option to purchase
provided to Carceller must be honored, but that Carceller must be liable for the interest that is due to
SIHI. It was remanded to the RTC for processing.

s/n: The issue in the case was to determine how one should interpret a contract in terms of the current
facts. There was a delay from Carceller’s end, though it was not substantial, but still technically delayed.

ISSUE: Should Carceller be allowed to exercise the option to purchase the leased property, despite the
alleged delay in giving the required notice to SIHI?

RULING:

Yes, Carceller should be given the option to purchase.

The Court said that in contractual relations, the law allows the parties reasonable leeway on the terms
of their agreement, which is the law between them.

s/n: The court resolved both cases based on equity stating that they may not countenance gross and
unfair results without doing violence to its solemn obligation to administer fair and equal justice for all.
Note that an option is a preparatory contract which one party grants to the other the power to decide
whether or not to enter into a contract.

Justification on Carceller’s side. The jan 15 letter of Carceller asking for extension was fair notice to SIHI,
intentionally showing that he is interested in purchasing the property. He exercised the option to
purchase before the term ended (and as per contract they’re given the next month to give the down
payment). Though Carceller was only able to secure the 360K downpayment on Feb 18, a delay of three
days was not substantial enough to render the agreement null and void.

Justification on SIHI’s side. There was no delay from SIHI’s end. Fair notice to Carceller was also
provided. From their view, there was already 18 days delay from Carceller’s end before he formally
expressed his option to buy (with the 360K). However, this delay again was not substantial enough to
defeat the intention of the parties when they executed the contract.

Also note that SIHI gave petitioner 4 periods: (a) the option to purchase the property for P1,800,000.00
within the lease period, that is, until January 30, 1986; (b) the option to be exercised within the option
period by written notice at anytime; (c) the "document of sale...to be consummated within the month
immediately following the month" when petitioner exercises the option; and (d) the payment in equal
installments of the purchase price over a period of 60 months.

Further, it is well-settled that in construing a written agreement, the reason behind and the
circumstances surrounding its execution are of paramount importance. Sound construction requires one
to be placed mentally in the situation occupied by the parties concerned at the time the writing was
executed. Thereby, the intention of the contracting parties could be made to prevail, because their
agreement has the force of law between them.

In short, the determination to buy and sell was clear. Carceller even loaned 8M to augment his capital
and that he just needed time to secure this loan from Tech Resources Center. When interpreting a
contract, the intention must be given effect.

s/n: it was remanded to RTC BR 5 for further proceedings; note that SIHI was already having financial
problems and needed to dispose the property whereas Carceller really wanted to buy the property but
just needed more time to raise the money. The intention of the contract was fulfilled.

Almeda v. Bathala Marketing, 542 SCRA 470

Topic: Interpretation of Contracts

Full text: https://www.chanrobles.com/cralaw/2008januarydecisions.php?id=33

Facts: Respondent Bathala Marketing Industries, Inc. as lessee renewed its Contract of Lease with
Ponciano (lessor). Under the said contract is an agreement to lease a portion of the Almeda Compound
(herein petitioner) consisting 7,348.25 sqm for a monthly rental of P1,107,348.69 for 4 years unless
sooner terminated as provided in the contract.

In the contract, it was also agreed that in cases of increase or decrease of tax the Lessee shall be bearing
it and in case of extraordinary inflation or devaluation of Phil. Currency should supervene, the value of
the Philippine peso at the time of the establishment of the obligation shall be the basis of payment.

During the effectivity of the contract Ponancio died and the respondent Bathala Marketing dealt with
petitioners.

Petitioners advised that they shall assess and collect VAT on its monthly rentals. However, the
respondent (bathala marketing) did not agree because what was in the contract was that the VAT are
already included in their monthly rentals. Petitioner (Almeda) also sent another letter stating that
monthly rentals should be increased by 73% in pursuant to condition no. 7 of the contract (in case of
extraordinary inflation the value of the Phil. Peso during the agreement should be followed)

Respondent (Bathala Mktg) instituted an action for a declaratory relief.

Issue: WON declaratory relief is the proper remedy to interpret the contract both parties agreed upon
beforehand.

Held: Yes. Declaratory relief is an action by any person to determine any question of construction or
validity arising from the instrument and for declaration of his rights and duties thereunder.

Additional info only no need to include in recitation unless asked by Gobie the great: requisites for an
action for declaratory relief – (1) subject matter must be a deed, will, contract or other written
instrument (2) terms in the document are doubtful and requires judicial construction, (3) there must have
been no breach of contract, (4) there must be actual justiciable controversy, (5) issue mut be ripe, and (6)
adequate relief is not available through other means.

In this case, the respondent seeked to ask the court for judicial construction in order to clarify the rights
and obligations of the parties.

The agreement between parties are clearly manifested in the stipulated contract. The condition clearly
states that respondent can only be held liable for “new taxes” imposed after the effectivity of the
contract of lease in which the petitioner keeps insisting that the lessee should pay additional for the
taxes.

Neither can the petitioner increase the rentals by reason of inflation because as agreed by the parties,
only extraordinary inflation or devaluation are qualified to such increase. Which in this case it was not
settled that there was an extraordinary inflation or devaluation that occured.

Bundalian v. CA, 129 SCRA 645 (ZAMBRANO)

Topic: Interpretation of Contracts: Interpretation as a Whole
Ponente: Gutierrez Jr, J

Petitioners: Carlo Bundalian, Jose Bundalian

Priv Respondents: Juanito Littawa, Edna Camcam

Summary: Petitioner says na equitable mortgage ang Deed of Sale with Right to Repurchase.

Respondents say na NO, kay intention daw is just a Deed of Sale with pacto de retro

But Court says na because of this stipulation/provision sa contract, (The vendor) having just purchased
the same from the Intestate estate of the deceased Agapita Sarao Vda. de Virata (Special Proceedings
No. B-710 of the Court of First Instance of Cavite), with funds loaned to him by the herein VENDEES.,
mortgage dyd daw ni sya. Dapat i-interpret nimo ang whole contract to determine the real intention
of the parties.
Actually naglibog ko sa case tungod sa terms but laban! Basaha lang please guyst ang full text!

Facts:
On July 1, 1975, the petitioners purchased from the Estate of the Deceased Agapita Sarao Vda. de
Virata three (3) contiguous parcels of land located at San Juan, Rizal, containing an aggregate area of
3,328 square meters, more or less, for and in consideration of the amount of P499,200.00.

The following day, July 2, 1975, the petitioners, in a contract denominated as Deed of Sale with Right
to Repurchase, sold to the private respondents the same three contiguous parcels of land for the
same amount of P499,200.00 under specified terms and conditions.

One of the terms and conditions was that the repurchase price would escalate month after month,
depending on when repurchase would be effected. The price would be P532,480.66 computed at
P160.00 per square meter after the first month; P565,760.00 computed at P170.00 per square meter
after the second month; P599,040.00 computed at P180.00 per square meter after the third month; and
P632,320.00 computed at P190.00 per square meter after the fourth month, from and after the date of
the instrument. It was also stipulated in the same contract that the vendor shall have the right to
possess, use, and build on, the property during the period pending redemption.

On August 26, 1976, the petitioners filed a petition for declaratory relief and/or reformation of
instrument before the Court of First Instance of Rizal at Pasig, Metro Manila to declare the Deed of
Sale with Right to Repurchase an equitable mortgage and the entire portion of the same deed
referring to the accelerating repurchase price null and void for being usurious, and to reduce the loan
obligation to P474,200.00, contending that the amount actually loaned was only P474,200.00 and the
petitioners put up P25,000.00 of the wife’s money when the purchase from the estate of Mrs. Virata
was consummated.

(Pwede ra ni dli iapil if ipa-recit ni)

Respondents filed for the consolidation of ownership on the ground that “more than a year has elapsed
since the execution of the Deed of Sale with Right to Repurchase by the vendor on July 2, 1975.

Petitioners filed their opposition on the ff grounds:

a. there is a pending suit between the same parties involving the same cause and subject
matter;
b. consolidation will be improper considering that the basic document upon which it is
being sought is in fact and in law only an equitable mortgage; and
c. consolidation cannot be effected thru the instant petition.

Issue:

Whether or not the deed of sale with right to repurchase should be declared as an equitable mortgage?

Ruling:

Yes, it should be declared as an equitable mortgage (definition of equitable mortgage - see notes)

Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other cases where it may be fairly inferred that the real intention of the parties is that the transaction
shall secure the payment of a debt or performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.

The private respondents argued that the petitioners’ contention is true only in cases where the contract
or instrument is not reflective of the true intentions of the contracting parties as would warrant
reformation of the same. They stated that if the intention of the parties is to execute a deed of sale with
pacto de retro, the contract should be held as such. The petitioners were allegedly fully aware that the
deed of sale with pacto de retro is what it purports to be and nothing else (dili daw sya equitable
mortgage kay wala nakastipulate). Furthermore, the petitioners waited for the period of redemption to
expire before availing of the relief granted by the Civil Code of reformation of contracts.

We find the stand of the private respondents without merit. The intent of the parties to avoid the
provision discouraging pacto de retro transactions is very apparent from the records. Significantly, a
portion of the document in question reads:

(The vendor) having just purchased the same from the Intestate estate of the deceased Agapita Sarao
Vda. de Virata (Special Proceedings No. B-710 of the Court of First Instance of Cavite), with funds loaned
to him by the herein VENDEES.

This statement appearing in the supposed pacto de retro sale confirms the real intention of the parties
to secure the payment of the loan acquired by the petitioners from the private respondents. The sale
with the right to repurchase of the three parcels of land was for P499,200.00, which was exactly the
same amount paid to the estate of the deceased Agapita Sarao Vda. de Virata- After having purchased
the three lots for P499,200.00, the vendors should at least have earned a little profit or interest if they
really intended to resell the lots the following day.

Instead, they suffered a loss of P25,000.00 because the amount borrowed, and we find grounds to
believe their statement of having advanced P25,000.00 of their own funds as earnest money, was
actually only P474,000.00. The petitioners also bound themselves to pay exceedingly stiff prices for the
privilege of repurchase. The intent of the parties is further shown by the fact that the Bundalians
P500,000.00 collectibles due from the government for completed construction contracts could not be
collected on time to pay for the lots advertised for sale in Bulletin Today. The petitioners had to run to
the private respondents who had money to lend. The Bundalians received the accounts due from the
government only in 1977 after the proceedings in the trial court were well underway.

The stipulation in the contract sharply escalating the repurchase price every month enhances the
presumption that the transaction is an equitable mortgage. Its purpose is to secure the return of the
money invested with substantial profit or interest, a common characteristic of loans.

Notes:
equitable mortgage - one which although lacking in some formality, or form or words, or other
requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real
property as security for a debt, there being no impossibility nor anything contrary to law in this intent.)

Pacto de retro - right to repurchase

Andreas v. BPI, 47 Phil 795

Ildefonso v Sibal
GR No. L-12181 / 106 Phil 287
September 30, 1959
Topic: Obscure words

Facts:
Petitioner: Lucio Ildefonso (realtor)
Respondent: Ernesto Sibal (businessman)

1. In a previous case (Civil Case 15371) Ildefonso and Sibal reached a compromise
agreement
a. Dismiss the case
b. Sibal promises that within 2 years from the date of the agreement, he shall
course through Ildefonso as Realtor the Sibal’s real estate purchase.
i. Should he fail, must pay penalty of 2k
c. Ildefonso through his counsel drew up the agreement.
2. Pursuant to the agreement, Sibal commissioned Ildefonso to sell his properties in
Sta. Mesa heights QC.
a. But properties were not sold by Ildefonso
b. Sibal on the other hand was able to sell it
3. Ildefonso, offered to sell to Sibal the Great Eastern Hotel and the Borja Building
and a lot along Rizal Avenue
 a. But Sibal declined, saying that it was beyond his means to buy but also
inappropriate for his business. And the lot in Rizal avenue was too small.

Petitioner :Ildefonso claimed that Sibal failed to make the purchase of real estate as
promised in the compromise agreement.

Respondent: Sibal answered that under the said agreement his liability may arise only
in the event that he buys or sells real estate without coursing the same through the
Ildefonso.

Lower court ruled in favor of Sibal

Issue: WON Defendant violated the compromise agreement.

Ruling : No

Art 1377
following the rule that ambiguities or obscure clauses in contracts cannot favor the one
who has caused them

In this case, and it appears that the compromise agreement was drawn by
appellant(Ildefonso) through his counsel, with the paragraph in dispute creating an
obligation in his favor, the ambiguity found therein must be construed in favor of herein
appellee.

Interpretation of SC on the provision:

There is nothing in the disputed paragraph of the compromise agreement that can be
construed to mean that appellee bound himself to purchase real property.

The paragraph of the agreement in question simply provides "that the defendant (herein
appellee) promises that within two (2) years from the date hereof, he shall course
through the plaintiff (herein appellant) as Realtor the former’s real estate purchase or
transaction", and should appellee fail to fulfill that obligation he becomes liable to pay
appellant the sum of P2,000.00 in accordance with the penal clause. It is evident,
therefore, that appellee’s principal undertaking was to "course" or make his real estate
purchases and sales through appellant for a period of two years from the date of the
execution of the compromise agreement.

In this case, Sibal constituted appellant for two years as his exclusive agent in the
purchase or sale of real property.
Ong Yong v. Tiu, 375 SCRA 614 (CLOMATA)

FACTS:

In 1994, the construction of the Masagana Citimall in Pasay City was threatened with stoppage and
incompletion when its owner, the First Landlink Asia Development Corporation (FLADC. It was heavily
indebted to the Philippine National Bank (PNB).

To stave off foreclosure of the mortgage on the two lots where the mall was being built, the Tius invited
the Ongs to invest in FLADC. Under the Pre-Subscription Agreement they entered into, the Ongs and the
Tius agreed to maintain equal shareholdings in FLADC: the Ongs were to subscribe to 1,000,000 shares
at a par value of P100.00 each while the Tius were to subscribe to an additional 549,800 shares each in
addition to their already existing subscription of 450,200 shares.

Tiu's contribution include:

1. A four-storey building registered in the name of Intraland Resources and Development Corporation (a
corporation wholly owned by the Tius) and valued at ₱20,000,000.00 (200k shares);
2. A 1,902.30 square meter parcel of land in the name of Masagana Telamart, Inc. (also a corporation
owned by the Tius) and valued at ₱30,000,000.00 (300k shares); and
3. A 151 square meter parcel of land adjacent to the properties valued at ₱4,980,000.00 (49.8k shares).

Also for purposes of equality, the parties agreed that 6 directors of FLADC were to be nominated from
the Ong Group, while 5 directors thereof were to be nominated from the Tiu Group. It was also agreed
that the positions of President and Secretary of FLADC shall be held by the Ongs, while the positions of
Vice-President and Treasurer thereof shall be held by the Tius. Moreover, the Ongs were given the right
to manage and operate the mall.

The controversy between the two parties arose when the Ongs refused to credit the number of FLADC
shares in the name of Masagana Telamart, Inc. commensurate to its 1,902.30 square meter property
contribution (300k shares); also when they refused to credit the number of FLADC shares in favor of the
Tius commensurate to their 151 square meter property contribution (49.8k shares); and when David S.
Tiu and Cely Y. Tiu were proscribed from assuming and performing their duties as Vice-President and
Treasurer, respectively of FLADC . These became the basis of the Tius' unilateral rescission of the Pre-
Subscription Agreement.
Regarding the assignment of shares, the Ongs maintain that their group cannot be faulted for not
crediting Masagana with 300,000 shares corresponding to the value of its 1,902.30 sq. m. property
contribution, because the Deed of Assignment over the said property executed by Masagana in favor of
FLADC was patently incomplete (not dated, no instrumental witness signed the Deed and the
Acknowledgement was not executed, because the Tius asked that the execution of the document be not
completed) and that the necessary documentary stamp taxes, and capital gains and transfer taxes had
not been paid, such that FLADC could not process with the SEC the application regarding the exchange
of the said property for shares of stock in the corporation.

Issue:
WON FLADC has the obligation to pay the taxes incident to the assignment?

Ruling:
Yes, FLADC has the obligation to pay the taxes.

Art 1370 provides that, In the interpretation of contracts, "if the terms of a contract are clear and leave
no doubt upon the intention of the contracting parties, the liberal meaning of its stipulation shall
control.

In the case here, The Deed of Assignment stipulates:

"The ASSIGNEE (FLADC) hereby accepts said assignment and assumes all the obligations of performing
all the terms and conditions including but not limited to, the transfer of the said parcel of land in the
name of First Landlink Asia Development Corporation within a reasonable time." Said stipulation does
not enumerate nor exclude any obligation on the part of the assignee for purposes of transferring the
property in its name. Instead, the Deed stipulates in simple language "all the obligations of performing
all the terms and conditions including, but not limited to, the transfer of the said parcel of land in the
name of (FLADC)." It imposes no obligation at all on the part of the assignor for purposes of transferring
the parcel of land in the name of FLADC.

The provisions on this matter in the Pre-Subscription Agreement is clear that upon the execution of the
Deed of Assignment thereon in favor of FLADC, Masagana Telamart, Inc. shall be credited with the
number of shares in FLADC commensurate to the value thereof of ₱30,000,000.00. Since the Deed of
Assignment over this property has already been executed in favor of FLADC, and the owner's duplicate
of the title and possession thereof have already been delivered to FLADC, the Ongs should have credited
300,000 shares of FLADC at a par value of ₱100.00 per share in the name of Masagana Telamart, Inc.
The transfer of the title to said property in FLADC's name is another matter which is governed by the
Deed of Assignment itself and not the Pre-Subscription Agreement.

Thus, FLADC has the obligation to pay the taxes.

Additional Info Only:
VIOLATIONS OF PRE-SUBSCRIPTION AGREEMENT BY BOTH PARTIES - Though not the issue on the topic
since we only focus on the interpretation of the contract. (For recit only in case he ask)

Ongs
1. Preventing the Tius from assuming the duties and responsibilities of the position of Vice-President and
Treasurer of FLADC.
2. Did not credit to Masagana Telamart, Inc. the number of shares in FLADC commensurate to its
property contribution (1,902.30 sq. m.), despite the execution by the Tius of the Deed of Assignment
over said property.

Tius
1.) While there is, on record, a Deed of Assignment over the 151 sq. m. parcel of land in favor of FLADC,
said Deed was not executed by the Tius in favor of FLADC but by the Lichaucos;
2.) Tius did not turn over to the Ong Group the entire amount of FLADC's funds in violation of the Pre-
Subscription Agreement which stipulated that the former grants to the latter, the management and
administration of the regular business of FLADC upon the agreement's execution.
3. The Tius were diverting rentals due to FLADC into their own MATTERCO account which rentals appear
to have not been remitted to FLADC up to now.

(FROM THE BOOK) Gov’t. of the Phil. v. Derham Bros. 36 Phil. 960 | GOVERNMENT OF THE
PHILIPPINES VS. DERHAM BROTHERS

FACTS:

In a contract, it was agreed that a metalled roadway would be built on the street where the real
property was located to “its entire length.” Now the pronoun “its” may refer either to the street or the
real property. The government contended that the whole street should be metalled, alleging that the
antecedent of “its” was the street. Upon the other hand, the contractor said that “its” referred
throughout the length of the real property (and not the whole street) should be metalled. It was the
government that drafted the contract.

Issue: Who is correct, the government or the contractor?

HELD: The contractor is correct. It was the government that cause the ambiguity, so the interpretation
of “its” should not be in the government’s favor and, therefore, it may be concluded that it was not
intended by the contracting parties that the whole street would be metalled. When different
interpretations of a provision are otherwise equally proper, that construction is to be taken which is the
most favorable to the party in whose favor the provision was made, and did not cause the ambiguity.
GOVERNMENT OF THE PHILIPPINES VS. DERHAM BROTHERS

Topic: Interpretation of Contracts

FACTS:

S/n: STREET; ROADWAY OF STREET. — A contract called for the metalling of the roadway of certain streets but
did not specify the width of the roadway. Held: Under the circumstances stated in the opinion that it was not
contemplated by the contracting parties that the entire street should be metalled.

FACTS: In the year 1910, Derham Brothers, of Manila, entered into negotiations with the Director of
Lands for the purpose of securing from the Government of the Philippine Islands a lease covering block
49 of Reclamation No. 1, Government of the Philippine Islands vs. Derham Brothers. Manila Harbor,
commonly known as the Luneta Fill, an area reclaimed from the sea by the process of dredging the
harbor and filling in the reclaimed territory.

The government contracted with Derham brothers the construction of roadway along the street and it
should be in metal. The government contended that the whole street should be metalled. The
contractor explained that according to their understanding its refer only to the part of the street.
Ambiguity of word used cause trouble and misunderstanding.

The only specification which is material to this controversy is contained in paragraph 4 of said
communication, which is as follows:

"4th. The rental and taxes to commence upon the grading to the official line and grade and metalling
thereof of the roadway of the streets of the three blocks on the south, east and the west, contiguous to
said property, and the grading to the official line and grade and metalling the roadway thereof of the
street on the north of said property to its entire length.

"This provision is made as it is absolutely necessary that we have a direct outlet for our proposed
building."

ISSUE:

WON the two principal matters there specified (1) that the streets shall be granted to the official line
and grade and (2) that the roadway shall be metalled, are met.

HELD:

Article 1377 of the Civil Code provides:

Art. 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity.

The interpretation should be in favor of the contractor because they were not the cause of
misunderstanding. The government must state their instruction in a clear manner. Whatever maybe
favorable to the party whose favors the provision was made and to the one who do not cause
misinterpretations.
Of course the burden of proof is on the Government to show compliance with the conditions which
were agreed upon as conditions precedent to the liability of the lessee for rent; but inasmuch as the
width of the roadway was not specified in the contract it may be safely inferred, in the absence of
proof to the contrary, that the roadways shown to be in existence on all these streets are ample for
the traffic required of them. We are therefore of the opinion that there is no merit in the contention
of the defendants so far as regards either the grade, the width of the roadway, or the quality of the
finish of these streets.

Paragraph 4, referred to above, contains no specification as to the width of the roadway, which should
be metalled or dressed with crushed rock; but it is obvious from the use of the expression "roadway of
the street" that it was not contemplated that the roadway should necessarily cover the width of the
entire street. The "roadway" was evidently thought of as something different from the whole street, and
therefore as something less extensive. The width of the roadway was, in our opinion, something that
was clearly left to be determined by the conditions of traffic in the neighbourhood of this property.

D. Contracts with Defects

1. Rescissible Contracts
Cannu v. CA, 459 SCRA 80
*Full text here*
*Full text clickable*

FACTS:
In order to buy a house and lot with an area of 150 square meters in Pulanglupa, Las Pinas City, Gil and
Fernandina Galang (herein respondents) loaned from Fortune Savings and Loan Association (FSLA) the
amount of Php 173,800.00. In order to pay it, they mortgaged the property in favour of the Fortune
Savings and Loan Association and the National Home Mortgage Finance Corporation (NHMFC) bought
the lot from FSLA. Leticia Cannu, one of the petitioners in this case, agreed to purchase the mortgaged
property for Php 120,000.00 and to assume the balance of the mortgage obligations with the NHMFC
and the developer of the property. Several payments were made and there was a remaining balance of
Php 45,000.00. A deed of sale & assumption of mortgage was executed between the Galang and Cannu
spouses and the petitioners immediately took possession and occupied the house and lot. Although
there have been requests by Adelina Timbang (the attorney-in-fact) and Fernandina Galang for the
payment of the balance, else the Cannu spouses would be forced to vacate the property, the Cannus
refused to do so. On May 21, 1993, Fernandina Galang paid Php 233, 957.64 as the full payment of the
remaining balance in the mortgage loan with the NHMFC. The Cannus opposed the release of Transfer
Certificate Title Number T-8505 in favour of the Galangs insisting that the subject property had already
been sold to them. A Complaint for Specific Performance and Damages was filed praying that the Cannu
spouses be declared as owners of the house and lot involved subject to reimbursements of the amount
made by the Galang spouses in preterminating the mortgage loan with NHMFC.
ISSUES: W/N the petitioners’ breach of contract was substantial for the action for rescission.
HELD:
The failure of the Cannus to pay the Php 45,000.00 is a substantial breach of obligation. The resolution
of a party to pay an obligation is founded on a breach of faith by the other party which violates the
reciprocal obligation. The petitioners had ample amount of time to pay the amount, but despite the
demands to pay such, they did not comply with their obligation. Rescission of Contracts may only occur
on breaches which are substantial in order to defeat the object of the parties in making the agreement.
Furthermore, Felipe and Leticia Cannu committed another breach in obligation on the Deed of Sale with
Assumption of Mortgage. The mortgage obligation with the NHMFC was not formally assumed on
account of the Cannus’ failure to submit the requirements in order to be considered as successors-in-
interest of the involved house and lot in Pulanglupa. Article 1191, not Article 1381, is the applicable
provision in the case at bar since it is a retaliatory provision in a sense that the action is not substantive
and because it is the duty of the court to require the parties involved to surrender whatever they may
have received from the other in the resolution of the Deed of Sale with Assumption of Mortgage. It is
unjust that a party is bound to fulfil his part of the obligation when the other does not do his part.

CBC v. CA, 327 SCRA 378

Oria v. McMicking 21 Phil 243 (HO)

Facts:

● Gutierrez Hermanos filed an action for recovery of a sum of money against Oria
Hermanos & Co. and herein plaintiff filed an action for recovery also for the same
defendant.
● Before the institution of the suits, members of the Company dissolved their relations and
entered into a liquidation.
● Tomas Oria y Balbas acting in behalf of his co-owners entered into a contract with the
herein plaintiff for the purpose of transferring and selling all the property which the Oria
Hermanos & Co. owned and among the goods stated on that instrument was the
steamship Serpantes and which the subject of this litigation.
● When the Trail Court resolved the action for recovery filed by Gutierrez Hermanos and
jugdment was in his favor, The sheriff demanded to Tomas Oria y Balbas to make
payment but the latter said there were no funds to pay the same.
● The sheriff then levied on the steamer, took possession of the same and announced it
for public auction. Herein plaintiff claimed that he is the owner of the steamer by virtue of
the selling of all the properties of the said Company.

Issue:

Whether or not the sale from Oria Hermanos to Manuel Oria y Gonzalez fraudulent against the
creditors of Oria Hermanos, making the transfer of the steamship void as to the creditors, and
as to Gutierrez Hermanos in particular?
Held:

At the time of said sale the value of the assets of Oria Hermanos & Co., as stated by the
partners themselves, was P274,000. The vendee of said sale was a son of Tomas Oria y
Balbas and a nephew of the other two persons heretofore mentioned which said three brothers
together constituted all of the members of said company.The plaintiff is a young man of 25
years old and has no property before the said selling.

The court had laid down the rules in determining whether a there has been fraud prejudicing
creditors:
1) consideration of conveyance is fictitious;
2) transfer was made while the suit against him (Tomas Oria y Balbas) was pending;
3) sale by insolvent debtor;
4) evidence of insolvency;
5) transfer of all Properties;
6) the sale was made between father and son;
7) and the failure of the vendee to take exclusive possession of the property.

The case at bar shows every one of the badges of fraud.

Contreras vs. CBC, 76 Phil 709 (Laguna)

Summary: The spouses Molina mortgaged to CBC the property of Jerusalem Gingco in order to defeat
the effectiveness of the decision declaring ½ as belonging to J. Gingco, and to frustrate the collection of
the monetary claims of Gingco for which the spouses Molina were sentenced to pay

FACTS:

● Spouses Arcadio Gingco and Dolores Contreras were the owners of two accesorias of strong
materials, located at Sande Street, Tondo, Manila.

● On June 1928 - Dolores died

● On Nov 1928 - Arcadio Gingco sold the two accesorias to spouses Molina
 ● On June 1930 - A. Gingco initiated a civil case no. 36669 against spouses Molina for annulment of
sale. The sale was declared by the court null and void as to ½ of the accesorias (which Jerusalem
Gingco, daughter of Dolores and Arcadio, is owner thereof). Jerusalem was also ordered to pay the
spouses ½ cost of repairs made in the property plus legal interest and ½ of rents paid/may continue
being paid for the land where the buildings are located.

● On Nov, 1930 - In spite of said decision, the spouses Molina mortgaged the two accesorias in favor of
CBC to answer for loan they obtained from said bank. Moreover, the said decision from Civil case no.
36669 was not final and executory since both parties appealed.

● On Dec 1930 - both parties withdrew their appeals and the decision has become final and executory.

● In the case, Plaintiff in this case maintained that the spouses Molina and the China Banking
Corporation acted in bad faith in the execution of the deed of mortgage, for the purpose of evading
the execution of the decision rendered in civil case No. 36669.

● On Aug 1933 - petitioners filed civil case no. 44960 against spouses Molina for collection of ½ of rents
received by the spouses from the properties.

● On Feb 1934 - the spouses were ordered to pay the plaintiffs the amount of Php4, 836.31 plus rent
defendants may continue collection on the property. As a result, the sheriff announced the public
auction of the share of said spouses in the property in question. But the public auction was stopped
in view of the third-party claim filed by the China Banking Corporation, Jerusalem Gingco having
failed to file the bond required by the sheriff in order to proceed with the public auction.

ISSUE: WON deed of mortgage is rescinded

RULING: YES, the court declared the mortgage rescinded.

This is because the spouse Molina, the mortgagors, had absolutely no authority and could not mortgage a
property belonging to a third person; and as to the remaining one-half of the property belonging to the
mortgagors, the mortgage must be declared rescinded, under either paragraphs 3 or 4 of article 1291 (now
1381) of the Civil Code.

The proven facts in this case tend to show that the spouses Molina mortgaged to the Banking Corporation
the property in question in order to defeat the effectiveness of the decision declaring one-half as belonging
to Jerusalem Gingco, and to frustrate the collection of the monetary claims of Jerusalem Gingco, for which
the spouses Molina were sentenced to pay. Paragraph 3 of article 1291 (now 1381) of the Civil Code is
applicable,

“(3) Those undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due to them;”

it appears from the record that Jerusalem Gingco was not able to collect said monetary claims in view of the
third party claim filed by the China Banking Corporation based on the deed of mortgage in question. The
deed of mortgage as to one-half belonging to the spouses Molina must, therefore, be cancelled and
rescinded. Although there is no direct evidence to the mortgage with the purpose of defrauding Jerusalem
Gingco, said purpose may, however, be deduced from the fact that the deed of mortgage was executed after
an adverse decision had been rendered against said spouses Molina, and this is the position taken by the
Supreme Court of Spain in its sentencia of March 13, 1902. (See also the decision of the Supreme Court in
Panlilio vs. Victorio, 35 Phil., 706.)

But if any doubt is to be entertained as to the applicability of paragraph 3 of article 1291 of the Civil Code in
the present case, there cannot be any question as to the applicability of paragraph 4 of the same article.

“(4) Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial authority’:

The deed of mortgage in question has for its object a property in litigation, and deed of mortgage was
executed by the spouses Molina without the knowledge and approval of neither the plaintiff nor the court
having cognizance of the litigation. The spouses Molina cannot allege that the one-half belonging to them
was free from litigation, because the action involved the whole property and at the time the deed of
mortgage was executed the appeals to both parties have not as yet been withdrawn.

Rosencor Dev’t Corp. v. Inquing, 354 SCRA 119 (Mag-aso)

Petitioners: ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN

Respondents: PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO MAGBANUA
and LIZZA TIANGCO

Topic: Rescissible Contracts

Facts: Paterno Inquing, Irene Guillermo, Frederico Bantugan, Fernando Magbanua, and Liza Tiangco,
herein respondents, averred that they are the lessees, since 1971, of a two-story residential apartment
owned by the spouses Faustino and Cresencia Tiangco. The lessees were assured by the Spouses
Tiangco that they had the pre-emptive right to purchase the property if ever there was a decision to
sell it.

Upon the death of the Spouses Tiangco, the management of the property was adjudicated to their
heirs who were represented by Eufrocina de Leon. The lessess were allegedly promised the same pre-
emptive rights to purchase by the heirs of the spouses Tiangco.

The lessees received a letter from a certain Atty. Erlinda Aguila demanding that they vacate the premises
so that demolition to the building could be undertaken. The lessees refused to vacate. They received a
letter from Eufrocina De Leon offering to sell them the property for 2M. The lessees countered the offer
by offering to buy the property for 1M. No answer was given by De Leon to accept the offer.
Rene Joaquin, came to the leased premises introducing himself as the new owner. The lessees again
received another letter from Atty. Aguila demanded that they vacate the premises. And thereafter, they
received a letter from De Leon advising them that the heirs had already sold the property to Rosencor.

The lessees, later on, received a copy of the Deed of Sale between De Leon and Rosencor. They
discovered that the sale took place in September 1990 while the offer by De Leon happened a month
later in October 1990. The lessees offered to reimburse De Leon the selling price but they were
refused. They then filed an action, among others, for the rescission of the Deed of Absolute Sale
between De Leon and Rosencor.

The RTC dismissed the complaint holding that the right of first refusal of the lessees was merely and oral
one and was thus unenforceable by virtue of the statute of frauds. The CA reversed the decision of the
RTC and ordered, among others, the rescission of the Deed of Absolute Sale and for the heirs to afford
the lessees to exercise their rights of first refusal.

Issue: WON the rescission of the Deed of Absolute Sale was proper

Ruling: No. The court mentioned four cases in relation to this issue. (See s/n below for the 4 cases & its
relation to the issue.) Thus, as enunciated in the cited cases, a contract of sale entered into in violation
of a right of first refusal of another person is rescissible.

However, that doctrine cannot be applied to the case at bar. Under Article 1381 of the Civil Code,
paragraph 3, a contract validly agreed upon may be rescinded if it is “undertaken in fraud of creditors
when the latter cannot in any manner collect the claim due them.” Moreover, under Article 1385,
rescission shall not take place “when the things which are the object of the contract are legally in the
possession of third persons who did not act in bad faith.”

Good faith is always presumed unless contrary to the evidence is adduced. In the case at bar, clear and
convincing evidence should have been shown to prove that petitioners were aware of the right of first
refusal accorded to the respondents.

Respondents point to the letter by Atty. Aguila as proof. However, no mention about the rights of first
refusal was made in said letter. Neither was there any showing that respondents notified Rosencor of
Atty. Aguila of their right of first refusal after they received the said letter. Respondents also point to the
letter by De Leon where she recognized the right of first refusal of the respondents. However, De Leon
was writing on her behalf and not on behalf of petitioners and, as such, it only shows that De Leon
was aware of the existence of the rights. It does not show that petitioners were aware of such rights.
Clearly, De Leon is the only party in bad faith in this case.

Considering that there was no showing of bad faith on the part of the petitioners, the CA erred in
ordering for the rescission of the Deed of Absolute Sale between Rosencor and De Leon. Thus, the
remedy for the respondent is not rescission but an action for damages against De Leon and the heirs of
the Spouses Tiangco for the unjustified disregard of their right of first refusal.

S/n: In the first cases, the court held in Guzman, Bocaling and Co, Inc. vs. Bonnevie that a Contract of Sale was not
voidable but rescissible. Under Article 1380 to 1381 (paragraph 3) of the Civil Code, a contract otherwise valid may
nonetheless be subsequently rescinded by reason of injury to third persons, like creditors.

According to Tolentino, rescission is a remedy granted by law to the contracting parties and even to third persons,
to secure reparations for damages caused to them by a contract.

In the second case, Equatorial Realty and Dev’t, Inc. vs Mayfair Theater, Inc, the court ordered the rescission of a
contract entered into in violation of a right of first refusal. Mayfair could only exercise the right if the fraudulent
sale is first set aside or rescinded.

Third, in Paranaque Kings Enterprises, Inc. vs CA, the Court held that the allegations in a complaint showing
violation of a contractual right of first option to buy properties subject to lease constitute a valid cause of action by
summarizing the rulings in the two previously cited cases.

Lastly, in the case of Litonjua vs L&R Corporation, the court held that the sale made therein in violation of a right of
first refusal embodied in a mortgage contract was rescissible.

Suria v. IAC, 151 SCRA 661

Regalado v. Luchsinger, 5 Phil 625

Goquiolay v. Sycip, 9 SCRA 663

Topic: Rescissible Contracts

ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-appellants,

vs.

WASHINGTON Z. SYCIP, ET AL., defendants-appellees.

S/n: (Para dili libog, Goquiolay & Tan Sin An is a partnership [engage in real estate business, either by
buying and selling real estates; to subdivide real estates into lots for the purpose of leasing and selling
them], nya namatay ni si Tan Sin An, nya as per succession, ang wife aning Tan Sin An kay nahimong
“general partner” ni Goquiolay, not only “limited partner” who obtained a right to sell the land. Basically,
lahi ug scope of power aning general partner and limited partner). Gosh, laban sa law on succession,
partnerships, and sales. Hahaha

Plus, kindly analyse more on the highlighted ones. More on law on co-partnerships ni nga case, but the
details need to be included sa digest to grasp the story behind this case.

Facts:
This case is about appellant’s (Goquiolay) motion for reconsideration which upheld the validity
of the sale of the lands owned by the partnership Goquiolay & Tan Sin An, made in 1949 by the
widow of the managing partner, Tan Sin An in favor of the buyers Washington Sycip and Betty
Lee for a total consideration of P153,726.04.

Appellant Goquiolay, in his motion for reconsideration, insist that, Kong Chai Pin, widow of the
deceased partner Tan Sin An, never became more than a limited partner, incapacitated by law
to manage the affairs of partnership. With this, appellant argued that the sale should be set
aside because it was executed with the intent to defraud appellant of his share in the properties
sold.

Issue: Whether or not the sale made by Kong Chai Pin (widow of the deceased partner Tan Sin
An) is a rescissible contract.

Ruling: NO.

Goquiolay actually manifested his willingness that the widow should manage the partnership
properties. Whether or not she complied with this authority is a question between her and the
appellant, and is not here involved. But the authority was given, and she did have it when she
made the questioned sale, because it was never revoked.

It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only to
manage the property, and that it did not include the power to alienate, citing Article 1713 of the
Civil Code of 1889. What this argument overlooks is that the widow was not a mere agent,
because she had become a partner upon her husband's death, as expressly provided by the
articles of copartnership. Even more, granting that by succession to her husband, Tan Sin An,
the widow only became a limited partner, Goquiolay's authorization to manage the partnership
property was proof that he considered and recognized her as general partner, at least since
1945. The reason is plain: Under the law (Article 148, last paragraph, Code of Commerce),
appellant could not empower the widow, if she were only a limited partner, to administer the
properties of the firm, even as a mere agent.

By seeking authority to manage partnership property, Tan Sin An's widow showed that she
desired to be considered a general partner. By authorizing the widow to manage partnership
property (which a limited partner could not be authorized to do), Goquiolay recognized her as
such partner, and is now in estoppel to deny her position as a general partner, with authority to
administer and alienate partnership property.

Besides, as we pointed out in our main decision, the heir ordinarily (and we did not say
"necessarily") becomes a limited partner for his own protection, because he would normally
prefer to avoid any liability in excess of the value of the estate inherited so as not to jeopardize
his personal assets. But this statutory limitation of responsibility being designed to protect the
heir, the latter may disregard it and instead elect to become a collective or general partner, with
all the rights and privileges of one, and answering for the debts of the firm not only with the
inheritance but also with the heir's personal fortune. This choice pertains exclusively to the heir,
and does not require the assent of the surviving partner.

It must be remember that the articles of co-partnership here involved expressly stipulated that:
 In the event of the death of any of the partners at any time before the
expiration of said term, the co-partnership shall not be dissolved but will have
to be continued and the deceased partner shall be represented by his heirs or
assigns in said co-partnership (Art. XII, Articles of Co-Partnership)

Furthermore, the stipulation in the articles of partnership that any of the two managing partners
may contract and sign in the name of the partnership with the consent of the other, undoubtedly
creates on obligation between the two partners, which consists in asking the other's consent
before contracting for the partnership. This obligation of course is not imposed upon a third
person who contracts with the partnership. Neither it is necessary for the third person to
ascertain if the managing partner with whom he contracts has previously obtained the consent
of the other. A third person may and has a right to presume that the partner with whom he
contracts has, in the ordinary and natural course of business, the consent of his copartner; for
otherwise he would not enter into the contract. The third person would naturally not presume
that the partner with whom he enters into the transaction is violating the articles of partnership,
but on the contrary is acting in accordance therewith. And this finds support in the legal
presumption that the ordinary course of business has been followed and that the law has been
obeyed.

Thus, since the sale by the widow was in conformity with the express objective of the
partnership, "to engage ... in buying and selling real estate" (Art. IV, No. 1 Articles of
Copartnership), it can not be maintained that the sale was made in excess of her power as
general partner.

Finally, the fraud charged not being one used to obtain a party's consent to a contract (i.e., not
being deceit or dolus in contrahendo), if there is fraud at all, it can only be a fraud of creditors
that gives rise to a rescission of the offending contract. But by express provision of law (Article
1294, Civil Code of 1889; Article 1383, New Civil Code) "the action for rescission is subsidiary; it
can not be instituted except when the party suffering damage has no other legal means to
obtain reparation for the same". Since there is no allegation, or evidence, that Goquiolay cannot
obtain reparation from the widow and heirs of Tan Sin An, the present suit to rescind the sale in
question is not maintainable, even if the fraud charged actually did exist.

Goldenrod v. CA, 299 SCRA 141 (PADUL)

Full case title: GOLDENROD, INC., petitioner vs. COURT OF APPEALS, PIO BARRETTO & SONS, INC., PIO
BARRETTO REALTY DEVELOPMENT, INC., and ANTHONY QUE, Respondents.
Topic: Rescissible Contracts

FACTS:

Goldenrod offered to buy the property of Barretto & Sons (they owned 43 parcels of land w/ 18, 500sqm
at Quiapo Manila) which was mortgaged in UCPB. On 25 May 1988, Sonya Mathay wrote respondent
Anthony Que about the acceptance of Barreto & Son’s Properties’ counter offer that the payment must
be made monthly instead of semi-annually, that the removal of steel frames etc be done in 180 days
instead of 60 days. That Goldenrod prefers the lots to be reconsolidated back to its mother titles. There
was also an enclosure of the earnest money of 1M which was to be part of the purchase price.

Addt’l facts: When the term of existence of BARRETTO & SONS expired, all its assets and liabilities including the property located
in Quiapo were transferred to respondent Pio Barretto Realty Development, Inc. (BARRETTO REALTY). So GoldenRod offered to
buy the property resulted in its agreement with respondent BARRETTO REALTY that they would pay the following amounts: (a)
P24.5 million representing the outstanding obligations of BARRETTO REALTY with UCPB on 30 June 1988, the deadline set by the
bank for payment; and, (b) P20 million which was the balance of the purchase price of the property to be paid in installments
within a 3-year period with interest at 18% per annum. Meanwhile, Barretto Realty already spent around 250K on the
consolidation of titles.

However, due to circumstances beyond GoldenRod’s control, they could not pay the bank nor Barretto
Realty. So on August 30, 1988 Logarta Realty who was the broker of Goldenrod wrote to Anthony Que
that it could not proceed with their agreement, and asked for a full refund instead of the earnest money
of P1M. Apparently, Barretto Realty sold to ASIAWORLD lot 2 (one of the consolidated lots) for P23M. It
was transferred through dacion.

On December 12, 1988 Logarta once again wrote to Que demanding the P1M to Goldenrod. Same
demand was requested by the lawyer of Goldenrod to no avail. Hence they filed their complaint in Court
stating that Barretto Realty was unjustly enriching themselves.

ISSUE: w/n in the absence of a specific stipulation, the seller of real estate may keep the money in case
the sale fails due to the prospective buyer.

RULING:

No. This is not possible as the purchase money must be returned otherwise it becomes unjust
enrichment. As provided under Art. 1482 of the Civil Code, whenever earnest money is given in a
contract of sale, it shall be considered as part of the purchase price and as proof of the perfection of the
contract. Goldenrod clearly stated without any objection from Barretto Realty that the earnest money
was intended to form part of the purchase price. It was an advance payment which must be deducted
from the total price. There was no intention to forfeit the money, and Goldenrod also informed the
Barretto Realty of its plan in not pushing through - this becomes an extrajudicial rescission of its
agreement w/ the Barretto Realty.

Moreover, since Barretto Realty did not oppose the declaration of rescission by the other party, and
failed to protest against it, its silence suggests an admission to the validity of rescinding party’s claim.
Also clearly selling to ASIAWORLD what could have been GoldenRod’s, was a clear indication of honoring
the rescission of contract.
As such, Article 1385 of the Civil Code prevailed wherein rescission created the obligation to return the
things which were the object of the contract together with their fruits and interest. Barretto Realty is
obliged to return to GoldenRod the earnest money plus legal interest.

Cabaliw v. Sadorra, 64 SCRA 310

Alpuerto v. Perez Pastor, 38 Phil 785
Ayles v. Reyes, 18 Phil 243
Lee v. Bangkok Bank, G.R. No. 173349

2. Voidable Contracts
Uy Soo Lim v. Tan Unchuan, 38 Phil 552
De Luna v. Linatoc, 74 Phil 15

Rosales v. Reyes, 25 Phil 495

*Full text here*
*Full text clickable*

Art 1390 par.3: “These contracts are binding, unless they are annulled by a proper action…”
s/n: I included this provision in case ma question why prescription ang topic is because for contracts
to be annulled need sila ug cause of action. Sa kini na case gi raise na walay cause of action because of
prescription period (guys sorry gyud kaayo huhu sa maka help mu dawat gyd kog correction please help wa gyd
ko kasabot ani na case kay cause of action ra ang discussion huhu ty)

Facts:
On July 29, 1902, Rivera sold a parcel of land to Reyes and Ordoveza for 800 pesos under pacto de retro,
on the condition, however, that the repurchase could not be made until after three years from the date
of the contract of sale. In this document, Rivera states that he was of age.
On May 29, 1903, Rivera sold his right to repurchase to Rosales for 1,075 pesos. In the document
evidencing this sale, Rivera states that he is 23 years of age.
Rosales, who is the plaintiff in this case, alleges that in January 1908, he tendered 800 pesos to Reyes
and Ordoveza with the request that the land be surrendered to him in accordance with the contract
entered into between them and Rivera in 1902, but that they refused to accept the money and comply
with his request.

Issue: W/N the period to repurchase has already expired or prescribed, thus, no cause of action can
be taken.

Held:

In this case, the period has not been prescribed yet. If there is no condition that will bar the right of
the vendor a retro to exercise his right of redemption, the period shall be counted from the
perfection of the contract of sale. However, if there is a condition that bars such exercise of right,
like in this case, it shall be counted from expiration of the condition and the period shall not exceed
4 years. Applying this rule in this case, the vendor a retro is given a period of 7 years within which to
repurchase the property and the 7 years shall be counted from the perfection of the contract.
In such a case the question arises, Upon what basis must the duration of the right to repurchase be
calculated? Any such contract must necessarily be terminated ten years from the date of its
execution, but should the vendor have the privilege to exercise this right for the balance of the ten
years, or should he be allowed only four years on the ground that there was no express agreement
of the parties upon this point?

In all such cases, it would seem that the vendor should be allowed four years from the expiration of
the time within which the right to redeem could not be exercised, or in the event that four years
would extend the life of the contract beyond ten years, the balance of the ten-year period, on the
ground that vendors, where the right to redeem is not thus suspended and no express agreement
as to the length of time during which it may be exercised is made, are also allowed four years.

Thus, the court finds that the complaint constitutes a cause of action since the prescription period
has not lapsed yet.

Philippine Trust Co. v. Roldan, 99 Phil 393

3. Unenforceable Contracts
Bumanlag v. Alzate, 144 SCRA 480

Rallos v. Felix Go Chan, 81 SCRA 259 (Laguna)

FACTS:
Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land known as Lot
No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the
Registry of Cebu. They executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell such land for and on their behalf. After Concepcion died, Simeon Rallos sold the
undivided shares of his sisters Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation for
the sum of P10,686.90. New TCTs were issued to the latter. Petitioner Ramon Rallos, administrator of
the Intestate Estate of Concepcion filed a complaint praying (1) that the sale of the undivided share of
the deceased Concepcion Rallos in lot 5983 be unenforceable, and said share be reconveyed to her
estate
ISSUE: WON the sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was
executed by the agent after the death of his principal?

RULING: NO, it is not valid.

It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of
another without being authorized by the latter, or unless he has by law a right to represent him. A
contract entered into in the name of another by one who has no authority or the legal representation or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by
the person on whose behalf it has been executed, before it is revoked by the other contracting party.
Article 1403 (1) of the same Code also provides:

ART. 1403. The following contracts are unenforceable, unless they are justified:

(1) Those entered into in the name of another person by one who has been given no authority
or legal representation or who has acted beyond his powers; …

Out of the above given principles, sprung the creation and acceptance of the relationship of agency
whereby one party, caged the principal (mandante), authorizes another, called the agent (mandatario),
to act for and in his behalf in transactions with third persons. The essential elements of agency are: (1)
there is consent, express or implied of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agents acts as a representative and not
for himself, and (4) the agent acts within the scope of his authority.

Agency is basically personal representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done
within the scope of the authority. Because of this, agency is extinguished by the death of the principal
or the agent (par 3 Art 1919). The death of the principal effects instantaneous and absolute revocation
of the authority of the agent unless the Power is coupled with an interest. A power without an interest
conferred upon an agent is dissolved by the principal's death, and any attempted execution of the
power afterward is not binding on the heirs or representatives of the deceased .

Almirol v. Monserrat, 48 Phil 67

Hernandez v. Andal, 78 Phil 196
Robles v. Lizarraga, 42 Phil 584
Reiss v. Memije, 15 Phil 350
Syquia v. CA, 151 SCRA 507
Case Title: JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C. SYQUIA and ANTHONY
C. SYQUIA, petitioners, vs. THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL PARK
CEMETERY, INC., respondents.

Topic: Unenforceable Contracts

s/n: A case where the Syquia family complained that MMPC breached the contract by boring holes in
the coffin, thereby desecrating the body of the deceased as water seeped through it; definition of
‘sealed’ and ‘waterproof’ distinguished; MMPC did not breach any contract, nor were they negligent.
FACTS:
Juan Syquia et al were the relatives of the deceased Vicente Juan Syquia (parents and siblings). It was
back on July 21, 1978 when Juan Syquia (dad) authorized MMPC to inter the remains of Vicente Syquia.
They purchased a new lot and wanted to transfer the remains of the deceased, in doing so, MMPC staff
had to bore a hole so that they could do the proper transfer. Unfortunately, it was raining hard, and the
Syquias knew the location was flood prone, and so water seeped through the holes inside the coffin and
the deceased’s clothing and exposed parts were damaged by the water. They filed a complaint stating
that MMPC breached the contract of “Deed of Sale and Certificate of Perpetual Care” when they
promised that they would be providing a sealed case, when it turned out to have not been waterproof.

To MMPC’s defense, they said that the holes were necessary in order to lift the coffin from the ground
and facilitate the transfer to the new plot. That had they not done that, the coffin would have floated,
and the soil would have caved in. They also promised a sealed case, and said that “seal” and “water
proof” were two different concepts. To “seal” meant any of various closures or fastenings . . . that
cannot be opened without rupture and that serve as a check against tampering or unauthorized
opening. Hence there was no breach. On the question of holes, it was necessary - to ensure that the
internment was done well.

ISSUE whether or not, by drilling holes in the coffin, MMPC did breach their contract of providing
perpetual care?

RULING:
No. MMPC did not breach the tenor of its contractual obligation to the Syquias. They could not also be
held negligent as negligence was defined as "omission of that diligence which is required by the nature
of the obligation and corresponds with the circumstances of the persons, of the time and of the place."
The diligence to be observed, absent the stipulated provisions in the contract, was that of a good father
of a family. In fact, boring the hole was a necessary means to ensure that the vault does not fault when
there is heavy rain.

s/n: also on the alleged culpa aquillana as raised by petitioners, SC does not agree. The Court also finds
no reason to justify the award of damages to the family. Had there been neglect, if any, it would be
culpa contractual as provided by Article 1170 of the Civil Code, to wit:

Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages.

Averia v. Averia, 436 SCRA 459

Abrenica v. Gonda, 34 Phil 739
Ayson v. CA, 97 Phil 965

4. Void Contracts
Ariaga vda. de Gurrea v. Suplico, 488 SCRA 332
Tongoy v. CA, 123 SCRA 99
Rongavilla v. CA, 294 SCRA 289
Calimlim–Canullas v. Fortun 129 SCRA 675
Mapalo v. Mapalo, 123 Phil 979
Manzano v. Garcia, G.R. No. 179323
Ras v. Sua, 134 Phil 131
Angeles v. CA, 102 Phil 1006
Terre v. Terre, 211 SCRA 7
Atienza v. Brillantes, 243 SCRA 32
MWSS v. CA, 297 SCRA 287

Batarra v. Marcos, 7 Phil 156 (PADUL)

G.R. No. L-2929 December 7, 1906
FAUSTA BATARRA, plaintiff-appellee, vs. FRANCISCO MARCOS, defendant-appellant.

Topic: Void Contracts:

Summary:

This was just a case revolving around breach of a promise to marry, whereby Fausta seeks to recover
damages for breach of promise to marry by Francisco after she submitted herself to sexual relation with
him on the account of such promise. The records do not show the crime of seduction as Fausta was not
below 23 yo, it could not also be based on rape, seduction, and abduction.

Could the defendant, having failed to perform his promise of marriage, be liable for the breach of that
contract and for damages resulting from his seduction of the plaintiff, the carnal connection being the
consideration (cause) of the promise?

The Court ruled in the negative. If the criminal intercourse between the parties was a crime or
misdemeanor, the crime or misdemeanor was common to both parties, and article 1305 of the Civil
Code prevents a recovery. The same is true if the act did not constitute a crime or misdemeanor. It was
in any event an immoral act and the fault lay with both parties. By the provisions of article 1306 of the
same code there can, in such a case, be no recovery by one against the other.

There’s also no recovery under the provisions of article 1902 of the Civil Code, which provides as
follows: "A person who by an act or omission causes damage to another when there is fault or
negligence shall be obliged to repair the damage so done;" for the plaintiff voluntarily participated in the
act. "

Hence such an agreement/contract is void in the first place.

s/n: lower court issued P500 peso penalty but was reversed; the defendant is acquitted of the complaint,
with the costs of the first instance. No costs will be allowed to either party in this court.

Santos v. Roman Catholic Church, 94 Phil 405

E. Natural Obligations
• Note: Cases TBA

F. Estoppel
Pio Baretto Realty v. CA, 360 SCRA 127
Kalalo v. Luz, 34 SCRA 337
Cristobal v. Gomez, 50 Phil 810
Marques v. Far East Bank and Trust Company, G.R. No. 171379
Fat Kee Computer v. Online Networks, G.R. No. 171238
Terminal Services v. PPA, 378 SCRA 82
Francel Realty v. Sycip, 469 SCRA 431
Metromedia Times vs. Pastoria, 465 SCRA 335
Magtira v. CA, 96 SCRA 680
De Ynchausti v. MERALCO, 36 Phil 908.
Rep v. Go Bon Lee, 111 Phil 805
Republic v. CA, 354 SCRA 148
Republic v. “G” Holdings, 475 SCRA 608

Favis vs. Municipality of Subangan, 136 Phil 366

Full Title: G.R. No. L-26522 February 27, 1969
ANTONIO FAVIS and CORAZON FAVIS doing business under the trade name "UNION GROCERY &
HARDWARE", plaintiffs-appellants, vs. MUNICIPALITY OF SABANGAN, BONTOC, MOUNTAIN PROVINCE,
defendant-appellee.
Topic: Estoppel; estoppel against a municipality; what cannot be done directly cannot be done
indirectly

FACTS:
Antonio and Corazon Favis who trade under “Union Grocery and Hardware” in Baguio City filed an
action (Feb 1965) for collection against the Municipality of Sabangan, Bontoc, Mountain Province, to
recover the principal amount of P1, 150 requesting the invoice value of GI pipes of various sizes needed
by the respondent in its municipal waterworks construction (besides the 12% interest and 25% atty’s
fees).

However, Mayor Agustin Velasco, defendant, filed that no such thing exists in their records. That "the
then Municipal Mayor of Sabangan was never authorized to contract or buy on credit from the plaintiff,
various and different sizes of G.I. pipes needed in the construction of its municipal waterworks ..., hence,
defendant municipality can not in any way, be legally bound for the acts of the then mayor ...."

The City of Baguio RTC favored the Favises hence the appeal from the respondent municipality. The case
proceeded to trial, and the Favises complaint was dismissed with lack of legal liability on the part of the
defendant municipality. The Favises then moved to SC for direct review of Section 2, Rule 42 which
involves the correct interpretation of SEC. 16. Government Exempt. — The Republic of the Philippines is
exempt from paying the legal fees provided in this rule. Contending that the municipality must pay its
legal fees for the perfection of the appeal. Also the CFI of Baguio did not have jurisdiction to try the
case.

ISSUE: Since the municipality of Subangan benefitted from the GI Pipes, were they already estopped
to question the validity of the contract of the then mayor and petitioners?

RULING:
s/n: Court Ruled that the Municipality of Subangan is not exempted from paying its fees (for docket fee
or appeal bond). The Court did not exercise grave abuse when it interpreted Sec 16 otherwise as this was
the first time it was questioned. That more importantly, the court dismissing the lack of legal liability on
the part of defendant municipality remains to be on its merits. It should be noted that the Favises having
directly elevated their appeal on questions of law to the Supreme Court, pursuant to Rule 42, Section 2,
they are foreclosed from disputing the Court a quo's findings of fact in its decision.

No. They are not estopped from questioning its validity.

Whenever trading with govt… there should be a bidding (Sec 3, RA 2264 under purchasing). So even
though they did not follow the process, it was clear the municipality benefited from the GI pipes. Yet,
estoppel could not be enforced against a municipality to validate a contract w/c it has no power to
make. To apply the doctrine of estoppel against a municipality would be to enable it to do indirectly
what it cannot do directly. This type of contract is violative of public policy, hence the municipality
executing it cannot be estopped to assert the invalidity on the ground; nor can it be estopped to assert
the invalidity of a contract which has ceded away, controlled, or embarrassed its legislative or
governmental powers.

The Favises also knew the assumption of risk. In the letter of the former mayor, it indicated that the
payment would come from the release to be made by former President Garcia which, unfortunately,
was frozen. It also indicates that instructions were given not to install the pipes until all questions were
settled. And since the pipes had already been installed they were ordered dismantled to be piled and to
be returned to the owner if the frozening (sic) order was not lifted. It is, therefore, clear that the mayor,
aside from want of authority to execute the contract, had not intended to bind the municipality of
Sabangan to pay for the indebtedness for the payment would not come from the funds of the
municipality but from the release of funds by former President Garcia.

Plaintiff took the risk of delivering the pipes not knowing definitely from whom the payment would be
drawn. He indicated in the invoice that the articles were sold to Gov. Bado Dangwa — for Mayor Bodud
of Sabangan. Not able to collect from Gov. Dangwa or Mayor Bodud he sued the municipality of
Sabangan. Unfortunately, the requisites of municipal contracts in order to bind the municipality have
not been complied with hence the same may not be enforced against the municipality of Sabangan.

Hence the lower court’s decision was reaffirmed, dismissing the complaints of the Favises. They would
have to look for payment to the National Government through funds yet to be released by way of
assistance to the municipality.

s/n: "public biddings are held for the best protection of the public and to give the public the best possible
advantages by means of open competition between the bidders. Thus, contracts requiring public bidding
affect public interest, and to change them without complying with that requirement would indeed be
against public policy."
Eugenio v. Perdido, 97 Phil 41
Cristobal v. Gomez, 50 Phil 810
Bachrach Motors v. Unson, 50 Phil 981
Nilo v. Romero, 111 Phil 540
Leca Realty v. Republic, 503 SCRA 563

G. Prescription
1. Prescription in General
Acquisitive vs. Extinctive. Morales v. CFI, 97 SCRA 872
Prescription vs. Laches. Tijam v. Sibonghanoy, 32 SCRA 29
Catholic Bishop v. Court of Appeals, G.R. No. 112519
Insurance of Phil Islands vs. Sps. Gregorio, G.R. No. 174104
Limitations and Extent of Prescription. Vda. De Alberto v. CA, 173 SCRA 436
Marcelino v. CA, 210 SCRA 444
Republic v. PNB, 13 SCRA 42
Director of Forest Administration v. Fernandez, 192 SCRA 121
Republic v. Court of Appeals, 131 SCRA 532
Waiver of Prescription. DBP v. Adil, 161 SCRA 307
Prescriptive Periods. DBP vs. Ozarraga, G.R. No. L-16631
Alvero vs. Reas, 35 SCRA 210

2. Prescription of Ownership
Ordinary vs. Extraordinary. Godinez v. CA, 135 SCRA 351
Heirs of Amarante v. CA, 185 SCRA 585
Concept of Possession. Republic v. CA, 146 SCRA 15
Ramos v. CA, 112 SCRA 542
Coronado v. CA, 191 SCRA 814
Corpus v. Padilla, 5 SCRA 814
Prescription over registered properties. Reyes v. CA, 258 SCRA 651
Good Faith. Negrete v. CFI of Marinduque, 48 SCRA 113
Magtira v. CA, 96 SCRA 680.
Just Title. Doliendo v. Biarnesa, 7 Phil 232
Solis v. CA, 176 SCRA 678
Prescription over illegally acquired movables. Tan v. CA, 195 SCRA 355
Computation of Time. South City Homes v. Republic, 185 SCRA 693
3. Prescription of Actions
Good Faith vs. Bad Faith. Dira v. Tanega, 33 SCRA 479
Prescriptive Periods. Espanol v. Philippine Veterans Administration, 137 SCRA 314
Kramer Jr. v. CA, 178 SCRA 518
Vda. De Borromeo v. Pogoy, 126 SCRA 217
Callanta v. Carnation Phils., 145 SCRA 268
When Period Begins to Run. Tolentino v. CA,162 SCRA 66
Provident v. CA, 222 SCRA 125
Tan v. CA, 195 SCRA 355
Interruptions of Periods. Ledesma v. CA, 224 SCRA 175
Cabrera v. Tinio, 8 SCRA 542
Olympia International v. CA, 180 SCRA 353
Ramos v. Condez, 20 SCRA 1146