Cases Final Edit

COMPILATION OF CASE LAWS
Presented to the Faculty of College of Law

University of Caloocan City
In Partial Fulfillment of the Requirements for the subject course

OBLIGATIONS AND CONTRACTS
by:
AGUADA, Lester C.
ALFEREZ, Jomar C.
BOBIS, Romeo Jr. G.
CELESPARA, Joey D.
CORPUZ, Jael Iona D.
DE PEDRO, Isaias II L.
DEL ROSARIO, Christian S.
ESTELLORE. Rose Ann B.
FAJARDO, Queenzel I.
GONZALES, Carilyn Mae M.
HIPOLITO, Ria N.
LACHICA, Jose Antonio
MACASPAC, Edgilin E.
SALAZAR, Jayson F.
SIMPLICIO, Prince Jonh Vincent G.
TEPASE, Jimboy L.
VIDUYA-BONTIA, Mary Fritzie M.
JURIS DOCTOR
JUNE 2022
2|Page University of Caloocan City – College of Law

TABLE OF CONTENTS
PAGE CASES ASSIGNED STUDENTS
13 Villaroel v. Estrada, 71 Phil 140 (1940) ALFEREZ, Jomar C.
15 Cristobal vs. Melchor, 78 SCRA 175; AGUADA, Lester C.
17 Secretary of the DPWH and District BOBIS, Romeo Jr. G.

Engineer Celestino Contreras vs Spouses
Tecson, GR No. 179334, July 1, 2013
19 DEVELOPMENT BANK OF THE CELESPARA, Joey D.

PHILIPPINES (DBP) versus THE
HONORABLE MIDPAINTAO L. ADIL,
Judge of the Second Branch of the Court of
First Instance of Iloilo and SPOUSES
PATRICIO CONFESOR and JOVITA
VILLAFUERTE (G.R. No. L 48889 May 11,
1989)
21 Insular Government vs. Aldecoa and Co., CORPUZ, Jael Iona D.

19 Phil. 505
23 SOTERA PAULINO MARCELO, DE PEDRO, Isaias II L.

GABRIELA M. ANGELES, SIMEONA
CUENCO, EMILIA MARCELO and RUBEN
MARCELO versus COURT OF APPEALS,
FERNANDO CRUZ and SERVANDO
FLORES, G.R. No. 131803 April 14, 1999)
24 Barredo v. Garcia, 73 Phil 607 (1942) DEL ROSARIO, Christian S.
27 Mendoza v. Arrieta, 91 SCRA 113 (1979) ESTELLORE, Rose Ann B.
29 PSBA v. CA, 205 SCRA 729 (1992) FAJARDO, Queenzel I.
31 Amadora v. CA, 160 SCRA 315 (1988) GONZALES, Carilyn Mae M.
33 De Guia v. Manila Electric Co, 40 Phil 706 HIPOLITO, Ria N.

(1920
35 US v. Barias, 23 Phil 434 (1912 LACHICA, Jose Antonio
37 Sarmiento v. Sps. Cabrido, 401 SCRA 122 MACASPAC, Edgilin E.

(2003)
39 Crisostomo v. CA, 409 SCRA 528 (2003 SALAZAR, Jayson F.
42 Fisher v. Robb, 69 Phil 101 (1939) SIMPLICIO, Prince Jonh Vincent G
44 Song Fo v. Hawaiian Philippines, 47 Phil TEPASE, Jimboy L.

821 (1925)
46 Velarde v. CA, 361 SCRA 56 (2001) LACHICA, Jose Antoino A.
49 Woodhouse v. Halili, 93 Phil 526 (1953) VIDUYA-BONTIA, Mary Fritzie M.
51 Geraldez v. CA, 230 SCRA 329 (1994) ALFEREZ, Jomar C.
53 Gutierrez v. Gutierrez, 56 Phil 177 (1932) AGUADA, Lester C.
55 Vasquez v. Borja, 74 Phil 560 (1944) BOBIS, Romeo Jr. G.
57 Cetus Development Corp. v. CA, 176 SCRA CELESPARA, Joey D.

72 (1989)
59 Santos Ventura Hocorna Foundation v. CORPUZ, Jael Iona

Santos, GR 153004, 04 Nov 2004
1
61 Vasquez v. Ayala Corp., GR 149734, 19 DE PEDRO, Isaias II L.
Nov 2004
63 Abella v. Francisco, 55 Phil 447 (1931) DEL ROSARIO, Christian S.
65 Tengco v. CA, GR 49852, 19 Oct 1989 FAJARDO, Queenzel I.
67 Central Bank v. CA, 139 SCRA 46 (1985 GONZALES, Carilyn Mae M.
70 Chavez v. Gonzales, 32 SCRA 547 (1970) HIPOLITO, Ria N.
74 Telefast v. Castro, 158 SCRA 445 (1988 LACHICA, Jose Antonio
76 Arrieta v. NARIC, 10 SCRA 79 (1964) MACASPAC, Edgilin E.
79 Magat v. Medialdea, GR L-37120, 20 Apr SALAZAR, Jayson F.

1983
82 Eastern Shipping Lines v. CA, 234 SCRA SIMPLICIO, Prince Jonh Vincent G
781 (1994)
84 Cristina Garments v. CA, 304 SCRA 356 TEPASE, Jimboy L.
1
(1999)
86 Security Bank v. RTC Makati, 263 SCRA VIDUYA-BONTIA, Mary Fritzie M.

453 (1996)
88 Almeda v. CA, 256 SCRA 292 (1996) ALFEREZ, Jomar C.
90 First Metro Investment v. Estate of Del Sol, AGUADA, Lester C.

420 Phil 902 (2001)
93 Tanguling v. CA, 266 SCRA 78 (1997) CELESPARA, Joey D.
95 Song Fo v. Hawaiian Philippines, 47 Phil CORPUZ, Jael Iona D.

821 (1925)
97 Boysaw v. Interphil Promotions, 148 SCRA DE PEDRO, Isaias II L.

365 (1987)
99 U.P. v. de los Angeles, 35 SCRA 365 (1970) DEL ROSARIO, Christian S.
101 De Erquiaga v. CA, 178 SCRA 1 (1989) ESTELLORE , Rose Ann B.
104 Angeles v. Calasanz, 135 SCRA 323 (1985) FAJARDO, Queenzel I.
106 Ong v. CA, 310 SCRA 1 (1999) GONZALES, Carilyn Mae M.
107 Visayan Sawmill v. CA, 219 SCRA 3 78 HIPOLITO, Ria N.

(1993)
109 Deiparine v. CA, 221 SCRA 503 (1993) LACHICA, Jose Antonio
111 Iringan v. CA, 366 SCRA41 (2001) MACASPAC, Edgilin E.
113 Vda. de Mistica v. Sps. Naguiat, 418 SCRA SALAZAR, Jayson F.

73 (2003)
116 Khe Hong Seng v. CA, 355 SCRA 701 (2001) SIMPLICIO, Prince Jonh Vincent G
118 Siguan v. Lim, 318 SCRA 725 ( 1999) TEPASE, JimNAKPILboy L.
120 Juan Nakpil & Sons v. CA, 144 SCRA 597 HIPOLITO, Ria N.
(1986
123 Republic v. Luzon Stevedoring, 21 SCRA ALFEREZ, Jomar C.

279 (1967)
124 Dioquino v. Laureano, 33 SCRA 65 (1970) AGUADA, Lester C.

125 Yobido v. CA, 281 SCRA 1 (1997) BOBIS, Romeo Jr. G.
128 Austria v. CA, 39 SCRA 527 (1971) CELESPARA, Joey D.
130 NPC v. CA, GRL-47379, 161 SCRA334 CORPUZ, Jael Iona D.

(1988)
132 Bacolod-Murcia Milling v. CA, 182 SCRA DE PEDRO, Isaias II L.

24 (1990)
135 Philcomsat v. Globe Telecom, 429 SCRA DEL ROSARIO, Christian S.

153 (2004)
137 Gonzales v. Heirs of Thomas, 314 SCRA FAJARDO, Queenzel I.

585 (1999)
139 Coronel v. CA, 253 SCRA 15 (1996) HIPOLITO, Ria N.
141 Parks v. Province of Tarlac, 49 Phil 142 LACHICA, Jose Antonio

(1927)
143 Central Philippines University v. CA, 246 MACASPAC, Edgilin E.

SCRA 511 (1995)
145 Quijada v. CA, 299 SCRA 695 (1998) SALAZAR, Jayson F.
147 Lim v. CA, 191 SCRA 156 (1990) SIMPLICIO, Prince Jonh Vincent G
149 Naga Telephone v. CA, 230 SCRA 351 TEPASE, Jimboy L.

(1990)
151 Osmena v. Rama, 14 Phil 99 (1909) ESTELLORE, Rose Ann B.
153 Hermosa v. Longora, 93 Phil 971 (1953) VIDUYA-BONTIA, Mary Fritzie M.
155 Taylor v. Uy Tieng Piao, 43 Phil 873 (1922) ALFEREZ, Jomar C.
157 Smith Bell v. Sotelo Matti, 44 Phil 875 (1922) AGUADA, Lester C.
160 Romero v. CA, 250 SCRA 223 (1995) CELESPARA, Joey D.
162 Roman Catholic Archbishop of Manila v. CORPUZ, Jael Iona

CA, 198 SCRA 300 (1991)
164 Herrera v. Leviste, GR 55744, 28 Feb 1985 DEL ROSARIO, Christian S.
167 Lachica v. Araneta, 47 OG No. 11, 5699, 04 DEL ROSARIO, Christian S.

Aug 1949
168 Ponce de Leon v. Syjuco, 90 Phil 311 (1951) CORPUZ, Jael Iona D.
170 Buce v. CA, 332 SCRA 151 (2000) ESTELLORE, Rose Ann B.
172 Araneta v. Philippine Sugar Estate AGUADA, Lester C.

Development Co., 20 SCRA 330 (1967)
174 Ynchausti v. Yulo, 34 Phil 978 (1916) DE PEDRO, Isaias II L.
176 Lafarge Cement Phil. v. Continental FAJARDO, Queenzel I.

Cement, 443 SCRA 522 (2004
178 Alipio v. CA, 341 SCRA 441 (2000) MACASPAC, Edgilin E.
180 Jauclan v. Querol, 38 Phil 718 (1918) SALAZAR, Jayson F.
182 RFC v. CA, O.G. No. 6, 2457 ESTELLORE, Rose Ann B.
184 Inciong v. CA, 257 SCRA 578 (1996) GONZALES, Carilyn Mae M.
186 Quisumbing v. CA, 189 SCRA 325 (1990) HIPOLITO, Ria N.
187 Arrieta v. NARIC, 10 SCRA 79 (1964) ESTELLORE, Rose Ann B.
189 Kalalo v. Luz, 34 SCRA 377 (1940) SIMPLICIO, Prince Jonh Vincent G.
191 Papa v. A.V. Valencia, 284 SCRA 643 (1998) DE PEDRO, Isaias II L.
193 PAL v. CA, 181 SCRA557 (1990) CELESPARA, Joey D.
195 Reparations Commission v. Universal Deep GONZALES, Carilyn Mae M.

Sea Fishing, 83 SCRA 764 (1978)
197 Paculdo v. Regalado, 345 SCRA 134 (2000) FAJARDO, Queenzel I.
199 DBP v. CA, GR 118342, 05 Jan 1998 VIDUYA-BONTIA, Mary Fritzie M.
201 Filinvest Credit Corp. v. Philippine MACASPAC, Edgilin E.

Acetylene, 111 SCRA 421 (1982
203 De Guzman v. CA, 137 SCRA 730 (1985) LACHICA, Jose Antonio
205 TLG International Continental Enterprising BOBIS, Romeo Jr. G.

Inc. v. Flores, 47 SCRA 437 (1972)
207 McLaughlin v CA, 144 SCRA 693 (1986) ALFEREZ, Jomar C.

209 Soco v. Militante, 123 SCRA 160 (1983) ESTELLORE, Rose Ann B.
211 Sotto v. Mijares, 28 SCRA 17 (1969) TEPASE, Jimboy L.
213 Meat Packing Corp. v. Sandiganbayan, 359 SALAZAR, Jayson F.

SCRA 409 (2001)
216 Pabugais v. Sahijwani, 423 SCRA 596 (2004) DEL ROSARIO, Christian S.
219 Occena v. CA, 73 SCRA 637 (1976) CORPUZ, Jael Iona
221 Naga Telephone Co. v. CA, 230 SCRA 351 SIMPLICIO, Prince Jonh Vincent G
(1994)
224 PNCC v. CA, 272 SCRA 183 (1997) ESTELLORE, Rose Ann B.
226 Yam v. CA, GR 104726, 11 Feb 1999 CELESPARA, Joey D.
227 Gan Tion v. CA, 28 SCRA 235 (1969) DE PEDRO, Isaias II L.
229 Silahis Marketing v. lAC, 180 SCRA 29 HIPOLITO, Ria N.

(1989)
231 BPI v. Reyes, 255 SCRA 571 (1996) LACHICA, Jose Antonio
234 PNB v. Sapphire Shipping, 259 SCRA 174 MACASPAC, Edgilin E.

(1996)
236 Mirasol v. CA, 351 SCRA 44 (2001) TEPASE, Jimboy L.
238 Miller v. CA, 38 SCRA 642 (1971) TEPASE, Jimboy L.
240 Magdalena Estate v. Rodriguez, 18 SCRA FAJARDO, Queenzel I.

967 (1966)
242 Reyes v. Secretary of Justice, 264 SCRA 3 5 ( ALFEREZ, Jomar C.

1996)
244 Conchingyan v. RB Surety and Insurance, VIDUYA-BONTIA, Mary Fritzie M.

151 SCRA 339 (1987)
246 Broadway Centrum Condominium Corp v. GONZALES, Carilyn Mae M.

Tropical Hut, GR 79642, 05 Jul 1993
248 California Bus Lines v. State Investment, DEL ROSARIO, Christian S.

GR 14 79 50, 11 Dec 2003
250 Garcia v. Llamas, 417 SCRA 292 (2003) CORPUZ, Jael Iona
252 Quinto v. People, GR 126715, 14 Apr 1999 BOBIS, Romeo Jr. G.
253 Astro Electronics Corp v. Philippine Export SIMPLICIO, Prince Jonh Vincent G
and Foreign Loan Guarantee Corp., GR
136729,23 Sep 2003
255 Licaros v. Gatmaitan, GR 142838, 09 Aug ESTELLORE, Rose Ann B.

2001
257 GSIS v. CA, 228 SCRA 183 (1993) DE PEDRO, Isaias II L.
259 Dizon v. Gaborro, 83 SCRA 688 (1978) FAJARDO, Queenzel I.
261 Rosenstock v. Burke, 46 Phil 217 (1924) MACASPAC, Edgilin E.
263 Malbarosa v. CA, 402 SCRA 168 (2003) BOBIS, Romeo Jr. G.
266 Sanchez v. Rigos, 45 SCRA 368 (1972) ALFEREZ, Jomar C.
268 Adelfa Properties v. CA, 240 SCRA 565 TEPASE, Jimboy L.

(1995)
270 Jardine Davies v. CA, GR 389 Phil 204 TEPASE, Jimboy L.

(2000)
272 Asiain v. Jalandoni, 45 Phil296 (1923 SALAZAR, Jayson F.
273 Theis v. CA, GR 126013, 12 Feb 1997 DEL ROSARIO, Christian S.
275 Heirs of William Sevilla, et al v. Sevilla, 402 CORPUZ, Jael Iona

SCRA 503 (2003)
277 Dumasug v. Modelo, 34 Phil252 (1916) SIMPLICIO, Prince Jonh Vincent G
279 Hemedes v. CA, 316 SCRA 34 7 (1999) HIPOLITO, Ria N.
281 Katipunan v. Katipunan, 375 SCRA 200 CELESPARA, Joey D.

(2002)
283 Songco v. Sellner, 3 7 SCRA 254 (1917) GONZALES, Carilyn Mae M.
284 Azurraga v. Gay, 52 Phil 599 (1928) VIDUYA-BONTIA, Mary Fritzie M.
286 Laureta Trinidad v. IAC, 204 SCRA 524 LACHICA, Jose Antonio
(1991)
289 Braganza v. Villa Abrille, 105 SCRA 456 DE PEDRO, Isaias II L.

(1959)
291 Tuason v. Marquez, 45 Phil 381 (1923) MACASPAC, Edgilin E.
293 Rural Bank of Sta. Maria v. CA, 314 SCRA FAJARDO, Queenzel I.
255 (1999)
295 Bias v. Santos, 1 SCRA 899 (1961) VIDUYA-BONTIA, Mary Fritzie M.
297 Tanedo v. CA, 252 SCRA 80 (1996) ALFEREZ, Jomar C.
299 Liguez v. CA, 102 Phil 577 (1957) SIMPLICIO, Prince Jonh Vincent G
301 Carantes v. CA, 76 SCRA 524 (1977) HIPOLITO, Ria N.
303 Sps. Buenaventura et al v. CA, 416 SCRA LACHICA, Jose Antonio

263 (2003)
Florentino v. Encarnacion, 79 SCRA 192 SIMPLICIO, Prince Jonh Vincent G

305 ( 1977)
307 Coquia v. Fieldmen's Insurance Co., 26 CELESPARA, Joey D.

SCRA 178 (1968)
308 Constantino v. Espiritu, 39 SCRA 206 CORPUZ, Jael Iona

(1971 )
310 Integrated Packaging Corp. v. CA, 333 TEPASE, Jimboy L.

SCRA 171 (2000)
312 So Ping Bun v. CA, 314 SCRA 751 (1999) GONZALES, Carilyn Mae M.
314 Hernaez v. De los Angeles, 27 SCRA 127 6 ( DEL ROSARIO

1969)
319 Pakistan International Airlines v. Ople, 190 FAJARDO, Queenzel I.

SCRA 90 (1990)
320 Cui v. Arellano, 2 SCRA 205 (1961) DE PEDRO, Isaias II L.
322 Arroyo v. Berwin, 36 Phil 386 (1917) TERUEL, Praise J.
324 Bustamante v. Rosel, 319 SCRA 413 (1999) VIDUYA-BONTIA, Mary Fritzie M.
326 Garcia v. Bisaya, 97 Phil 609 (1955) ALFEREZ, Jomar C.
328 Bentir v. Leande, 330 SCRA 591 (2000) LACHICA, Jose Antonio
330 Atilano v. Atilano, 28 SCRA 2232 (1969) CELESPARA, Joey D.
10 | P a g e U n i v e r s i t y o f C a l o o c a n C i t y – C o l l e g e o f L a w
332 Carrantes v. CA, 76 SCRA 524 (1977) CORPUZ, Jael Iona
332 Sarming et al v. Dy et al, 383 SCRA 131 SALAZAR, Jayson F.

(2002)
334 Kasilag v. Rodriguez, 69 Phil 217 (1939) ALFEREZ, Jomar C.
336 Rodriguez v. Rodriguez, 28 SCRA 229 BOBIS, Romeo Jr. G.

(1914)
339 Suntay v. CA, 251 SCRA 430 (1995) CELESPARA, Joey D.
343 Oria v. Mcmicking, 21 Phil 24 3 (1912) DE PEDRO, Isaias II L.
345 Universal Food Corp. v. CA, 33 SCRA 1 FAJARDO, Queenzel I.

(1970)
347 Singsong v. Isabela Sawmill, 88 SCRA 623 GONZALES, Carilyn Mae M.

(1979)
349 Caldwallader & Co. v. Smith, Bell & Co., 7 HIPOLITO, Ria N.
Phil 461 (1907)
351 Uy Soo Lim v. Tan Unchuan, 38 Phil 552 LACHICA, Jose Antonio
(1918)
354 Carbonnel v. Poncio, 103 Phil 655 (1958) MACASPAC, Edgilin E.
356 PNB v. Philippine Vegetable Oil Co., 49 SALAZAR, Jayson F.

Phil 857 (1927)
358 Limketkai Sons Milling Inc. v. CA, 261 SIMPLICIO, Prince Jonh Vincent G
SCRA 464 (1995)
360 Swedish Match v. CA, 441 SCRA 1 (2004) TEPASE, Jimboy L.
362 Liguez v. CA, 102 Phil 577 (1957) SIMPLICIO, Prince Jonh Vincent G
364 Rellosa v. Gaw Cheen Hum, 93 Phil 827 VIDUYA-BONTIA, Mary Fritzie M.
(1953)
366 Frenzel v. Catitu, 406 SCRA 55 (2003) ALFEREZ, Jomar C.
368 Ubarra v. Mapalad, AM MT J 91-622 ( 1993) BOBIS, Romeo Jr. G.
370 Modina v. CA, 317 SCRA 606 (1999) CELESPARA, Joey D.
TITLE:
Villaroel v. Estrada, 71 Phil 140 (1940)
PONENTE:
AVANCEÑA, Pres p:
FACTS OF THE CASE:
On May 9, 1912, Alejandra F. Callao, mother of defendant John F. Villarroel,

obtained from the spouses Mariano Estrada and Severina a loan of P1, 000 payable after
seven years. Alejandra died, leaving the defendant as her sole heir. Spouses Mariano
Estrada and Severina also died, leaving plaintiff Bernardino Estrada as their sole heir. On
August 9, 1930, the defendant signed a document by which the applicant must declare in
the amount of P1, 000, with an interest of 12 percent per year.
RULING OF LOWER AND APPELLATE COURTS:
The Court of First Instance of Laguna ruled in favor of the plaintiff, directing the
defendant to pay the claimed amount of P1, 000 with legal interest of 12 percent per year
from August 9, 1930 until full payment. Villaroel appealed the sentence.
ISSUE BROUGHT TO SUPREME COURT:
1. Whether he right to prescription may be waived or renounced

2. Whether the waiver or renunciation of the benefit of prescription
must be made by the same person who entered into the original
contract or a person duly-authorized by said person
RULING AND RATIO DECIDENDI OF SUPREME COURT:
Yes. The right to prescription may be waived or renounced. As a general rule, when a debt
is already barred by prescription, it cannot be enforced by the creditor. But a new contract
recognizing and assuming the prescribed debt would be valid and enforceable. Therefore,
where the party acknowledges (1) The correctness of the debt and; (2) promises to pay it
after the same has been prescribed and; (3) and with the full knowledge of the
prescription; he thereby waives the benefit of prescription.
No. In this case, the voluntary assumption of the son of the debt of his parent is sufficient
to produce a valid waiver of the benefit of prescription. This action is not based on the
original obligation contracted by the mother of the defendant, which has already been
prescribed, but on the contract entered into by the defendant on August 9, 1930. The
second contract entered into by the defendant acknowledges the original debt, and was
meant to make him responsible for the fulfillment of the obligation to pay.
Note: Art. 1424. When a right to sue upon a civil obligation has lapsed by extinction, the
obligor who voluntarily performs the contract cannot recover what he has delivered or the
value of the service he has rendered.
TITLE:
G.R. No. L-43203 July 29, 1977, JOSE C. CRISTOBAL, plaintiff-appellant,
vs. ALEJANDRO MELCHOR and FEDERICO ARCALA, defendants-appellees.
PONENTE:
MUÑOZ -PALMA, J.
FACTS OF THE CASE:
On July 1, 1961, Jose Cristobal was employed as private secretary in the Office of the
President. Sometime in January 1962, Executive Secretary Amelito Mutuc wrote a letter
informing that some of employees including the petitioner are being dismissed from
service. In return, the employees wrote a letter to reconsider their services offered but still
denied.
A civil case titled Ingles et al. v. Mutuc was ensued on March 24, 1962 before the
Court of First Instance of Manila with the prayer of reinstatement and payment of salaries
effective January 1, 1962. Sometime in May 1962, some of the employees were reinstated
without prejudice to the civil action hereof. Some were not reinstated, including the
petitioner.
After a decision was made, the petitioner plead for reinstatement and payment of
salary, he wrote a letter requesting the same based on the decision but still denied. Having
received the letter of May 13, 1971, petitioner Jose Cristobal filed before the Court of First
Instance of Manila the on August 10, 1971 against Secretary Alejandro Melchor and
Federico Arcala praying to declare that the dismissal rendered is illegal and unlawful;
ordering Secretary Melchor to include him retroactively to the payroll effective January 1,
1962; and to make petitioner continue his services.
Having Solictor General as defendant for the Office of the President, the same
contended that the plaintiff failed to institute his right within a period of one year from the
date of separation, pursuant to Sec. 16 of Rule 66 of the Rules of Court.
On May 18, 1972, then Honorable Conrado Vasquez, now Justice of the Court of
Appeals rendered the dismissal of the action based on Sec. 16, Rule 66 of the Rules of
Court, “action against a public office or employee may not be filed for the plaintiffs ouster
from office unless the same is commenced within one year after the cause of the ouster, or
the right of the plaintiff to hold such office or position arose.”
The case was dismissed by the trial court which prompted the petitioner to file the case in
the Supreme Court. The CFA ruling was reversed for being contrary to law and rendering
the employees to be reinstated.
Whether the principle of laches or non-compliance with the Statute of Limitations

applicable?

Ruling:
No. Laches does not apply to the appellant. The Court agrees with the defendant-
appellees, the action must be instituted within the period of one year from the time of the
cause arose. In effect, it is the doctrine of laches which was invoked to defeat Cristobal’s
suit.
RATIO:
In Tijam vs. Sibonghanoy, this Court stated that in a general sense, laches is failure
or neglect, for an unreasonable and unexplained length of time, to do that which, by
exercising due diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it.
However, with the circumstances thus surrounding this particular case, viz: (a) Jose
Cristobal consistently pressed for a reconsideration of his separation from the service; (b)
he was given assurance that he would be recalled at the opportune time; and (c) that the
sudden termination of his employment without cause after eight years of service in the
government is contrary to law following the ruling in Ingles vs. Mutuc which insures to
the benefit of Cristobal who is similarly situated as the plaintiffs in said case and who
merely desisted from joining the suit because of the assurance given him that he would be
recalled to the service—with all these factors, Hence, there is justification for not applying
existing jurisprudence to his case.
TITLE:
G.R. No. 179334, April 21, 2015, SECRETARY OF THE DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS and DISTRICT ENGINEER CELESTINO R. CONTRERAS,
Petitioners vs. SPOUSES HERACLEO and RAMONA TECSON, Respondents.
PONENTE:
PERALTA, J
FACTS OF THE CASE

Spouses HERACLEO and RAMONA TECSON asked the Court to take a second look at
their case which had previously modified the CA decision on July 31, 2007 in CAG.R. CV
No. 77997 that subject property owned by respondents-movant shall be paid of ₱1,500.00
per square meter with interest at six percent (6%) per annum from the date of taking in
1940 up to of March 17, 1995, however, Supreme modified the decision in its decision on
July 1, 2013, that the respondents-movants in entitled to P0.70/square meters and 6%
interest per annum up to 1995
In 1940 DPWH took the property of the movant-respondents without the benefit of
expropriation proceeding. In December 15, 1994 respondent-movants in a letter demanded
the payment of P1500.00/square meter payment for the property. On the other hand Engr.
Celistino Contreras offered to pay the amount of P0.70/square meter pursuant to resolution
of Provincial Appraisal Committee. The lower court and the CA upheld the contention of
the respondent-movants of P1500.00/square meter and 6% legal interest per annum. The
Court on the other affirmed the CA decision but modified the just compensation to P0.70/
square meter and 6% legal interest per annum. The respondents-movants for consideration
asked the court for "JUSTNESS" OF THE MISERABLE AMOUNT OF COMPENSATION
BEING AWARDED TO THE HEREIN RESPONDENTS and THE HONORABLE COURT
MAY SETTLE FOR A HAPPY MIDDLE GROUND IN THE NAME OF DOCTRINAL
PRECISION AND SUBSTANTIAL JUSTICE.
The lower court and the CA upheld the contention of the respondent-movants of
P1500.00/square meter and 6% legal interest per annum.
Whether the Court must reconsider the previously awarded P0.70/square meter
payment with legal interest from 1940 up to 1995 on the basis of happy middle
ground

No. The Court denied the motion for reconsideration however; the Court gave the
respondents-movants exemplary damages, attorney’s fee, and the fair market value with
interest at the time of the taking of property from the time of the taking in 1940 to 2014.
Ratio Decidendi:
It was held that for failure of respondents-movants to question the lack of expropriation
proceedings for a long period of time, they are deemed to have waived and are estopped
from assailing the power of the government to expropriate or the public use for which the
power was exercised.
Additional compensation shall be awarded to respondents-movants by way of exemplary

damages and attorney's fees in view of the government's taking without the benefit of
expropriation proceedings. As held in Eusebio v. Luis, an irregularity in an expropriation
proceeding cannot ensue without consequence. Thus, the Court held that the government
agency's illegal occupation of the owner's property for a very long period of time surely
resulted in pecuniary loss to the owner.
TITLE:
G.R. No. L 48889, May 11, 1989 DEVELOPMENT BANK OF THE PHILIPPINES (DBP),
Petitioner, vs. THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch
of the Court of First Instance of Iloilo and SPOUSES PATRICIO CONFESOR and
JOVITA VILLAFUERTE, Respondent
PONENTE:
GANCAYCO, J.:
FACTS OF THE CASE:

Patricio Confesor, who was a member of the Congress of the Philippines and his
wife, Jovita Villafuerte, acquired a loan amounting two-thousand pesos (P2, 000) from the
Development Bank of the Philippines (DBP) on February 10, 1940. This is supported by a
promissory note that they have signed binding themselves jointly and severally to pay the
said amount in ten (10) equal yearly amortizations. The period lapsed, the obligation
outstanding and unpaid. Then on April 11, 1961, Confessor signed a second promissory
note, promising to pay the loan on or before June 15, 1961. The said promissory note states
that if Confessor fails to pay the said amount, he agrees to foreclose his mortgage. DBP
then filed a complaint on September 11, 1970 against the spouses for the payment of the
loan.

The lower court decided that the spouses had to pay DBP the borrowed amount
plus interest. The defendants then made an appeal, and the decision was reversed. The
plaintiff filed for a motion for reconsideration of said decision, but it was denied.

Whether the prescription may be renounced or waived?

Yes, the right to prescription can be renounced or waived. Article 1112 of the Civil
Code provides “Persons with capacity to alienate property may renounce prescription
already obtained, but not the right to prescribe in the future. Prescription is deemed to
have been tacitly renounced when the renunciation results from acts which imply the
abandonment of the right acquired.” The first promissory note had set in, but by signing
another promissory note on April 11, 1961, Confesor expressly renounced and waived his
right to the prescription of the action for the first promissory note that he had signed.
The Supreme Court stated that the signing of the second promissory note does not
only mean acknowledgement of the first promissory note, but a promise to pay the loaned
amount. “…there is something more than a mere moral obligation to support a promise, to
wit a – pre-existing debt which is a sufficient consideration for the new promise; upon this
sufficient consideration constitutes, in fact, a new cause of action. ... It is this new promise,
either made in express terms or deduced from an acknowledgement as a legal implication,
which is to be regarded as reanimating the old promise, or as imparting vitality to the
remedy (which by lapse of time had become extinct) and thus enabling the creditor to
recover upon his original contract.”
TITLE
G.R. No. L-6098, THE INSULAR GOVERNMENT, plaintiff-appellee,
vs. ALDECOA AND COMPANY, defendant-appellant.
PONENTE
Torres, J.
FACTS OF THE CASE
A written complaint was filed against the herein defendant, Aldecoa & Co., alleging that
the mercantile co-partnership continues to operate as such and despite knowing that it had
no title or right whatever to two adjoining parcels of land which belong to the domain of
the Gov't. of the US, has been occupying them illegally for the past seventeen years-- all for
its exclusive use and benefit. The subject lands as set out in the judgment of the court; that
these lands were placed under the control of the Insular Government and by the Treaty of
Paris succeeded the Spaniards all its rights; and to recognize the latter's right of dominion
over the same and to deliver to it said property.
The herein defendant subsequently agreed to return the land but still concluded by
persisting in its attempt to continue occupying and refused to return it to the Insular Gov't;
wherefore the Attorney-General asked the court to enter into judgment declaring the
Insular Gov't to be the owner of the land claimed, to order that it be placed in possession of
the same together with fruits collected, since it too such possession and those awaiting
collection and to sentence the defendant to pay the costs. The provincial fiscal of Surigao,
with the permission of the court, inserted in the complaint that tells that Aldecoa and
Company's possession of the subject lands was interrupted during the years 1900-1902 and
that the municipality of Surigao in year 1900, removed the posts and wire which enclosed
the property.
ISSUE BROUGHT TO THE SUPREME COURT
Whether the subject lands as claimed by the defendant is a part of a public dominion.
RULING AND RATIO DECIDENDI OR SUPREME COURT
Yes, It is incontrovertible that the land in question is of the public domain and belongs to
the State, inasmuch as at the present time it is partly shore land and in part, was such
formerly, and now is land formed by the action of the sea. On the supposition that Aldecoa
& Co. commenced to occupy the land and shore herein concerned, prior to the
enforcement of the Civil Code in these Islands, it is unquestionable that the issue must be
determined in accordance with the provisions of the Law of Waters of August 3, 1866,
inasmuch as the shores, as well as the lands united thereto by the accretions and alluvium
deposits produced by the action of the sea, are of the public use and domain. All this said
land, together with the adjacent shore, belongs to the public domain and is intended for
public uses. Thus, the defendant, in construction on the two aforementioned parcels of
land a retaining wall, a pier or wharf, a railway, and warehouses for the storage of coal, for
its exclusive use and benefit, did all this without due and competent authority and has
been illegally occupying the land since 1901.
Aldecoa & Co. endeavored to prove that the land, consisting of the two united parcels,
belonged to them in fee simple, on account of their having begun to occupy it through a
verbal permit from the then politico-military governor of Surigao. The said permit was a
verbal authorization to occupy the land on condition that the defendant should later on
prepare title deeds thereto, and that this authorization was granted for the purpose of
furnishing facilities to, and benefiting the merchants of Surigao, in view of the backward
condition of things in those regions at the time. It is certain, however, that Aldecoa & Co.
did not obtain or solicit permission from the Government to establish them there and erect
thereon their buildings and works, nor did they endeavor to obtain any title of ownership
to the said land.
TITLE:
SOTERA PAULINO MARCELO, GABRIELA M. ANGELES, SIMEONA CUENCO,
EMILIA MARCELO and RUBEN MARCELO versus COURT OF APPEALS,
FERNANDO CRUZ and SERVANDO FLORES, G.R. No. 131803 April 14, 1999)-
PONENTE:
Associate Justice Jose C. Vitug
FACTS OF THE CASE:
The heirs of deceased Jose Marcelo filed with the RTC of Malolos, Bulacan, an action for
the recovery of a portion of unregistered land in Sta. Lucia, Angat, Bulacan against
FERNANDO CRUZ and SERVANDO FLORES who allegedly encroached said property.
The parcel of land subject of litigation was originally owned by spouses JOSE MARCELO
and SOTERA PAULINO and they had been in continuous possession of said property
since 1939. Following the death of JOSE in 1965, they discovered in 1967 that a portion of
said property had been encroached by FERNANDO CRUZ.
FERNANDO CRUZ sold his property with an area of 13,856 square meters to
SERVANDO FLORES pursuant to a deed of sale which includes the encroached portion
(7,540 square meters of MARCELOs’ property). According to CRUZ, he purchased said
property from the SARMIENTOs pursuant to a ‘Kasulatan ng Partisyon sa Labas ng
Hukuman at Bilihang Patuluyan’ dated November 19, 1960 covering an area of 6,000
square meters. As soon as the said property was sold to CRUZ, the adjoining property
described and classified as ‘’parang’ with an area of 7,856 square meters was declared by
CRUZ in his name which circumstance, increased his landholding to 13,856 square meters.
The said property was subsequently sold by CRUZ to FLORES.
The MARCELOs attempted to cultivate the disputed portion sometime in 1968, but
were barred from doing so by FLORES who claimed that the area was part of the land he
bought from CRUZ.

RTC Branch 19, of Malolos, Bulacan ruled in favor of the MARCELOs. CRUZ and FLORES
went to the Court of Appeals who reversed the decision of the RTC.
Whether or not respondents must return the ownership and possession of a portion of
subject unregistered and untitled land to the herein petitioners.
(No) WHEREFORE, the petition for review on certiorari is DENIED. No costs.
Shortly after the execution of the deed of sale in his favor, respondent Cruz declared
both parcels, i.e., the palayero and the parang, for taxation purposes in 1960 in the Office of
the Provincial Assessor and forthwith a new tax declaration was issued in his name for the
entire 13,856 square-meter property. In turn, respondent Cruz sold, on 03 November 1968,
the 13,856 square meters of land to respondent Flores under a "Kasulatan ng Bilihan."
Respondent Flores immediately took possession of the property to the exclusion of all
others and promptly paid the realty taxes thereon. From that time on, Flores had been in
possession of the entire area in the concept of an owner and holding it in that capacity for
almost fourteen (14) years before petitioners initiated their complaint on 06 October 1982.
Acquisitive prescription of dominion and other real rights may be ordinary or

extraordinary. Ordinary acquisitive prescription requires possession of things in good faith
and with just title for the time fixed by law; without good faith and just title, acquisitive
prescription can only be extraordinary in character. As regards, real or immovable
property, Article 1134 of the Civil Code provides that ownership and other real rights over
immovable property are acquired by ordinary prescription through possession of ten
years.
The record of the case amply supports the holding of the appellate court that the
requirements for ordinary prescription hereinabove described have indeed been duly met
(good faith, with just title, in the concept of an owner, public, peaceful and uninterrupted).
The Court finds no cogent reasons to reverse the above findings of the appellate court and
thus gives its affirmance to the assailed decision.
TITLE
G.R. No. L-48006, Fausto Barredo , Petitioner,
Vs. Severino Garcia and Timotea Almario, Respondents 73 Phil 607 (1942) Represented
by Celedonio P. Gloria for petitioner, Jose G. Advincula for respondents
PONENTE:
Bocobo, J.
FACTS OF THE CASE:
A head-on collision happened between a Malate Taxicab driven by Pedro Fontanilla and a
Carretela guided by Pedro Dimapalis. As a result of the collision the carretela overturned,
and one of its passengers, Faustino Garcia suffered injuries from which he died two days
later. Evidence presented shows that it was Fontanillas negligence that caused the mishap
as he was driving on the wrong side of the road. A criminal action was filed against
Fontanilla in the CFI of Rizal wherein he was convicted. The parents of the deceased also
filed an action for damages in the CFI of Manila against Fausto Barredo as the sole
proprietor of Malate Taxicab. In Barredo’s defense his liability is governed by the RPC
hence his liability is only subsidiary, and as there has been n civil action against Pedro
Fontanilla he cannot be held responsible in the case.
The CFI of Manila awarded damages in favor of the Plaintiffs. The Court of Appeals
rejected Barredo’s defense and held him liable as the employer of Fontanilla for his failure
to exercise all the diligence of a good father of a family in the selection and supervision of
Pedro Fontanilla to prevent damages suffered by the respondents. It shows on the record
of the Bureau of Public Works that he was careless for employing Fontanilla who had been
caught several times for violation of the Automobile Law and Speeding.
Whether the employer can be sued and held principally responsible for civil liabilities of
his employees act?
Yes. The Supreme Court affirmed the Judgment of the Court of Appeals. Article 1093 of the
Civil Code makes obligations arising from faults or negligence not punished by the law,
subject to the provisions of Chapter II of Title XVI. Section 1902 of that chapter reads:
"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 done.
"SEC. 1903. The obligation imposed by the preceding article is demandable, not only for
personal acts and omissions, but also for those of the persons for whom they should be
responsible. "The father, and on his death or incapacity, the mother, is liable for the
damages caused by the minors who live with them.
The Supreme Court explained that the primary and direct responsibility of employers and
their presumed negligence are principles calculated to protect society, workmen and
employees should be carefully chosen and supervised in order to avoid injury to the
public. In order for Barredo to not be held liable he must present sufficient evidence to
prove that there is no negligence on his part in hiring Fontanilla in which he failed to do
so.
TITLE:
G.R.No. L-32599 June 29, 1979 EDGARDO E. MENDOZA, Petitioner
vs. HON. ABUNDIO Z. ARRIETA, Presiding Judge of Branch VIII, Court of First
Instance of Manila, FELINO TIMBOL, and RODOLFO SALAZAR, Respondents
PONENTE:
MELENCIO-HERRERA, J:
FACTS OF THE CASE:

A three-way vehicular accident occurred along Marilao, Bulacan involving a Mercedes
Benz owned and driven by petitioner; a private jeep owned and driven by respondent
Rodolfo Salazar; and a gravel and sand truck owned by respondent Felipino Timbol and
driven by Freddie Montoya. As a consequence of the accident, two separate Informations
for Reckless Imprudence Causing Damage to Property were filed.

The Court of First Instance of Bulacan rendered judgment stating that the accused Freddie
Montoya is guilty beyond reasonable doubt of the crime of damage to property through
reckless imprudence in Crime Case No. SM 227 and sentenced him to pay a fine of P972.50
and to indemnify Rodolfo Salazar in the same amount of P972.50 as actual damages, with
subsidiary imprisonment in case of insolvency, both as to fine and indemnity.

1. Whether to dismiss Civil Case No. 80803

Yes. The Supreme Court dismissed the complaint in Civil Case No. 80803 against
respondent Rodolfo Salazar dated January 30, 1971 and February 23, 1971. Jeep-owner-
driver Salazar cannot be held liable for the damages sustained by the petitioner's car. The
petitioner's cause of action as against jeep-owner-driver Salazar is ex- delictu, founded on
Article 100 of the Revised Penal Code, the civil action must be held to have been
extinguished in consonance with Section 3(c), Rule 111 of the Rules of Court which
provides: Sec. 3. Other civil actions arising from offenses. In all cases not included in the
preceding section the following rules shall be observed: And even if petitioner's cause of
action as against jeep-owner-driver Salazar were not ex-delictu, the end result would be the
same, it being clear from the judgment in the criminal case that Salazar's acquittal was not
based upon reasonable doubt, consequently, a civil action for damages can no longer be
instituted.
TITLE:
G.R. No. 84698, February 4, 1992, Philippine School of Business Administration, Juan D.
Lim, Benjamin P. Paulino, Antonio M. Magtalas, Col. Pedro Sacro, and LT. M. Soriano,
petitioners, vs Court of Appeals, Hon. Regina Ordonez-Benitez, in her capacity as
Presiding Judge of Branch 47, Regional Trial Court Manila, Segunda R. Bautista, and
Arsenia D. Bautista, respondents
PONENTE:
PADILLA, J.:
FACTS OF THE CASE:

Carlitos Bautista was a third year student at the Philippine School of Business
Administration. Assailants, who were not members of the school’s academic community,
while in the premises of PSBA, stabbed Bautista to death. This incident prompted his
parents to file a suit against PSBA and its corporate officers for damages due to their
alleged negligence, recklessness and lack of security precautions, means and methods
before, during, and after the attack on the victim. The defendants filed a motion to dismiss,
claiming that the complainant states no cause of action against them based on quasi-
delicts, as the said rule does not cover academic institutions.

The trial court denied the motion to dismiss. Their motion for reconsideration was likewise
dismissed, and was affirmed by the appellate court. The case was forwarded to the
Supreme Court.

Whether PSBA may be held liable under quasi-delicts?

No, PSBA may not be held liable under quasi-delicts, because the circumstances of
the present case indicate a contractual relation between the PSBA and Carlitos Bautista, the
rules on quasi-delicts do not really govern. A perusal of Article 2176 shows that
obligations arising from quasi-delicts or tort, also known as extra-contractual obligations,
arise only between parties not otherwise bound by contract, whether express or implied.
The foregoing premises considered, the petition is denied. The court of origin is hereby
ordered to continue proceedings consistent with this ruling of the Court.
TITLE:G.R. No. L-47745 April 15, 1988
JOSE S. AMADORA, LORETA A. AMADORA, JOSE A. AMADORA JR., NORMA A.
YLAYA PANTALEON A. AMADORA, JOSE A. AMADORA III, LUCY A. AMADORA,
ROSALINDA A. AMADORA, PERFECTO A. AMADORA, SERREC A. AMADORA,
VICENTE A. AMADORA and MARIA TISCALINA A. AMADORA, petitioners
vs
HONORABLE COURT OF APPEALS, COLEGIO DE SAN JOSE-RECOLETOS,
VICTOR LLUCH SERGIO P. DLMASO JR., CELESTINO DICON, ANIANO
ABELLANA, PABLITO DAFFON thru his parents and natural guardians, MR. and
MRS. NICANOR GUMBAN, and ROLANDO VALENCIA, thru his guardian, A.
FRANCISCO ALONSO, respondents.
PONENTE:
CRUZ, J.
FACTS OF THE CASE:
On 13 April 1972, while in the auditorium of the Colegio de San Jose-Recoletes, Alfredo
Amadora was mortally hit by a gun fired by his classmate, Pablo Daffon. Daffon was
convicted of homicide thru reckless imprudence. Amadora’s parents filed a civil action for
damages under Article 2180 of the Civil Code against the Colegio de San Jose-Recoletos, its
rector, the high school principal, the dean of boys, and the physics teacher (for Alfredo was
in the school to finish his physics experiment as a prerequisite to his graduation), together
with Daffon and two other students, through their respective parents. The complaint
against the students was later dropped.

The Court of First Instance of Cebu held the remaining defendants liable to the plaintiffs in
the sum of P294,984.00, representing death compensation, loss of earning capacity, costs of
litigation, funeral expenses, moral damages, exemplary damages, and attorney’s fees.On
appeal to the respondent court, however, the decision was reversed and all the defendants
were completely absolved. In its decision, the respondent court found that Article 2180
was not applicable as the Colegio de San Jose-Recoletos was not a school of arts and trades
but an academic institution of learning. It also held that the students were not in the
custody of the school at the time of the incident as the semester had already ended, that
there was no clear identification of the fatal gun, and that in any event the defendants had
exercised the necessary diligence in preventing the injury.

Whether or not the respondents may be held liable for the acts of its students

No, none of the respondents is liable for the injury inflicted by Pablito Daffon on Alfredo
Amadora that resulted in the latter’s death at the auditorium of the Colegio de San Jose-
Recoletos on April 13, 1972. The protective custody of the school heads and teachers is
mandatorily substituted for that of the parents, and hence, it becomes their obligation as
well as that of the school itself to provide proper supervision of the students’ activities
during the whole time that they are at attendance in the school, including recess time, as
well as to take the necessary precautions to protect the students in their custody from
dangers and hazards that would reasonably be anticipated, including injuries that some
students themselves may inflict wilfully or through negligence on their fellow students.
However, in this case the rector, the high school principal and the dean of boys cannot be
held liable because none of them was the teacher-in-charge; assuming that the physics
teacher was the teacher-in-charge, there is no showing that he was negligent in enforcing
discipline upon Daffon or that he had waived observance of the rules and regulations of
the school or condoned their non-observance. If there is anyone who might be closely held
to be liable, it may be the dean of boys who had earlier confiscated an unlicensed gun from
one of the students and returned the same later to him without taking any disciplinary
action or reporting the matter to higher authorities. For this, he deserves to be sanctioned.
However, the incident does not necessarily link him to the shooting of Amador as it has
not been shown that the confiscated gun was the gun that killed Amadora. Finally, the
school cannot be held directly liable under the article, because only the teacher-in-charge
or the head of the school of arts and trades is made responsible for the damage cause by
the student or apprentice.
TITLE:
G.R. No. L-14335, 28 January 1920, MANUEL DE GUIA vs. THE MANILA ELECTRIC
RAILROAD & LIGHT COMPANY
PONENTE:
STREET, J.:
FACTS OF THE CASE:

On 04 September 1915 at about 8 o'clock in the evening, plaintiff Manuel de Guia, a
physician, boarded a car at the end of the line with the intention of coming to the city. At
about 30 meters from the starting point the car entered a switch, the plaintiff remaining on
the back platform holding the handle of the right-hand door. Upon coming out of the
switch, the small wheels of the rear truck left the track ran for a short distance along the
macadam filling, which was flush with the rails, and struck a concrete post at the left of the
tract. The post was shattered; and as the car stopped the plaintiff was thrown against the
door with some violence, receiving bruises and possibly certain internal injuries, the extent
of which is a subject of dispute.
RULING OF LOWER AND APPELATE COURTS:

The Court of First Instance (CFI) Manila found that the motorman of the derailed
car was negligent in having maintained too rapid a speed and awarded the plaintiff the
sum of P6,100, with interest and costs, as damages incurred by him in consequence of
physical injuries sustained.

Whether the defendant should be liable for damages?
RULING AND RATIO DECIDENDI OF THE SUPREME COURT:

YES - The conclusion being accepted that there was negligence on the part of the
motorman in driving the car, it results that the company is liable for the damage resulting
to the plaintiff as a consequence of that negligence. The plaintiff had boarded the car as a
passenger for the city of Manila and the company undertook to convey him for hire. The
relation between the parties was, therefore, of a contractual nature, and the duty of the
carrier is to be determined with reference to the principles of contract law, that is, the
company was bound to convey and deliver the plaintiff safely and securely with reference
to the degree of care which, under the circumstances, is required by law and custom
applicable to the case (art. 1258, Civil Code). Upon failure to comply with that obligation
the company incurred the liability defined in articles 1103-1107 of the Civil Code.
From the nature of the liability thus incurred, it is clear that the defendant company
can not avail itself of the last paragraph of article 1903 of the Civil Code, since that
provision has reference to liability incurred by negligence in the absence of contractual
relation, that is, to the culpa aquiliana of the civil law. It was therefore irrelevant for the
defendant company to prove, as it did, that the company had exercised due care in the
selection and instruction of the motorman who was in charge of its car and that he was in
fact an experienced and reliable servant.
Furthermore, we think it obvious that an employer who has in fact displayed due
diligence in choosing and instructing his servants is entitled to be considered a debtor in
good faith, within the meaning of article 1107 of the same Code. Construing these two
provisions together, applying them to the facts of this case, it results that the defendant's
liability is limited to such damages as might, at the time of the accident, have been
reasonably foreseen as a probable consequence of the physical injuries inflicted upon the
plaintiff and which were in fact a necessary result of those injuries. There is nothing novel
in this proposition, since both the civil and the common law are agreed upon the point that
the damages ordinarily recoverable for the breach of a contractual obligation, against a
person who has acted in good faith, are such as can reasonably be foreseen at the time the
obligation is contracted. In Daywalt vs. Corporacion de PP. Agustinos Recoletos (39 Phil.,
587), we said: "The extent of the liability for the breach of a contract must be determined in
the light of the situation in existence at the time the contract is made; and the damages
ordinarily recoverable are in all events limited to such as might be reasonably foreseen in
the light of the facts then known to the contracting parties."
TITLE:
G.R. No. 7567 November 12, 1912 - UNITED STATES v. SEGUNDO BARIAS
PONENTE:
Carson, J.:
FACTS OF THE CASE
Segundo Barias was a motorman of the Pasay-Cervantes lines of the Manila Electric
Railroad and Light Company. As such, he was controlling and operating said street car
along Rizal Avenue and is under the obligation to run the same with due care and
diligence to avoid any accident that might occur to vehicles and pedestrians. While Barias
was driving his car, he stopped near the intersection of Calle Requesen to take some
passengers. When the car stopped, the defendant looked backward, presumably to note
whether all the passengers were aboard, and then started his car. At that moment Fermina
Jose, a child about 3 years old, walked or ran in front of the car. She was knocked down
and dragged some little distance underneath the car, and was left dead upon the track.
Defendant is guilty of imprudencia temeraria (reckless negligence) and sentenced Barias to

one year and one month of imprisonment.
Whether the evidence shows such carelessness or wants of ordinary care on the part of the
defendant as to amount to reckless negligence (imprudencia temeraria)?

Yes. The evidence shows that the thoroughfare on which the incident occurred was a
public street in a densely populated section of the city. The hour was six in the morning, or
about the time when the residents of such streets begin to move about. Under such
conditions a motorman of an electric street car was clearly charged with a high degree of
diligence in the performance of his duties. He was bound to know and to recognize that
any negligence on his part in observing the track over which he was running his car might
result in fatal accidents. He had no right to assume that the track before his car was clear. It
was his duty to satisfy himself of that fact by keeping a sharp lookout, and to do
everything in his power to avoid the danger which is necessarily incident to the operation
of heavy street cars on public thoroughfares in populous sections of the city.
Did he exercise the degree of diligence required of him? We think this question must be
answered in the negative. We do not go so far as to say that having brought his car to a
standstill it was his bounden duty to keep his eyes directed to the front. Indeed, in the
absence of some regulation of his employers, we can well understand that, at times, it
might be highly proper and prudent for him to glance back before again setting his car in
motion, to satisfy himself that he understood correctly a signal to go forward or that all the
passengers had safely alighted or gotten on board. But we do insist that before setting his
car again in motion, it was his duty to satisfy himself that the track was clear, and, for that
purpose, to look and to see the track just in front of his car. This the defendant did not do,
and the result of his negligence was the death of the child.
TITLE:
G.R. No. 141258 April 9, 2003 TOMASA SARMIENTO, Petitioner vs. SPS. LUIS &
ROSE SUN-CABRIDO and MARIA LOURDES SUN, Respondents
PONENTE:
CORONA, J
FACTS OF THE CASE:
Petitioner, Tomasa Sarmiento, states that sometime in April 1994, a friend, Dra. Virginia
Lao, requested her to find somebody to reset a pair of diamond earrings into two gold
rings. Accordingly, Sarmiento sent a certain Tita Payag with the pair of earrings to
Dingding’s Jewelry Shop, owned and managed by respondent spouses Luis and Rose
Cabrido, which accepted the job order for P400. Sarmiento provided 12 grams of gold to be
used in crafting the pair of ring settings. After 3 days, Tita Payag delivered to the jewelry
shop one of Dra. Lao’s diamond earrings which was earlier appraised as worth .33 carat
and almost perfect in cut and clarity. Respondent Ma. Lourdes (Marilou) Sun went on to
dismount the diamond from its original setting. Unsuccessful, she asked their goldsmith,
Zenon Santos, to do it. Santos removed the diamond by twisting the setting with a pair of
pliers, breaking the gem in the process. Petitioner required the respondents to replace the
diamond with the same size and quality. When they refused, the petitioner was forced to
buy a replacement in the amount of P30,000.
Petitioner filed a complaint for damages on June 28, 1994 with the Municipal Trial Court in
Cities (MTCC) of Tagbilaran. Decision was in favor of Sarmiento ordering defendants to
pay jointly and severally the amount of Thirty Thousand Pesos (P30,000.00) as actual or
compensatory damages; Three Thousand Pesos (P3,000.00) as moral damages; Five
Thousand Pesos ( P5,000.00) as attorney’s fees; Two Thousand Pesos (P2,000.00) as
litigation expenses, with legal interest of 6% per annum from the date of this decision and
12% per annum from the date when this decision becomes final until the amounts shall
have been fully paid and to pay the costs.
The Regional Trial Court (RTC) of Tagbilaran City, Branch 3, reversed the decision of the
MTCC, thus absolving the respondents of any responsibility arising from breach of
contract.
Finding no reversible error, the Court of Appeals (CA) affirmed the judgment of the RTC
in its Decision promulgated on November 26, 1999

Whether or not the scope of obligation of the defendant included the dismounting of the
diamond.
Yes. It is beyond doubt that Santos acted negligently in dismounting the diamond from its
original setting. It appears to be the practice of the trade to use a miniature wire saw in
dismounting precious gems, such as diamonds, from their original setting. However,
Santos employed a pair of pliers in clipping the original setting, thus resulting in breakage
of the diamond.
Ratio decidendi:
Obligations arising from contracts have the force of law between the contracting parties.
Corollarily, 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. The fault or negligence of the obligor consists in the 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.
TITLE:
G.R. No. 138334, August 25, 2003 ESTELA L. CRISOSTOMO, Petitioner,
vs. The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL,
INC., Respondents.
PONENTE:
YNARES-SANTIAGO, J.:
FACTS OF THE CASE
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent

Caravan Travel and Tours International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed "Jewels of Europe". The package tour
included the countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland
and France at a total cost of P74, 322.70. Petitioner was given a 5% discount on the amount,
which included airfare, and the booking fee was also waived because petitioner’s niece,
Meriam Menor, was respondent company’s ticketing manager.
on June 12, 1991 – a Wednesday - Menor went to her aunt’s residence to deliver
petitioner’s travel documents and plane tickets. Petitioner went to NAIA on Saturday, June
15, 1991, to take the flight for the first leg of her journey from Manila to Hongkong. To
petitioner’s dismay, she discovered that the flight she was supposed to take had already
departed the previous day. She learned that her plane ticket was for the flight scheduled
on June 14, 1991. She thus called up Menor to complain.
Menor prevailed upon petitioner to take another tour – the "British Pageant".For
this tour package, petitioner was asked anew to pay US$785.00 or P20, 881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7, 980.00 as partial
payment and commenced the trip in July 1991.
Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of P61, 421.70, representing the difference between the sum she paid for
"Jewels of Europe" and the amount she owed respondent for the "British Pageant" tour.
Despite several demands, respondent company refused to reimburse the amount,
contending that the same was non-refundable.
Petitioner was thus constrained to file a complaint against respondent for breach of
contract of carriage and damages, which was docketed as Civil Case No. 92-133 and raffled
to Branch 59 of the Regional Trial Court of Makati City.
RULING OF LOWER AND APPELLATE COURT
The Regional Trial Court of Makati City in favor of the petitioner with the cost against the
defendant.
Respondent appealed to the Court of Appeals which reversed and set aside the
decision of trial court ordering the requiring the plaintiff-appellee to pay to the defendant-
appellant the amount of P12,901.00, representing the balance of the price of the British
Pageant Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per
annum, to be computed from the time the counterclaim was filed until the finality of this
decision. After this decision becomes final and executory, the rate of TWELVE PERCENT
(12%) interest per annum shall be additionally imposed on the total obligation until
payment thereof is satisfied. The award of attorney’s fees is DELETED, costs against the
plaintiff-appellee.
ISSUE BROUGHT TO SUPREME COURT
Whether Caravan Travel and Tours, as a travel agency, is required to exercise

extraordinary diligence within the purview of a common carrier?
RULING AND RATIO DECIDENDE OF THE COURT
NO. Article 1732 of the Civil Code as persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in
the business of transporting either passengers or goods and is therefore, neither a private
nor a common carrier. Respondent did not undertake to transport petitioner from one
place to another since its covenant with its customers is simply to make travel
arrangements in their behalf. Respondent’s services as a travel agency include procuring
tickets and facilitating travel permits or visas as well as booking customers for tours.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latter’s obligation
under the contract. For reasons of public policy, a common carrier in a contract of carriage
is bound by law to carry passengers as far as human care and foresight can provide using
the utmost diligence of very cautious persons and with due regard for all the
circumstances. As earlier stated, however, respondent is not a common carrier but a travel
agency. It is thus not bound under the law to observe extraordinary diligence in the
performance of its obligation, as petitioner claims.
WHEREFORE, the instant petition is DENIED for lack of merit.
TITLE:
G.R. No. 46274 November 2, 1939 , A.O. FISHER, plaintiff-appellee,
vs JOHN C. ROBB, defendant-appellant
PONENTE:
VILLA-REAL, J.
FACTS OF THE CASE:
In September 1935, John C Robb went to Shanghai, China to study the operation of a dog
racing course. In Shanghai, he met A.O Fisher. Robb invited Fisher to be one of the
stockholders of his employer; Philippine Greyhound Club Inc. Fisher agreed and was
given 3000 pesos as first installment. Some months later, the plaintiff gave another 2000
pesos for his second installment. Due to the manipulations of those who controlled the
Philippine Greyhound Club, Inc., during the absence of the defendant-appellant
undertook the organization of a company called The Philippine Racing Club, which now
manages the race track of the Santa Ana park. Due to this, the defendant explains the
condition of the former company and his plans to save the properties and assets of the
plaintiff because he is morally responsible to the plaintiff. Plaintiff requires him to return
him the full amount he invested. Defendant, through sending a letter, assured plaintiff for
any loss which he might suffer in connection with Philippine Greyhound Club in the same
that he could not expect anyone to reimburse him for his own losses which were more
than that of plaintiff.
The Court of First Instance of Manila held in favor of the plaintiff and against the
defendant, who is ordered to pay to the former the sum of P2,000, with interest at the legal
rate from March 11, 1938, until paid, plus costs.
Whether the trial court erred in holding that there was sufficient consideration to justify
the promise made by the defendant-appellant in his letters
Wherefore, the appealed judgment is reversed and the costs to the plaintiff.
Yes. Defendant, although morally responsible because of the failure of the enterprise, is not
a consideration under Article 1261 of the Civil Code as an essential element for the legal
existence for an onerous contract which could bind the promisor to comply with his
promise. Also, The promise which said defendant-appellant has made to the plaintiff-
appellee to return to him P2,000 which he had paid to the Philippine Greyhound Club,
Inc., as second installment of the payment of the amount of the shares for which he has
subscribed, was prompted by a feeling of pity which said defendant-appellant had for the
plaintiff-appellee as a result of the loss which the latter had suffered because of the failure
of the enterprise. The obligation which the said defendant-appellant had contracted with
the plaintiff-appellee is, therefore, purely moral and, as such, is not demandable in law but
only in conscience, over which human judges have no jurisdiction
TITLE:
G.R. No. 23769, September 16, 1925, SONG FO & COMPANY, plaintiff-appellee,
VS. HAWAIIAN PHILIPPINE CO., defendant-appellant
PONENTE:
MALCOLM, J.:
FACTS OF THE CASE:

A written contract between Song Fo & Co. and Hawaiian-Philippine Co. was made. They
have agreed to deliver 300,000 gallons of molasses. Mr. Song Heng, the representative of
Song Fo & Co., demanded that an additional 100,000 gallons be delivered.” The payment
for these molasses shall be done at the end of each month.
Plaintiff presented a complaint with two causes of action for breach of contract against
the defendant, in which judgment was asked for P70, 369.50. Defendant set up the special
defense that the plaintiff delayed the payment for the molasses, compelling the former to
cancel and rescind the contract.

The judgment of the trial court condemned the defendant to pay to the plaintiff a total of
P35, 317.93, with legal interest from the date of the presentation of the complaint, and with
costs.

Whether Hawaiian-Philippine Co. has the right to rescind the contract of sale made with
Song Fo & Co.?

NO. The Supreme Court stated a delay in payment for a small quantity of molasses for
some twenty days is not such a violation of an essential condition of the contract as
warrants rescission for non- performance. The general rule is that rescission will not be
permitted for a slight or casual breach of the contract, but only for such breaches as are
so substantial and fundamental as to defeat the object of the parties in making the
agreement. A delay in payment for a small quantity of molasses for some twenty days is
not such a violation of an essential condition of the contract was warrants rescission for
non-performance. Not only had this, but the Hawaiian-Philippine Co. waived this
condition when it arose by accepting payment of the overdue accounts and continuing
with the contract. Thereafter, Song Fo & Company was not in default in payment so that
the Hawaiian-Philippine co.Plaintiff was to pay defendant at the end of each month. The
Supreme Court stated a delay in payment for a small quantity of molasses for some
twenty days is not such a violation of an essential condition of the contract as warrants
rescission for non- performance.
TITLE:
G.R. No. 108346 July 11, 2001, Spouses MARIANO Z. VELARDE and AVELINA D.
VELARDE, petitioners, vs. COURT OF APPEALS, DAVID A. RAYMUNDO and
GEORGE RAYMUNDO, respondents.
PONENTE:
PANGANIBAN, J.
FACTS OF THE CASE:
Defendant David Raymundo is the owner of a parcel of land that is mortgaged to Bank of
the Philippine Islands (BPI) for Php1.8M. David’s father, George Raymundo, negotiated
the sale of the said lot, through a Deed of Sale with Assumption of Mortgage, to the
plaintiff spouses Mariano and Avelina Velarde. Wherein, as part of the consideration of
the sale, Avelina Velarde assumes to pay the mortgage obligations on the property.
Unfortunately, Velarde’s application for the assumption of the mortgage with BPI was not
approved. Velarde stopped the monthly payments which prompted the defendants to
write the plaintiffs informing them that their non-payment to the mortgage bank
constituted non-performance of their obligation. The spouses Velarde, thru counsel,
responded, as follows:
“This is to advise you, therefore, that our client is willing to pay the balance in cash not
later than January 21, 1987 provided: (a) you deliver actual possession of the property to
her not later than January 15, 1987 for her immediate occupancy; (b) you cause the release
of title and mortgage from the Bank of P.I. and make the title available and free from any
liens and encumbrances; and (c) you execute an absolute deed of sale in her favor free
from any liens or encumbrances not later than January 21, 1987”
David and George Raymundo then sent a notarial notice of cancellation/rescission of the
intended sale of the subject property allegedly due to the latter’s failure to comply with the
terms and conditions of the Deed of Sale with Assumption of Mortgage and the
Undertaking. Thus, the Spouses Velarde filed a complaint against the private defendants
for specific performance, nullity of cancellation, writ of possession and damages.
Lower Court: Granted Velarde’s Motion for Reconsideration and directed the parties to
proceed with the sale. He instructed petitioners to pay the balance of P1.8 million to
private respondents who, in turn, were ordered to execute a deed of absolute sale and to
surrender possession of the disputed property to petitioners.
Private respondents appeal to the CA.

CA: set aside the Order of Judge Abad Santos and reinstated then Judge Ynares-Santiago’s
earlier decision dismissing petitioners’ complaint and upholding the validity of the
rescission made by private respondents.

Whether the defendant has the right to rescind the contract.
Yes. In the present case, private respondents validly exercised their right to rescind the
contract, because of the failure of petitioners to comply with their obligation to pay the
balance of the purchase price. Indubitably, the latter violated the very essence of
reciprocity in the contract of sale, a violation that consequently gave rise to private
respondents’ right to rescind the same in accordance with law.
The right of rescission of a party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party who violates the reciprocity between
them. The breach contemplated in the said provision is the obligor’s failure to comply with
an existing obligation. When the obligor cannot comply with what is incumbent upon it,
the obligee may seek rescission and, in the absence of any just cause for the court to
determine the period of compliance, the court shall decree the rescission.
“Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.
The injured party may choose between fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission even after he has
chosen fulfillment, if the latter should become impossible.”
TITLE:
G.R. No. L-4811, July 31, 1953 CHARLES F. WOODHOUSE, Plaintiff-Appellant vs.
FORTUNATO F. HALILI, Defendant-Appellant
PONENTE:
LABRADOR, J.
FACTS OF THE CASE:
Plaintiff entered into an agreement with the defendant in November 1947, the
important provisions of which are (1) that they shall organize a partnership for the bottling
and distribution of Mission soft drinks, plaintiff to act as industrial partner or manager,
and the defendant as a capitalist, furnishing the capital therefor; (2) that the defendant was
to decide of general policy regarding the business, while the plaintiff was to attend to the
operation and development of the bottling plant; (3) that the plaintiff was to secure the
Mission soft drinks franchise for and in behalf of the proposed partnership; and (4) that the
plaintiff was to receive 30 percent of the net profits of the business. Prior to entering into
this agreement, plaintiff requested for the grant of an exclusive rights to bottle and
distribute from Mission soft drinks for a limited time under the condition that it will
finally be transferred to the corporation in order for him to close the deal with the
interested proponent financier (herein defendant) in the business, who was willing to
invest half a million dollars in the bottling and distribution of the said beverages. In view
of the request, plaintiff was given a “30-days” option on exclusive bottling and distribution
rights for the Philippines. A contract on business partnership was signed between the
Plaintiff and the Defendant on December 3, 1947. Both flew to the US and on December 10,
1947, a franchise agreement was entered into between the Mission Dry Corporation and
Fortunato F. Halili and/or Charles F. Woodhouse, granting defendant exclusive right,
license and authority to produce, bottle, distribute and sell Mission beverages in the
Philippines.
Eventually, the plaintiff filed a complaint asking for the execution of the contract of
partnership, an accounting of the profits, and a share of 30% with damages. The defendant
on the other hand alleged that his consent to the agreement was secured by false
representation of plaintiff that he was the owner or was about to become the owner of an
exclusive bottling franchise. Defendant also filed for counterclaim for damages contending
that plaintiff did not secure the franchise but was given to defendant himself.
The Court of First Instance rendered judgment ordering the defendant to render an
accounting of the profits of the bottling and distribution business, subject of the action, and
to pay plaintiff 15% thereof. It held that the execution of the contract of partnership could
not be enforced upon the parties, but it also held that the defense of fraud was not proved.

Whether Defendant had falsely represented that he had an exclusive franchise to
bottle Mission beverages, and whether this false representation or fraud, if it existed,
annuls the agreement to form the partnership.

No. In order that fraud may vitiate consent, it must be the causal (dolo causante),
not merely the incidental (dolo incidente). In the case at bar, inasmuch as the principal
consideration, the main cause that induced defendant to enter into the partnership
agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle
and distribute for the defendant or for the partnership, the false representation made by
the plaintiff was not the causal consideration, or the principal inducement, that led the
defendant to enter into the partnership agreement. While the representation that plaintiff
had the exclusive franchise did not vitiate defendant’s consent to the contract, it was used
by plaintiff to get from the defendant a share of 30% of the net profits; in other words, by
pretending that he had the exclusive franchise and promising to transfer it to defendant, he
obtained consent of the latter to give a big slice in the net profits. This is the dolo incidente
defined in Article 1270 of the Spanish Civil Code.
Accordingly, the agreement of partnership was not annulled, hence, judgment

affirmed. To render an accounting of the profits of the bottling and distribution business,
subject of the action, and to pay plaintiff 15% thereof.
TITLE:
G.R. No. 108253 February 23, 1994, LYDIA L. GERALDEZ, petitioner,
vs. HON. COURT OF APPEALS and KENSTAR TRAVEL
CORPORATION, respondents.
Natividad T. Perez for petitioner.
Bito, Lozada, Ortega & Castillo for private respondent.
PONENTE:
REGALADO, J.:
FACTS OF THE CASE:
The Volare 3 tour was arranged by the petitioner through Kenstar. She paid the complete
equivalent sum of P190,000.00 charged by private respondent for her and her sister,
Dolores, for a 22-day tour of Europe for $2,990.00; petitioners argued that what was
claimed in the brochure was not what they experienced throughout the tour and there was
no European tour manager, the hotels they stayed in were not marketed as best class,
the UGC leather factory, which was particularly included as a highlight of the tour, was
not visited, and the Filipino tour guide hired by Kenstar was a first-timer and hence
inexperienced. Respondent Kenstar Travel Corp. was sued by petitioner Geraldez for
damages due to a breach of contract. Private respondents failed to keep its promises under
the Volare 3 tour program, particularly in not providing a European tour manager to
explain points of interest and familiarize the tour group with the places they would visit in
Europe, and instead assigning a first-timer Filipino tour guide, Rowena Zapanta, to
perform that role, which clearly requires experience and knowledge.
The Quezon City RTC issued an order requiring defendant Kenstar to pay P1, 000,000 in
moral, nominal, and exemplary damages, as well as P50, 000 in attorney's expenses.
Respondent Court of Appeals overturned the award of moral and exemplary damages and
reduced the nominal damages and attorney's costs to P30, 000 and P10, 000, respectively,
on appeal.

Whether Kenstar behaved in bad faith or with gross negligence in fulfilling its contract
obligations?
Wherefore considering the foregoing, the decision of respondent Court of Appeals is

hereby set aside, and a new one is rendered, ordering private respondent Kenstar Travel
Corporation to pay petitioner Lydia L. Geraldez P100, 000.00 in moral damages, P50,
000.00 in exemplary damages, and P20, 000.00 in attorney's fees, plus costs against private
respondent and the award of nominal damages is now void. its contracts with petitioner
and other members of the tour group, which deceptions became evident in light of after-
events when, contrary to its representations, it employed an inexperienced tour guide,
housed the tourist group in substandard hotels, and reneged on its promise of a European
tour manager and the visit to the leather factory, it is in the interest of the court. The
repercussions of dolo causante include contract nullity and indemnification of damages, 63
and dolo incidente requires the person who employs it to pay damages. As a result,
private respondent Kenstar Travel Corporation is ordered to pay petitioner Lydi L.
Geraldez the sums of P100, 000.00 in moral damages, P50, 000.00 in exemplary damages,
and P20, 000.00 in attorney's fees, plus expenses.
TITLE:
G.R. No. 34840, September 23, 1931
NARCISO GUTIERREZ, plaintiff-appellee,
vs.
BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL GUTIERREZ,
ABELARDO VELASCO, and SATURNINO CORTEZ, defendants-appellants.
L.D. Lockwood for appellants Velasco and Cortez.
San Agustin and Roxas for other appellants.
Ramon Diokno for appellee.
PONENTE:
MALCOLM, J.
FACTS OF THE CASE:
On February 2, 1930, a passenger truck and an automobile of private ownership collided

on the Talon Bridge on the Manila South Road in the Municipality of Las Pinas, province
of Rizal. The truck was driven by Abelardo Velasco, and was owned by Saturnino Cortez.
The automobile was driven by a, 18 year-old, Bonifacio Gutierrez, and was owned by his
parents, Mr. and Mrs. Manuel Gutierrez. A passenger in the autobus, Narciso Gutierrez
suffered fracture on his right leg.
The chauffer and the owner of the passenger truck blamed the automobile driver who was
found to have just been released with a license which having him found to be an
incompetent driver; while the automobile driver blamed the passenger truck, to which the
owner, as prayed, shall be held liable based on master-servant rule. Furthermore, the
owner of the passenger truck contended that Narciso Gutierrez’s fracture to his right leg
was based on his contributory negligence since his leg is protruding out of the window.

It is conceded that the collision was caused by pure and simple negligence.

Whether Mr. and Mrs. Gutierrez shall be held liable for the damage caused by their son
based on master-servant rule?
Yes. Master-servant rule is applicable.

The head of a house, the owner of an automobile, who maintains it for the general
use of his family, is liable for its negligent operation by one of his children, whom he
designates or permits to run it, where the car is occupied and being used at the time of the
injury for the pleasure of other members of the owner's family than the child driving it.
TITLE:
G.R. No. L-48930, February 23, 1944, ANTONIO VAZQUEZ, petitioner,
vs. FRANCISCO DE BORJA, respondent.
PONENTE:
OZAETA, J.:
FACTS OF THE CASE:
Antonio Vazquez, petitioner and Fernando Busuego obligated themselves severally and
jointly for the delivery of 4000 canvas of rice to Francisco de Borja the respondent, at the
price of P2.10/cavan. Respondent alleges that petitioner and Busuego already received the
entire payment for the said number of canvas amounting to P8400.00.
However, in the months of February, March and April they only delivered 2488 canvas
amounting to P5224.80 and they refused to deliver the remaining 1512 canvas amounting
to P3175, to which they also refused to return the amount; caused of their refusal to return
the amount the respondent suffered losses of P1000.00; and they also failed to return the
4000 empty sacks only returned 2490 empty sacks and refused to deliver the remaining
1510 empty sacks or pay the equivalent amount of 377 to which the respondent suffered
P150.00 damage.
The petitioner on the other hand claimed that he never enter into a contract personally and
Busuego was known to the respondent has nothing to do with it, instead he claimed that
the respondent entered in to a contract to Natividad-Vasquez Sabani Development Co.,
Inc. not to him personally, but he was just an acting manager of the said company and he
suffered P1000.00 damages as counterclaim, because of the case filed against him knowing
that he has nothing to do with the contract.
The trial court absolved Busuego and ordered the petitioner to pay the respondent
P3175.90 plus the sum P377.50 with legal interest. The respondent was also absolved from
the counterclaim of the petitioner.
CA modified the decision of the lower court by reducing the amount to be paid by the
petitioner to P3,314.78, however, upon reconsideration moved by the petitioner, CA set
aside the decision of the lower court by remanding it to the court of origin. The petitioner,
not happy with the CA decision filed the present petition and Respondent filed a cross-
petition for certiorari to maintain the original judgment of the Court of Appeals.
Whether the petitioner Varquez is personally liable to the contract entered into with
Francisco Borja
No, based on the contract and preponderance of evidence the one who entered into the
contract was the Corporation the Natividad-Vasquez Sabani Development Co., Inc. being
the acting president of the corporation. The said corporation was not a party to the
complaint of the respondent; the complaint should have been dismissed.
It is well known that a corporation is an artificial being invested by law with a personality
of its own, separate and distinct from that of its stockholders and from that of its officers
who manage and run its affairs xxx corporation being a legal fiction that can only be
disregarded if used to cloak to hide unlawful and fraudulent purpose.
To which the respondent never alleged in the complaint that the petitioner benefited
personally.
TITLE:
G.R. No. 77648, August 7, 1989 CETUS DEVELOPMENT, INC., Petitioner,
vs. COURT OF APPEAL Cetus S, Respondents.
PONENTE:
MEDIALDEA, J.:
FACTS OF THE CASE:

Private respondents were the lessees of the premises originally owned by Susana Realty.
The payments of the rentals were paid by the lessees to a collector at the Susana Realty
who went to the premises monthly. Susana Realty, however, sold the property to
petitioner Cetus Development, Inc. The private respondents then continued to pay their
monthly rentals to a collector sent by the petitioner. In succeeding months, for three
months, the private respondents failed to pay their rentals because no collector came. They
then contacted the petitioner over the telephone as to where they should pay their rentals.
The petitioner then told them that they would send a collector to collect the rentals. Private
respondents waited but no collector came. Petitioner then sent a letter to each of the
private respondents demanding that they vacate the subject premises and to pay their
arrearages within 15 days from the receipt thereof. With this, private respondents
immediately upon the receipt of such demand tendered their payments which were
accepted by the petitioner with the condition that the acceptance was without prejudice to
the filing of an ejection suit. For failure of the private respondents to vacate the premises as
demanded, petitioner filed an ejectment suit against them.

The Metropolitan Trial Court of Manila, RTC and CA dismissed the ejectment suit.
Whether there was a delay of payment by the private respondents to the petitioner
considering that upon receipt of the demand letter, they immediately tendered their
payments.
No. There was no failure yet on the part of the private respondents to pay rents for three
consecutive months. It has been duly established that it has been customary for private
respondents to pay their rentals through a collector sent by the lessor.
Article 1169 of the Civil Code provides that those obliged to deliver or to do
something incur in delay from the time the oblige judicially or extrajudicially demands
from them the fulfillment of their obligation.
The moment the petitioner extrajudicially demand the payment of the rentals,
private respondents immediately answered their obligation by paying their arrearages of
rentals to the petitioner.
TITLE
G.R. No. 153004, SANTOS VENTURA HOCORMA FOUNDATION, INC., petitioner,
vs. ERNESTO V. SANTOS and RIVERLAND, INC., respondents.
PONENTE:
Quisimbing, J.
FACTS OF THE CASE
The parties executed a Compromise Agreement on October 26, 1990, where (1) the herein
Foundation shall pay Santos P14.5 Million in the following manner: (a) P1.5 Million
immediately upon the execution of this agreement; and (b) the balance of P13 Million shall
be paid, whether in lump sum or in installments at the discretion of the Foundation, within
a period of not more than two years format he execution of this agreement; (2) that
immediately upon the execution of this agreement and the payment of the P1.5 Million,
Santos shall cause the dismissal of the civil cases filed and voluntarily withdraw the
appeals in other civil cases, provided, however that in the event the foundation sell or
dispose of any of the lands, the proceeds of such may be required, partially devoted to the
payment of their obligations under the agreement.
In compliance with the Compromise Agreement, respondent Santos moved for the
dismissal of the aforesaid civil cases. Petitioner SVHFI sold to Development Exchange
Livelihood Corporation two real properties. This was ignored by the latter. Respondent
Santos sent another letter to the petitioner inquiring when it would pay the balance of P 13
million. There was no response from petitioner. Consequently, respondent Santos applied
with the RTC of Makati for the issuance of a writ of execution.
On June 2, 1995, Santos and Riverland Inc, filed a Complaint for Declaratory Relief and
Damages alleging delay on the part of SVHFI in paying the balance. They further alleged
that under the Compromise Agreement, the obligation became due on October 26, 1992,
but payment of the remaining balance was affected only on November 22, 1994. Thus,
respondents prayed that petitioner be ordered to pay legal interest on account of fault or
delay was not due and payable, considering that the obligation had been superseded by
the compromise agreement. Moveover, SVHFI argued that absent a stipulation, Santos
must ask for judicial intervention for purposes of fixing the period.
RULING OF THE LOWER AND APPELLATE COURTS

The trial court rendered a Decision dismissing herein respondents' complaint.
They then appealed to the Court of Appeals and the latter reversed the ruling of the trial
court.

Whether the SVHFI incurred in delay based on the compromise agreement and thereby
liable for legal interest
RULING AND RATIO DECIDENDI OR SUPREME COURT

Yes, SVHFI is liable for legal interest as penalty on account of delay. The general rule is
that a compromise has upon the parties the effect and authority of res judicata, with
respect to the matter definitely stated therein, or which by implication from its terms
should be deemed to have been included therein. This holds true even in the agreement
has not been judicially approved. Article 1169 of the NCC provides that those obliged to
deliver or to do something incur in delay form the time the oblige judicially or extra
judicially demands from the fulfillment of their obligation.
In order for the debtor to be in default, it is necessary that the following requisites be
present: (1) that the obligation be demandable and already liquidated; (2) that the debtor
delays performance; and (3) that the creditor requires the performance judicially or extra
judicially.
In the case at bar, the obligation was already due and demandable after the lapse of the
two-year period form the execution of the contract. The Compromise Agreement was
entered into by the parties on October 26, 1990. It was judicially approved on September
30, 1991. Applying existing jurisprudence, the compromise agreement as a consensual
contract become binding between the parties upon its execution and not upon its court
approval. From the time a compromise is validly entered into, it becomes the source of the
rights and obligations of the paties thereto. Hence, the two-year period must be counted
from October 26, 1990. Verify, the petitioner is liable for damages for the delay in the
perfomrance of its obligation. This is provided for in Art. 1170 of the NCC.
TITLE:
G.R. No. 149734, November 19, 2004. DR. DANIEL VAZQUEZ and MA. LUIZA M.
VAZQUEZ, petitioners, vs. AYALA CORPORATION, respondent.
PONENTE:
Associate Justice Dante O. Tiñga
FACTS OF THE CASE:
On April 23, 1981, spouses VASQUEZ entered into a Memorandum of Agreement (MOA)
with AYALA, buying from the Vazquez spouses, all of the latter's shares of stock in
CONDUIT Development, Incorporated. Under the MOA, Ayala was to develop the entire
property, less what was defined as the "Retained Area" consisting of 18,736 square meters.
This "Retained Area" was to be retained by the Vazquez spouses. The area to be developed
by Ayala was called the "Remaining Area". After the execution of the MOA, Ayala caused
the suspension of work on Village 1 of the Don Vicente Project. Ayala then received a letter
from Lancer General Builder Corporation demanding Ayala the amount of P1,509,558.80
as the subcontractor of G.P. Construction. Lancer sued G.P. Construction, Conduit and
Ayala in the then Court of First Instance of Manila. G.P. Construction in turn filed a cross-
claim against Ayala. G.P. Construction and Lancer both tried to enjoin Ayala from
undertaking the development of the property.
Ayala paid both Lancer and GP Construction the total of P4,686,113.39, which caused the
dismissal of the case. Taking the position that Ayala was obligated to sell the 4 lots
adjacent to the "Retained Area" within 3 years from the date of the MOA, the Vasquez
spouses sent several "reminder" letters of the approaching so-called deadline. However, no
demand after April 23, 1984, was ever made by the Vasquez spouses for Ayala to sell the 4
lots. By early 1990 Ayala finished the development of the vicinity of the 4 lots to be offered
for sale. The four lots were then offered to be sold to the Vasquez spouses at the prevailing
price in 1990. This was rejected by the Vasquez spouses who wanted to pay at 1984 prices.
RTC rendered decision in favor of the VASQUEZ spouses and stated that one of its reasons
was because the MOA was drafted and prepared by the AYALA who should suffer its
ambiguities; however the Court of Appeals reversed the ruling of the RTC and dismissed
the complaint against Ayala.

Whether AYALA was in default in the fulfillment of its obligation to the spouses
VASQUEZ
No. WHEREFORE, the instant petition is DENIED. No pronouncement as to costs.
Under Article 1193 of the Civil Code, obligations for whose fulfillment a day certain
has been fixed shall be demandable only when that day comes. However, no such day
certain was fixed in the MOA. Petitioners, therefore, cannot demand performance after the
three (3) year period fixed by the MOA for the development of the first phase of the
property since this is not the same period contemplated for the development of the subject
lots. Since the MOA does not specify a period for the development of the subject lots,
petitioners should have petitioned the court to fix the period in accordance with Article
119734 of the Civil Code. As no such action was filed by petitioners, their complaint for
specific performance was premature, the obligation not being demandable at that point.
Accordingly, Ayala Corporation cannot likewise be said to have delayed performance of
the obligation.
Even assuming that the MOA imposes an obligation on Ayala Corporation to

develop the subject lots within three (3) years from date thereof, Ayala Corporation could
still not be held to have been in delay since no demand was made by petitioners for the
performance of its obligation.
At best, petitioners' letters can only be construed as mere reminders which cannot
be considered demands for performance because it must appear that the tolerance or
benevolence of the creditor must have ended.
TITLE:
G. R. No. 32336 December 20, 1930 Julio C. Abella, represented by Antonio T.
Carrascoso jr for Plaintiff - Appellant v. Guillermo B. Francisco, represented by Camus
& Delgado for Defendant - Appellee
PONENTE:
Avancena, C.J.
FACTS OF THE CASE:

This is an appeal from the judgment of CFI Rizal. Francisco bought 9 lots from the
Government but was behind on his payments, he then signed a document stating that he
received P500 from Abella and that the latter will pay for the lots on or before December
15, extendible by 15 days thereafter. However, Abella failed to pay within the specified
time and instead paid the balance on January 9 to Mabanta(attorney-in-fact of Francisco)
but the latter refused to accept it as he was only given until January 5. Francisco rescinded
the contract through his attorney-in-fact Mabanta. Abella filed an action before the CFI of
Rizal to compel Francisco to accept his payment and deliver the lots to him.

The CFI of Rizal absolved the defendant from the complaint. CFI of Rizal relied on the fact
that the plaintiff had failed to pay the price of the lots within the stipulated time and that
since the contract between the plaintiff and defendant was an option for the purchase of
the lots, time was an essential element to it.

Whether Francisco can rescind the contract given the delay in the payment within the
specified time?

The Supreme Court affirmed the judgment appealed from. The trial court considered that
the contract in question was an option for the purchase of the lots, and that in an
agreement of this nature the period is deemed essential. The defendant wanted to sell
those lots to the plaintiff in order to pay off certain obligations which fell due in the month
of December, 1928. The time fixed for the payment of the price was therefore essential for
Francisco. In accordance with Art. 1124 of the Civil Code, the defendant is entitled to
resolve the contract for failure to pay the price within the time specified.
TITLE:
G.R.No. L-49852, October 19, 1989, Emilia Tengco, petitioner, vs Court of Appeals and
Benjamin Cifra Jr., respondents
PONENTE:
PADILLA, J.:
FACTS OF THE CASE:

Lutgarda Cifra, the owner of the premises at No. 164 Int.,Gov. Pascual St. Navotas,
Metro Manila, leased the said property to Emilia Tengco. The contract was not in writing,
hence, not recorded. While the contract of lease was still subsisting Lutgarda Cifra
transferred the ownership of the property to Benjamin Cifra. Tengco, despite her
knowledge of the transfer, attempted to pay her rentals to the person whom she used to
pay her dues.But that person refused to accept the payment as she no longer had the
authority to accept payments. Tengco, on the other hand, did not give the payment to
Benjamin Cifra or consigned the amount to the court. Benjamin Cifra filed an action for
unlawful detainer with the MTC of Navotas to evict the petitioner on the said premises for
her alleged failure to comply with the terms and conditions of the lease contract by failing
and refusing to pay the stipulated rentals despite repeated demands.

The MTC of Navotas rendered judgment against Tengco and ordered the
defendants and any and all persons claiming rights under her to vacate the premises
occupied by her and to surrender possession thereof to the plaintiff.

Whether the landlord is guilty of mora accipiendi?
RULING AND RATIO DECIDENDI OF SUPRE

No, the lessor was not guilty of mora accipiendi, the Court has held that a
contract of lease executed by the vendor, unless recorded, ceases to have effect when the
property is sold, in the absence of a contrary agreement. The petitioner cannot claim
ignorance of the transfer of ownership of the property because by her own account, Aurora
Recto and the respondent had informed her of their respective claims to ownership of the
property occupied by the petitioner. The petitioner should have tendered payment of the
rentals to the respondent, and if that was not possible, she should have consigned such
rentals in court. The petition is denied. The decision is immediately executory.
TITLE:
G.R.No. L-45710 October 3, 1985
CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR ANTONIO T.
CASTRO, JR. OF THE DEPARTMENT OF COMMERCIAL AND SAVINGS BANK, in
his capacity as statutory receiver of Island Savings Bank, petitioners, vs. THE
HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO, respondents.
PONENTE:
MAKASIAR, CJ.
FACTS OF THE CASE:
On April 28, 1965, Island Savings Bank, upon favorable recommendation of its legal
department, approved the loan application for P80,000.00 of Sulpicio M. Tolentino, who, as
a security for the loan, executed on the same day a real estate mortgage over his 100-
hectare land.
On May 22, 1965, a mere P17,000.00 partial release of the P80,000.00 loan was made by the
Bank; and Sulpicio M. Tolentino and his wife Edita Tolentino signed a promissory note for
it at 12% annual interest. An advance interest for the P80,000.00 loan covering a 6-month
period amounting to P4,800.00 was deducted from the partial release of P17,000.00. But
this pre-deducted interest was refunded to Sulpicio M. Tolentino on July 23, 1965, after
being informed by the Bank that there was no fund yet available for the release of the
P63,000.00 balance. On August 13, 1965, the Monetary Board of the Central Bank, after
finding Island Savings Bank was suffering liquidity problems issued the prohibition on the
bank from making new loans and investments.
On June 14, 1968, the Monetary Board, after finding that Island Savings Bank failed to put
up the required capital to restore its solvency, prohibited Island Savings Bank from doing
business in the Philippines and instructed the Acting Superintendent of Banks to take
charge of the assets of Island Savings Bank. On August 1, 1968, Island Savings Bank, in
view of non-payment of the P17,000.00 covered by the promissory note, filed an
application for the extra-judicial foreclosure of the real estate mortgage covering the 100-
hectare land of Sulpicio M. Tolentino; and the sheriff scheduled the auction for January 22,
1969.
On January 20, 1969, Sulpicio M. Tolentino filed a petition with the Court of First Instance
of Agusan for injunction, specific performance or rescission and damages with preliminary
injunction, alleging that since Island Savings Bank failed to deliver the P63,000.00 balance
of the P80,000.00 loan, he is entitled to specific performance by ordering Island Savings
Bank to deliver the P63,000.00 with interest of 12% per annum from April 28, 1965, and if
said balance cannot be delivered, to rescind the real estate mortgage.

The trial court, upon the filing of a P5,000.00 surety bond, issued a temporary restraining
order enjoining the Island Savings Bank from continuing with the foreclosure of the
mortgage. On January 29, 1969, the trial court admitted the answer in intervention praying
for the dismissal of the petition of Sulpicio M. Tolentino and the setting aside of the
restraining order, filed by the Central Bank and by the Acting Superintendent of Banks.
After trial on the merits rendered its decision, finding unmeritorious the petition of
Sulpicio M. Tolentino, ordering him to pay Island Savings Bank the amount of PI 7 000.00
plus legal interest and legal charges due thereon, and lifting the restraining order so that
the sheriff may proceed with the foreclosure. On February 11, 1977, the Court of Appeals,
on appeal by Sulpicio M. Tolentino, modified the Court of First Instance decision by
affirming the dismissal of Sulpicio M. Tolentino's petition for specific performance, but it
ruled that Island Savings Bank can neither foreclose the real estate mortgage nor collect the
P17,000.00 loan.

Whether there was default in both parties

Yes. The reason of Island Savings Bank that it can no longer provide for the P63,000
because of the Central Bank’s resolution is untenable. The resolution only prohibits the
bank from issuing new loans and investments, and nowhere did it prohibit the bank
from releasing the balance of loan agreements previously contracted. Likewise, since
Tolentino issued a Promissory Note in favor of the bank, and failed to pay the amount of
the note, he is also liable for default in payment of his obligation. Since both parties were
in default in the performance of their respective reciprocal obligations, Article 1192 of the
Civil Code provides that the liability of the first infractor shall be equitably tempered by
the courts.
The Court rules that the liability of Island Savings Bank for damages in not furnishing the
entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the form of
penalties and surcharges, for not paying his overdue P17,000.00 debt. The liability of
Sulpicio M. Tolentino for interest on his PI 7,000.00 debt shall not be included in offsetting
the liabilities of both parties. Since Sulpicio M. Tolentino derived some benefit for his use
of the P17,000.00, it is just that he should account for the interest thereon.
TITLE:
ROSENDO O. CHAVES vs. FRUSTUOSO GONZALES
PONENTE:
REYES, J.B.L. J.
FACTS OF THE CASE:
In July 1963, the plaintiff brought to the defendant his portable typewriter for
routine cleaning and servicing. Three months have passed but the defendant was not able
to finish the job. The plaintiff gave P6.00 to the defendant for the purchase of some spare
parts. After getting exasperated with the delay of the repair of the typewriter, the plaintiff
asked for the return of the typewriter. The defendant then delivered the typewriter in a
wrapped package. After examination, the plaintiff found out that the same was in
shambles, with the interior cover and some parts and screws missing. The plaintiff,
through a letter, formally demanded the return of the missing parts, the interior cover and
the sum of P6.00. The following day, the defendant returned some of the missing parts, the
interior cover and the P6.00.
On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business
Machines which cost him a total of P89.85 for the repair and labor.
On 23 August 1965 plaintiff filed an action before the City Court of Manila,
demanding the return of P90.00 as actual compensatory damages, P100.00 for temperate
damages, P500.00 for moral damages, and P500.00 for attorney’s fees.
The defendant did not deny the allegations but contended that the repair done by
the Freixas Business Machines should not be fully chargeable against him because the
missing parts had a total value of only 31.10

The City Court of Manila ordered the defendant to pay the plaintiff the sum of
P31.00 and the cost of suit. The plaintiff appealed directly to the Supreme Court.

Whether defendant should be liable for the whole amount of repair paid by plaintiff
to Freixas Business Machines?
NO- The defendant-appellee contravened the tenor of his obligation because he not
only did not repair the typewriter but returned it "in shambles". For such contravention, he
is liable under Article 1167 of the Civil Code. The cost of the execution of the obligation in
this case should be the cost of the labor or service expended in the repair of the typewriter,
which is in the amount of P58.75 because the obligation or contract was to repair it.
TITLE:
Chavez v. Gonzales, 32 SCRA 547 (1970)
FACTS OF THE CASE:
This is a direct appeal by the party who prevailed in a suit for breach of oral contract and
recovery of damages but was unsatisfied with the decision rendered by the Court of First
Instance of Manila
In July 1963, the plaintiff delivered to the defendant his typewriter for periodic
maintenance. The defendant has not done the job despite repeated reminders. In October
1963 the defendant asked for P6.00 for the spareparts being needed to fix the typewriter.
October 26, 1963 the plaintiff went to the house of the defendant to demand the return of
the typewriter. The defendant delivered the typewriter in a wrapped package, the
defendant upon reaching home he discovered that the typewriter was in shambles. On
October 29, 1963 he demanded the defendant to return the P6.00 and the missing spare
parts, to which it was compiled by the defendant. On August 29 plaintiff asked Freixas
Business Machines to fix the typewriter that cost him P89.85. On August 23, 1965 the
plaintiff commenced his action to the court of Manila asking the defendant to pay him
P90.00 as actual and compensatory damage, P100.00 for temperate damages, P500.00 for
moral damages, and P500.00 as attorney’s fees. The court ordered the defendant to pay the
plaintiff for P30 for the missing spare parts.
The lower court ordered the defendant to pay the plaintiff of P31.10 for the missing spare
parts and denied the following claims: P690 00 for actual, temperate and moral damages
and attorney’s fees of the plaintiff.
1. Whether or not the lower is correct in its application of art. 1167 of the Civil Code ordering
the defendant-appellee to pay for the cost of the spare parts only and not the entire cost of
repair and damages.
2. Whether or not defendant appellee commit breach the contract
1. Yes. It is clear that the defendant-appellee contravened the tenor of his obligation
because he did not repair the typewriter but returned it "in shambles", according to
the appealed decision. He is liable under Article 1167 of the Civil Code not just to
the cost of the spare parts but to the entire repair. ART. 1167. If a person obliged to
do something fails to do it, the same shall be executed at his cost.
As to compensatory damages, for temperate damages, moral damages and

attorney’s fee the Supreme Court upheld the ruling of the lower court. The appealed
judgment thus made no findings on these claims. There is no factual basis upon
which to make an award therefore, the plaintiff is bound to the ruling of the lower
court.
2. Yes. not because the contract does not contain the period as alleged by the
defendant-appellee he can’t be held liable for breach of contract, Where the time for
compliance had expired and there was breach of contract by non-performance, it
was academic for the plaintiff to have first petitioned the court to fix a period for the
performance of the contract before filing his complaint.
Damages
Since the plaintiff appellant directly went to the Supreme Court, facts of the case became
conclusive and unreviewable. It causes for the SC not to grant the damages since it was not
pleaded before the lower court and no findings of facts, it follows that there is no basis to
grant the same.
TITLE:
G.R. No. 73867 February 29, 1988
TELEFAST COMMUNICATIONS/PHILIPPINE WIRELESS, INC., petitioner,
vs. IGNACIO CASTRO, SR., SOFIA C. CROUCH, IGNACIO CASTRO JR., AURORA
CASTRO, SALVADOR CASTRO, MARIO CASTRO, CONRADO CASTRO,
ESMERALDA C. FLORO, AGERICO CASTRO, ROLANDO CASTRO, VIRGILIO
CASTRO AND GLORIA CASTRO, and HONORABLE INTERMEDIATE APPELLATE
COURT, respondents.
PONENTE:
PADILLA, J
FACTS OF THE CASE:
On 2 November 1956, Consolacion Bravo-Castro, wife of plaintiff Ignacio Castro, Sr. and
mother of the other plaintiffs, passed away in Lingayen, Pangasinan. On the same day, her
daughter Sofia C. Crouch, who was then vacationing in the Philippines, addressed a
telegram to Sofia’s father in the United States announcing Consolacion's death. The
telegram was accepted by the defendant in its Dagupan office, for transmission, after
payment of the required fees or charges. But Sofia’s father and siblings were not able to
attend the wake and burial of Consolacion.
When Sofia returned to the United States, she discovered that the telegram had not been
received prompting her and the other plaintiffs to file action for damages arising from the
defendant's breach of contract. The only defense of the defendant was that it was unable to
transmit the telegram because of "technical and atmospheric factors beyond its control."
No evidence appears on record that the defendant ever made any attempt to advise the
plaintiff Sofia C. Crouch as to why it could not transmit the telegram.
CFI: ordered the defendant (now petitioner) to pay the plaintiffs (now private
respondents) damages with interest at 6% per annum.
IAC: affirmed the trial court's decision.

Whether the petitioner can only be held liable for the fee or charges (P31.92) paid by Sofia
C. Crouch and not liable for the damages as its act was not motivated by “fraud, malice or
recklessness."?
No. Petitioner's act or omission, which amounted to gross negligence, was precisely the
cause of the suffering private respondents had to undergo.
Art. 1170 of the Civil Code provides that "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." Art. 2176 also provides that
"whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done."
Art. 2217 of the Civil Code applicable to the case at bar. It states: "Moral damages include
physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury. Though incapable
of pecuniary computation, moral damages may be recovered if they are the proximate
results of the defendant's wrongful act or omission."
TITLE:
G.R. No. L-15645 January 31, 1964 PAZ P. ARRIETA and VITALIADO ARRIETA,
plaintiffs-appellees, vs. NATIONAL RICE AND CORN CORPORATION, defendant-
appellant, MANILA UNDERWRITERS INSURANCE CO., INC., defendant-appellee.
PONENTE:
REGALA, J
FACTS OF THE CASE:
On May 19, 1952, plaintiff-appellee participated in the public bidding called by the NARIC
for the supply of 20,000 metric tons of Burmese rice. As her bid of $203.00 per metric ton
was the lowest, she was awarded the contract for the same. Accordingly, on July 1, 1952,
plaintiff-appellee Paz P. Arrieta and the appellant corporation entered into a Contract of
Sale of Rice, under the terms of which the former obligated her to deliver to the latter
20,000 metric tons of Burmese Rice at $203.00 per metric ton, CIF Manila.
In turn, the defendant Corporation committed itself to pay for the imported rice "by means
of an irrevocable, confirmed and assignable letter of credit in U.S. currency in favor of the
plaintiff-appellee and/or supplier in Burma, immediately." Despite the commitment to pay
immediately "by means of an irrevocable, confirmed and assignable Letter of Credit,"
however, it was only on July 30, 1952, or a full month from the execution of the contract,
that the defendant corporation, thru its general manager, took the first step to open a letter
of credit by forwarding to the Philippine National Bank its Application for Commercial
Letter of Credit. On the same day, July 30, 1952, Mrs. Paz P. Arrieta, thru counsel, advised
the appellant corporation of the extreme necessity for the immediate opening of the letter
of credit since she had by then made a tender to her supplier in Rangoon, Burma
"equivalent to 5% of the F.O.B. price of 20,000 tons at $180.70 and in compliance with the
regulations in Rangoon this 5% will be confiscated if the required letter of credit is not
received by them before August 4, 1952." In a letter dated August 2, 1952, the NARIC
bluntly confessed to the appellee its dilemma:
"In this connection, please be advised that our application for the opening of the letter of
credit has been presented to the bank since July 30th but the latter requires that we first
deposit 50% of the value of the letter amounting to approximately $3,614,000.00 which we
are not in a position to meet." Consequently, the credit instrument applied for was opened
only on September 8, 1952 "in favor of Thiri Setkya, Rangoon, Burma, and/or assignee for
$3,614,000.00," (which is more than two months from the execution of the contract) the
party named by the appellee as beneficiary of the letter of credit. As a result of the delay,
the allocation of appellee's supplier in Rangoon was cancelled and the 5% deposit,
amounting to 524,000 kyats or approximately P200,000.00 was forfeited. The plaintiffs-
appellees offered to deliver Thailand rice instead of what was agreed due to the
circumstances stated in the preceding paragraphs to the defendant-appellant, but the latter
denied the said offer which prompted the former to demand compensation for damages
representing the unrealized profit. Nevertheless the latter rejected such demand which
caused the plaintiffs-appellees to seek judicial action alleging that the defendant-appellant
committed breach of contract because of the foregoing facts mentioned above.
Trial court decided awarding the plaintiffs-appellees the amount of $286,000.00 as

damages for breach of contract and dismissing the counterclaim and third party complaint
of the defendant-appellant NARIC.
Whether the delay of the credit instrument applied for by the defendant-appellant in favor
of the plaintiffs-appellees constitutes a breach of contract and therefore the former is
entitled for damages such as unrealized profit.
Yes, the Supreme Court ruled that the defendant-appellant’s culpability arises from its
willful and deliberate assumption of contractual obligations even as it was well aware of
its financial incapacity to undertake the presentation. The judgment is based upon the
letter which accompanied the application filed by the appellant with the bank, in the said
application, appellant admitted and owned that it did not have sufficient deposit with the
bank with which to cover the amount required to be deposited as a condition for the
opening of letters of credit. Having called for bids for the importation of rice involving
millions, $4,260,000.00 to be exact, it should have ascertained its ability and capacity to
comply with the inevitable requirements in cash to pay for such importation. Having
announced the bid, it must be deemed to have impliedly assured suppliers of its capacity
and facility to finance the importation within the required period, especially since it had
imposed on the supplier the 90-day period within which the shipment of the rice must be
brought into the Philippines. Having entered into the contract, it should have taken steps
immediately to arrange for the letter of credit for the large amount involved and inquired
into the possibility of its issuance.
Under Article 1170 of the Civil Code, "Those who in the performance of their obligation
are guilty of fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable in damages."
TITLE
G.R. No. L-37120 April 20, 1983
VICTORINO D. MAGAT, petitioner,
vs. HON. LEO D. MEDIALDEA and SANTIAGO A. GUERRERO, respondents.
Sinesio S. Vergara for petitioner.
Eladio B. Samson for respondents.
PONENTE:
ESCOLIN, J
FACTS OF THE CASE:
That sometime in September 1972, the defendant entered into a contract with the U.S.
Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each taxicab
to be provided with the necessary taximeter and a radio transceiver. Aligada, acting as
agent of Guerrero, conducted studies on how to best meet the requirements of his contract
with the US. He approached the plaintiff herein in behalf of the defendant and proposed to
import from Japan thru the plaintiff herein or thru plaintiff's Japanese business associates,
all taximeters and radio transceivers needed by the defendant in connection with his
contract with the U.S. Navy Exchange, Subic Bay, Philippines. Defendant herein and his
aforesaid agent Isidro Q. Aligada were able to import from Japan with the assistance of the
plaintiff and his Japanese business associates the necessary taximeters for defendant's
taxicabs.
Isidro Q. Aligada secured a firm offer in writing dated September 25wherein the plaintiff
quoted in his offer a total price of $77,620.59 [U.S. dollars] FOB Yokohama, the goods or
articles therein offered for sale by the plaintiff to the defendant to be delivered sixty to
ninety [60-90] days after receipt of advice from the defendant of the radio frequency
assigned to the defendant by the proper authorities. Magat received a notice of Guerrero’s
acceptance as shown by the signed conformity.
Petitioner requested a letter of credit from the defendant, a normal business practice in
case of foreign importation. Petitioner was repeatedly assured by Aligada and respondent
of the latter’s financial capabilities to pay and refused to open a letter of credit. Magat
learned that Guerrero was operating the taxicabs without the required radio transceivers.
The US Navy pressed Guerrero to comply with his obligations but he blamed Magat for
the delays, thus destroying Magat’s reputation with the US Navy to whom he transacted
business.
Magat filed a complaint in view of Guerrero’s failure to fulfill his contractual obligations
and prayed for damages. Guerrero filed a motion to dismiss said complaint for lack of
cause of action, on ground that the plaintiff was merely anticipating his loss or damage
and was not actually suffering. The court dismissed the complaint.
RULING OF LOWER AND APPELATE COURT
The court of first instance of Rizal granted respondent’s petition and dismissed the
case on the ground of lack of cause of action.
Whether the defendant is liable for damages
YES. The court found the test of legal sufficiency of the cause of action adequately satisfied.
The essential elements of a cause of action are present, to wit: (1) the existence of a legal
right to the plaintiff; (2) a correlative duty of the defendant, and (3) an act or omission of
the defendant in violation of the plaintiff's right, with consequent injury or damage to the
latter for which he may maintain an action for recovery of damages or other appropriate
relief.
In this case at bar, petitioner had fulfilled his part of the bargain, private respondent failed
to comply with his correlative obligation by refusing to open a letter of credit to cover
payment of the goods ordered by him, and that consequently, petitioner suffered not only
loss of his expected profits, but moral and exemplary damages as well. Article
Article 1170 of the Civil Code provides: Those who in the performance of their obligation
are guilty of fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof are liable for damages.
The phrase "in any manner contravene the tenor" of the obligation includes any ilicit act or
omission which impairs the strict and faithful fulfillment of the obligation and every kind
of defective performance.
The damages which the obligor is liable for includes not only the value of the loss suffered
by the obligee [daño emergente] but also the profits which the latter failed to obtain [lucro
cesante] . If the obligor acted in good faith, he shall be liable for those damages that are the
natural and probable consequences of the breach of the obligation and which the parties
have foreseen or could have reasonably foreseen at the time the obligation was constituted;
and in case of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages
which may be reasonably attributed to the non-performance of the obligation.
In fine, we hold that on the basis of the facts alleged in the complaint, the court could
render a valid judgment in accordance with the prayer thereof.
ACCORDINGLY, the questioned order of dismissal is hereby set aside and the case
ordered remanded to the court of origin for further proceedings. No costs.
TITLE:
G.R. No. 97412 , July 12, 1994 EASTERN SHIPPING LINES, INC. petitioner VS HON.
COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC.,
respondents.
PONENTE:
VITUG, J.:
FACTS OF THE CASE:
Two fiber drums of riboflavin delivered by SS Eastern Comet owned by defendant Eastern
Shipping Lines, arrived in Manila unto custody of Metro Port Service Inc. Upon delivery
by Allied Brokerage Corporation, upon inspection of the consignee, one drum contained
spillages with the rest being fake. Allied contended that due to the losses/damage
sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault
and negligence of defendants. Claims were presented against defendants who failed and
refused to pay the same. Defendants filed their respective answers, traversing the material
allegations of the complaint contending that: As for defendant Eastern Shipping it alleged
that the shipment was discharged in good order from the vessel unto the custody of Metro
Port Service so that any damage/losses incurred after the shipment was incurred after the
shipment was turned over to the latter, is no longer its liability. Allied Brokerage alleged
that plaintiff has no cause of action against it, not having negligent or at fault for the
shipment was already in damage and bad order condition when received by it, but
nonetheless, it still exercised extra ordinary care and diligence in the handling/delivery of
the cargo to consignee in the same condition shipment was received by it.
RTC favors the Mercantile Insurance Company. They ordered the Eastern Shipping Inc to
pay the amount of P19,032.95 with a present legal interest of 12% per annum from October
1, 1982, the date of filing of these complaints, until fully paid. Eastern appealed the case in
the Court of Appeal. The Court of Appeal affirmed the decision of the lower court.

1. Whether the applicable rate of legal interest is 12% or 6%.
2. Whether the payment of legal interest on the award for loss or damage is to be
computed from the time the complaint is filed from the date the decision appealed
from is rendered.
WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with
the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount
due computed from the decision, dated 03 February 1988, of the court a quo. A TWELVE
PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount
upon finality of this decision until the payment thereof.
No. The Court held that the legal interest is 6% computed from the decision of the court a
quo. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest shall be adjudged on liquidated claims or
damages except when or until the demand can be established with reasonable certainty.
When the judgment of the court awarding a sum of money becomes final and executor, the
rate of legal interest shall be 12% per annum from such finality until satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of money.
No. Where the demand is established with reasonable certainty, the interest shall begin to
run from the time the claim is made judicially but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run only
from the date of judgment of the court.
TITLE:
G.R. No. 128721 March 9, 1999
CRISMINA GARMENTS, INC., petitioner,
vs. COURT OF APPEALS and NORMA SIAPNO, respondent.
PONENTE:
PANGANIBAN, J.:
FACTS OF THE CASE:

The petitioner, who was engaged in the export of girls' denim pants, contracted the
services of the respondent, the sole proprietress of the D'Wilmar Garments, for the sewing
of 20,762 pieces of assorted girl’s denims. The respondent sewed the materials and
delivered them to the petitioner. Petitioner told the respondent that some were
defective. The respondent offered to take the defective goods back, but the petitioner’s
representative already said they were good. She was told just to return for her check of
P76, 410.4. The petitioner failed to pay. The respondent demanded payment. The
petitioner’s vice president comptroller wrote to the respondent saying that 6,164 pairs of
jeans were defective and as such, she was liable to the petitioner for P49, 925.51.5. The
respondent filed before the trial court for the collection of P76, 410.
The trial court ordered the petitioner to pay the said amount with interest thereon at 12%
per annum. The CA affirmed. Petitioner submits that the interest rate should be six percent
(6%), pursuant to Article 2209 of the Civil Code. On the other hand, private respondent
maintains that the interest rate should be twelve percent (12 %) per annum, in accordance
with Central Bank (CB) Circular No. 416. She argues that the circular applies, since "the
money sought to be recovered by her is in the form of forbearance.
Whether it is proper to impose interest at the rate of twelve percent (12%) per
annum for an obligation that does not involve a loan or forbearance of money in
the absence of stipulation of the parties
No. The proper interest rate should be 6% per annum. Because the amount due in this case
arose from a contract for a piece of work, not from a loan or forbearance of money, the
legal interest of six percent (6%) per annum should be applied. Furthermore, since the
amount of the demand could be established with certainty when the Complaint was filed,
the six percent (6%) interest should be computed from the filing of the said Complaint. The
rate of interest shall be six percent (6%) per annum, computed from the time of the filing of
the Complaint in the trial court until the finality of the judgment. If the adjudged principal
and the interest (or any part thereof) remains unpaid thereafter, the interest rate shall be
twelve percent (12%) per annum computed from the time the judgment becomes final and
executory until it is fully satisfied. No pronouncement as to costs.
TITLE:
G.R. No. 113926, October 23, 1996 SECURITY BANK AND TRUST COMPANY,
Petitioner, vs. REGIONAL TRIAL COURT OF MAKATI, BRANCH 61,
MAGTANGGOL EUSEBIO AND LEILA VENTURA, Respondents.
PONENTE
HERMOSISIMA, JR., J.
FACTS OF THE CASE:
Private Respondent Magtanggol Eusebio executed three (3) promissory notes in

favor of Security Bank and Trust Co. (SBTC) in the amounts of Php100,000.00 on April 27,
1983, Php100,000.00 on July 28, 1983 and Php65,000.00 on August 31, 1983 with the
agreement to pay each for six months installments plus interest rate of 23% per annum. In
all the said promissory notes, Leila Ventura had signed as co-maker. Upon maturity of
said loans, the principal balance remaining on the notes stood at 16,665.00, 83,333.30 and
65,000.00. However, Eusebio failed and refused to pay the aforestate balance payable,
hence, a collection case was filed in court by SBTC.

The trial court ruled in favor of SBTC lowering the interest rate at 12% per annum.
SBTC moved for partial reconsideration claiming that per signed agreement, the interest
rate was 23% per annum. Consequently, said motion for reconsideration was denied.

Whether the 23% rate of interest per annum agreed upon by the parties may be
validly disregarded by the court as stipulated in the promissory note?
No. The interest due should be that stipulated in writing and in the absence thereof
the rate shall be at 12% per annum. The SC found no valid reason for the respondent court
a quo to impose a 12% rate of interest on the principal balance owing to petitioner by
respondent in the presence of a valid stipulation. Considering that the rate interest of 23%
was agreed upon by the parties freely. Significantly, Magtanggol Eusebio did not question
that rate. It is not for the respondent court a quo to change the stipulations in the contract
where it is not illegal. Furthermore, Article 1306 of the New Civil Code provides that
contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy. Hence, 23% per annum as agreed shall govern.
TITLE:
G.R. No. 113412 April 17, 1996, Spouses PONCIANO ALMEDA and EUFEMIA P.
ALMEDA, petitioner, vs. THE COURT OF APPEALS and PHILIPPINE NATIONAL
BANK, respondents.
PONENTE:
KAPUNAN, J.:
FACTS OF THE CASE:
Ponciano and Eufemia Almeda acquired several loan/credit accommodations totalling P18
million from PNB, at an interest rate of 21% per annum. To secure the loan, spouses
executed a Real Estate Mortgage Contract covering a parcel of their land at Pasong Tamo,
Makati and the building erected thereon (Marvin Plaza). A credit agreement was also
executed by the parties, which provides: “the Bank reserves the right to increase the
interest rate within the limits allowed by law at any time…provided, that the interest rate
on this/these accommodations shall be correspondingly decreased in the event that the
applicable maximum interest rate is reduced by law or by the Monetary Board.
In either case, the adjustment in the interest rate agreed upon shall take effect on the
effective date of the increase or decrease of the maximum interest rate.” the Almedas made
several partial payments on the loan totaling P7,735,004.66, a substantial portion of which
was applied to accrued interest. Then, over the Almedas’ protests, PNB raised the interest
rate to 28% pursuant to their credit agreement, and thereafter increased it to a high of 68%
before the loan matured. Thus, the Almedas filed a petition for declaratory relief with
prayer for a writ of preliminary injunction and TRO to enjoin PNB from unilaterally
raising the interest rates on the loan, pursuant to the credit agreement’s escalation clause.
The RTC granted the Almedas’ prayer for a writ of preliminary injunction against the sale
anew. PNB appealed to the CA, which set aside the trial court’s order granting the writs
and upheld PNB’s right to foreclosure pursuant to Act 3135 and PD 385.
Whether PNB was authorized to raise its interest rates from 21% to as high as 68% under
the credit agreement?
NO. Any contract which appears to be heavily weighted in favor of one of the parties so as
to lead to an unconscionable result is void. Likewise, any stipulation regarding the validity
or compliance of the contract which is left solely to the will of one of the parties is invalid.
o The binding effect of any agreement between parties to a contract is premised on two
settled principles: that any obligation arising from contract has the force of law between
the parties; and that there must be mutuality between the parties based on their essential
equality. o PNB unilaterally altered the terms of its contract with the Almedas by
increasing the interest rates on the loan without prior assent of the latter, in violation of the
mutuality principle of contracts expressed in A1308, NCC.
While interest escalation clauses in credit agreements are perfectly valid and do not
contravene public policy, they are still subject to laws and provisions. o The stipulation in
the credit agreement, which requires that the increase be within the limits allowed by law
refers to legislative enactments, not administration circulars, otherwise the credit
agreement would not have made the distinction between law and the Monetary Board in
the phrase “that the interest rate on this/these accommodations shall be correspondingly
decreased in the event that the applicable maximum interest rate is reduced by law or by
the Monetary Board.” o The increased interest rates, to which the Almedas never assented,
thereby resulting to PNB’s contravention of their credit agreement by implementing the
same, are patently unconscionable and excessive, unjustly disabling the Almedas from
fulfilling their obligation due to the new amount of the loan that is way above the original
amount of the old interest rate.
TITLE:
G.R. No. 141811. November 15, 2001, FIRST METRO INVESTMENT
CORPORATION, Petitioner, v. ESTE DEL SOL MOUNTAIN RESERVE, INC.,
VALENTIN S. DAEZ, JR., MANUEL Q. SALIENTES, MA.ROCIO A. DE VEGA,
ALEXANDER G. ASUNCION, ALBERTO * M. LADORES, VICENTE M. DE VERA, JR.,
and FELIPE B. SESE, Respondents.
PONENTE:
DE LEON, JR., J
FACTS OF THE CASE:
On January 31, 1978: FMIC availed a loan Este del Sol P7.3M to aid its plan for the
construction of a resort in Montalban, Rizal with 16% interest per annum subject to the
following stipulations: (a) one time penalty of 20% of the amount due which shall bear
interest at the highest rate permitted by; law from the date of default until full payment;
(b) liquidated damages at 2% per month compounded quarterly on the unpaid
balance and accrued interests together with all the penalties, fees, expenses or charges
until the balance is fully paid; and (c) attorney’s fees equivalent to 25% for the sum sought
to be recovered. The loan was released on a staggered basis.
On the same day, as provided in the loan agreement, the parties also entered into an
Underwriting Agreement (a) whereby FMIC shall underwrite on a best-efforts basis the
public offering of 120,000 common shares of Este del Sol's capital stock for a
one-time underwriting fee of P200,000.00; (b) an annual supervision fee of P200,000 for
four consecutive years to be paid to FMIC for supervising the public offering of the shares;
(c) and a consultancy fee of P332,500.00 per annum for 4 consecutive years to FMIC.
Simultaneously, a Consultancy Agreement was executed whereby Estedel Sol engaged
FMIC’s services for a fee as consultant to render general consultancy services
On February 22, 1978, FMIC billed Este del Sol for the underwriting of two hundred
thousand pesos (P200k) with supervision fees of two hundred thousand pesos
(P200,000.00), as well as P1.3M worth of consultancy fees for 4 years. These were all
deducted from the first release of the loan.
On June 23, 1980, Este del Sol failed to meet the payment schedules, incurring
P12.6M due to FMIC. FMIC caused the foreclosure of P7.5M worth of properties
mortgaged by Este del Sol. Of the P9M from the foreclosure and auction, P3.1M was
deducted for attorney’s fees and P5.8M for interests and penalties, and partly on the
principal.
On November 11, FMIC initiated a collection suit against respondents-sureties for

the remaining P6.8M owed by Este del Sol. The respondents argued that the Underwriting
and Consultancy Agreements were integral parts of the Loan Agreement and were merely
“subterfuges” to camouflage the usurious interest charged by FMIC.
The trial court ruled in favor with FMIC and ordered respondents to pay the P6.8M
balance. The CA reversed. It found and declared that the fees provided for in the
Underwriting and Consultancy Agreements were mere subterfuges to camouflage the
excessive, usurious interest charged by FMIC on the loan of Este del Sol; and that the
stipulated penalties, liquidated damages and attorney's fees were "excessive,
iniquitous, unconscionable and revolting to the conscience.”
Whether the loan obtained from FMIC is considered void for being usurious?
No. The loan obtained under usurious rate is valid.
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. The reason for this rule was adequately explained in
the case of Angel Jose Warehousing Co., Inc. v. Chelda Enterprises where this Court held:
In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the
principal debt, which is the cause of the contract (Article 1350, Civil Code), is not illegal.
The illegality lies only as to the prestation to pay the stipulated interest; hence, being
separable, the latter only should be deemed void, since it is the only one that is illegal.
An apparently lawful loan is usurious when it is intended that additional

compensation for the loan be disguised by an ostensibly unrelated contract providing for
payment by the borrower for the lender’s services which are of little value or which are not
in fact to be rendered, such as in the instant case. In this connection, Article 1957 of the
New Civil Code clearly provides that: Art. 1957. Contracts and stipulations, under any
cloak or device whatever, intended to circumvent the laws against usury shall be void. The
borrower may recover in accordance with the laws on usury.
TITLE:
G.R. No. 117190 January 2, 1997 JACINTO TANGUILIG doing business under the name
and style J.M.T. ENGINEERING AND GENERAL MERCHANDISING, Petitioner,
v. COURT OF APPEALS and VICENTE HERCE JR., Respondents.
PONENTE:
BELLOSILLO, J.:
FACTS OF THE CASE:
Herce contracted Tanguilig to construct a windmill system for him, for consideration of
60,000.00. Pursuant to the agreement Herce paid the downpayment of 30,000.00 and
installment of 15,000.00 leaving a 15,000.00 balance. Herce refused to pay the balance
because he had already paid this amount to SPGMI which constructed a deep well to
which the windmill system was to be connected since the deepwell, and assuming that he
owed the 15,000.00 this should be offset by the defects in the windmill system which
caused the structure to collapse after strong winds hit their place. According to Tanguilig,
the 60,000.00 consideration is only for the construction of the windmill and the
construction of the deepwell was not part of it. The collapse of the windmill cannot be
attributed to him as well, since he delivered it in good and working condition and Herce
accepted it without protest. Herce contested that the collapse is attributable to a typhoon, a
force majeure that relieved him of liability.
The RTC ruled in favor of Tanguilig, but this decision was overturned by the Court of
Appeals which ruled in favor of Herce.

Whether petitioner is under obligation to reconstruct the windmill after it collapsed?

Yes. The Court held that the petitioner is under obligation to reconstruct the collapsed
windmill. The Court has consistently held that in order for a party to claim exemption
from liability by reason of fortuitous event under Art.1174 of the Civil Code, the event
should be the sole and proximate cause of the loss or destruction of the object of the
contract.
In the case at bar the petitioner failed to show that the collapse of the windmill was due
solely to a fortuitous event. Interestingly, the evidence does not disclose that there was
actually a typhoon on the day the windmill collapsed. Petitioner merely stated that there
was a "strong wind." But a strong wind in this case cannot be fortuitous — unforeseeable
or unavoidable. On the contrary, a strong wind should be present in places where
windmills are constructed; otherwise the windmills will not turn.
TITLE:
G.R. No. 23769, SONG FO & COMPANY, plaintiff-appellee,
vs. HAWAIIAN PHILIPPINE CO., defendant-appellant.
PONENTE:
Malcolm, J.
FACTS OF THE CASE:

The herein parties entered into an agreement where the Hawaiian-Philippine Co, the
herein defendant agreed to deliver to Song Fo & Company, the herein plaintiff, 300,000
gallons of molasses. And that the defendant will accommodate the plaintiff by supplying
the latter with an extra 100,000 gallons which is not a definite promise-- less did it
constitute an obligation. Where the herein plaintiff filed a complaint with two causes of
action for breach of contract against the defendant when the former allegedly defaulted in
the payment of the molasses delivered by the latter. Hence the cancellation and rescission
of the said contract

RTC ruled that the defendant agreed to sell to the plaintiff 400,000 gallons of molasses; and
that defendant had no right to rescind the contract of sale made with the plaintiff.

1. Whether or not the defendant agrees to sell to the plaintiff 400,000 gallons of
molasses or 300,000 gallons?
2. Whether or not the plaintiff had the right to rescind the contract of sale made with
defendant?
RULING AND RATION DECIDENDI OF SUPREME COURT:

1. The contract of the parties is in writing. The Hawaiian-Philippine Co. Agreed to
deliver to Song Fo & Company 300,000 gallons of molasses and the language used
with reference to the additional 100,000 gallons was not a definite promise. The
contract between the parties expressly mentions an understanding between the
patties of a contract for 300.000 gallons of molasses.
2. Some doubt has risen as to when Song Fo & Company was expected to make
payments for the molasses delivered. Exhibit P, a communication sent direct by the
Hawaiian-Philippine Co. by which the latter gave notice of the termination of the
contract, gave as the reason of the rescission, the breach. Resolving such ambiguity
as exists and having in mind ordinary business practice, a reasonable deduction is
that Song Fo was to pay the former, upon presentation of accounts at the end of
each month. The terms of payment fixed by the parties are controlling, the time of
payment stipulated should be treated as of the essence of the contract.
The general rule is that rescission will not be permitted for a slight or casual breach of the
contract, but only for such breaches as are so substantial and fundamental as to defeat the
object of the parties in making the agreement. A delay in payment for a small quantity of
molasses for some twenty days is not such a violation of an essential condition of the
contract was warrants rescission for non-performance. Not only this but the Hawaiian-
Philippine Co. Waived this condition when it arose by accepting payment of the overdue
accounts and continuing with the contract. Hence, there were no default in payment and
no excuse to cancel the contract.
TITLE:
G.R. No. L-22590 March 20, 1987, Boysaw vs. Interphil Promotions
PONENTE:
Chief Justice Marcelo B. Fernan
FACTS OF THE CASE:
On May 1, 1961, SOLOMON BOYSAW and his then Manager, WILLIE KETCHUM,
signed with INTERPHIL PROMOTIONS, Inc. represented by LOPE SARREAL, SR., a
contract to engage GABRIEL "FLASH" ELORDE in a boxing contest for the junior
lightweight championship of the world, stipulating that the bout would be held at the
Rizal Memorial Stadium in Manila on September 30, 1961. On September 2, 1961,
BOYSAW informed SARREAL of his arrival and presence in the Philippines. On
September 5, 1961, ALFREDO YULO, JR. wrote to SARREAL informing him of his
acquisition of the managerial rights over BOYSAW and indicating his and BOYSAW's
readiness to comply with the boxing contract of May 1, 1961. On the same date, on behalf
of INTERPHIL, SARREAL wrote a letter to the Games and Amusement Board (GAB)
expressing concern over reports that there had been a switch of managers in the case of
BOYSAW, of which he had not been formally notified, and requesting that BOYSAW be
called to an inquiry to clarify the situation. After a series of conferences called by the GAB,
it moved the schedule of the ELORDE-BOYSAW fight for November 4, 1961, which was
approved by the USA National Boxing Association.
As a result of the foregoing occurrences, on October 12, 1961, BOYSAW and YULO
sued INTERPHIL, SARREAL and MANUEL NIETO, JR. in the CFI of Rizal [Quezon City
Branch] for damages allegedly occasioned by the refusal of INTERPHIL and SARREAL,
aided and abetted by NIETO, then GAB Chairman, to honor their commitments under the
boxing contract of May 1, 1961. The trial for BOYSAW’s complaint was repeatedly reset
because BOYSAW left the country without informing the court, and therefore the case was
deemed submitted after the plaintiffs declined to submit documentary evidence when they
had no other witnesses to present.
The CFI rendered decision in favor of the respondents, ordered BOYSAW and YULO to
jointly and severally pay defendant-appellee Manuel Nieto, Jr., the total sum of P25,000.00,
broken down into P20,000.00 as moral damages and P5,000.00 as attorney's fees; the
defendants-appellees Interphil Promotions, Inc. and Lope Sarreal, Sr., P250,000.00 as
unrealized profits, P33,369.72 as actual damages and P5,000.00 as attorney's fees; and
defendant-appellee Lope Sarreal, Sr., the additional amount of P20,000.00 as moral
damages aside from costs. BOYSAW and YULO appealed directly to the Supreme Court
by reason of the amount involved.
Whether or not petitioners are guilty of violating the fight contract of May 1, 1961; and
must pay for damages.
Yes. WHEREFORE, except for the award of moral damages which is herein deleted, the
decision of the lower court is hereby affirmed.
The assignments, from Ketchum to Araneta, and from Araneta to Yulo, were in fact
novations of the original contract which, to be valid, should have been consented to by
Interphil. There is no showing that Interphil, upon receipt of Yulo's letter, acceded to the
"substitution" by Yulo of the original principal obligor, who is Ketchum. The logical
presumption can only be that, with Interphil's letter to the GAB expressing concern over
reported managerial changes and requesting for clarification on the matter, the appellees
were not reliably informed of the changes of managers. Not being reliably informed,
appellees cannot be deemed to have consented to such changes. Under the law when a
contract is unlawfully novated by an applicable and unilateral substitution of the obligor
by another, the aggrieved creditor is not bound to deal with the substitute. Novation
which consists in substituting a new debtor in the place of the original one may be made
even without the knowledge or against the will of the latter, but not without the consent of
the creditor (Art. 1293, Civil Code).
TITLE:
G.R.No. L-28602 September 29, 1970 University of the Philippines, Petitioner,
Represented by Office of the Solicitor General Antonio P. Barredo, Solicitor Augusto M.
Amores for Petitioner Vs. Walfrido Delos Angeles, et al., Respondents, represented by
Norberto J. Quisumbing
PONENTE:
J.B.L., J.
FACTS OF THE CASE:

University of the Philippines (UP) granted logging concessions to Associated Lumber
Manufacturing Company(ALUMCO) in exchange for royalties. However, ALUMCO failed
to pay what is stipulated in their contract despite repeated demands, UP threatened
rescission of the agreement. To avoid rescission of said agreement, Alumco executed an
instrument entitled ‘’Acknowledgment of Debt and Proposed Manner of Payments’’ which
stipulated the ff:
In the event that the payments called for in Nos. 1 and 2 of this paragraph are not sufficient
to liquidate the foregoing indebtedness of the DEBTOR in favor of the CREDITOR, the
balance outstanding after the said payments have been applied shall be paid by the
DEBTOR in full no later than June 30, 1965;
In the event that the DEBTOR fails to comply with any of its promises or undertakings in
this document, the DEBTOR agrees without reservation that the CREDITOR shall have the
right and the power to consider the Logging Agreement dated December 2, 1960 as
rescinded without the necessity of any judicial suit, and the CREDITOR shall be entitled as
a matter of right to Fifty Thousand Pesos (P50, 000.00) by way of and for liquidated
damages;
However, Alumco, again incurred an unpaid account in addition to the indebtedness that
it had previously acknowledged prompting UP to rescind the agreement and file for
collection for the unpaid accounts against the former. UP prayed for an injunction to
restrain ALUMCO from continuing logging operations, Alumco contended that it is only
after a final court decree declaring the contract rescinded for violation of its terms that UP
could disregard ALUMCO’s rights under the contract and treat the agreement as breached
and of no effect. Alumco further states that before the issuance of the aforesaid preliminary
injunction UP had taken steps to have another concessionaire take over the logging
operation by advertising an invitation to bid which was awarded to Sta. Clara Lumber
Company. ALUMCO filed a petition to enjoin UP from conducting the bidding.

CFI of Rizal (Quezon City) issued the first order, enjoining UP from awarding logging
rights over the concession to any other party. UP received the order after it had concluded
its contract with Sta. Clara Lumber Company and said company had already started
logging operations. The said court declared UP in contempt of Court and directed Sta.
Clara Lumber Company refrain from exercising logging rights in the concession.

1. Whether the U.P. can treat its contract with ALUMCO rescinded and may disregard the
same before any judicial pronouncement to that effect
2. Whether the CFI of Rizal did not abuse its discretion in granting ALUMCO’s petition?

1. Yes, the Supreme Court held that there is nothing in the law that prohibits the parties
from entering into agreement that violation of the terms of the contract would cause
cancellation of it, even without court intervention. It is not always necessary for the injured
party to resort to court for rescission of the contract.
2. The Supreme Court granted the writ of Certiorari and the order of the respondent court
be set aside. Stating that UP made out a prima facie case of breach of contract and defaults
in payment by respondent ALUMCO, to the extent that the court below issued a writ of
preliminary injunction stopping ALUMCO’s logging operations, and repeatedly denied its
motions to lift the injunction. It is not denied that ALUMCO had already profited from its
operations previous to the agreement and its excuses do not constitute on their face
sufficient excuse for non-payment. The Supreme court held that the acts of respondent
court in enjoining the petitioner's measures to protect its interest without first receiving
evidence on the issues tendered by the parties , and in subsequently refusing to dissolve
the injunction, were in grave abuse of discretion.
TITLE:
G.R. No. 47206 September 27, 1989, GLORIA M. DE ERQUIAGA, administratrix of the
estate of the late SANTIAGO DE ERQUIAGA & HON. FELICIANO S. GONZALES,
petitioners VS. HON. COURT OF APPEALS, AFRICA VALDEZ VDA. DE REYNOSO,
JOSES V. REYNOSO, JR., ERNESTO , SYLVIA REYNOSO, LOURDES REYNOSO,
CECILE REYNOSO, EDNA REYNOSO, ERLINDA REYNOSO & EMILY REYNOSO,
respondents.
PONENTE:
GRINO-AQUINO, J.:
FACTS OF THE CASE:

Erquiaga which owns the Hacienda San Jose, Sorsogon entered into an Agreement with
Jose Reynoso to sell his 3,100 shares of Erquiaga Development Corporation for 900,000
payable in installments on definite dates fixed in the contract but Reynoso failed to pay the
second and third installments on time, the total price of the sale was later increased to
P971,371.70 payable on or before December 17, 1969. Reynoso was able to pay the total
sum of 410,000 to Erquiaga upon transferring his shares as well as possession of Hacienda.
However, as provided in paragraph 3, subparagraph (c) of the contract to sell, Reynoso
pledged 1,500 shares in favor of Erquiaga as security for the balance of his obligation.
Reynoso failed to pay the balance of P561,321.70 on or before December 17, 1969, as
provided in the promissory notes he delivered to Erquiaga. So, on March 2, 1970, Erquiaga,
through counsel, formally informed Reynoso that he was rescinding the sale of his shares
in the Erquiaga Development Corporation.
The Court of Appeals rendered its decision on May 31, 1976 only the following have been
done by the parties in compliance with the final judgment in the main case: (1) The
Hacienda San Jose was returned to Erquiaga on March 3, 1975 upon approval of Erquiaga's
surety bond of P410,000 in favor of Reynoso; (2) Reynoso has returned to Erquiaga only
the pledged 1,500 shares of stock of the Erquiaga Development Corporation, instead of
3,100 shares, as ordered in paragraph (a) of the final judgment.
Whether Erquiaga should return the shared stocks paid by Reynoso with legal rate of
interes

Yes. The Court directing Erquiaga to return the sum of P410,000 (or net P348,000 after
deducting P62,000 due from Reynoso under the decision) as the price paid by Reynoso for
the shares of stock, with legal rate of interest, and the return by Reynoso of Erquiaga's
3,100 shares with the fruits(construed to mean not only dividends but also fruits of the
corporation's Hacienda San Jose) is in full accord with Art. 1385 of the Civil Code which
provides:
ART. 1385. Rescission creates the obligation to return the things which were the object of
the contract, together with their fruits, and the price with its interest; consequently, it can
be carried out only when he who demands rescission can return whatever he may be
obliged to restore.
Neither shall rescission 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.
In this case, indemnity for damages may be demanded from the person causing the
loss.The Hacienda San Jose and 1,500 shares of stock have already been returned to
Erquiaga. Therefore, upon the conveyance to him of the remaining 1,600 shares, Erquiaga
(or his heirs) should return to Reynoso the price of P410,000 which the latter paid for those
shares. Pursuant to the rescission decreed in the final judgment, there should be
simultaneous mutual restitution of the principal object of the contract to sell (3,100 shares)
and of the consideration paid (P410,000). This should not await the mutual restitution of
the fruits, namely: the legal interest earned by Reynoso's P410,000 while in the possession
of Erquiaga and its counterpart: the fruits of Hacienda San Jose which Reynoso received
from the time the hacienda was delivered to him on November 4,1968 until it was placed
under receivership by the court on March 3, 1975. However, since Reynoso has not yet
given an accounting of those fruits, it is only fair that Erquiaga's obligation to deliver to
Reynoso the legal interest earned by his money, should await the rendition and approval
of his accounting. To this extent, the decision of the Court of Appeals should be modified.
For it would be inequitable and oppressive to require Erquiaga to pay the legal interest
earned by Reynoso's P410,000 since 1968 or for the past 20 years (amounting to over
P400,000 by this time) without first requiring Reynoso to account for the fruits of
Erquiaga's hacienda which he allegedly squandered while it was in his possession from
November 1968 up to March 3, 1975.
TITLE:
G.R. No. L-42283, March 18, 1985, Buenaventura Angeles et. al., plaintiffs-appellees, vs
Ursula Torres Calasanz et. al., defendants-appellants
PONENTE:
GUTIERREZ,JR.,J.:
FACTS OF THE CASE:

Spouses Calasanz entered into a contract to sell a piece of land located in Cainta, Rizal
with Angeles and Juani. Plaintiffs-Appellees made a down payment of P392 upon the
execution of the contract. They promise to pay the balance in monthly installments of
P41.20 until fully paid. On numerous occasions, the Defendants-Appellants received
delayed installment payments from Plaintiffs-Appellees. Defendants-Appellants canceled
the said contract because the Plaintiffs-Appellees failed to meet subsequent payments.
Plaintiffs-Appellees filed a civil case to compel the Defendants-Appellants to execute in
their favor the final deed of sale alleging that after computing all the subsequent payments
they found out that they had already paid the total amount, including the interest, realty
taxes, and incidental expenses for the registration and transfer of the land.

The Court of First Instance of Rizal, Seventh Judicial District Branch X, rendered a
ruling in favor of the Plaintiffs-Appellees.

Whether the contract to sell has been automatically and validly canceled by the
Defendants-Appellants?

No, the Defendants-Appellants did not automatically cancel the contract. The right
to rescind the contract for non-performance of one of its stipulations is not absolute.
Rescission of a contract should not be permitted for slight or casual breach, but only for
such substantial and fundamental as would defeat the very object of the parties in making
the agreement. In this case, the breach of contract is so slight that in only a short time the
entire obligation would have been paid. To sanction the rescission made by the
Defendants-Appellants will work injustice to the Plaintiffs-Appellees. It would unjustly
enrich the Defendants-Appellants. The instant petition is denied for lack of merit. The
decision appealed from is affirmed with the modification that the Plaintiffs-Appellees
should pay the balance of P671.67 without any interest.
TITLE:
G.R. No. 97347 July 6, 1999, JAIME G. ONG, petitioner,
vs. THE HONORABLE COURT OF APPEALS, SPOUSES MIGUEL K. ROBLES and
ALEJANDRO M. ROBLES, respondents.
PONENTE:
YNARES-SANTIAGO, J.
FACTS OF THE CASE:

On May 10, 1983, petitioner Jaime Ong and respondent spouses Miguel K. Robles and
Alejandra Robles executed an “Agreement of Purchase and Sale” respecting two parcels of
land. On May 15, 1983, petitioner took possession of the subject parcels of land together
with the piggery, building, rice mill, residential house and other improvements thereon.
The petitioner failed to completely pay the agreed price; hence, the spouses filed a
complaint for rescission of contract and recovery of properties with damages.

The trial court rendered a decision in favor of the plaintiffs ordering that the contract
entered Inyo by the parties be rescinded including its improvements. The CA affirmed this
decision

Whether the contract entered into by the parties may be validly rescinded

The Court upheld the decision of the Court of Appeals. The Contract entered into by the
parties was a “Contract to Sell” which means that the payment of the purchase price is a
positive suspensive condition, the failure of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring an
obligatory force. The non-fulfillment of the condition of full payment rendered the contract
to sell ineffective and without force and effect. Hence, the agreement of the parties in the
case at bench may be set aside, but not because of a breach on the part of petitioner for
failure to complete payment of the purchase price. Rather, his failure to do so brought
about a situation which prevented the obligation of respondent spouses to convey title
from acquiring an obligatory force.
TITLE:
G.R. No. 83851, 03 March 1993, VISAYAN SAWMILL COMPANY, INC., and ANG TAY
vs. THE HONORABLE COURT OF APPEALS and RJH TRADING, represented by
RAMON J. HIBIONADA.
PONENTE:
DAVIDE JR. J.
FACTS OF THE CASE:

On 01 May 1983, RJH Trading (RJHT) and Visayan Sawmill Company, Inc. (VSCI)
entered into a Purchase and Sale of Scrap Iron located at VSCI’s stockyard in Cawitan, Sta.
Catalina, Negros Oriental, subject to the condition that RJHT will open a Letter of Credit
(LC) of P250,000.00 in favor of VSCI on or before May 15, 1983.
On 17 May 1983, RJHT, through his men, started to dig and gather scrap iron until
May 30 when it was resisted by VSCI because of an alleged case filed against RJHT by a
certain Alberto Pursuelo. VSCI denied the allegations and sent a telegram cancelling the
contract of sale because of failure to comply with the conditions thereof.
On 24 May 1983, RJHT informed VSCI by telegram that the LC was opened on 12
May 1983 at the Bank of the Philippine Islands (BPI) main office in Ayala, but the
transmittal was delayed.
On 26 May 26, 1983, VSCI received a letter advice from BPI Dumaguete relaying
that an irrevocable domestic LC No. 01456-d of P250,000.00 in favor Ang Tay c/o VSCI on
the account of Armaco-Marsteel Alloy Corporation was opened.
On 19 July 1983, RJHT sent a series of telegrams stating that the case filed against
him had been dismissed and demanding that VSCI comply with the deed of sale,
otherwise a case will be filed against them. In reply, VSCI's lawyer informed them that
they were no longer willing to continue with the sale due to RJHT's failure to comply with
essential pre-conditions of the contract.
On 29 July 1983, RJHT filed the complaint below with a petition for preliminary
attachment. The writ of attachment was returned unserved because VSCI was no longer in
operation and because the scrap irons as well as other pieces of machinery can no longer
be found on the premises.
The Regional Trial Court (RTC) of Iloilo rendered judgment in favor of plaintiff and
against the defendants ordering the latter to pay jointly and severally plaintiff, to wit:
1) The sum of thirty-Four Thousand Five Hundred Eighty-Three and 16/100

(P34,583.16), as actual damages;
2) The sum of One Hundred Thousand (P100,000.00) Pesos, as moral
damages;
3) The sum of Ten Thousand (P10,000.00) Pesos, as exemplary damages;
4) The sum of twenty-five Thousand (P25,000.00) Pesos, as attorney's fees;
and
5) The sum of Five Thousand (P5,000.00) Pesos as actual litis expenses.
The Court of Appeals reduced the moral damages to P25,000.00.

Whether VSCI can rescind the contract?
YES. The private respondent fail to open, make or indorse an irrevocable and
unconditional letter of credit on or before 15 May 1983 despite his earlier representation in
his 24 May 1983 telegram that he had opened one on 12 May 1983, the letter of advice
received by the petitioner corporation on 26 May 1983 from the Bank of the Philippine
Islands Dumaguete City branch explicitly makes reference to the opening on that date of a
letter of credit in favor of petitioner Ang Tay c/o Visayan Sawmill Co. Inc., drawn without
recourse on ARMACO-MARSTEEL ALLOY CORPORATION and set to expire on 24 July
1983, which is indisputably not in accordance with the stipulation in the contract signed by
the parties on at least three (3) counts: (1) it was not opened, made or indorsed by the
private respondent, but by a corporation which is not a party to the contract; (2) it was not
opened with the bank agreed upon; and (3) it is not irrevocable and unconditional, for it is
without recourse, it is set to expire on a specific date and it stipulates certain conditions
with respect to shipment. In all probability, private respondent may have sold the subject
scrap iron to ARMACO-MARSTEEL ALLOY CORPORATION or otherwise assigned to it
the contract with the petitioners. Private respondent's complaint fails to disclose the
sudden entry into the picture of this corporation.
Consequently, the obligation of the petitioner corporation to sell did not arise; it
therefore cannot be compelled by specific performance to comply with its prestation. In
short, Article 1191 of the Civil Code does not apply; on the contrary, pursuant to Article
1597 of the Civil Code, the petitioner corporation may totally rescind, as it did in this case,
the contract. Said Article provides:
“ARTICLE 1597. Where the goods have not been delivered to the buyer, and the
buyer has repudiated the contract of sale, or has manifested his inability to perform his
obligations, thereunder, or has committed a breach thereof, the seller may totally rescind
the contract of sale by giving notice of his election so to do to the buyer."
TITLE:
G.R. No. 96643. April 23, 1993, ERNESTO DEIPARINE, JR., petitioner,
vs. THE HON. COURT OF APPEALS, CESARIO CARUNGAY and ENGR. NICANOR
TRINIDAD, respondents.
Gregorio B. Escasinas for petitioner.
PONENTE:
CRUZ, J.
FACTS OF THE CASE:

Spouses Cesario and Teresite Carungay entered into an agreement with Ernesto Deipatine,
Jr. for the construction of a three-story dormitory in Cebu City. In their contract, Deiparine
bound himself to erect the building “in strict accordance to plans and specifications.”
Nicanor Trinidad, civil engineer, was designated as the representative of the Carungays.
During the construction, Trinidad reported to Cesario Carungay that Deiparine had been
deviating from the plans and specifications, thus impairing the strength and safety of the
building. Memoranda were sent to Deiparine but the latter ignored them. Upon testing, the
building turned out to be structurally defective.
Spouses Carungay filed a complaint with the RTC of Cebu for the recission of the
construction contract and for damages. Deiparine alleged that the construction contract
was not among the rescissible contracts enumerated in Article 1381 of the Civil Code.

RTC: declared the construction agreement rescinded and ordered reimbursement of the
expenses of spouses Carungay.
CA: Affirmed in toto the decision of the RTC.

Whether the rescission of the contract is proper?

Yes. The reliance of Deiparine in Article 1381 is untenable. There is also a right of
rescission under the law on obligations as granted in Article 1191, providing as follows:
“Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.”
This was the provision the trial court and the respondent court correctly applied because it
relates to contracts involving reciprocal obligations like the subject construction contract.
The construction contract falls squarely under the coverage of Article 1191 because it
imposes upon Deiparine the obligation to build the structure and upon the Carungays the
obligation to pay for the project upon its completion.
Article 1191, unlike Article 1385, is not predicated on economic prejudice to one of the
parties but on breach of faith by one of them that violates the reciprocity between them.
The violation of reciprocity between Deiparine and the Carungay spouses, to wit, the
breach caused by Deiparine’s failure to follow the stipulated plans and specifications, has
given the Carungay spouses the right to rescind or cancel the contract.
Article 1725 cannot support the petitioner’s position either, for this contemplates a
voluntary withdrawal by the owner without fault on the part of the contractor, who is
therefore entitled to indemnity, and even damages, for the work he has already
commenced. There is no such voluntary withdrawal in the case at bar. On the contrary, the
Carungays have been constrained to ask for judicial rescission because of the petitioner’s
failure to comply with the terms and conditions of their contract.
WHEREFORE, the challenged decision is hereby AFFIRMED and the instant petition for
review is DENIED, with costs against the petitioner. For deliberately changing the
language of Section 6(b), paragraph 3, of P.D. No. 1746, Atty. Gregorio B. Escasinas is
hereby fined P1,000.00, with the warning that repetition of a similar offense will be dealt
with more severely. It is so ordered.
TITLE:
G.R. No. 129107 September 26, 2001 ALFONSO L. IRINGAN, petitioner, vs. HON.
COURT OF APPEALS and ANTONIO PALAO, represented by his Attorney-in-Fact,
FELISA P. DELOS SANTOS, respondents.
PONENTE:
QUISUMBING, J
FACTS OF THE CASE:

On March 22, 1985, private respondent Antonio Palao sold to petitioner Alfonso Iringan,
an undivided portion of Lot No. 992 of the Tuguegarao Cadastre, located at the Poblacion
of Tuguegarao and covered by Transfer Certificate of Title No. T-5790. The parties
executed a Deed of Sale on the same date with the purchase price of P295,000.00.
When the second payment was due, Iringan paid only P40,000. Thus, on July 18, 1985,
Palao sent a letter to Iringan stating that he considered the contract as rescinded and that
he would not accept any further payment considering that Iringan failed to comply with
his obligation to pay the full amount of the second installment. On February 21, 1989,
Iringan, now represented by a new counsel - Atty. Carmelo Z. Lasam, proposed that the
P50,000 which he had already paid Palao be reimbursed or Palao could sell to Iringan, an
equivalent portion of the land.
Trial court ruled in favor of Palao and affirmed the rescission of the contract. CA affirmed
the decision of the lower court.
Whether the contract of sale was validly rescinded
YES. When private respondent filed an action for Judicial Confirmation of Rescission and
Damages before the RTC, he complied with the requirement of the law for judicial decree
of rescission. The complaint categorically stated that the purpose was 1) to compel
appellants to formalize in a public document, their mutual agreement of revocation and
rescission; and/or 2) to have a judicial confirmation of the said revocation/rescission under
terms and conditions fair, proper and just for both parties.
Ratio decidendi:
Under Article 1191, the power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation,
with payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The "rescission" in Article 1381 is not akin to the term "rescission" in Article 1191 and
Article 1592. In Articles 1191 and 1592, the rescission is a principal action which seeks the
resolution or cancellation of the contract while in Article 1381; the action is a subsidiary
one limited to cases of rescission for lesion as enumerated in said article.
TITLE:
G.R. No. 137909, December 11, 2003, FIDELA DEL CASTILLO Vda. DE
MISTICA, petitioner, vs. Spouses BERNARDINO NAGUIAT and MARIA PAULINA
GERONA-NAGUIAT, respondents.
PONENTE:
PANGANIBAN, J.:
FACTS OF THE CASE:
Petitioner De mistica Leased a portion of land located in malharan Meycuayan Bulacan to

respondent Naguiat.On april 5 1979 Eulalio Mistica entered into contract to sell with
respondent over a portion of lot containing an area of 200 square meter.
NAGSASALAYSAY:
‘Na ang NAGBIBILI ay nagmamay-aring tunay at naghahawak ng isang lagay na lupa na

nasa Nayon ng Malhacan, Bayan ng Meycauayan, Lalawigan ng Bulacan, na ang kabuuan
sukat at mga kahangga nito gaya ng sumusunod:
xxx xxx xxx
‘Na alang-alang sa halagang DALAWANG PUNG LIBONG PISO (₱20,000.00) Kualtang

Pilipino, ang NAGBIBILI ay nakipagkasundo ng kanyang ipagbibili ang isang bahagi o
sukat na DALAWANG DAAN (200) METROS PARISUKAT, sa lupang nabanggit sa itaas,
na ang mga kahangga nito ay gaya ng sumusunod:
xxx xxx xxx
‘Na magbibigay ng paunang bayad ang BUMIBILI SA NAGBIBILI na halagang

DALAWANG LIBONG PISO (₱2,000.00) Kualtang Pilipino, sa sandaling lagdaan ang
kasulatang ito.
‘Na ang natitirang halagang LABING WALONG LIBONG PISO (₱18,000.00) Kualtang
Pilipino, ay babayaran ng BUM[I]BILI sa loob ng Sampung (10) taon, na magsisimula sa
araw din ng lagdaan ang kasulatang ito.
‘Sakaling hindi makakabayad ang Bumibili sa loob ng panahon pinagkasunduan, an[g]

BUMIBILI ay magbabayad ng pakinabang o interes ng 12% isang taon, sa taon nilakaran
hanggang sa ito’y mabayaran tuluyan ng Bumibili:
‘Sa katunayan ng lahat ay nilagdaan ng Magkabilang Panig ang kasulatang ito, ngayon ika
5 ng Abril, 1979, sa Bayan ng Meycauayan. Lalawigan ng Bulacan, Pilipinas.
Pursuant to said agreement, [Respondent Bernardino Naguiat] gave a

downpayment of ₱2,000.00. He made another partial payment of ₱1,000.00 on 7 February
1980. He failed to make any payments thereafter. Eulalio Mistica died sometime in October
1986.
Petitioner filed a complaint for rescission on the ground that respondent failure and
refusal to pay the balance of the purchase price constitutes a violation of the contract
which entitles her to rescind the same. In their answer respondent claimed that contract
cannot be rescinded because there was a clear stipulation that that in case of failure to pay,
a yearly 12% is to be paid. He also added that he offered to pay the remaining balance to
petitioner ( late mistica) but the latter refused, hence, there is no breach or violation
committed by them as well as damages; that he is presently the owner in fee simple of the
subject lot having acquired the same by virtue of a Free Patent Title duly awarded to him
by the Bureau of Lands; and that his title and ownership had already become indefeasible
and incontrovertible.
Respondent filed a counter claim praying for damages, atty. fees and other litigation
expenses.
"On 8 July 1992, [respondents] also filed a motion to dismiss which was denied by
the court on 29 July 1992. The motion for reconsideration was likewise denied per its Order
of 17 March 1993.
Disallowing rescission, the CA held that respondents did not breach the Contract of
Sale. It explained that the conclusion of the ten-year period was not a resolutory term,
because the Contract had stipulated that payment -- with interest of 12 percent -- could still
be made if respondents failed to pay within the period. According to the appellate court,
petitioner did not disprove the allegation of respondents that they had tendered payment
of the balance of the purchase price during her husband’s funeral, which was well within
the ten-year period. Moreover, rescission would be unjust to respondents, because they
had already transferred the land title to their names. The proper recourse, the CA held,
was to order them to pay the balance of the purchase price, with 12 percent interest.
Whether the Honorable Court of Appeals erred in the application of Art. 1191 of the
New Civil Code, as it ruled that there is no breach of obligation in spite of the lapse of the
stipulated period and the failure of the private respondents to pay.
No. Under Art. 1191 of Civil Code, the right to rescind an obligation is predicated on
violation between parties brought about by breach of faith by one of them. Rescission,
however, is allowed only when the breach is substantial and fundamental to the
fulfillment of the obligation. In this case, no substantial breach – in the Kasulatan, it was
stipulated that payment could be made even after 10 years from execution of contract,
provided they will pay the 12% interest
In this case, no substantial breach – in the Kasulatan, it was stipulated that payment could
be made even after 10 years from execution of contract, provided they will pay the 12%
interest
WHEREFORE, the assailed Decision and Resolution are AFFIRMED with the
MODIFICATION that the payment for the extra 58-square meter lot included in
respondents’ title is DELETED.
TITLE:
G.R. No. 144169 March 28, 2001 KHE HONG CHENG, alias FELIX KHE, SANDRA JOY
KHE and RAY STEVEN KHE, petitioners, vs.COURT OF APPEALS, HON. TEOFILO
GUADIZ, RTC 147, MAKATI CITY and PHILAM INSURANCE CO., INC., respondents
PONENTE:
KAPUNAN, J.:
FACTS OF THE CASE:

Philippine Agricultural Trading Corporation shipped on board the vessel M/V PRINCE
ERIC, owned by petitioner Khe Hong Cheng, 3,400 bags of copra at Masbate, Masbate, for
delivery. The said shipment of copra was insured by American Home Insurance Company
which PHILAM insurance was assured. Unfortunately, the ship sank resulting in loss of
shipment. Because of the loss, the insurer, American Home, paid the amount of P354,
000.00. Then, American Home, filed a civil suit against Cheng but during the pendency of
the case.On December 20, 1989, Cheng executed deeds of donations of parcels of land in
favor of his children, herein co-petitioners Sandra Joy and Ray Steven.
The trial court rendered judgment against petitioner Khe Hong Cheng and renders
judgment on December 29, 1993, four years after the donations, in favor of the plaintiff and
against the defendant, ordering the latter to pay the former: the sum of P354, 000.00
representing the amount paid by the plaintiff to the Philippine Agricultural Trading
Corporation with legal interest at 12% from the time of the filing of the complaint in this
case. Once the judgment was issued, the sheriff found no property under the name of
Butuan Shipping Lines and/or petitioner Khe Hong Cheng to levy or garnish for the
satisfaction of the trial court's decision. When the sheriff, accompanied by counsel of
respondent Philam, went to Butuan City on January 17, 1997, to enforce the alias writ of
execution, they discovered that petitioner Khe Hong Cheng no longer had any property
and that he had conveyed the subject properties to his children.
On February 25, 1997, respondent Philam filed a complaint with the Regional Trial Court
of Makati City, Branch 147, for the rescission of the deeds of donation executed by
petitioner Khe Hong Cheng in favor of his children. Philam claimed that the deeds is to
fraud the creditors Petitioners argued that the ground for action was already prescribed
because the deed of donation was done on December 27, 1989 but the complaint filed only
on February 25, 1997, or more than four (4) years
RTC of Makati held in favor of the Philam side. It held that respondent Philam's complaint
had not yet been prescribed. According to the trial court, the prescriptive period began to
run only from December 29, 1993, the date of the decision of the trial court in Civil Case.
CA affirmed the trial court's decision in favor of respondent Philam. The CA declared that
the action to rescind the donations had not yet prescribed Citing Articles 1381 and 1383 of
the Civil Code, the CA basically ruled that the four year period to institute the action for
rescission began to run only in January 1997, and not when the decision in the civil case
became final and executory on December 29, 1993

Whether the Philam action of recission of the subject deeds of donation already prescribed
NO. WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit.
Article 1389 of the Civil Code simply provides that, “The action to claim rescission must be
commenced within four years.” Since this provision of law is silent as to when the
prescriptive period would commence, the general rule, i.e, from the moment the cause of
action accrues, therefore, applies. It is thus apparent that an action to rescind or an accion
pauliana must be of last resort, availed of only after all other legal remedies have been
exhausted and have been proven futile.
An accion pauliana accrues only when the creditor discovers that he has no other legal
remedy for the satisfaction of his claim against the debtor other than an accion pauliana.
The accion pauliana is an action of a last resort. For as long as the creditor still has a
remedy at law for the enforcement of his claim against the debtor, the creditor will not
have any cause of action against the creditor for rescission of the contracts entered into by
and between the debtor and another person or persons. Indeed, an accion pauliana
presupposes a judgment and the issuance by the trial court of a writ of execution for the
satisfaction of the judgment and the failure of the Sheriff to enforce and satisfy the
judgment of the court. It presupposes that the creditor has exhausted the property of the
debtor.
TITLE:
G.R. No. 134685, Siguan v. Lim, 318 SCRA 725 ( 1999)
PONENTE:
DAVIDE, JR., C.J.:
FACTS OF THE CASE:

On 25 and 26 August 1990 respondent Rosa Lim issued two Metro bank checks in the sums of
P300,000 and P241,668, respectively, payable to “cash” to satisfy her debts to petitioner Maria
Antonia Siguan. Upon presentment by petitioner with the drawee bank, the checks were
dishonored because the account was already “closed”. Demands to make good the checks
proved futile. A criminal case for violation of Batas Pambansa Blg. 22 was filed against Lim. On
29 December 1992, the RTC of Cebu City a quo convicted Lim as charged. Lim was also
convicted of estafa by the RTC of Quezon City filed Victoria Suarez. This was affirmed by CA.
However, the Supreme Court acquitted Lim but found her civilly liable in the amount of
P169,000.
On 2 July 1991, a Deed of Donation conveying parcels of land and purportedly executed by Lim
on 10 August 1989 in favor of her children, was registered with the Register of Deeds of Cebu.
New transfer certificates of title were thereafter issued in the names of the donees. On 31
December 1994, trial court ordered the rescission of the questioned deed of donation; declared
null and void the transfer certificates of title issued in the name of Lim’s children; ordered
Registered of Deeds of Cebu to cancel said titles and to reinstate the previous titles in the name
of Lim; directed the Lims to pay the petitioner jointly and severally, the sum of P10,000 moral
damages, P10,000 attorney’s fees, P5,000 as expenses of litigation.

On 20 February 1998, CA reversed RTC’s decision and dismissed petitioner’s accion
pauliana, because two requisites for said action were absent:
1. There must be a credit existing prior to the celebration of the contract; and
2. There must be a fraud, or the intent to commit the fraud.

Whether the Deed of Donation executed by respondent Rosa Lim in favor of her
children was made in fraud of petitioner and, therefore, rescissible.

‘’No‘’ the facts of the RTC and the CA regarding the execution of the Deed are
conflicting, therefore, the Court has jurisdiction to review errors of fact of the case.
For accion pauliana to prosper, the following must be present: plaintiff asking for
rescission has a credit prior to the alienation; debtor has made a subsequent contract
conveying a patrimonial benefit to a 3rd party; creditor has no other legal remedy to
satisfy his claim; act impugned is fraudulent;
As general rule, rescission requires the existence of creditors at the time of the alleged
fraud, and this must be proved as one of the bases of the judicial pronouncement setting
aside the contract. Without any prior existing debt, there can neither be no injury nor
fraud. Contracts entered in fraud may be rescinded only when the creditors cannot in any
manner collect the claims due them. Action for rescission is a subsidiary remedy only.
The petitioner was not able to prove that she had exhausted other legal means to obtain
reparation for the same.
Fourth requisite for accion pauliana not present either. Art. 759 of Civil Code states that
donation is always presumed to be in fraud of creditors when the donor did not reserve
sufficient property to pay his debts prior to donation. Petitioner’s alleged credit existed
only a year after the deed of donation was executed. She cannot be said to have been
prejudiced or defrauded by such alienation. In addition, when the Deed was executed,
Lim had properties such as farming lands, a house and lot, residential lots which were
sufficient to cover the debts.
In an attempt to support the case for rescission, petitioner brought up the criminal case
involving Victoria Suarez. However, Suarez, albeit a creditor prior to the alienation, is not
a party to the accion pauliana. Only the creditor who brought the action for rescission can
benefit from the rescission (Art. 1384, Civil Code). The revocation is only to the extent of
the plaintiff creditor’s unsatisfied credit; as to the excess, alienation is maintained.
As for the awards of moral damages, etc., the trial court made these awards without
stating any justification in their ratio decidendi.
TITLE:
G.R. No. L-47851, 03 October 1986 JUAN F. NAKPIL, ET AL. vs. THE COURT OF
APPEALS, ET AL.
PONENTE:
PARAS, J.
FACTS OF THE CASE:
Philippine Bar Association (PBA), decided to construct an office building on its lot
located at the comer of Aduana and Arzobispo Streets, Intramuros, Manila. The
construction was undertaken by the United Construction, Inc. (UCI) on an
"administration" basis, on the suggestion of Juan J. Carlos (Carlos), president and general
manager of the corporation. The proposal was approved and signed by its president
Roman Ozaeta (Ozaeta), a third-party defendant in this case. While the plans and
specifications for the building were prepared by Juan F. Nakpil & Sons. The building was
completed in June 1966.
However, on August 2, 1968 an unusually strong earthquake hit Manila, the

building sustained major damage. The front columns of the building buckled, causing the
building to tilt forward dangerously. The tenants vacated the building and as temporary
remedial measure, the building was shored up by UCI at the cost of P13,661.28.
Thereafter, the plaintiff filed an action for recovery of damages against UCI, its
President and General Manager, alleging that the collapse of the building was due to the
defects in the construction, the failure of the contractors to follow plans and specifications
and violations by the defendants of the terms of the contract.
In turn, defendants filed a third-party complaint against the architects, Juan F.

Nakpil & Sons alleging in that the collapse was due to the defects in the said plans and
specifications

The RTC ordered defendant United Construction Co., Inc. and third-party
defendants (except Roman Ozaeta) to pay the plaintiff, jointly and severally, the sum of
P989,335.68 with interest at the legal rate from November 29, 1968, the date of the filing of
the complaint until full payment; dismissed the complaint with respect to defendant Juan
J. Carlos; dismissed the third-party complaint and defendant's and third-party defendants'
counterclaims for lack of merit; and ordered defendant United Construction Co., Inc. and
third-party defendants (except Roman Ozaeta) to pay the costs in equal shares.
The Court of Appeals MODIFIED the judgment rendered by the RTC, it include an
award of P200,000.00 in favor of plaintiff-appellant Philippine Bar Association, with
interest at the legal rate from 29 November 1968 until full payment to be paid jointly and
severally by defendant United Construction Co., Inc. and third party defendants (except
Roman Ozaeta). In all other respects, the judgment dated September 21, 1971 as modified
in the December 8, 1971 Order of the lower court is hereby affirmed with COSTS to be paid
by the defendant and third party defendant (except Roman Ozaeta) in equal shares.

Whether an act of God-an unusually strong earthquake- which caused the failure of
the building, exempts from liability, parties who are otherwise liable because of their
negligence

NO. The parties are liable under Art. 1723 of the New Civil Code which provides:
Art. 1723. The engineer or architect who drew up the plans and specifications
for a building is liable for damages if within fifteen years from the
completion of the structure the same should collapse by reason of a defect in
those plans and specifications, or due to the defects in the ground. The
contractor is likewise responsible for the damage if the edifice fags within the
same period on account of defects in the construction or the use of materials
of inferior quality furnished by him, or due to any violation of the terms of
the contract. If the engineer or architect supervises the construction, he shall
be solidarily liable with the contractor.
Defendant United Construction Co., Inc. was found to have made substantial
deviations from the plans and specifications and to have failed to observe the
requisite workmanship in the construction as well as to exercise the requisite
degree of supervision; while the third-party defendants were found to have
inadequacies or defects in the plans and specifications prepared by them. As
correctly assessed by both courts, the defects in the construction and in the
plans and specifications were the proximate causes that rendered the PBA
building unable to withstand the earthquake of August 2, 1968. For this
reason the defendant and third-party defendants cannot claim exemption
from liability.
TITLE:
G.R. No. L-21749, September 29, 1967REPUBLIC OF THE PHILIPPINES, plaintiff-
appellee, vs. LUZON STEVEDORING CORPORATION, defendant-appellant.
Office of the Solicitor General for plaintiff-appellee.
H. San Luis and L.V. Simbulan for defendant-appellant.
PONENTE:
REYES, J.B.L., J.:
FACTS OF THE CASE:
A barge being towed by tugboats "Bangus" and "Barbero" all owned by Luzon
Stevedoring Corp. rammed one of the wooden piles of the Nagtahan Bailey Bridge due to
the swollen current of the Pasig after heavy rains days before. The Republic sued Luzon
Stevedoring for actual and consequential damages. Luzon Stevedoring claimed it had
exercised due diligence in the selection and supervision of its employees; that the damages
to the bridge were caused by force majeure; that plaintiff has no capacity to sue; and that the
Nagtahan bailey bridge is an obstruction to navigation.

CFI of Manila ruled in favor of the Republic, holding the defendant liable for PhP192,
561.72, the actual cost for the repair of said bridge. Defendant appealed directly to the
Court.
Whether the collision of appellant's barge with the supports or piers of the Nagtahan
bridge was in law caused by fortuitous event or force majeure?

No, there is a presumption of negligence on part of the employees of Luzon Stevedoring,
as the Nagtahan Bridge is stationary. For caso fortuito or force majeure (which in law are
identical in so far as they exempt an obligor from liability) by definition, are extraordinary
events not foreseeable or avoidable, "events that could not be foreseen, or which, though
foreseen, were inevitable" (Art. 1174, Civ. Code of the Philippines).
It is, therefore, not enough that the event should not have been foreseen or anticipated, as
is commonly believed, but it must be one impossible to foresee or to avoid. The mere
difficulty to foresee the happening is not impossibility to foresee the same. Luzon
Stevedoring knew the perils posed by the swollen stream and its swift current, and
voluntarily entered into a situation involving obvious danger; it therefore assured the risk,
and cannot shed responsibility merely because the precautions it adopted turned out to be
insufficient. It is thus liable for damages.
TITLE:
G.R. No. 113003 October 17, 1997, ALBERTA YOBIDO and CRESENCIO
YOBIDO, petitioners, vs. COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY
and JASMIN TUMBOY, respondents.
PONENTE:
ROMERO, J.:
FACTS OF THE CASE:

On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee
and Jasmin, bearded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao
City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus
exploded. The bus fell into a ravine around three (3) feet from the road and struck a tree.
The incident resulted in the death of 28-year-old Tito Tumboy and physical injuries to
other passengers. On November 21, 1988 Leni Tumboy and her children file a case for
damages against ALBERTA YOBIDO and CRESENCIO YOBIDO.
While the third party complaint against Philippine Phoenix Surety and Insurance, Inc. was
dismissed after knowing that it was not liable under their insurance contract. Plaintiff
asserted that there was a violation of contract of carriage failure to exercise the diligence
required of the carrier in transporting passengers. That the driver drove so fast despite the
road condition was bad because of the rain. Leni warned the driver not to drive so fast.The
respondents however argue that the accident was due to a fortuitous event. Considering
that the tire was new in fact it was of a good brand of tire which was a Goodyear tire, plus
the fact that it was 5 days old only. the bus was just running around 60 or 50 kph plus the
road was zigzag making it slow.
On August 29, 1991 ruled that the cause of the accident is tire blowout and take exception
to La Mallorca and Pampanga Bus Co. v. De Jesus that tire blowout is easily discoverable "a
mechanical defect of the conveyance or a fault in its equipment which was easily
discoverable if the bus had been subjected to a more thorough or rigid check-up” the lower
court ruled: a caso fortuito which is completely an extraordinary circumstance independent
of the will" of the defendants who should be relieved of "whatever liability the plaintiffs
may have suffered by reason of the explosion pursuant to Article 1174 of the Civil Code.
Unhappy with the decision of the lower court, respondents appealed before the CA. The
CA reversed the decision of the lower court citing as follows: “To Our mind, the explosion
of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory
defect, improper mounting, excessive tire pressure, is not an unavoidable event” CA cited
Necesito vs. Paras that have a good reputation with the manufacturer will not necessarily
relieve the carrier from liability. More or less the condition of the road and the driver
driving fast that due to the blow-out that precipitated the accident that caused the death of
Toto Tumboy may not still be prevented even if he exercised due care, but he was not
presented as a witness.
Lower court absolved the petitioner from liability that the cause of the death of Toto
Tumboy was caso fortuito taking exception to La Mallorca and Pampanga Bus Co. v. De
Jesus.
CA reversed the decision of the lower court finding that the petitioner failed to overcome
the burden on the defendant as enunciated in Necesito vs. Paras rejected the contention
that the cause of death of Toto Tumboy was caso fortuito. Motion for reconsideration also
denied.
Whether the petitioner should be exempted from liability since the cause of death of Toto
Tumbow was caso fortuito
No. In view of the foregoing, petitioners' contention that they should be exempt from
liability because the tire blowout was no more than a fortuitous event that could not have
been foreseen, must fail. Under the circumstances of this case, the explosion of the new tire
may not be considered a fortuitous event. There are human factors involved in the
situation. The fact that the tire was new did not imply that it was entirely free from
manufacturing defects or that it was properly mounted on the vehicle. Neither may the
fact that the tire bought and used in the vehicle is of a brand name noted for quality,
resulting in the conclusion that it could not explode within five days' use. Be that as it may,
it is settled that an accident caused either by defects in the automobile or through the
negligence of its driver is not a caso fortuito that would exempt the carrier from liability for
damages.
Characteristics of caso fortuito
In this case the Supreme Court give the characteristics of caso fortuito:
a. the cause of the unforeseen and unexpected occurrence, or the failure of the debtor
to comply with his obligations, must be independent of human will;
b. it must be impossible to foresee the event which constitutes the caso fortuito, or if it
can be foreseen, it must be impossible to avoid
c. the occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and
d. the obliger must be free from any participation in the aggravation of the injury
resulting to the creditor
The defendant must overthrow the presumption of negligence to prove that the incident
is caso fortuito
In common carrier in case of death and injury law presumes that the common carrier is
negligent, under: Art. 1756. In case of death or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in articles 1733 and 1755.
TITLE:
G.R. No. L-29640 June 10, 1971 GUILLERMO AUSTRIA, Petitioner,
vs. THE COURT OF APPEALS Second Division), PACIFICO ABAD and MARIA G.
ABAD, Respondents.
PONENTE:
REYES, J.B.L., J.:
FACTS OF THE CASE:
Maria G. Abad received from Guillermo Austria one (1) pendant with diamonds to be sold
on commission basis or to be returned on demand. Maria Abad while walking home, two
men snatched her purse containing jewelry and cash, and ran away. The incident became
the subject of a criminal case filed in CFI Rizal against certain persons. Austria, upon
Abad’s failure to return the jewelry or pay for its value notwithstanding demands, filed an
action against her and her husband for recovery of the pendant or of its value,
and damages. Abad raised the defense that the alleged robbery had extinguished their
obligation.
CFI Manila ordered Abads, jointly and severally, to pay Austria P4,500.00, with legal
interest thereon, plus P450.00 as reasonable attorneys' fees, and the costs. CA overruled the
finding of CFI.
Whether in a contract of agency (consignment of good for sole) it is necessary that there be
prior conviction for robbery before the loss of the article shall exempt the consignee from
liability for such loss
NO. To constitute a caso fortuito that would exempt a person from responsibility, it is
necessary that (1) the event must be independent of the human will (or rather, of the
debtor's or obligor's); (2) the occurrence must render it impossible for the debtor to fulfill
the obligation in a normal manner, and that (3) the obligor must be free of participation in,
or aggravation of, the injury to the creditor.
A fortuitous event, therefore, can be produced by nature, e.g., earthquakes, storms, floods,
etc., or by the act of man, such as war, attack by bandits, robbery, etc., provided that the
event has all the
characteristics enumerated above.
A1174’s emphasis of the provision is on the events, not on the agents or factors responsible
for them. To avail of the exemption granted in the law, it is not necessary that the persons
responsible for the occurrence should be found or punished;it would only be sufficient to
establish that the unforeseeable event, the robbery in this case, did take place without any
concurrent fault on the debtor's part, and this can be done by preponderant evidence. To
require in the present action for recovery the prior conviction of the culprits in the criminal
case, in order to establish the robbery as a fact, would be to demand proof beyond
reasonable doubt to prove a fact in a civil case.
The SC was not persuaded, however, that the same rule should obtain ten years
previously, in 1961, when the robbery in question did take place, for at that time
criminality had not by far reached the levels attained in the present day
TITLE:
G.R. No. L-47379, NATIONAL POWER CORPORATION, petitioner,
vs. HONORABLE COURT OF APPEALS and ENGINEERING CONSTRUCTION, INC.,
respondents.
PONENTE:
Gutierrez, Jr., J.
FACTS OF THE CASE:
The herein respondent, Engineering Construction, Inc executed a contract in Manila with
the NAWASA whereby the former undertook to furnish all tools, labor, equipment, and
materials, and to construct the proposed 2nd Ipo-Bicti Tunnel at Norzagaray Bulacan and
to complete said works within eight hundred calendar days from the date the Contractor
receives the format notice to proceed. On the completion of the first major phase of the
work a typhoon hit Central Luzon affecting the constructed first phase which the stockpile
of materials and supplies, structures and accessories either washed away, lost or
destroyed.
In the consolidated petitions, NPC assails the appellate court's decision as being erroneous
on the ground that the destruction and loss for the ECI's equipment and facilities were due
to force majeure. The rapid rise of the water level in the reservoir of its dam due to heavy
rains brought about by the typhoon was an extraordinary occurence that could not have
been foreseen, and thus, the subsequent release of water throught he spillway gates and its
resultant effect, if any, may rightly be attributed to force majure. ECI assails the deduction
of the consequential damages from 333,200 to 119, 000 on the grounds that the appellate
court has no basis in concluding ECI acquired a new Crawler-type crane and therefore, it
only can claim rentals for the temporary use of the leased crane for a period of one month.

RTC ruled that the evidence preponderantly establish the fact that due to negligent
manner which the spillway gates of the Dam were opened an extraordinary large volume
of water rushed out of the gates and hit the installations and construction works of ECI.
The appellate court sustained the findings of the RTC.
CA ruled that it cannot be pretended that there was no negligence or that the appellant
exercised extraordinary care in the opening of the spillway gates of the dam. Maintainers
of the dam knew very well that it was far more safe to open them gradually.

Whether tNPC is negligent on the opening the spillway gates of the Angat Dam.

SC affirmed the decision of the CA and ruled that even though the typhoon was an act of
God or what we may call force majeure, NPC cannot escape liability because its negligence
was the proximate cause of the loss and damage. The respondent CA did not err in
holding the NPC liable for damages, in consequential damages.
TITLE:
G.R. Nos. 81100-01 February 7, 1990, BACOLOD-MURCIA MILLING CO.,
INC., petitioner, vs.HON. COURT OF APPEALS AND ALONSO
GATUSLAO, respondents.
BACOLOD-MURCIA MILLING CO., INC., petitioner, vs.
HON. COURT OF APPEALS, ALONSO GATUSLAO, AGRO-INDUSTRIAL
DEVELOPMENT OF SILAY-SARAVIA (AIDSISA) AND BACOLOD-MURCIA
AGRICULTURAL COOPERATIVE MARKETING ASSOCIATION (BM-ACMA),
respondents.
Jalandoni, Herrera, Del Castillo & Associates for petitioner.
Tañada, Vico & Tan for respondent AIDSISA.
San Juan, Gonzalez, San Agustin & Sinense for respondents Alfonso Gatuslao and BM-
ACMA.
PONENTE:
Associate Justice Edgardo L. Paras
FACTS OF THE CASE:
The expiration of milling contracts between Bacolod-Murcia Milling Company (BMMC)

and the landowners caused the expiration of the grant of right of way. Thus, the BMMC
was unable to use its railroad facilities during the crop year 1968-1969 due to the closure in
1968 of the portion of the railway traversing the Hacienda Helvetia. Central was required
to remove the railway tracks in the hacienda. BMMC filed a complaint for legal easement
against the owners of the hacienda, before the CFI of Negros Occidental; however, the
outcome of the case was not favorable to the BMMC.
Among the adhered planters affected by such closure was ALONSO GATUSLAO who
filed a complaint on before the CFI of Negros Occidental against BMMC for breach of
contract, praying that BMMC be ordered to immediately send transportation facilities and
haul the already cut sugarcane to the mill site and principally praying after hearing, that
judgment be rendered declaring the rescission of the milling contract executed by BMMC
and GATUSLAO in 1957 for seventeen (17) years invoking as ground the failure and
inability of BMMC to comply with its specific obligation of providing the necessary
transportation facilities to haul the sugarcane of Gatuslao from the BMMC plantation, and
further prayed for the recovery of actual and compensatory damages as well as moral and
exemplary damages and attorney's fees. BMMC filed in the same court, a petition against
Alonso Gatuslao, et. al, seeking specific performance under the milling contract executed
on May 24, 1957 between BMMC and GATUSLAO praying that GATUSLAO be stopped
violating the contract by hiring at tremendous expense, private trucks as prime movers for
its trailers to be used for hauling of the canes, especially for those who applied for and
requested transportation facilities. The two cases were consolidated for joint trial before
Branch II of the CFI of Negros Occidental.
The CFI rendered judgment declaring the milling contract dated May 24, 1957 rescinded,
and ordered BMMC to pay GATUSLAO Php 2,625.00 with legal interest from the time of
the filing of the complaint by way of actual damages; Php 5,000.00 as attorney's fees and
the costs of the suit. BMMC appealed the case to respondent Court of Appeals which
affirmed in toto.
Whether private respondent GATUSLAO has the right to rescind the milling contract with
petitioner under article 1191 of the Civil Code
Yes. PREMISES CONSIDERED, the petition is hereby DENIED for lack of merit and the
decision of the Court of Appeals is hereby AFFIRMED in toto.
Ratio Decidendi
There is no question that the contract in question involves reciprocal obligations; as

such party is a debtor and creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be performed simultaneously so
that the performance of one is conditioned upon the simultaneous fulfillment of the other.
There appears to be no question that the means of transportation provided by

BMMC is very inadequate to answer the needs of Gatuslao. Undoubtedly, BMMC is guilty
of breach of the conditions of the milling contract and that Gatuslao is the injured party.
Under the same Article 1191 of the Civil Code, the injured party may choose between the
fulfillment and the rescission of the obligation, with the payment of damages in either case.
In fact, he may also seek rescission even after he had chosen fulfillment if the latter should
become impossible. Under the foregoing, Gatuslao has the right to rescind the milling
contract and neither the court a quo erred in decreeing neither the rescission claimed nor
the Court of Appeals in affirming the same. Conversely, BMMC cannot claim enforcement
of the contract. As ruled by this Court, by virtue of the violations of the terms of the
contract, the offending party has forfeited any right to its enforcement. Under the
circumstances, no evidence of bad faith on the part of private respondents could be found
much less any plausible reason to disturb the findings and conclusions of the trial court
and the Court of Appeal
TITLE:
G.R. No. 147324, May 25, 2004 Philippine Communications Satellite Corporation ,
petitioner, V. Globe Telecom, Inc., Respondents
PONENTE:
TINGA, J.
FACTS OF THE CASE:
Prior to the non-ratification by the Senate of the RP-US Bases agreement on 31 Dec.
1992 ,Philippine Communications Satellite Corporation(Philcomsat) and Globe Telecom,
Inc. (Globe) entered into an Agreement whereby Philcomsat obligated itself to establish ,
operate, and provide an earth station within Cubi Point for the exclusive use of the
USDCA. The term of the contract was for 60 months, or five years and in turn, Globe
Promised to pay Philcomsat monthly rentals for each leased circuit involved.
In a letter dated 06 Aug. 1992 Globe notified Philcomsat their intention to discontinue the
use of said earth station effective on 08 Nov 1992 due to the withdrawal of the US Military
Personnel from Subic Naval Base. Invoking Section 8 of their Agreement which states that
neither party shall be held liable to be in default if failure results directly or indirectly from
force majeure or fortuitous events. In Philcomsat’s reply they invoked Section 7 of their
agreement which states that should Globe decide to discontinue the use of the earth station
they shall serve a written notice to Philcomsat at least 60 days prior to the expected date of
termination and Globe shall continue to pay for the rentals of the T1 Circuits for the
remaining life of the agreement. Should Philcomsat make use or sell the earth station the
obligation of Globe to pay the rental for the remaining life of the agreement shall be at
such monthly rate as may be agreed upon by the parties.
Philcomsat sent a letter to Globe demanding payment amounting to USD 4,910,136.00 plus
interest and attorney’s fees however Globe refused to heed its demand. Prompting
Philcomsat to file a complaint against Globe at the RTC of Makati.

In its decision RTC ordered the Globe to pay USD 92,238.00 representing rentals for the
month of Dec. 1992 with interest at the legal rate of 12% per annum until the amount is
fully paid and PHP 300,000.00. Also ordering the Dismissal of defendants counterclaim for
lack of merit. Both parties appealed to the Court of Appeals
Philcomsat claiming that the RTC erred in (1) The non-ratification by the Senate of the said
Treaty constitutes force majeure which exempts globe from complying with its obligations
under the agreement; (2) Globe is not liable to pay the rentals for the remainder of the term
of the agreement; and (3) Globe is not liable to Philcomsat for exemplary damages. While
Globe claims that RTC erred in holding them liable for payment of rent of the earth station
for Dec. 1992 and of attorney’s fees.
Court of Appeals in its Decision dismissed Philcomsat’s appeal for lack of merit and
affirmed the RTC’s finding that certain events constituting force majeure under Sec 8 of the
agreement justified Globes non-payment of rentals. CA also ruled out that Globe is still
liable to pay rentals until Dec 1992 because the US military forces completely withdrew
only on 31 Dec 1992.

Whether the non-ratification of the said Treaty is constitute Force Majeure that would
exempt Globe for complying with its obligation to pay rentals under its Agreement with
Philcomsat

The Supreme Court held that the termination of said Treaty constitutes force majeure that
would exempt Globe from complying with said obligation to pay rentals to Philcomsat.
Invoking Art. 1174 of the Civil Code ‘’which exempts an obligor from liability on account
of fortuitous events or force majeure, refers not only to events that are unforeseeable, but
also to those which are foreseeable but inevitable.
Philcomsat and Globe agreed in Sec 8 of the agreement that the ff events shall be deemed
events constituting force majeure (1) any law, order, regulation, direction or request of the
Philippine Government.
Furthermore, the foregoing are either unforeseeable or foreseeable but beyond the control
of the parties. There is nothing in the enumeration that runs contrary to, or expands, the
concept of a fortuitous event under Art. 1174. However Art 1159 of the Civil Code also
provides that ‘’obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.’’ Courts cannot stipulate
for the parties nor amend their agreement where the same does not contravene law,
morals, good customs, public order or public policy, for to do so would be to alter the real
intent of the parties, and would run contrary to the function of the courts to give force and
effect thereto
TITLE:
G.R. No. 131784, September 16, 1999, Felix I . Gonzales, petitioner, vs The Heirs of
Thomas and Paula Cruz, herein represented by Elena C. Talens, respondents.
PONENTE:
PANGANIBAN, J.:
FACTS OF THE CASE:

Paula Cruz together with the heirs of Thomas Cruz, entered into a Contract of
Lease/Purchase, with the defendant Felix Gonzales. Gonzales paid the annual rental on the
half-portion of the property and thereafter took possession of the property. He did not
exercise his option to purchase the property immediately after the expiration of the one
year lease. He remained in possession of the property without paying the purchase price
and any rentals. A letter was sent by one of the plaintiffs to Gonzales informing him of
their decision to rescind the contract due to a breach committed by Gonzales. It also serves
as a demand to vacate the premises within 10 days upon receipt of the letter. Gonzales
refused to vacate the property and continued the possession. The plaintiffs filed a
complaint for recovery of possession of the property. Gonzales filed his answer, praying
for the dismissal of the complaint.

The trial court rendered a decision in favor of Gonzales. It held that the failure of
the plaintiffs to secure the Transfer Certificate of Title does not entitle them to rescind the
contract. The court of appeals reversed the decision of the RTC.

Whether the express stipulation of the contract, which is to secure the Transfer
Certificate of Title, a condition precedent before Gonzales could exercise his option to buy
the property

Yes, it is a condition precedent because the ninth clause required respondents to
obtain a separate and distinct TCT in their names and not in the name of Gonzales. It
logically follows that such undertaking was a condition precedent to the latter’s obligation
to purchase and pay for the land. Put differently, petitioner’s obligation to purchase the
land is a conditional one and is governed by Article 1181 of the Civil Code. The petition is
granted and the appealed decision is reversed and set aside. The decision of the trial court
is reinstated, but the award of moral damages and attorney’s fees is deleted for lack of
basis.
TITLE:
G.R. No. 103577 October 7, 1996, ROMULO A. CORONEL, ALARICO A. CORONEL,

ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of
Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A.
ALMONTE, and CATALINA BALAIS MABANAG vs. THE COURT OF APPEALS,
CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-in-fact.
PONENTE:
MELO, J.
FACTS OF THE CASE:

On 19 January 1985, petitioners executed a “Receipt of Down Payment” of P50,000
in favor of plaintiff Ramona Alcaraz, binding themselves to transfer the ownership of the
land in their name from their deceased father, after which the balance of P1,190,000 shall
be paid in full by Alcaraz. On 06 February 1985, the property was transferred to
petitioners. On 18 February 1985, petitioners sold the property to Catalina Mabanag. The
contract entered into with Ramona was cancelled and rescinded by the petitioners. For this
reason, Concepcion, Ramona’s mother, and Ramona filed an action for specific
performance.

RTC Quezon City rendered judgment for specific performance ordering defendant
to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land
embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582)
of the Registry of Deeds for Quezon City, together with all the improvements existing
thereon free from all liens and encumbrances, and once accomplished, to immediately
deliver the said document of sale to plaintiffs and upon receipt thereof, the said document
of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants
the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer
Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of
intervenor is hereby canceled and declared to be without force and effect. Defendants and
intervenor and all other persons claiming under them are hereby ordered to vacate the
subject property and deliver possession thereof to plaintiffs. Plaintiffs' claim for damages
and attorney's fees, as well as the counterclaims of defendants and intervenors are hereby
dismissed.
The Court of Appeals rendered its decision fully agreeing with the trial court.
Whether the “Receipt of Down Payment” is a perfected contract of sale
YES. The Supreme Court held that when the "Receipt of Down Payment" is
considered in its entirety, it becomes more manifest that there was a clear intent on the
part of petitioners to transfer title to the buyer, but since the transfer certificate of title was
still in the name of petitioner's father, they could not fully effect such transfer although the
buyer was then willing and able to immediately pay the purchase price. Therefore,
petitioners-sellers undertook upon receipt of the down payment from private respondent
Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from
that of their father, after which, they promised to present said title, now in their names, to
the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay
the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of ownership or title to the subject parcel of land.
Furthermore, the circumstance which prevented the parties from entering into an absolute
contract of sale pertained to the sellers themselves (the certificate of title was not in their
names) and not the full payment of the purchase price. Under the established facts and
circumstances of the case, the Court may safely presume that, had the certificate of title
been in the names of petitioners-sellers at that time, there would have been no reason why
an absolute contract of sale could not have been executed and consummated right there
and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely
promise to sell the properly to private respondent upon the fulfillment of the suspensive
condition. On the contrary, having already agreed to sell the subject property, they
undertook to have the certificate of title changed to their names and immediately
thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after
compliance by the buyer with certain terms and conditions, promised to sell the property
to the latter. What may be perceived from the respective undertakings of the parties to the
contract is that petitioners had already agreed to sell the house and lot they inherited from
their father, completely willing to transfer full ownership of the subject house and lot to
the buyer if the documents were then in order.
TITLE:
G.R. No. L-24190, July 13, 1926, Parks v. Province of Tarlac, 49 Phil 142
PONENTE:
AVANCEÑA, C. J.
FACTS OF THE CASE:
On October 18, 1910, Concepcion Cirer and James Hill donated a parcel of land to the
municipality of Tarlac, Province of Tarlac, under certain conditions which are specified in
the public document of donation. The condition states that a public school be erected, and
a public park made of the donated land, work on the same to commence within six months
from the date of the ratification of the donation by the parties. But on January 15, 1921,
they (donors) sold this parcel to the plaintiff, George L. Parks. On August 24, 1923, the
municipality of Tarlac transferred the parcel to the Province of Tarlac which applied the
registration and corresponding certificate of title in its name.
Plaintiff, George L. Parks, alleged that the conditions of the donation had not been
complied with and invoking the sale of this parcel of land in his favor, brought this action
against the Province of Tarlac and prayed that he be declared the absolute owner entitled
to the possession of this parcel, that the transfer of the same by the municipality of Tarlac
to the Province of Tarlac be annulled, and the transfer certificate issued to the Province of
Tarlac cancelled.

The lower court dismissed the complaint stating, inter alia, that the plaintiff has no right of
action since the sale of the parcel made by Concepcion Cirer and James Hill in the
plaintiff’s favor on January 15, 1921 cannot have any effect. This parcel, having been
donated by Concepcion Cirer and James Hill to the municipality of Tarlac and was not
revoked by Cirer and Hill prior to the sale. Also, it was necessary, in order to consider it
revoked, either that the revocation had been consented to by the donee (the municipality
of Tarlac) or that it had been judicially decreed. This was neither done by Cirer and Hill.

Whether the condition of the donation is a condition precedent, thus, never making the
donation effective after not being complied with by the donee
No. The Supreme Court finds no merit in this contention. The appellant refers to the
condition imposed that one of the parcels donated was to be use absolutely and
exclusively for the erection of a central school and the other for a public park, the work to
commence in both cases within the period of six months from the date of the ratification by
the parties of the document evidencing the donation. It is true that this condition has not
been complied with. The allegation, however, that it is a condition precedent is erroneous.
The characteristic of a condition precedent is that the acquisition of the right is not effected
while said condition is not complied with or is not deemed complied with. Meanwhile
nothing is acquired and there is only an expectancy of right. Consequently, when a
condition is imposed, the compliance of which cannot be effected except when the right is
deemed acquired, such condition cannot be a condition precedent. In the present case the
condition that a public school be erected and a public park made of the donated land,
work on the same to commence within six months from the date of the ratification of the
donation by the parties, could not be complied with except after giving effect to the
donation. The donee could not do any work on the donated land if the donation had not
really been effected, because it would be an invasion of another's title, for the land would
have continued to belong to the donor so long as the condition imposed was not complied
with.
TITLE:
G.R. No. 112127 July 17, 1995 CENTRAL PHILIPPINE UNIVERSITY, petitioner, vs.
COURT OF APPEALS, REMEDIOS FRANCO, FRANCISCO N. LOPEZ, CECILIA P.
VDA. DE LOPEZ, REDAN LOPEZ AND REMARENE LOPEZ, respondents.
PONENTE:
BELLOSILLO, J
FACTS OF THE CASE:

In 1939, late Don Ramon Lopez, Sr. executed a deed of donation in favor of Central
Philippines University (CPU) of a parcel of land with the following conditions:
(1) The land shall be exclusively use for the establishment of and use of a medical college.
(2) CPU shall not sell, transfer or convey to any third party or any way the land. (3)The
said land shall be called “Ramon Lopez Campus”
However in 1989, the respondents who are heirs of Don Ramon filed an action for
annulment of donation, re-conveyance and damages against CPU alleging that since 1939
until the filing of the action, it has not complied with the conditions of the donation and
that the University negotiated with National Housing Authority (NHA) to exchange the
donated land with another land.

RTC held that petitioner failed to comply with the conditions of the donation declaring
such null and void, directed petitioner to execute a deed of reconveyance of the property
in favor of the private respondents. Appellate court reversed RTC decision and ordered
the same to determine the time within which petitioner should comply with the action
annotated in the title certificate.

Whether the petitioner failed to comply the resolutory conditions annotated at the back of
petitioner’s certificate of title without a fixed period when to comply with such conditions

YES. Records are clear and facts are undisputed that since the execution of the deed of
donation up to the time of filing of the instant action, petitioner has failed to comply with
its obligation as donee.
Under Art. 1181, on conditional obligations, the acquisition of rights as well the
extinguishment or loss of those already acquired shall depend upon the happening of the
event which constitutes the condition. When a person donates land to another on the
condition that the latter would build upon the land a school is such a resolutory one. The
donation had to be valid before the fulfillment of the condition. If there was no fulfillment
with the condition such as what obtains in the instant case, the donation may be revoked &
all rights which the donee may have acquired shall be deemed lost & extinguished.
Petitioner has slept on its obligation for an unreasonable length of time. Hence, it is only
just and equitable now to declare the subject donation already ineffective and, for all
purposes, revoked so that petitioner as donee should now return the donated property to
the heirs of the donor, private respondents herein, by means of reconveyance.
TITLE:
G.R. No. 126444 December 4, 1998, ALFONSO QUIJADA, CRESENTE QUIJADA,

REYNELDA QUIJADA, DEMETRIO QUIJADA, ELIUTERIA QUIJADA, EULALIO
QUIJADA, and WARLITO QUIJADA, petitioners,
vs. COURT OF APPEALS, REGALADO MONDEJAR, RODULFO GOLORAN,
ALBERTO ASIS, SEGUNDINO RAS, ERNESTO GOLORAN, CELSO ABISO,
FERNANDO BAUTISTA, ANTONIO MACASERO, and NESTOR
MAGUINSAY, respondents.
PONENTE:
MARTINEZ, J.:
FACTS OF THE CASE:
Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda,
de Quijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from the
latter the two-hectare parcel of land subject of the case, situated in the barrio of San
Agustin, Talacogon, Agusan del Sur. April 5,1956, Trininad along with her siblings,
executed a Deed Of Donation in favor of the Municipality of Talacogon, with condition
that the land shall be used exclusively as part of the campus of the proposed Provincial
High School in Talacogon.
Despite the Donation, Trinidad sold 1 hectare to defendant-appellant (respondent)

Regalado Mondejar without the benefit of a written deed of sale and evidenced solely by
receipts of payment. In 1987, the proposed provincial high school having failed to
materialize, the Sangguniang Bayan of the municipality of Talacogon enacted a resolution
reverting the two (2) hectares of land donated back to the donors.
July 5, 1988. Petitioners (heirs) filed against the respondents stating that their late
mother did sell the property. If it was true that she (Trinidad) sold the property, it would
be null and void since it was already donated to the Municipality thus the ownership is
with the Municipality.
Defendants-appellants (respondents), on the other hand, in their answer claimed

that the land in dispute was sold to Regalado Mondejar, the one (1) hectare on July 29,
1962, and the remaining one (1) hectare on installment basis until fully paid. As affirmative
and/or special defense, defendants-appellants (respondents) alleged that plaintiffs action is
barred by laches or has prescribed.
The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners):

firstly because "Trinidad Quijada had no legal title or right to sell the land to defendant
Mondejar in 1962, 1966, 1967 and 1968, the same not being hers to dispose of because
ownership belongs to the Municipality of Talacogon (Decision, p. 4; Rollo, p. 39) and,
secondly, that the deed of sale executed by Trinidad Quijada in favor of Mondejar did not
carry with it the conformity and acquiescence of her children, more so that she was already
63 years old at the time, and a widow (Decision, p. 6; Rollo, p. 41)
On appeal, the Court of Appeals reversed and set aside the judgment a quo3 ruling
that the sale made by Trinidad Quijada to respondent Mondejar was valid as the former
retained an inchoate interest on the lots by virtue of the automatic reversion clause in the
deed of donation.
Whether the sale is valid
RULING AND RATIO DECIDENDI OF THE COURT
Yes. When the property was donated to the Municipality, the ownership was
transferred to them but the condition that the subject should be used exclusively as part of
the campus of the proposed Provincial High School in Talacogon is a Resolutory
Condition which was not fulfilled. Though it was not stated in the condition on how long
the condition was, it was evident that the Municipality had intended to build the school.
The Municipality still gave back the property to the donors thus the ownership was
transferred. Making the sale valid since ownership was returned.
WHEREFORE, by virtue of the foregoing, the assailed decision of the Court of

Appeals is AFFIRMED.
TITLE:
G.R. No. 87047 October 31, 1990 FRANCISCO LAO LIM, petitioner, vs. COURT OF
APPEALS and BENITO VILLAVICENCIO DY, respondents.
PONENTE:
REGALADO, J.:
FACTS OF THE CASE:
Benito Dy entered a contract of lease with Francisco Lim for a period of three years from
1976 to 1979. After the term expired, private respondent refused to vacate the premises,
hence, petitioner filed an ejectment suit but it was terminated by a compromise agreement
between the two. The agreement said that the lease will continue from 1979 to 1982 then
from 1982 to 1985. However, on August 5, 1985, respondent informed petitioner in writing
of his intention to renew the contract of lease for another term, commencing November,
1985 to October, 1988. In reply, petitioner advised the private respondent that he did not
agree to a renewal of the lease contract upon its expiration in October, 1985. On January 15,
1986, because of private respondent's refusal to vacate the premises, petitioner filed
another ejectment suit in MTC of Manila
MTC of Manila dismissed the complaint on the grounds that (1) the lease contract has not
expired; being a continuous one the period whereof depended upon the lessee's need for
the premises and his ability to pay the rents; and (2) the compromise agreement constitutes
res judicata. RTC of Manila held the decision of the MTC. Petitioner appeal to the Court of
Appeals and CA held the RTC decision stating that the stipulation in the compromise
agreement allows the respondent to stay on the premises as long as he needs it and can
pay rents is valid, being a resolutory condition and, therefore, beyond the ambit of Article
1308 of the Civil Code.
Whether the stipulation of the respondent to stay on the premises as long as he needs it
and can pay rents is a resolutory condition
WHEREFORE, the decision of the respondent Court of Appeals is REVERSED and SET
ASIDE. Private respondent is hereby ordered to immediately vacate and return the
possession of the leased premises subject of the present action to petitioner and to pay the
monthly rentals due thereon in accordance with the compromise agreement until he shall
have actually vacated the same. This judgment is immediately executory.
In accordance to the issue, since the stipulation “for as long as the defendant needed the
premises and can meet and pay said increases” is a purely potestative condition because it
leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the
lessee. It is likewise a suspensive condition because the renewal of the lease, which gives
rise to a new lease, depends upon said condition. It should be noted that a renewal
constitutes a new contract of lease although with the same terms and conditions as those in
the expired lease. It should also not be overlooked that said condition is not resolutory in
nature because it is not a condition that terminates the lease contract. The lease contract is
for a definite period of three (3) years upon the expiration of which the lease automatically
terminates. The continuance, effectivity and fulfillment of a contract of lease cannot be
made to depend exclusively upon the free and uncontrolled choice of the lessee between
continuing the payment of the rentals or not, completely depriving the owner of any say in
the matter. Mutuality does not obtain in such a contract of lease and no equality exists
between the lessor and the lessee since the life of the contract is dictated solely by the
lessee.
TITLE:
G.R. No. 107112 February 24, 1994NAGA TELEPHONE CO., INC. (NATELCO)
ANDLUCIANO M. MAGGAY, petitioners, vs.
THE COURT OF APPEALS AND CAMARINES SURII ELECTRIC COOPERATIVE,
INC. (CASURECO II)
PONENTE:
NOCON, J.:
FACTS OF THE CASE:
Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering

local as well as long distance service in Naga City while private respondent Camarines Sur
II Electric Cooperative, Inc. (CASURECO II) is a private corporation established for the
purpose of operating an electric power service in the same city. On November 1, 1977, the
parties entered into a contract for the use by petitioners in the operation of its telephone
service the electric light posts of private respondent in Naga City. In consideration
therefor, petitioners agreed to install, free of charge, ten (10) telephone connections for the
use by private respondent
After the contract had been enforced for over ten (10) years, private respondent filed
on January 2, 1989 with the Regional Trial Court of Naga City against petitioners for
reformation of the contract with damages, on the ground that it is too one-sided in favor of
petitioners; that it is not in conformity with the guidelines of the National Electrification
Administration (NEA) which direct that the reasonable compensation for the use of the
posts is P10.00 per post, per month; that after eleven (11) years of petitioners' use of the
posts, the telephone cables strung by them thereon have become much heavier with the
increase in the volume of their subscribers, worsened by the fact that their linemen bore
holes through the posts at which points those posts were broken during typhoons.
Plaintiff's claim for attorney's fees and expenses of litigation and defendants' counterclaim
are both hereby ordered dismissed by the trial court. Without pronouncement as to costs.
CA affirmed the decision of the trial court, but based on different grounds to wit: (1) that
Article 1267 of the New Civil Code is applicable and (2) that the contract was subject to a
potestative condition which rendered said condition void. The motion for reconsideration
was denied in the resolution dated September 10, 1992.Hence, the present petition.
ISSUES BROUGHT TO SUPREME COURT:
Whether respondent court erred in making a contract for the parties by invoking Article
1267 of the New Civil Code
Article 1267 speaks of "service" which has become so difficult. Taking into consideration
the rationale behind this provision, the term "service" should be understood as referring to
the "performance" of the obligation. In the present case, the obligation of private
respondent consists in allowing petitioners to use its posts in Naga City, which is the
service contemplated in said article. Furthermore, a bare reading of this article reveals that
it is not a requirement thereunder that the contract be for future service with future
unusual change. According to Senator Arturo M. Tolentino, 10 Article 1267 states in our
law the doctrine of unforseen events. This is said to be based on the discredited theory of
rebus sic stantibus in public international law; under this theory, the parties stipulate in
the light of certain prevailing conditions, and once these conditions cease to exist the
contract also ceases to exist. Considering practical needs and the demands of equity and
good faith, the disappearance of the basis of a contract gives rise to a right to relief in favor
of the party prejudiced.
TITLE:
G.R. No. 4437, September 9, 1909, TOMAS OSMEÑA, plaintiff-appellee,
vs. CENONA RAMA, defendant-appellant.
Filemon Sotto for appellant.
J. H. Junquera for appellee.
PONENTE:
JOHNSON, J.
FACTS OF THE CASE:

Defendant Cenona Rama (Rama) entered into two (2) loan contracts with Victoriano
Osmeña (Victoriano): first, for P200.00 to be paid in sugar in the month of January or
February with interest rate of half cuartillo per month until fully paid; and second, for
P70.00 (50 for Don Evaristo Peñaristo, 20 for Rama) to be paid in sugar following the
conditions set in the first contract.
Victoriano died leaving the contracts as part of his estate. It became the property of
Agustina Rafols who ceded her rights and interest in said contracts to Tomas Osmeña
(plaintiff). The plaintiff presented the contracts to the defendant who acknowledged the
same and executed another contract stating that she promised to pay her indebtedness if
her house in Pagina will be sold.
The defendant defaulted in her payment which led the plaintiff to file an action in
the Court of First Instance.

The Court of First Instance rendered a judgment in favor of the plaintiff and against
the defendant for the sum of P200 with interest at the rate of 18 ¾ per cent per annum,
from the 15th day of November 1890, and for the sum of P20 with interest at the rate of 18
¾ per cent per annum, from the 27th day of October 1891, until the said sums were paid.
Defendants appealed; hence, this petition.

Whether the proof presented in the lower court are sufficient to support its findings

YES. The defendant in her acknowledgment imposed the condition that she would
pay the obligation if she sold her house. If that statement found in her acknowledgment of
the indebtedness should be regarded as a condition, it was a condition which depended
upon her exclusive will, and is therefore, void. (Art. 1115, Civil Code). The
acknowledgment, therefore, was an absolute acknowledgment of the obligation and was
sufficient to prevent the statute of limitation from barring the action upon the original
contract.
TITLE:
G.R. No. L-5267, October 27, 1953, LUZ HERMOSA, as administratrix of the Intestate
Estate of Fernando Hermosa, Sr., and FERNANDO HERMOSA, JR., petitioners,
VS. EPIFANIO M. LONGARA, respondent.
PONENTE:
LABRADOR, J.
FACTS OF THE CASE:

Respondent Epifanio M. Longara filed a claim against the estate of Fernando
Hermosa, Sr. The claims are of three kinds, namely, P2,341.41 representing credit
advances made to the intestate from 1932 to 1944, P12,924.12 made to his son Francisco
Hermosa, and P3,772 made to this grandson, Fernando Hermosa, Jr. from 1945 to 1947,
after the death of the intestate, which occured in December, 1944. Fernando Hermosa, Sr.
was able to obtain these credit advances on the condition that payment should be made as
soon as he received funds derived from the sale of his property in Spain.

The Court of Appeals held that payment of the advances did not become due until
the administratrix received the sum of P20,000.00 from the buyer of the property.

Whether the obligation contracted by the intestate was subject to a condition on his
sole will as debtor, and is therefore, null and void.

No. The condition does not depend exclusively upon the will of the debtor, but also
upon other circumstances beyond his power or control. If the condition were “if he
decides to sell his house,” or “if he likes to pay the sums advanced,” or any other condition
of similar import implying that upon him (the debtor) alone payment would depend, the
condition would depend, the condition would be “potestative”, dependent upon his will
or discretion. In the case at bar, the condition of the obligation was not a purely
potestative one, but a mixed one, depending partly upon the will of the obligor and partly
upon chance, i.e. the presence of a buyer of the property for the price and under the
conditions desired by the obligor. The obligation is clearly governed by the second
sentence of article 1115 of the old Civil Code (8 Manresa, 126). The condition is, besides, a
suspensive condition, upon the happening of which the obligation to pay is made
dependent. And upon the happening of the condition, the debt became immediately due
and demandable. (Article 1114, old Civil Code, 8 Manresa, 119)
TITLE:
Taylor v. Uy Tieng Piao, 43 Phil 873 (1922)
PONENTE:
STREET, J.:
FACTS OF THE CASE:
Uy Tieng, defendant, employed Taylor, plaintiff, for two years as the oil mill
superintendent. Written in the contract that the machinery to be installed in the factory fail
and to not arrive in Manila within 6 months, this contract can be cancelled by the
defendant. The machinery failed to arrive in Manila within 6 months. Because the
defendant saw that the oil business no longer promised large returns. After 6 months the
defendant decided to revoke the contract and notified the plaintiff of his discharge.
Plaintiff sued the defendant for the commission he would have received under the
contract. The plaintiff also stated that the defendants voluntarily prevented the arrival of
the said agreement, and under article 1186 of the Civil Code, the condition should be
considered fulfilled.
The Court of First Instance of the city of Manila, in a case where the court awarded to the
plaintiff the sum of P300, as damages for breach of contract. The judgment having been
heretofore affirmed by us in a brief opinion
Whether the defendant is liable for the salary the plaintiff lost under the contract

Court of First Instance committed no error in rejecting the plaintiff's claim in so far as
damages are sought for the period subsequent to the expiration of the first six months, but
in assessing the damages due for the six-month period, the trial judge evidently
overlooked the item of P60, specified in the plaintiff's fourth assignment of error, which
represents commutation of house rent for the month of June, 1919. This amount the
plaintiff is clearly entitled to recover, in addition to the P300 awarded in the court below.
Uy Tieng Piao, who is sued as a partner with Tan Liuan, appealed from the judgment
holding him liable as a member of the firm of Tan Liuan and Co.; and it is insisted in his
behalf that he was not bound by the act of Tan Liuan as manager of Tan Liuan and Co. in
employing the plaintiff. Upon this we will merely say that the conclusion stated by the trial
court in the next to the last paragraph of the decision with respect to the liability of this
appellant in our opinion is in conformity with the law and facts.
TITLE:
G.R. No. L-16570, Smith Bell v. Sotelo Matti, 44 Phil 875 (1922)
PONENTE:
Romualdez, J.
FACTS OF THE CASE:

On August 1918, plaintiff, Smith Bell and defendant, Mr. Vicente Sotello, entered
into an agreement for the delivery of 2 steel tanks which shall be shipped from New York
to Manila within 2-4 months with the stipulation “approximate delivery within 90 days-
not guaranteed.
Several deliveries were affected: The tanks arrived on April 1919; expellers on on
October 1918; and motors on February 27, 1918. The plaintiff informed the defendant on
the arrival of goods, but the latter refused to accept. With this, the plaintiff filed a suit
against the defendant for not receiving the same.

The lower court absolved the plaintiff and ordered the defendant to accept the same which
now became the subject of appeal by both parties.

Whether the plaintiff fulfilled in due time its obligation to bring the goods in Manila

No. It did not incur delay. From the record it appears that these contracts were executed at
the time of the world war when there existed connection with the tanks and "Priority
Certificate, subject to the United -States Government requirements," with respect to the
motors. At the time of the execution of the contracts, the parties were not unmindful of the
contingency of the United States Government not allowing the export of the goods, nor of
the fact that the other foreseen circumstances therein stated might prevent it.
Considering these contracts in the light of the civil law, we cannot but conclude that
the term which the parties attempted to fix is so uncertain that one cannot tell just whether,
as a matter of fact, those articles could be brought to Manila or not. If that is the case, as we
think it is, the obligation must be regarded as conditional.
When the delivery was subject to a condition the fulfillment of which depended not
only upon the effort of the herein plaintiff, but upon the will of third persons who could in
no way be compelled to fulfill the condition. In cases like this, which are not expressly
provided for, but impliedly covered, by the Civil Code, the obligor will be deemed to have
sufficiently performed his part of the obligation, if he has done all that was in his power,
even if the condition has not been fulfilled in reality.
In connection with this obligation to deliver, occurring in a contract of sale like

those in question, the rule in North America is that when the time of delivery is not fixed
in the contract, time is regarded unessential.
When the contract provides for delivery 'as soon as possible' the seller is entitled to
a reasonable time, in view of all the circumstances, such as the necessities of manufacture,
or of putting the goods in condition for delivery. The term does not mean immediately or
that the seller must stop all his other work and devote himself to that particular order. But
the seller must nevertheless act with all reasonable diligence or without unreasonable
delay. It has been held that a requirement that the shipment of goods should be the
'earliest possible' must be construed as meaning that the goods should be sent as soon as
the seller could possibly send them, and that it signified rather more than that the goods
should be sent within a reasonable time.
"The question as to what is a reasonable time for the delivery of the goods by the
seller is to be determined by the circumstances attending the particular transaction, such as
the character of the goods, and the purpose for which they are intended, the ability of the
seller to produce the goods if they are to be manufactured, the facilities available for
transportation, and the distance the goods must be carried, and the usual course of
business in the particular trade." (35 Cyc., 181-184.)
The record shows, as we have stated, that the plaintiff did all within its power to
have the machinery arrive at Manila as soon as possible, and immediately upon its arrival
it notified the purchaser of the fact and offered to deliver it to him. Taking these
circumstances into account, we hold that the said machinery was brought to Manila by the
plaintiff within a reasonable time.
TITLE:
G.R No 107207, November 23, 1995 VIRGILIO R. ROMERO, Petitioner
vs. HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG,
Respondents
PONENTE:
VITUG, J.:
FACTS OF THE CASE:
Private respondent, was engaged in the business of production, manufacture and

exportation of perlite filter aids, permalite insulation and processed perlite ore, entered
into a “Conditional Deed of Sale” with petitioner over a parcel of land in Paranaque, the
latter advancing P50,000 for the eviction of squatters therein. An ejectment suit was then
filed by the private respondent against the squatters. Although successful, private
respondent sought the return of the downpayment she received because “she could not get
rid of the squatters” on the lot. She opted to rescind the sale in view of her failure to get rid
of the squatters.
The lower court held that Ongsiong (D) had no right to rescind the contract since it was
she who "violated her obligation to eject the squatters from the subject property"and that
Romero (P), being the injured party, was the party who could, under Article 1191 of the
Civil Code, rescind the agreement. The court further ruled that the provision calling for the
reimbursement of the downpayment amounted to a "penalty clause".But the decision was
reversed on appeal where the court decided that the agreement was a contract with a
resolutory condition

May the vendor demand the rescission of a contract for the sale of a parcel of land for a
cause traceable to his/her own failure?
No. Ongsiong's (D) action for rescission is not warranted because she is not the injured
party. The right of resolution of a party to an obligation under Article 1191 of the Civil
Code is predicated on a breach of faith by the other party that violates the reciprocity
between them. It is Ongsiong (D) who has failed in her obligation under the contract.
A perfected contract of sale may either be absolute or conditional depending on whether

the agreement is devoid of, or subject to, any condition imposed on the passing of title of
the thing to be conveyed or on the obligation of a party thereto. When ownership is
retained until the fulfillment of a positive condition the breach of the condition will simply
prevent the duty to convey title from acquiring an obligatory force. If the condition is
imposed on an obligation of a party which is not complied with, the other party may either
refuse to proceed or waive said
condition (Article 1545, Civil Code). Where, of course, the condition is imposed upon the
perfection of the contract itself, the failure of such condition would prevent the juridical
relation itself from coming into existence.
The term "condition" in a perfected contract of sale pertains to the compliance to a

prestation by one party and upon fulfillment, the demand of the reciprocal prestation by
the other party. The reciprocal obligations referred to would normally be, in the case of
Romero (P), the payment of the agreed purchase price and, in the case of the Ongsiong (D),
the fulfillment of certain express warranties(which, in this case, is the timely eviction of the
squatters on the property).
It is futile to challenge the agreement here as not being a duly perfected contract. A sale is
at once perfected when a person (the seller) obligates himself, for a price certain, to deliver
and to transfer ownership of a specified thing or right to another (the buyer) over which
the latter agrees.
TITLE:
G.R. No. 77425, THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, THE ROMAN
CATHOLIC BISHOP OF IMUS, and the SPOUSES FLORENCIO IGNAO and
SOLEDAD C. IGNAO, petitioners,
vs. HON. COURT OF APPEALS, THE ESTATE OF DECEASED SPOUSES EUSEBIO
DE CASTRO and MARTINA RIETA, represented by MARINA RIETA GRANADOS
and THERESA RIETA TOLENTINO, respondents.
PONENTE:
Regaaldo, J.
FACTS OF THE CASE:

The herein respondents, spouses Eusebio de Castro and Martina Rieta, now both deceased,
executed a deed of donation in favor of therein defendant Roman Catholic Archbishop of
Manila covering a parcel of land (Lot No. 626, Cadastral Survey of Kawit), located at
Kawit, Cavite, containing an area of 964 square meters, more or less. The deed of donation
allegedly provides that the donee shall not dispose or sell the property within a period of
one hundred (100) years from the execution of the deed of donation, otherwise a violation
of such condition would render ipso facto null and void the deed of donation and the
property would revert to the estate of the donors. However, failed to complied with and
subsequently transferred through a deed of absolute sale of the property subhect of the
donation in favor of the herein petitioners.
The private respondents then filed a complaint for nullification of deed of donation,
rescission of contract and reconveyance of real property with damages against the herein
petitioners which the latter consequently filed a motion to dismiss based on the grounds
that the (1) respondents have no legal capacity to sue; (2) complaint states no cause of
action; and (3) that the cause of action has prescribed. Roman Catholic added a ground
that he is not a real party in interest thus no cause of action against him.
It is the contention of petitioners that the cause of action of herein private respondents has
already prescribed, invoking Article 764 of the Civil Code which provides that "(t)he
donation shall be revoked at the instance of the donor, when the donee fails to comply
with any of the conditions which the former imposed upon the latter," and that "(t)his
action shall prescribe after four years from the non-compliance with the condition, may be
transmitted to the heirs of the donor, and may be exercised against the donee's heirs.
RTC issued an order dismissing the complaint on the grounf that the cause of action has
prescribed. The CA however reversed the decision stating that the action has not yet
prescribed.
Whether the action for rescission of contracts has prescribed; and (2) the dismissal of action
for rescission of contracts on the ground of prescription carries with it the dismissal of the
main action for reconveyance of real property.

The court affirming the decision of the CA and dismissed the decision of the RTC and
ruled that although it is true that under Article 764 of the Civil Code an action for the
revocation of a donation must be brought within four (4) years from the non-compliance of
the conditions of the donation, the same is not applicable in the case at bar. The deed of
donation involved herein expressly provides for automatic reversion of the property
donated in case of violation of the condition therein, hence a judicial declaration revoking
the same is not necessary.
In support of its aforesaid position, respondent court relied on the rule that a judicial
action for rescission of a contract is not necessary where the contract provides that it may
be revoked and cancelled for violation of any of its terms and conditions. It called attention
to the holding that there is nothing in the law that prohibits the parties from entering into
an agreement that a violation of the terms of the contract would cause its cancellation even
without court intervention, and that it is not always necessary for the injured party to
resort to court for rescission of the contract. It reiterated the doctrine that a judicial action
is proper only when there is absence of a special provision granting the power of
cancellation.
TITLE:
G.R. No. L-55744 February 28, 1985 Jose V. Herrera, petitioner Vs. L.P. Leviste & Co.,
INC. , Jose T. Marcelo , Government Service IN- Insurance System, Provincial Sheriff of
Rizal, Register of Deeds of Rizal and the Hon. Court of Appeals, Respondents ,
represented by Amador Santiago, Jr for L.P. Leviste & Co., Inc , Benjamin Aquino for
respondent J.T. Marcelo, Jr.
PONENTE:
Melencio- Herrera, J.
FACTS OF THE CASE:

Respondent Leviste obtained a loan amounting to P1,854,311.50 from the GSIS and as
security He mortgaged 2 lots one Located in Parañaque and one in Buendia.
Petitioner Herrera and Respondent Leviste entered into a contract to sell wherein
respondent agreed to sell the Buendia Property for an amount of P3,750,000.00 to
Petitioner with Conditions that states Petitioner (1) pay Leviste P11,895,688.50; (2) assume
Leviste’s indebtedness of P1854,311.50 to the GSIS; and (3) substitute the Paranaque
property with his own within a period of six (6) months. Furthermore it was also
stipulated in the contract that failure to comply with said conditions particularly the
payment of the scheduled amortizations on the dates shall render the contract
automatically canceled and any payments made shall be forfeited in favor of the vendor
and deemed as rental and/or liquidated damages which he readily agreed to.
However, after Herrera took ownership of said property he only remitted P300,000 to GSIS
despite receiving rentals amounting to P800,000.00. He Requested restructuring the
mortgage obligation because of his own arrearages in the payment of the amortization
which GSIS rejected by reason of policy stating that GSIS may grant it if Herrera would
update the account and pay 20% of said loan.
GSIS sent notice to Leviste to foreclose the mortgage by reason of default in payment
wherein it pushed through and Leviste assigned its right to redeem the foreclosed
properties to respondent Marcelo. Marcelo redeemed the properties by paying an amount
of P3,232,766.94 to GSIS for which he was issued a certificate of redemption. Herrera filed a
suit against Leviste for ‘’injunction, damages and cancellation of annotation” to the CFI of
Rizal.
The CFI of RIZAL rendered its decision wherein the trial court dismissed the Complaint
for lack of basis in fact and in law, and ordering payments made by petitioner to Levisted
forfeited in favor of the latter pursuant to their contract providing for automatic forfeiture
stipulated in their contract to sell. On appeal, the Court of Appeals affirmed the judgment
of the CFI of Rizal in TOTO. Petitioner seeks reconsideration essentially on the contention
that affirmance of the Court of Appeals would result in patent injustice as he would forfeit
the said Property and would lose an amount of P1,895,688.00 and P300,000 That would
result in the unjust enrichment of Leviste and would benefit the GSIS, Marcelo and Leviste
at Petitioners expense.

Whether the Court of Appeals affirmation of the ruling of the CFI of Rizal would benefit
the GSIS, Marcelo and Leviste at Petitioners expense?

No. The GSIS has not benefited in any way at the expense of the petitioner. What it
received, by way of redemption from respondent Marcelo, was the mortgage loan it had
extended plus interest and sundry charges.
Neither has Marcelo benefited at the expense of the petitioner. He had paid to GSIS the
amount P3,232,766.94, which is not far below the sum of P 3,750,000.00, which was the
consideration petitioner would have paid to Leviste had his contract been consummated.
Leviste had neither profited at the expense of petitioner, For Losing his Buendia Property,
all he had received was P 1,854,311.50 from GSIS less amounts he had paid, plus P
1,895,688.00 paid to him by Herrera, the total of which is substantially a reasonable value
of the Buendia Property.
It is quite true that petitioner had lost the P 1,895,688.00 he had paid to Leviste, plus P
300,000.00 he had paid to GSIS, less the rentals he had received when in possession of the
Buendia Property.
That loss is attributable to his fault in:
(a) Not having been able to submit collateral to GSIS in substitution of the Paranaque
Property; (b) Not paying off the mortgage debt when GSIS decided to foreclose; and not
making an earnest effort to redeem the property as a possible redemptioner
TITLE:
47 OG 5699 August 19, 1949 Maria Lachica VS Gregorio Araneta
FACTS OF THE CASE:

Gregorio Araneta, Inc. through President Jose Araneta offered for a sale of a parcel of land
with improvements thereon. This property was bought by Investment Corporation
through Maria Lachica, the wife of Esteban Sadang who was a sales agent of the defendant
Corporation. The stipulation in their contract about the price and its manner of payment
was P20,000 of which P8,000 was to be paid in cash and the balance of P12,000 will be paid
in installments (1st) P1,000 on December 31,1943 , (2nd) P1,000 on December 31, 1944 and
(3rd) P10,000 on December 31, 1945. The contract further added that the said parcel of land
shall be mortgaged as guarantee to the unpaid balance and will bear an interest of 8
percent per annum to be paid monthly in advance.
The terms were complied with. On Sept 5. 1944, Sadang went to see Araneta to pay the
entire balance but the latter refused to accept the tender of payment stating that such
payment was not in accordance with the terms of the contract. Lachica deposited the
supposed to be paid amount to Araneta to the CFI of Manila by way of consignation, and
at the same time presented the complaint.

Whether Araneta can be compelled to accept the payment
RULING AND RATIO DECIDENDI OF SUPREME COURT

Yes, the contract does not prohibit it if it is done before the date stipulated in the contract.
If a term is fixed in a contract it is presumed to have been established for the benefit of the
creditor as well as that of the debtor, unless from its tenor or from other circumstances it
should appear that the term was established for the benefit of one or the other. The
Supreme Court cited the decision from Villasenor Vs Javellana ‘’The only impediment to a
debtor in making payments before the fixed term, is the denial to the creditor of the
benefits such as interests accruing to the latter by reason of the fixed term. This coupled
with the facts that the contract did not prohibit payment before the fixed date justifies the
conclusion that under the terms signed plaintiffs could do so. To hold otherwise would be
virtually compelling an obligor to assume an obligation later when he offers to do so and
could very well discharge it earlier. The law should not be interpreted as to compel a
debtor to remain so, when he is in a position to release himself.
TITLE:
G.R. No. L-3316, JOSE PONCE DE LEON, plaintiff-appellant,
vs. SANTIAGO SYJUCO, INC., defendant-appellant,
PHILIPPINE NATIONAL BANK, defendant-appellee.
PONENTE:
Bautista Angelo, J.
FACTS OF THE CASE:
The herein defendant, Philippine National Bank, owns 2 parcels of land and sell it to the
herein plaintiff, Jose Ponce de Leon. De Leon then obtained a loan from Santiago Syjuco in
the amount of P200,000 in Japanese Military Notes payable within one year from May 5,
1948. It was also provided in said promissory note that the promisor (Ponce de Leon)
could not pay, and the payee (Syjuco) could not demand, the payment of said note except
within the aforementioned period. To secure the payment of said obligation, Ponce de
Leon mortgaged in favor of Syjuco the parcels of land which he agreed to purchase from
the Bank.
On May 6, 1944, Ponce de Leon paid the Bank of the balance of the purchase price
amounting to P23,670 in Japanese Military notes and, on the same date, the Bank executed
in favor of Ponce de Leon, a deed of absolute sale of the aforementioned parcels of land.
De Leon then paid the PNB the balance for the purchase of the land and obtained the
certificates where the mortgage in favor of Syjuco was annotated on its back. De Leon then
obtained an additional loan from Syjuco.
On several occasions in Oct. 1944, De Leon tendered to Syjuco full payment of his
indebtedness to the latter with the interest up to May 5, 1948. Syjuco however refused to
accept such repeated tenders. During the trial, Ponce de Leon explained that he wanted to
settle his obligations because as a member of the guerilla forces he was being hunted by
the Japanese and he was afraid of getting caught and killed.

The lower court rendered a decision absolving Syjuco from Ponce de Leon's complaint
and condemning Ponce de Leon to pay Syjuco the total amount of P23,130 with interest at
the legal rate from May 6, 1949, until fully paid (R. on A., pp. 107-135). Both Ponce de Leon
and Syjuco file their appeal from this decision.
Whether the consignation made by the plaintiff valid in the light of the law and the
stipulations agreed upon in the two promissory notes signed by the plaintiff
The court ruled in the negative. In order that cogsignation may be effective, the debtor
must first comply with certain requirements prescribed by law. The debtor must show (1)
that there was a debt due; (2) that the consignation of the obligation had been made
bacause the creditor to whom tender of payment was made refused to accept it, or because
he was absent for incapacitated, or because several persons claimed to be entitled to
receive the amount due (Art. 1176, Civil Code); (3) that previous notice of the consignation
have been given to the person interested in the performance of the obligation (Art. 1177,
Civil Code); (4) that the amount due was placed at the disposal of the court (Art 1178, Civil
Code); and (5) that after the consignation had been made the person interested was
notified thereof (Art. 1178, Civil Code).
It may be argued that the creditor has nothing to lose but everything to gain by the
acceleration of payment of the obligation because the debtor has offered to pay all the
interests up to the date it would become due, but this argument loses force if we consider
that the payment of interests is not the only reason why a creditor cannot be forced to
accept payment contrary to the stipulation. There are other reasons why this cannot be
done. One of them is that the creditor may want to keep his money invested safely instead
of having it in his hands (Moore vs. Cord 14 Wis. 231). Another reason is that the creditor
by fixing a period protects him against sudden decline in the purchasing power of the
currency loaned specially at a time when there are many factors that influence the
fluctuation of the currency (Kemmerer on Money, pp. 9-10).
TITLE:
ANITA C. BUCE vs. THE HONORABLE COURT OF APPEALS, SPS. BERNARDO C.
TIONGCO and ARACELI TIONGCO, SPS. DIONISIO TIONGCO and LUCILA
TIONGCO, and JOSE M. TIONGCO
G.R. No. 136913, 12 May 2000
PONENTE:
DAVIDE, JR., C.J.
FACTS OF THE CASE:

Anita Buce (petitioner) leased a 56-square meter land in Quirino Avenue, Pandacan,
Manila for a period of 15 years to commence on 01 June 1979, subject to renewal for
another 10 years, under the same terms and conditions. Jose Tiongco (respondent)
demanded a gradual rental increase, in 1985 it reached P400.00 but on July and August
1991, petitioner paid P1,000.00 as monthly rental. Sometime on December 1991,
respondent, through a letter, informed petitioner that he will again increase the rental fee
pursuant to the Rent Control Law which will become effective on January 1992. The
petitioner tendered checks for P400.00 dated October 1991 to January 1993 but respondents
refused to accept it.
The petitioner then filed with the Regional Trial Court (RTC) of Manila a complaint
for specific performance with prayer for consignation. Respondents, in their answer,
countered that petitioner had already paid the monthly rental for July and August 1991
but under RA No. 877, rentals have increased to P1,576.58. Hence, their refusal to accept
the tender of checks for P400 was justified.

The RTC declared the lease contract automatically renewed for 10 years and
considered as evidence thereof (a) the stipulations in the contract giving the lessee the
right to construct buildings and improvement and (b) the filing by petitioner of the
complaint almost one year before the expiration of the initial term of 15 years. It then fixed
the monthly rent at P400.00 from 01 June 1900 to 01 June 1994; P1,000.00 from 01 June 1994
until 01 June 1999; and P1,500.00 for the rest of the period or from 01 June 2000 to 01 June
2004, reasoning that the continuous increase of rent from P200 to P250 then P300, P400 and
finally P1,000 caused “an inevitable novation of their contract”.
The Court of Appeals reversed the RTC decision and ordered the petitioner to
immediately vacate the leased premises on the ground that the contract expired on 01 June
1994 without being renewed and to pay the rental arrearages at the rate of P1,000 monthly.

Whether the parties intended an automatic renewal of the lease contract when they
agreed that the lease shall be for a period of 15 years “subject to renewal for another 10
years”
NO - there is anything in the stipulations in the contract and the parties' actuation
that shows that the parties intended an automatic renewal or extension of the term of the
contract. The fact that the lessee was allowed to introduce improvements on the property
is not indicative of the intention of the lessors to automatically extend the contract.
Considering the original 15-year duration of the contract, structures would have
necessarily been constructed, added, or built on the property, which in its previous state
was an idle 56-square meter lot in the heart of Manila. Petitioner leased the property for
the purpose of turning it into a commercial establishment and to which it has been
transformed as Anita's Grocery and Store. Neither the filing of the complaint a year before
the expiration of the 15-year term nor private respondents' acceptance of the increased
rentals has any bearing on the intention of the parties regarding renewal. It must be
recalled that the filing of the complaint was even spawned by private respondents' refusal
to accept the payment of monthly rental in the amount of only P400.
TITLE:
G.R. No. L-22558, May 31, 1967, GREGORIO ARANETA, INC., petitioner,
vs. THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., respondent.
Araneta and Araneta for petitioner.
Rosauro Alvarez and Ernani Cruz Paño for respondent.
PONENTE:
REYES, J.B.L., J.
FACTS OF THE CASE:
On July 28, 1950, Gregorio Aranerta, Inc. sold 43,034.4 sq. m. of land to Philippine
Sugar Estate Development Co., Ltd. in the amount of P436,514.00 with the stipulation that
the seller will construct a road on the North Easter Portion and will be named as Sto.
Domingo Avenue. The construction of the subject road remained unfinished due to the
actual possession of its middle part by one Manuel Abundo who refused to vacate the
premises.
On May 7, 1958, Philippine Sugar filed a case against J.M. Tuason, Co. Inc., seeking
to comply and or to pay damages in the event that the latter failed to fulfill its obligation.

The lower court denied defendant Gregorio Araneta, Inc.'s motion. While the appellate
court declared that the fixing of a period was within the pleadings and that there was no
true change of theory.

Whether the obligation to construct the subject street shall be fulfilled within 2 years
No, since the obligation is a conditional one. Article 1197 of the New Civil Code involves a
two-step process. The court must first determine that the obligation does not fix a period
(or that the period depends upon the debtor's willed) and that the intention of the parties,
as may be inferred from the nature and circumstances of the obligation, is to have a period
for its performance. The second step is to ascertain the period probably contemplated by
the parties. The court cannot arbitrarily fix a period out of thin air.
Where the seller obligated itself to construct streets around the perimeter of the land
sold (site of the Santo Domingo Church in Quezon City) and the parties were aware that
the land, on which the streets would be constructed, was occupied by squatters, the time
for the performance of the seller's obligation should be fixed at the date that all the
squatters on the affected areas are finally evicted therefrom. While this solution would
render the date of performance indefinite, still the circumstances of the case admit of no
other reasonable view. This very indefiniteness explains why the contract did not specify
any exact period of performance. The ruling that the obligation should be performed
within two years is not warranted.
TITLE:
G.R. No. L-7721, March 25, 1914, INCHAUSTI & CO., plaintiff-appellant,
vs GREGORIO YULO, defendant-appellee.
Hausserman, Cohn and Fisher for appellant.
Rohde and Wright for appellee.
Bruce, Lawrence, Ross and Block, Amici Curiae, for Manuel, Francisco and Carmen Yulo.
PONENTE:
Chief Justice Cayetano Simplicio L. Arellano
FACTS OF THE CASE:
After the death of TEODORO YULO, his children under the name of HIJOS DE T.
YULO continued borrowing money from INCHAUSTI & COMPANY for the exploitation
and cultivation of their numerous haciendas. On August 12, 1909, GREGORIO YULO, in
behalf of Hijos de T. Yulo, executed a notarial instrument, severally and jointly
acknowledging and admitting their indebtedness to INCHAUSTI & COMPANY for Php
253,445.42, obligating themselves to pay, with interest at 10% per annum, in 5 installments
at the rate of Php 50,000, except the last, this being Php 53,445.42, beginning June 30, 1910,
continuing successively on the 30th of each June until the last payment on June 30, 1914.
The said notarial instrument contains an acceleration clause. Hence, when the YULOs
weren’t able to pay the 1 st installment of the obligation, INCHAUSTI brought an ordinary
action in the CFI of Iloilo, against GREGORIO YULO for the payment of Php 253,445.42,
with interest at 10% per annum, equivalent to Php 42,944.76.
On May 12, 1911, the YULOs executed another notarial instrument in recognition of the
debt and obligation of payment, requesting for the reduction of debt to P225,000; reduction
of interest to 6 % per annum; increase of installments to 8 gives - the first of P20,000,
beginning on June 30, 1911, and the rest of P30,000 each on the same date of each
successive year until the total obligation shall be finally and satisfactorily paid on June 30,
1919. On July 10, 1911, GREGORIO YULO answered the complaint and alleged as defense
that the instrument of August 12, 1909 was novated by that of May 12, 1911.
CFI of Iloilo decided the case "in favor of the defendant without prejudice to the
plaintiff's bringing within the proper time another suit for his proportional part of the joint
debt, and that the plaintiff pay the costs. INCHAUSTI appealed before the Supreme Court.
Whether the GREGORIO YULO must be sued alone despite entering into a compromise
with the other conjoint and solidary debtors.
No. We therefore sentence the defendant Gregorio Yulo to pay the plaintiff
Inchausti & Company P112,500, with the interest stipulated in the instrument of May 12,
1911, from March 15, 1911, and the legal interest on this interest due, from the time that it
was claimed judicially in accordance with article 1109 of the Civil Code, without any
special finding as to costs. The judgment appealed from is reversed. So ordered.
The contract of May 12, 1911, does not constitute a novation of the former one of
August 12, 1909, with respect to the other debtors who executed this contract, or more
concretely, with respect to the defendant Gregorio Yulo. Because "in order that an
obligation may be extinguished by another which substitutes it, it is necessary that it
should be so expressly declared or that the old and the new be incompatible in all points"
(Civil Code, Article 1204); and the instrument of May 12, 1911, far from expressly declaring
that the obligation of the three who executed it substitutes the former signed by Gregorio
Yulo and the other debtors. "It is always necessary to state that it is the intention of the
contracting parties to extinguish the former obligation by the new one". There exist no
incompatibility between the old and the new obligation. An obligation to pay a sum of
money is not novated in a new instrument wherein the old is ratified, by changing only the
term of payment and adding other obligations not incompatible with the old one. By
sentencing Gregorio Yulo to pay Php 253,445.42 of August 12, 1909, he could not recover
from his joint debtors Francisco, Manuel, and Carmen their proportional parts of the
P253,445.42 which he had paid, inasmuch as the three were not obligated by virtue of the
instrument of May 12, 1911, to pay only 225,000 pesos, thus constituting a violation of
Gregorio Yulo's right of being reimbursed for the sum paid by him, with the interest of the
amounts advanced at the rate of 1/6 part from each of his five codebtors. The obligation
being solidary, the remission of any part of the debt made by a creditor in favor of one or
more of the solidary debtors necessarily benefits the others, and therefore there can be no
doubt that, in accordance with the provision of article 1143 of the Civil Code, the
defendant has the right to enjoy the benefits of the partial remission of the debt granted by
the creditor."
TITLE:
G.R. No. 155173, November 23,2004, Lafarge Cement Philippines Inc., (formerly Lafarge
Philippines Inc.) Luzon Continental Land Corporation, Continental Operating
Corporation and Philip Roseberg, petitioners, vs Continental Cement Corporation,
Gregory T. Lim and Anthony A. Mariano, respondents.
PONENTE:
PANGANIBAN, J.:
FACTS OF THE CASE:

Lafarge Cement agreed to purchase the cement business of Continental Cement.
Both parties entered into a Sale and Purchase Agreement. Lafarge was aware that
Continental Cement had a pending case with the Supreme Court. In anticipation of the
liability that the High Tribunal might adjudge against Continental Cement, the parties
under clause 2 of the SPA, allegedly agreed to retain from the purchase price a portion of
the contract price. The amount was to be deposited in an interest-bearing account in the
First National City bank of New York for payment to Asset Privatization Trust, the
petitioner in the pending case. Lafarge allegedly refused to apply the sum to the payment
to APT, despite the subsequent finality of the decision and the repeated instructions of
Continental Cement. Lafarge denied the allegations in the complaint and alleged that
Continental Cement through Lim and Mariano filed baseless complaint in a civil case and
procured the attachment in bad faith. So they prayed that both the major stockholder and
president Lim and corporate secretary Mariano be held jointly and solidarily liable with
Continental Cement.

The Regional Trial Court of Quezon City Branch 80 dismissed Lafarge counterclaims
because the counterclaims against Lim and Mariano are not compulsory.

Whether there is solidary liability

Yes, there is solidary liability. The fact that the liability sought against respondent is
for specific performance and tort, while that sought against the individual respondent is
based solely on tort does not negate the solidary nature of their liability for tortuous acts
alleged in the counterclaim. Obligations arising from tort are by their nature, always
solidary. Petition is granted, assailed orders reversed. The court of origin is ordered to
take cognizance of the counterclaims pleaded in petitioner’s answer with compulsory
counterclaims and to cause the service of summons on respondents Lim and Mariano.
TITLE:
G.R. No. 134100, September 29, 2000, PURITA ALIPIO, petitioner, vs. COURT OF
APPEALS and ROMEO G. JARING, represented by his Attorney-In-Fact RAMON G.
JARING, respondents.
PONENTE:
MENDOZA, J
FACTS OF THE CASE:
Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond in Barito, Mabuco,
Hermosa, Bataan. The lease was for a period of five years ending on September 12, 1990.
On June 19, 1987, he subleased the fishpond, for the remaining period of his lease, to the
spouses Placido and Purita Alipio and the spouses Bienvenido and Remedios Manuel. The
stipulated amount of rent was ₱485,600.00, payable in two installments of ₱300,000.00 and
₱185,600.00, with the second installment falling due on June 30, 1989. Each of the four
sublessees signed the contract.The first installment was duly paid, but of the second
installment, the sublessees only satisfied a portion thereof, leaving an unpaid balance of
₱50,600.00. Despite due demand, the sublessees failed to comply with their obligation, so
that, on October 13, 1989, private respondent sued the Alipio and Manuel spouses for the
collection of the said amount before the Regional Trial Court, Branch 5, Dinalupihan,
Bataan. In the alternative, he prayed for the rescission of the sublease contract should the
defendants fail to pay the balance. Petitioner Purita Alipio moved to dismiss the case on
the ground that her husband, Placido Alipio, had passed away on December 1, 1988

The trial cout denied petitioner’s motion to dismiss stating that since she was herself a
party to the sublease contract, she could be independently impleaded in the suit together
with the Manuel spouses and that the death of her husband merely resulted in his
exclusion from the case. Court of Appeals affirmed.
Whether the creditor can sue the surviving spouse of a decedent in an ordinary proceeding
for the collection of a sum of money chargeable against the conjugal partnership
No. Creditor cannot sue the surviving spouse of a decedent in an ordinary proceeding for
the collection of a sum of money chargeable against the conjugal partnership. The proper
remedy is for him to file a claim in the settlement of estate of the decedent.
When petitioner's husband died, their conjugal partnership was automatically dissolved
and debts chargeable against it are to be paid in the settlement of estate proceedings in
accordance with Rule 73 which states:
Where estate settled upon dissolution of marriage. When the marriage is dissolved by the
death of the husband or wife, the community property shall be inventoried, administered,
and liquidated, and the debts thereof paid, in the testate or intestate proceedings of the
deceased spouse. If both spouses have died, the conjugal partnership shall be liquidated in
the testate or intestate proceedings of either.
Title:
ROMAN JAUCIAN, plaintiff-appellant, vs. FRANCISCO QUEROL, administrator of
the intestate estate of the deceased Hermenegildo Rogero, defendant-appellee.
PONENTE:
STREET, J.:
FACTS OF THE CASE
Lino Dayandante and Hermenegilda Rogero Jointly and Severally bound

themselves to be indebted to Roman Juacian in the sum of P13,332.33. Rogero signed
the document in the capacity of surety for Dayandante, but the instrument showed that
both debtors bound themselves jointly and severally to the creditor. There was nothing
in the terms of the obligation itself to show that the relation between the two debtors
was that of principal and surety. Rogero filed an action before the court of first instance
of albay against Jucian to cancel the document in question on the ground that her
signature was obtained by means of fraud. But in his answer, Jaucian asked for
judgment against the Rogero for the amount due upon the obligation. Judgment was
rendered in the Court of First Instance in favor of the plaintiff, from which judgment
the defendant appealed to the Supreme Court.
While the case was pending in the Supreme Court, Hermenegilda Rogero died and
the administrator of her estate was substituted as the party plaintiff and
appellee.Francisco Querol was named administrator; demanded judgment from the
court of claims against Dayandante that He is insolvent and that Jaucian exhausted all
means to collect from principal.
On November 25, 1913, the Supreme Court rendered in its decision reversing the
judgment of the trial court and holding that the disputed claim was valid and
Rogero was a surety of the debtor.
Whether Hermenegilda Rogero was solidary liable with the principal debtor
YES. Rogero (P), though a surety for Dayandante, was nevertheless bound jointly
and severally with him in the obligation.
Article 1822 of the Civil Code provides: By security a person binds himself to pay or
perform for a third person in case the latter should fail to do so.
Article 1144 of the Civil Code provides: A creditor may sue any of the joint and several
(solidarios) debtors or all of them simultaneously. The claims instituted against one shall
not be an obstacle for those that may be later presented against the others, as long as it
does not appear that the debt has been collected in full.
Rogero (P) was solidary liable for the full amount of the obligation without any right to
demand the exhaustion of the property of the principal debtor. Her position so far as the
creditor was concerned was exactly the same as if she had been the principal debtor.
For the reasons stated, the decision of the trial court denying appellant's petition
and his motion for a new trial was correct and should be affirmed.
TITLE:
G.R. No. L-5942, May 14, 1954. REHABILITATION FINANCE CORPORATION,
petitioner, VS. THE HONORABLE COURT OF APPEALS, ESTELITO MADRID and
JESUS ANDUIZA, respondents
PONENTE:
CONCEPCION, J.
FACTS OF THE CASE:

Jesus de Anduiza & Quinatana Cano borrowed money from the Agricultural and
Industrial Bank as evidenced by a promissory note dated October 31, 1941. In said note,
they promised to pay the AIB, or order, on or before October 31, 1951, the sum of
P13,800.00, with interest at the rate of 6%, the note also recited that payments were to be
made in ten equal annual installments in accordance with the given schedule of
amortizations. o Mortgagors Anduiza and Cano failed to pay the yearly amortizations that
fell due on October 31, 1942 and 1943. Learning of this, Estelito Madrid Offered to pay and
actually paid on October 30, 1944 the full amount of said indebtedness to AIB/RFC.
Madrid instituted the present action asking the court to (a) declare as paid the P16,425.17
Anduiza owed the AIB/RFC; (b) order AIB/RFC to cancel the mortgage and release the
properties; (c) condemn Anduiza to pay Madrid the P16,425.17 with legal interest, etc. In
answer, AIB/RFC prayed that the complaint be dismissed. The bank argued that in as
much as Madrid’s payment was unauthorized by Anduiza, Madrid’s deposit in the sum of
P16,425.17 was null and void in accordance with EO No. 49, series of 1945. Anduiza, on the
other hand, alleged that when Madrid paid his debt, the same was not yet due and
demandable; hence, he may not be compelled to pay the latter.

RTC dismissed the complaint. On appeal, the CA reversed and directed AIB/RFC to cancel
the mortgage and Anduiza to pay Madrid the P16,425.17

Whether the debtors were entitled to pay the obligation prior to Oct. 31, 1951
YES. It should be noted that the makers of the promissory note quoted above promised to
pay the obligation evidenced thereby "on or before October 31, 1951." Although the full
amount
of said obligation was not demandable prior to October 31, 1951, in view of the provision
of the note relative to the payment in ten (10) annual installments, it is clear, therefore, that
the makers or debtors were entitled to make a complete settlement of the obligation at any
time before said date.
TITLE:
G.R. No. 96405 June 26, 1996 BALDOMERO INCIONG, JR., petitioner, vs.
COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
PONENTE:
ROMERO, J.:
FACTS OF THE CASE:

Inciong signed a promissory note with Rene Naybe and Gregorio Pantanosas in the
amount of Php 50 000 in favor of Philippine Bank of Commerce which they are held jointly
and severally liable. The due date has expired without any one of them paying the obligor.
PBC amended payment from them, however, no one still paid. PBC released Pantanosas
from the obligation, Naybe left for another country leaving only Inciong to pay. Inciong
contended that he only agreed to limit his liability to Php 5 000 and that his consent was
vitiated by fraud.

The lower court held that even granting the said limit, it will only be enforceable between
him and Naybe and not binding with the PBC. It also noted that petitioner is a graduate of
Bachelor of Law and a labor consultant who was supposed to take due care of his
concerns.
Whether Inciong should be held liable
Yes. The Court held that by alleging fraud, it must be established by clear and convincing
evidence. However, the petitioner failed to prove fraud as he only presented self-serving
evidence. The Supreme Court in deciding this case, gave more weight on the promissory
note signed by the petitioner expressly stating that the signatories are solidarily liable. The
choice is left to the solidary creditor as to whom he will enforce collection.
TITLE:
G.R. No. L-50076, 14 September 1990, NORBERTO QUISUMBING, SR., and GUNTHER
LOEFFLER vs. COURT OF APPEALS and PHILIPPINE AIR LINES, INC.
PONENTE:
NARVASA, J.:
FACTS OF THE CASE:

On 06 November 1968, a hijack-robbery ensued in one of the Philippine Airlines
(PAL) flights heading from Mactan to Manila. Among the passengers divested of their
belongings were plaintiffs Norberto Quisumbing, Sr. and Gunther Leoffler. As a result of
the incident, Quisumbing, Sr. suffered shock, because a gun had been pointed at him
during the incident. The perpetrators were able to escape. Plaintiffs thereafter made a
demand on PAL to indemnify them but PAL refused averring that it is not liable in law or
in fact.

The Court of First Instance (CFI) dismissed the complaint with costs against the
plaintiffs. The Court of Appeals affirmed the trial court's judgment.

Whether PAL should be held liable
NO. The essential conclusion of both the trial and appellate courts that the evidence
does indeed fail to prove any want of diligence on the part of PAL, or that, more
specifically, it had failed to comply with applicable regulations or universally accepted and
observed procedures to preclude hijacking; and that the particular acts singled out by the
petitioners as supposedly demonstrative of negligence were, in the light of the
circumstances of the case, not in truth negligent acts "sufficient to overcome the force
majeure nature of the armed robbery." The Court quite agrees, too, with the Appellate
Tribunal's wry observation that PAL's "failure to take certain a step that a passenger in
hindsight believes should have been taken is not the negligence or misconduct which
mingles with force majeure as an active and cooperative cause."
TITLE:
G.R. No. L-15645, January 31, 1964, PAZ P. ARRIETA and VITALIADO ARRIETA,
plaintiffs-appellees VS. NATIONAL RICE AND CORN CORPORATION, defendant-
appellant, MANILA UNDERWRITERS INSURANCE CO., INC., defendant-appellee.
PONENTE:
REGALA, J.:
FACTS OF THE CASE:

Arrieta participated in the public bidding called by the NARIC for the supply of 20,000
metric tons of Burmese rice. As her bid of $203.00 per metric ton was the lowest, she was
awarded the contract. Paz P. Arrieta and the appellant corporation entered into a Contract
of Sale of Rice, under the terms of which the former obligated herself to deliver to the latter
20,000 metric tons of Burmess Rice at $203.00 per metric ton. Mrs. Paz P. Arrieta thru
counsel, advised the appellant corporation of the extreme necessity for the immediate
opening of the letter credit since she had by then made a tender to her supplier in
Rangoon, Burma.
The Philippine National Bank informed that its application for a letter of credit has been
approved by the Board of Directors with the condition that marginal cash deposit be paid
and that drafts are to be paid upon presentment. Furthermore, the Bank represented that it
will hold the application in pending compliance of the stated requirement.
As a result of the delay, the allocation of appellee's supplier in Rangoon was canceled and
the 5% deposit, amounting to 524,000 kyats or approximately P200,000.00 was forfeited. In
this connection, it must be made of record that although the Burmese authorities had set
August 4, 1952, as the deadline for the remittance of the required letter of credit, the
cancellation of the allocation and the confiscation of the 5% deposit were not affected until
August 20, 1952, or, a full half month after the expiration of the deadline. And yet, even
with the 15-day grace, the corporation was unable to make good its commitment to open
the disputed letter of credit.
It is clear upon the records that the sole and principal reason for the cancellation of the
allocation contracted in Burma was the failure of the letter to be opened within the
contemplated period, this failure taken as the immediate cause for the consequent damage.

Whether Burma is held liable for damages

Yes, Burma is held liable for damages. They knew the bank requirements for opening
letters of credit; second, that appellant also knew it could not meet those requirements.
When, therefore, despite this awareness that was financially incompetent to open a letter of
credit immediately, agreed in paragraph 8 of the contract to pay immediately "by means of
an irrevocable, confirm and assignable letter of credit. Article 11 of the Civil Code which
provides: Those who in the performance of their obligation are guilty of fraud, negligence,
or delay, and those who in any manner contravene the tenor thereof, are liable in damages.
TITLE:
G.R. No. L-27782 July 31, 1970 OCTAVIO A. KALALO, plaintiff-appellee,vs. ALFREDO
J. LUZ, defendant-appellant.
PONENTE:
ZALDIVAR, J.:
FACTS OF THE CASE:
On November 17, 1959, Octavio A. Kalalo entered into an agreement with Alfredo J . Luz
where in the will render engineering service to the latter. On December 11, '1961, appellee
sent to appellant a statement of account to which was attached an itemized statement of
defendant-appellant's account according to which the total engineering fee asked by
appellee for services rendered amounted to P116,565.00 from which sum was to be
deducted the previous payments made in the amount of P57,000.00, thus leaving a balance
due in the amount of P59,565.00. In response, the appellant sent a resume of fees due to the
latter. Said fees, according to the appellant. Amounted to P10,861.08 instead of the amount
claimed by the appellee. Appellant sent appellee a check for said amount, which appellee
refused to accept as full payment of the balance of the fees due him. Due to this, appellee
file four cause of action, one of this is payment for construction of International Rice
Research Institute amounting 28000 dollars.
The Trial court erred in favor of the plaintiff and against the defendant, by ordering the
defendant to pay plaintiff the sum of P51,539.91 and $28,000.00, the latter to be converted
into the Philippine currency on the basis of the current rate of exchange at the time of the
payment of this judgment, as certified to by the Central Bank of the Philippines

Whether the rate of exchange of dollar to peso are those at the time of the payment of the
judgment or at the time when the research institute project became due and demandable

WHEREFORE, the decision appealed from is affirmed, with costs against the defendant-
appellant. It is so ordered.
Yes. Under the agreement, Kalalo was entitled to 20% of $140,000.00, or the amount of
$28,000.00. He, however, cannot oblige the Luz to pay him in dollars, even if the appellant
himself had received his fee for the IRRI project in dollars. This payment in dollars is
prohibited by Republic Act 529. Under the provision of Republic Act 529, if the obligation
was incurred prior to the enactment of the Act and requires payment in a particular kind
of coin or currency other than the Philippine currency the same shall be discharged in
Philippine currency measured at the prevailing rate of exchange at the time the obligation
was incurred.
TITLE:
G.R. No. 105188, January 23, 1998, Papa vs. A.U. Valencia & Company Inc.
PONENTE:
Associate Justice Santiago M. Kapunan
FACTS OF THE CASE:
On June 15, 1973, MYRON PAPA, acting as attorney-in-fact of Angela Butte, sold to
respondent PEÑARROYO, through respondent VALENCIA, a parcel of land (which was
then mortgaged by Butte to the Associated Banking Corporation). After the sale, but before
the title to the subject property had been released, Angela Butte passed away, and despite
representations made by herein respondents to the bank to release the title to the property
sold to respondent PEÑARROYO, the bank refused to release it unless and until all the
mortgaged properties of the late Angela Butte were also redeemed. Despite the release of
property on April 1977, MYRON PAPA had been collecting monthly rentals in the amount
of P800.00 from the tenants of the property, knowing that said property had already been
sold to private respondents. Despite repeated demands from said respondents, MYRON
PAPA refused and failed to deliver the title to the property. Thereupon, respondents
VALENCIA and PEÑARROYO filed a complaint for specific performance, praying that
petitioner be ordered to deliver to respondent PEÑARROYO the title to the subject
property (TCT 28993); to turn over to the latter the sum of P72,000.00 as accrued rentals as
of April 1982, and the monthly rental of P800.00 until the property is delivered to
respondent PEÑARROYO; to pay respondents the sum of P20,000.00 as attorney's fees;
and to pay the costs of the suit. The Trial Court rendered decision in favor of
PEÑARROYO.
MYRON PAPA appealed the aforesaid decision of the trial court to the Court of Appeals,
alleging among others that the sale was never "consummated" as he did not encash the
check (in the amount of P40,000.00) given by respondents Valencia and Peñarroyo in
payment of the full purchase price of the subject lot. He maintained that what said
respondent had actually paid was only the amount of P5,000.00 (in cash) as earnest money.
CA affirmed with modification the said decision, to deliver to PEÑARROYO the owner's
duplicate of TCT No. 28993 of Angela M. Butte and the peaceful possession and enjoyment
of the lot in question or, if the owner's duplicate certificate cannot be produced, to
authorize the Register of Deeds to cancel it and issue a certificate of title in the name of
Felix Peñarroyo.

Whether the sale was consummated despite allegation of petitioner that he did not encash
the aforesaid check
WHEREFORE, the petition for review is hereby DENIED and the Decision of the Court of
Appeals, dated 27 January 1992 is AFFIRMED
The acceptance of a check implies an undertaking of due diligence in presenting it for

payment, and if he from whom it is received sustains loss by want of such diligence, it will
be held to operate as actual payment of the debt or obligation for which it was given. It
has, likewise, been held that if no presentment is made at all, the drawer cannot be held
liable irrespective of loss or injury unless presentment is otherwise excused. The payee of a
check would be a creditor under this provision and if its no-payment is caused by his
negligence, payment will be deemed effected and the obligation for which the check was
given as conditional payment will be discharged. Considering that respondents Valencia
and Peñarroyo had fulfilled their part of the contract of sale by delivering the payment of
the purchase price, said respondents, therefore, had the right to compel petitioner to
deliver to them the owner's duplicate of TCT No. 28993 of Angela M. Butte and the
peaceful possession and enjoyment of the lot in question.
TITLE:
G.R. No. L-49188 January 30, 1990 PHILIPPINE AIRLINES, INC., petitioner, vs.HON.
COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance
of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First
Instance, Manila, and AMELIA TAN, respondents
PONENTE:
GUTIERREZ, JR., J.:
FACTS OF THE CASE:

The petition involved the alias writ of execution when respondent Amelia Tan
commenced a complaint for damages against PAL, which CDI Manila rendered a decision
in her favor. Four months later, Tan moved for the issuance of an alias writ of execution
stating that the judgment rendered by the lower court, and affirmed with modification by
the Court of Appeals, remained unsatisfied. In opposition, PAL countered that it already
fully paid its obligation to Tan through the deputy sheriff of the respondent court, Emilio
Z. Reyes, as evidenced by cash vouchers properly signed and receipted by said sheriff who
had absconded.
The case was remanded to the trial court for execution and Tan filed a motion praying for
the issuance of a writ of execution of the judgment rendered by the CA.
1. Whether the payment made to the absconding sheriff by check in his name did operate
to satisfy the judgment debt
2. Whether such payments extinguish the judgment debt
1. No, the Court disagrees that the payment made to the absconding sheriff by check in his
name operates to satisfy the judgment debt. In general, a payment, in order to be effective
to discharge an obligation, must be made to the proper person.
Article 1240 of the Civil Code provides that “Payment shall be made to the person in
whose favor the obligation has been constituted, or his successor in interest, or any person
authorized to receive it.”
In the instant case, because PAL did not issue the checks intended for her, in her name, but
to the absconding sheriff, such payment did not extinguish the judgment debt.
2. No, the Court rules that the acceptance by the sheriff of the petitioner's checks, in the
case at bar, does not, per se, operate as a discharge of the judgment debt.
Article 1249 of the Civil Code provides: The payment of debts in money shall be made in
the currency stipulated, and if it is not possible to deliver such currency, then in the
currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been cashed, or when
through the fault of the creditor they have been impaired.
Since a negotiable instrument is only a substitute for money and not money, the delivery
of such an instrument does not, by itself, operate as payment. A check, whether a
manager's check or ordinary cheek, is not legal tender, and an offer of a check in payment
of a debt is not a valid tender of payment and may be refused receipt by the obligee or
creditor. Mere delivery of checks does not discharge the obligation under a judgment. The
obligation is not extinguished and remains suspended until the payment by commercial
document is actually realized.
Thus, the petition is hereby DISMISSED.
TITLE:
G.R. Nos. L-21901 and L-21996. June 27, 1978 REPARATIONS COMMISSION, Plaintiff-
Appellants, v. UNIVERSAL DEEP-SEA FISHING CORPORATION and MANILA
SURETY AND FIDELITY CO., INC., Defendants-Appellants.
PONENTE:
CONCEPCION, JR., J.:
FACTS OF THE CASE:

Reparations Commission awarded 6 boats to Universal Deep Sea Fishing Corporation to
be delivered two at a time, with each delivery being covered by conditional purchase and
sale. The obligations were to be paid by installments. To guarantee the faithful compliance
with the obligations, a performance bond was issued by Universal in favor of Reparations
Commission with Manila Surety as its surety. However, in August 1962, RC sued
Universal and its surety to recover various amounts of money under the contracts.
Universal claimed that the amounts were not yet due. Universal alleged that there was an
obscurity in the terms of the contracts in question which was caused by the plaintiff as to
the amounts and due dates of the first installments which should have been first fixed
before the creditor could demand its payment from the debtor, specifically referring to the
schedule of payments which allegedly indicated two (2) due dates for the payment of the
first installment.
After appropriate proceedings and upon the preceding facts, the trial court rendered
judgment against Universal.

Whether the 1st installments under the three contracts of conditional purchase and sale of
reparations goods were already due and demandable

Yes. The Supreme Court found the terms of the contracts clear and left no doubt as to the
intent of the contracting parties that the first installment due 24 months after delivery was
different from the the first ten (10) equal yearly installment of the balance of the purchase
price. When the stipulations in the contract are clear, the courts are in no way to interpret
them but to take the words into their literal meaning.
TITLE:
G.R. No. 123855, November 20, 2000, Nereo J. Paculdo, petitioner, Bonifacio Regalado,
respondent.
PONENTE:
PARDO, J.:
FACTS OF THE CASE:

Nereo Paculdo and Bonifacio Regalado entered into a contract of lease over a parcel
of land. The contract of lease was for 25 years. For the first 5 years of the contract, Paculdo
would pay a monthly rental of P450,000 payable within the first 5 days of each month,
with a 2% penalty for every month of late payment. Petitioner also leased 11 other
properties from Respondent. He also bought 8 heavy equipment and vehicles. Due to non-
payment of P361,895.55 and non-payment of full monthly rental of June and July 1992,
Respondent sent demand letters demanding payment of the back rentals, and if no
payment was made within 15 days from receipt, it would cause the cancellation of the
lease contract. Respondent mortgaged the subject land of the lease contract to Monte de
Piedad Savings bank, including P35 million worth of improvements made by him, as a
security for P20 million loan. Petitioner filed an action for injunction and damages seeking
to enjoin Respondent from disturbing his possession of the property subject of the lease
contract at the RTC. On the same day, the Respondent filed a complaint for ejectment with
the MTC.
MTC ruled in favor of Respondent and ordered Petitioner to vacate the leased
premises and pay the back rental fees with interest. RTC affirmed the MTC decision.
Petitioner filed a petition for review with the CA. The CA ruled that the Petitioner
impliedly consented to Respondent’s application of payment to his other obligations and
thus dismissed the petition for lack of merit.

Whether Respondent Regalado may exercise the right to apply the payments to the
other obligations of Petitioner Paculdo

No, this is subject to the condition that Petitioner must give his consent. Petitioner’s silence
is not tantamount to consent. The consent must be clear and definite. Article 1252 provides
that no payment is to be made to a debt that is not yet due and Article 1254 states that the
payment has to be applied first to the debt most onerous to the debtor. In this case, the
purchase price of the heavy equipment was not yet due at the time the payment was made,
for there was no date set for such payment. Neither was there a demand by the creditor to
make the obligation to pay the purchase price due and demandable. The application made
by the respondent is contrary to the provision of the law. The Supreme Court grants the
petition, it reverses and sets aside the decision of the CA.
TITLE:
G.R. No. 118342, January 5, 1998 DEVELOPMENT BANK OF THE PHILIPPINES,
Petitioner vs. COURT OF APPEALS and LYDIA CUBA, Respondents
G.R. No. 118367, January 5, 1998 LYDIA P. CUBA, Petitioner vs. COURT OF APPEALS,
DEVELOPMENT BANK OF THE PHILIPPINES and AGRIPINA P. CAPERAL,
Respondents
PONENTE:
DAVIDE, JR., J.
FACTS OF THE CASE:

Lydia Cuba is a grantee of a Fishpond Lease Agreement from the government and
obtained several loans from the DBP through Deeds of Assignment of her Leasehold
Rights. However, Cuba failed to pay her loans on the scheduled dates in accordance with
the terms specified in the promissory notes. Consequently, DBP, without foreclosure
proceedings, whether judicial or extrajudicial, appropriated the leasehold rights of Cuba
over the fishpond in question. DBP, in turn, executed a Deed of Conditional Sale of the
Leasehold Rights in favor of Cuba over the same fishpond in question, but Cuba failed to
pay the amortizations stipulated in the Deed of Conditional Sale. DBP sent Notice of
Rescission and took possession of the Leasehold Rights over the said fishpond and
thereafter executed a Deed of Conditional Sale in favor of defendant Agripina Caperal
awarding the Fishpond Lease Agreement.

The RTC of Pangasinan resolved the issue in favor of Cuba, but the Court of Appeals ruled
otherwise, except for the damages awarded to Cuba.

Whether the assignment to guarantee the loans which in effect a mortgage
constitute payment by Cession

No. There is no payment by Cession under Article 1255 of the Civil Code where
there is only one creditor. In the case at bar, Cuba had only one creditor which is the DBP,
in order to constitute payment by cession, Article 1255 contemplates the existence of two
or more creditors and involves the assignment of all the debtor’s property. Hence, the
assignment to guarantee the loans which in effect a mortgage, does not constitute payment
by cession.
TITLE:
G.R. No. L-50449, January 30, 1982, FILINVEST CREDIT CORPORATION, plaintiff-
appellee, vs. PHILIPPINE ACETYLENE, CO., INC., defendant-appellant.
PONENTE:
DE CASTRO, J.
FACTS OF THE CASE:
Philippine Acetylene Co. purchased from Alexander Lim a motor vehicle forP55K to be
paid in installments. As security for the payment of said promissory note, the appellant
executed a chattel mortgage over the same motor vehicle in favor of said Alexander Lim.
Then, Lim assigned to the Filinvest all his rights, title, and interests in the promissory note
and chattel mortgage by virtue of a Deed of Assignment. Phil Acetylene defaulted in the
payment of nine successive installments. When Filinvest sent a demand letter, Phil
Acetylene wrote back of its desire to return the mortgaged property, which return shall be
in full satisfaction of its indebtedness. Thus, the vehicle was returned to the Filinvest.
However, they failed to sell the motor vehicle, as there were unpaid taxes on the said
vehicle. Filinvest requested the appellant to update its account by paying the installments
in arrears and accruing interest. They also offered to deliver back the motor vehicle to the
appellant but the latter refused to accept it, so appellee instituted an action for collection of
a sum of money with damages. Accordng to Phil Acetylene, the delivery of the motor
vehicle to Filinvest extinguished its money obligation as it amounted to a dation in
payment.
The trial court renders judgment directing defendant to pay plaintiff the outstanding
unpaid obligation and directing plaintiff to deliver to, and defendant to accept, the motor
vehicle.
Whether the return of the mortgaged motor vehicle to the appellee by virtue of its
voluntary surrender by the appellant totally extinguished and/or cancelled its obligation to
the appellee
NO. The mere return of the mortgaged motor vehicle by the mortgagorto the mortgageeac
does not constitute dation in payment or dacion en pago in the absence, express or implied
of the true intention of the parties.
Dacion en pago, according to Manresa, is the transmission of the ownership of a thing by

the debtor to the creditor as an accepted equivalent of the performance of obligation. In
dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor
who accepts it as equivalent of payment of an outstanding debt..
TITLE:
De Guzman v. CA, 137 SCRA 730 (1985)
G.R. No. No. L-52733. July 23, 1985
PONENTE:
CONCEPCION, JR., J
FACTS OF THE CASE:

On February 17, 1971, the petitioners, as SELLER, and the private respondent, as BUYER,
executed a Contract to Sell covering two (2) parcels of land owned by the petitioners
located at Cementina Street, Pasay City. It was stipulated therein that the private
respondent should pay the balance of the purchase price of P133,640.00 on or before
February 17, 1975. Two days before the said date, or on February 15, 1975, the private
respondent asked the petitioners to furnish her with a statement of account of the balance
due; copies of the certificates of title covering the two parcels of land subject of the sale;
and a copy of the power of attorney executed by Rolando Gestuvo in favor of Pilar de
Guzman. But, the petitioners denied the request.
Private respondent filed a complaint for specific performance charging that due to the
refusal of the petitioner to furnish the copies of the documents, they committed breach of
contract. The petitioners claimed that they are not obliged to give the documents and the
balance due was already predetermined in the contract. The petitioners also alleged that
the failure of the respondent to pay the balance on time rendered the contract ineffective
without necessity of notice of any judicial declaration.
On November 29. 1977, the trial court rendered a decision approving the compromise
agreement submitted by the parties which states, among others, the amount to be paid by
the private respondent, the deadline for payment, and for the petitioners to transfer the
titles upon payment.
One day after the deadline of payment, petitioners filed a motion for the issuance of
execution claiming that private respondent failed to abide by the compromise agreement.
The private respondent, on the other hand, alleged that she had complied with the
compromise agreement.

RTC: ruled in favor of the private respondent and directed the Clerk of Court to release to
the petitioners the amount of P250,000.00 deposited by the private respondent.
CA: Sustained the judgment of the RTC

Whether there was a valid tender of payment

Yes. The private respondent had substantially complied with the terms and conditions of
the compromise agreement. Her failure to deliver to the petitioners the full amount on
January 27, 1978 was not her fault. The blame lies with the petitioners. The record shows
that the private respondent went to the sala of Judge Bautista on the appointed day to
make payment, as agreed upon in their compromise agreement. But, the petitioners were
not there to receive it. Only the petitioners’ counsel appeared later, but he informed the
private respondent that he had no authority to receive and accept payment. Instead, he
invited the private respondent and her companions to the house of the petitioners to effect
payment. But, the petitioners were not there either. They were informed that the petitioner
Pilar de Guzman would arrive late in the afternoon, possibly at around 4:00 o’clock. The
private respondent was assured, however, that she would be informed as soon as the
petitioners arrived. The private respondent, in her eagerness to settle her obligation,
consented and waited for the call which did not come and unwittingly let the period lapse.
The next day, January 28, 1978, the private respondent went to the office of the Clerk of the
Court of First Instance of Rizal, Pasay City Branch, to deposit the balance of the purchase
price. But, it being a Saturday, the cashier was not there to receive it. So, on the next
working day, Monday, January 30, 1978, the private respondent deposited the amount of
P30,000.00 with the cashier of the Office of the Clerk of the Court of First Instance of Rizal,
Pasay City Branch, to complete the payment of the purchase price of P250,000.00. Since the
deposit of the balance of the purchase price was made in good faith and that the failure of
the private respondent to deposit the purchase price on the date specified was due to the
petitioners who also make no claim that they had sustained damages because of the two
days delay, there was substantial compliance with the terms and conditions of the
compromise agreement.
WHEREFORE, the petition should be, as it is hereby DISMISSED. The temporary
restraining order heretofore issued is LIFTED and SET ASIDE. With costs against the
petitioners.
TITLE:
TLG International Continental Enterprising Inc. v. Flores, 47 SCRA 437 (1972)
PONENTE:
ANTONIO, J.:
FACTS OF THE CASE:

Respondent in an order dated October 5, 1971, accepted and granted petitioner's "Motion
To Intervene" and admitted its "Complaint In Intervention", in Civil Case No. 14880,
(Bearcon Trading Co., Inc. vs. Juan Fabella Et Al). Petitioner intervened as sub-lessee of
Bearcon over the property, and the purpose of its intervention was to protect its rights as
such sub-lessee and to enable it, during pendency of the case, to make a consignation of
the monthly rentals as it was "at a loss as to who is lawfully and rightfully entitled to
receive payments of the monthly" rentals. As a consequence of the admission of the
"Complaint In Intervention", petitioner deposited with the Clerk of Court of the Court of
First Instance of Rizal, the following sums by way of rentals: October 27, 1971 P900.00,
November 29, 1971 600.00, January 19, 1972 750.00March 8, 1972 1,500.00 or a total of
P3,750.00, which deposits are properly covered by official receipts. On October 20, 1971 the
defendant in the case filed an omnibus motion to dismiss the complaint and the motion for
intervention. To which on April 24, 1972 the court granted the motion and dismissed both.
On May 27, 1972, petitioner filed its Motion to withdraw the sums it deposited to which
this motion was denied by the respondent on the reason that, there is no order to
intervenor to make any deposit in connection" with the case.

The lower court denied the petition to withdraw the deposited amount to make
consignation, even though the case was already dismissed, reasoning that it never order
the deposit, therefore, no authority to authorize the withdrawal.

Whether the lower court is correct in denying the motion to withdraw the amount
deposited to make a consignation following the dismissal of the case

No. it was incumbent upon Respondent to have allowed the withdrawal by petitioner of
the sums of money deposited by it with the Court. Nevertheless respondent insists that the
Court had no authority to authorize its withdrawal since it "has not ordered intervenor to
make" the deposit. This contention ignores the fact that the deposit was made by petitioner
as a consequence of the admission by the Court of its "Complaint In Intervention". It must
be noted that the aforesaid deposit was made with and officially received by the Clerk of
Court. "Consignation shall be made by depositing the things due at the disposal of judicial
authority, before whom the tender of payment shall be proved, in a proper case, ...". It was
therefore money received by the Clerk of Court pursuant to Section 6 of the Judiciary Act.
(Rep. Act 296 as Amended).
TITLE:
McLaughlin v CA, 144 SCRA 693 (1986)
PONENTE:
FERIA, Actg. C.J.
FACTS OF THE CASE:

On February 28, 1977, petitioner Luisa F. McLaughlin and private respondent Ramon
Flores entered into a contract of conditional sale of real property. Paragraph one of the
deed of conditional sale fixed the total purchase price of P140,000.00 payable as follows:
P26,550.00 upon the execution of the deed; and b) the balance of P113,450.00 to be paid not
later than May 31, 1977. The parties also agreed that the balance shall bear interest at the
rate of 1% per month to commence from December 1976, until the full purchase price was
paid. Under paragraph 3 of the Compromise Agreement, private respondent agreed to pay
one thousand (P1,000.00) pesos monthly rental beginning December 5, 1979 until the
obligation is duly paid, for the use of the property subject matter of the deed of conditional
sale. On October 15, 1980, petitioner wrote to private respondent demanding that the latter
pay the balance of P69,059.71 on or before October 31, 1980. This demand included not
only the installment due on June 30, 1980 but also the installment due on December 31,
1980. Private respondent states on page 14 of his brief that on November 3, 1980, the first
working day of said month, he tendered payment to petitioner but this was refused
acceptance by petitioner. However, this does not appear in the decision of the Court of
Appeals. On November 17, 1980, private respondent filed a motion for reconsideration
tendering at the same time a Pacific Banking Corporation certified manager's check in the
amount of P76,059.71, payable to the order of petitioner and covering the entire obligation
including the... installment due on December 31, 1980. However, the trial court denied the
motion for reconsideration in an order dated November 21, 1980 and issued the writ of
execution on November 25, 1980 In an order dated November 27, 1980, the trial court
granted petitioner's ex-parte motion for clarification of the order of execution rescinding
the deed of conditional sale of real property.
CFI rendered a decision on Jan. 22, 1980. Paragraphs 6 and 7 of the Compromise
Agreement further state: "That the parties are agreed that in the event the defendant fails
to comply with his obligations herein provided, the plaintiff will be entitled to the issuance
of a writ of execution rescinding the Deed of Conditional Sale of Real Property and CA
reversed and ordered the CFI to accept the manager’s check, holding: "McLaughlin wrote
Flores on October 15, 1980 demanding that Flores pay the balance of P69,059.71 on or
before October 31, 1980
Whether the CA erred in not observing Article No. 1306 of the NCC and in having
arbitrarily abused its judicial discretion by disregarding the penal clause stipulated by the
parties in the compromise agreement
NO. The SC agreed with the last paragraph of the CA decision cited above, particularly
after Flores had tendered P76,059.71 in full payment of his obligation. This constitutes
substantial compliance with the compromise agreement (citing De Guzman v. CA).
McLaughlin invoked the SC ruling in Luzon Brokerage Co., Inc. vs. Maritime Building Co.,
Inc., to the effect that Republic Act 6552 (the Maceda Law) "recognizes and reaffirms the
vendor's right to cancel the contract to sell upon breach and nonpayment of the stipulated
installments but requires a grace period after at least two years of regular installment
payments x x x." Flores also invoked said law as an expression of public policy to protect
buyers of real estate on installments against onerous and oppressive conditions (Section 2
of Republic Act No. 6552). Section 4 of Republic Act No. 6552 provides: "In case where less
than two years of installments were paid, the seller shall give the buyer a grace period of
not less than sixty days from the date the installment became due. If the buyer fails to pay
the installments due at the expiration of the grace period, the seller may cancel the contract
after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act." Section 7 of said law provides as follows: "Any
stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4,
5 and 6, shall be null and void." The spirit of these provisions further supports the CA
decision. The record does not contain the complete text of the compromise agreement and
the decision approving it.
TITLE:
G.R. No. L-58961 June 28, 1983, SOLEDAD SOCO, petitioner,
vs. HON. FRANCIS MILITANTE, Incumbent Presiding Judge of the Court of First
Instance of Cebu, Branch XII, Cebu City and REGINO FRANCISCO, JR., respondents.
PONENTE:
GUERRERO, J.:
FACTS OF THE CASE:

On January 17, 1973, Soledad Soco entered into a contract of lease with Regino Francisco,
Jr., whereby Soco leased her commercial building and lot situated at Manalili Street,
Cebu City, to Francisco for a monthly rental of P 800.00 for a period of 10 years
renewable for another 10 years at the option of the lessee. However, during the leasing
period, both parties were disputing certain terms indicated in the Contract of Lease,
which made Soco decide to annul the Contract and filed a civil suit for annulment
against Francisco. While the case was pending, Soco alleged that Francisco was not able
to pay his monthly rentals for the months May, June, July and August, 1977. She also
found out that Francisco was subleasing a portion of the property to NACIDA at a
monthly rate of PhP 3,000 that was higher than what Francisco was paying to Soco under
the Contract of Lease. She felt that she was on losing end and tried to find means to
terminate the Contract. Thus, the alleged non-payment of the rental beginning May 1977,
prompted her to serve notice to Francisco to vacate the premises. When Francisco
refused to leave and informed her that all payments rental due to her were in fact paid
by Commercial Bank and Trust Company (Comtrust) through the Clerk of Court of the
City Court of Cebu, she decided to file another petition which is Illegal Detainer on
January 8, 1978. Soco alleged that she had personally demanded the payment but
Francisco did not pay for the reason that he had no funds available at that time. She also
admitted that she received the check payments issued by Comtrust only from June, 1975
to April, 1977.
The City Court of Cebu ruled that there was proper substantial compliance of the
requisites of consignation; hence Francisco’s payments were valid and effective. However,
the Court of First Instance reversed the judgment and ruled in favour of Soco.
Whether consignation of rental payments were valid to discharge effectively Francisco’s
obligation
No. The Court ruled that Francisco failed to comply with the requisites for consignation
based on the evidence presented. In order that consignation may be effective, the debtor
must first comply with certain requirements prescribed by law. The debtor must show (1)
that there was a debt due; (2) that the consignation of the obligation had been made
because the creditor to whom tender of payment was made refused to accept it, or
because he was absent or incapacitated, or because several persons claimed to be entitled
to receive the amount due (Art. 1176, Civil Code); (3) that previous notice of the
consignation had been given to the person interested in the performance of the obligation
(Art. 1177, Civil Code); (4) that the amount due was placed at the disposal of the court
(Art. 1178, Civil Code); and (5) that after the consignation had been made the person
interested was notified thereof (Art. 1178, Civil Code). Failure in any of these
requirements is enough ground to render a consignation ineffective.
In sum, the Court find and rule that the lessee has failed to prove tender of payment
except that in Exh. 10; he has failed to prove the first notice to the lessor prior to
consignation except that given in Exh. 10; he has failed to prove the second notice after
consignation except the two made in Exh. 12; and he has failed to pay the rentals for the
months of July and August, 1977 as of the time the complaint was filed for the eviction of
the lessee. We hold that the evidence is clear, competent and convincing showing that the
lessee has violated the terms of the lease contract and he may, therefore, be judicially
ejected.
TITLE:
G.R. No. L-23563. May 8, 1969CRISTINA SOTTO, plaintiff-appellee,
vs. HERNANI MIJARES, ET AL., defendants-appellants.
PONENTE:
MAKALINTAL, J.:
FACTS OF THE CASE:
Sotto filed a "Motion for Deposit" on a case she filed before the CFI of Negros Occidental,
in view of the admission of the defendants of the same for an amount of P5,106.00 as a
remaining balance of debt by Defendants, in their "Opposition", signified their willingness
to deposit the amount provided that the complaint be dismissed and that they be
absolved of all other liabilities, expenses and costs. The CFI ordered "Defendants to
deposit said amount to the Clerk of Court pending the final termination of the case."
Later, Sotto represented by new counsel filed a motion for partial judgment on the
pleadings with respect to the amount of P5,106.00, modifying their previous request for
judicial deposit, which had already been granted.
Defendants moved to reconsider the order, explaining that through oversight they failed to
allege in their "Opposition" that the P5,106.00 was actually secured by a real estate
mortgage. They would thus premise their willingness to deposit said amount subject to the
condition that the mortgage they had executed as security be cancelled.
The CFI denied both motions. Thus, this appeal. Originally appealed to the CA, this case
was certified to the SC.
Whether the Court of First instance acted with authority and in the judicious exercise of its
discretion in ordering the defendants to make the deposit but without the condition they
had stated
NO. Whether or not to deposit at all the amount of an admitted indebtedness, or to do so

under certain conditions, is a right which belongs to the debtor exclusively. If he refuses he
may not be compelled to do so, and the creditor must fall back on the proper coercive
processes provided by law to secure or satisfy his credit, as by attachment, judgment and
execution.
Consignation is a facultative remedy which the debtor may or may not avail himself of.
The debtor has the right to withdraw the thing or sum deposited before the creditor has
accepted or before a judicial declaration that the consignation has been properly made is
given. If the debtor has such right of withdrawal, he surely has the right to refuse to make
the deposit in the first place.
TITLE
G.R. No. 103068, June 22, 2001, MEAT PACKING CORPORATION OF THE
PHILIPPINES, petitioner, vs. THE HONORABLE SANDIGANBAYAN, THE
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT and PHILIPPINE
INTEGRATED MEAT CORPORATION, respondents.
PONENTE:
YNARES-SANTIAGO, J.:
FACTS OF THE CASE:
Petitioner Meat Packing Corporation of the Philippines (hereinafter, MPCP), is a

corporation wholly owned by the Government Service Insurance System (GSIS). It is the
owner of three (3) parcels of land situated in Barrio Ugong, Pasig City, as well as the meat
processing and packing plant thereon. November 3, 1975, MPCP and the Philippine
Integrated Meat Corporation (hereinafter, PIMECO) entered into an Agreement 1 whereby
MPCP leased to PIMECO, under a lease-purchase arrangement, its aforesaid property at
an annual rental rate of P1,375,563.92, payable over a period of twenty-eight years
commencing on the date of execution of the Agreement, or for a total consideration of
P38,515,789.87.
On March 17, 1986, the PCGG, in a letter signed by then Commissioner Ramon A.
Diaz, sequestered all the assets, properties and records of PIMECO. The sequestration
included the meat packing plant and the lease-purchase agreement. MPCP wrote a letter
on November 17, 1986 to PIMECO, giving notice of the rescission of the lease-purchase
agreement on the ground, among others, of non-payment of rentals of more than
P2,000,000.00 for the year 1986.
GSIS asked the PCGG to exclude the meat packing plant from the sequestered assets
of PIMECO, inasmuch as the same is owned by MPCP. However, PCGG denied the
request. MPCP sought the turnover to it of the meat packing plant on the ground that the
lease-purchase agreement had already been rescinded. PCGG instituted with the
Sandiganbayan on July 29, 1987 a complaint for reconveyance, reversion, accounting,
restitution and damages, docketed as Civil Case No. 0024, entitled, "Republic of the
Philippines, Plaintiff versus Peter Sabido, et al., Defendants."The complaint alleged, in
pertinent part, that Peter Sabido obtained, under favored and very liberal terms, huge
loans from the GSIS in favor of PIMECO, among other corporations, which was
beneficially held and controlled by defendants Peter Sabido, Roberto S. Benedicto and Luis
D. Yulo; and that PIMECO was granted the monopoly to supply meat products in the
Greater Manila Area.
On April 28, 1989, defendant Sabido filed with the Sandiganbayan an Urgent
Manifestation and Motion, to the effect that he has come across newspaper reports stating
that PCGG intends to turn over the management, control and possession of PIMECO to the
GSIS and MPCP.
The Sandiganbayan, in a Resolution dated May 4, 1989, ordered the PCGG to submit its
comment as to the veracity of the alleged turnover of the management, control and
possession of PIMECO to the GSIS or MPCP, and if true, to furnish movant Sabido a copy
of the PCGG resolution approving the same. Sabido filed with the Sandiganbayan a
Motion for the Issuance of a Writ of Preliminary Injunction against consummating the
projected turnover of PIMECO to the MPC, alleging that it will result to dissipation of
assets which will cause injury to his rights and interests in the company in the event that
the same was not an ill-gotten wealth.
The sandiganbayan ruled in favor of sabido and issued the writ. PIMECO filed a
petition for declatory relief against MPCP before the sandiganbayan alleging that PIMECO
has been paying its rental regularly to MPCP from 1981 to 1985 prior to its sequestration.
However, after its sequestration, the PCGG Management Team that took over the plant
became erratic and irregular in its payments of the annual rentals to MPCP, thus
presenting the danger that PIMECO may be declared in default in the payment of rentals
equivalent to three (3) annual installments and causing the cancellation of the lease-
purchase agreement. Hence, PIMECO prayed for a declaration that it is no longer bound
by the provisions of the above-quoted paragraph 5 of the lease-purchase agreement.
In the meantime, PCGG tendered to MPCP two checks in the amounts of

P3,000,000.00 and P2,000,000.00, or a total of P5,000,000.00, representing partial payment of
accrued rentals on the meat packing plant, which MPCP refused to accept on the theory
that the lease-purchase agreement had been rescinded. Thus, the PCGG filed an Urgent
Motion20 praying that the Sandiganbayan order MPCP to accept the tendered amount of
P5,000,000.00.
The Sandiganbayan set the aforesaid Urgent Motion for hearing. On April 3, 1991,
MPCP, by special appearance, filed its Comment,21 alleging that the Sandiganbayan had no
jurisdiction over MPCP since it was not a party in Civil Case No. 0024; that its lease-
purchase agreement with PIMECO has been rescinded as early as November 19, 1986; and
that PIMECO was in arrears in the payment of rentals in the amount of P12,378,171.06,
which is more than the equivalent of three cumulative rentals at the annual rate of
P3,346,269.70.
The Court declares that the tender of payment and consignation of P5,000,000.00 in
the form of two checks, namely: China Banking Corporation Check No. LIB M 003697 for
P3,000,000.00 and Far East Bank and Trust Company Check No. 29A A 021341 for
P2,000,000.00, both dated January 30, 1991, and payable to GSIS-MPCP, have been validly
made in accordance with law and, accordingly, orders Meat Packing Corporation of the
Philippines to accept the payment and issue the corresponding receipt.
Whether Consignation was valid
YES. There was the prior tender of payment by PCCG of P5,000,000.00 for payment
of rentals for arrears. MPCP’s refusal to accept the same, on the ground merely that the
lease-purchase agreement to PIMECO has been rescinded, was unjustified.
In this case the Sandiganbayan already approved the consignation by the PCGG
wherein consignation is the act of depositing the thing due with the court or judicial
authorities whenever the creditor cannot accept or refuses to accept payment, and it
generally requires a prior tender of payment. Tender on the other hand is the antecedent of
consignation, an act preparatory to the consignation.
WHEREFORE, in view of the foregoing, the instant petition is DISMISSED for lack of
merit.
TITLE:
G.R. No. 156846 February 23, 2004 Teddy G. Pabugais, Petitioner VS Dave P. Sahijwani,
Respondent
PONENTE:
YNARES-SANTIAGO, J.
FACTS OF THE CASE:

Petitioner Pabugais and Respondent Sahijwani entered in to a ‘’Agreement and
Undertaking” dated Dec. 3 , 1993 wherein both agreed that Petitioner in consideration of
P15,487,500.00 agreed to sell to Respondent a lot containing 1,239 SQM located at North
Forbes Park, Makati. Respondent paid petitioner the amount of P600,000.00 as
option/reservation fee and the balance of P14,887,500 will be paid by him within 60 days
from the execution of the contract and in turn Petitioner will deliver the owners duplicate
TCT in respondents name, the Deed of Absolute Sale, the Certificate of Non- Tax
Delinquency on real estate taxes and Clearance on Payment of Association Dues. Both
Parties further agreed that failure on the part of respondent to pay the balance shall entitle
the petitioner to forfeit the P600,00.00 reservation fee; while non-delivery by the petitioner
of the necessary documents obliges him to return to respondent said reservation fee with
an interest of 18% per annum.
Petitioner failed to deliver the required documents and returned P600, 000.00 through a
check that was dishonored. A dispute between the parties transpired. Petitioner claims
that he twice tendered to respondent through his counsel an amount of
P672,900(reservation fee + 18% per annum from Dec. 3 1993 to Aug. 3 1994) in the form of a
Manager's Check but said counsel refused to accept it. First attempt to tender payment was
allegedly made on Aug. 3 1994 through his messenger and the Second one on August 3,
1994 through DHL Worldwide Services on August 8, 1994. On Aug. 11, 1994 petitioner
wrote a letter to respondent saying that he is consigning the amount tendered with the
RTC of Makati City. Respondent counsel claims that there is no valid tender of payment
because no check was tendered and the computation of the amount to be tendered was
insufficient because petitioner verbally promised to pay 3% monthly interest and 25%
attorney’s fees as penalty for default in addition to the 18% interest per annum and the
reservation fee.
On November 29, 1996, the trial court rendered a decision declaring the consignation
invalid for failure to prove that petitioner tendered payment to respondent and that the
latter refused to receive the same. It further held that even assuming that respondent
refused the tender, the same is justified because the manager’s check allegedly offered by
petitioner was not legal tender, hence, there was no valid tender of payment. The trial
court ordered petitioner to pay respondent the amount of P600,000.00 with interest of 18%
per annum from December 3, 1993 until fully paid, plus moral damages and attorney’s
fees.
On a motion for reconsideration, the Court of Appeals declared the consignation as valid
in an Amended Decision dated January 16, 2003. It held that the validity of the
consignation had the effect of extinguishing petitioner’s obligation to return the
option/reservation fee to respondent. Hence, the petitioner can no longer withdraw the
same.

Whether there a valid tender of payment
Yes, The manager’s check in the amount of P672,900.00 (representing the P600,000.00
option/reservation fee plus 18% interest per annum computed from December 3, 1993 to
August 3, 1994) which was tendered but refused by respondent, and thereafter consigned
with the court, was enough to satisfy the obligation. As testified by the counsel for
respondent, the reasons why his client did not accept petitioner’s tender of payment were
– (1) the check mentioned in the August 5, 1994 letter of petitioner manifesting that he is
settling the obligation was not attached to the said letter; and (2) the amount tendered was
insufficient to cover the obligation. It is obvious that the reason for respondent’s non-
acceptance of the tender of payment was the alleged insufficiency thereof – and not
because the said check was not tendered to respondent, or because it was in the form of
manager’s check. While it is true that in general, a manager’s check is not legal tender, the
creditor has the option of refusing or accepting it. Payment in check by the debtor may be
acceptable as valid, if no prompt objection to said payment is made. Consequently, the
petitioner's tender of payment in the form of manager’s check is valid.
TITLE:
G.R. No. L-44349, JESUS V. OCCENA and EFIGENIA C. OCCENA, petitioners,
vs. HON. RAMON V. JABSON, Presiding Judge of the Court Of First Instance of Rizal,
Branch XXVI; COURT OF APPEALS and TROPICAL HOMES, INC., respondents.
PONENTE:
Teehankee, J.
FACTS OF THE CASE:

On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint for
modification of the terms and conditions of its subdivision contract with petitioners
(landowners of a 55,330 square meter parcel of land in Davao City) alleging that due to
increase in price of oil and its derivatives and the worldwide spiralling of prices, all
commodities including basis raw materials required for such development work, the cost
of development has risen to levels which are unanticipated, unimagined and not within
the remotest contemplation of the parties at the time agreement was entered into and into
such degree that the conditions and factors which formed the original contract totally
changed.
Respondent pray of the Rizal court of first instance that "after due trial, this Honorable
Court render judgment modifying the terms and conditions of the contract ... by fixing the
proer shares that shouls pertain to the herein parties out of the gross proceeds from the
sales of subdivided lots of subjects subdivision", which petitioners moved to dismiss die to
lack of cause of action.

RTC dismissed the petition. CA also dismissed the petition on the ground under Art.
1267: ART. 1267. When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or in
part. A positive right is created in favor of the obligor to be released from the performance
of an obligation in full or in part when its performance 'has become so difficult as to be
manifestly beyond the contemplation of the parties.
Whether the worldwide increase in prices cited by respondent does not constitute a
sufficient cause of action for modification of the subdivision contract
The petition must be granted. While respondent court correctly cited in its decision the
Code Commission's report giving the rationale for Article 1267 of the Civil Code, to wit;
the general rule is that impossibility of performance releases the obligor. However, it is
submitted that when the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the court should be authorized to release the obligor in whole
or in part. The intention of the parties should govern and if it appears that the service turns
out to be so difficult as have been beyond their contemplation, it would be doing violence
to that intention to hold the obligor still responsible.
Respondent’s complaint seeks not release from the subdivision contract but that the court
"render judgment I modifying the terms and Conditions of the Contract by fixing the
proper shares that should pertain to the herein parties out of the gross proceed. From the
sales of subdivided lots of subject subdivision. The cited article does not grant the courts
this authority to remake, modify or revise the contract or to fix the division of shares
between the parties as contractually stipulated with the force of law between the parties,
so as to substitute its own terms for those covenanted by the parties themselves.
Respondent's complaint for modification of contract manifestly has no basis in law and
therefore states no cause of action. Under the particular allegations of respondent's
complaint and the circumstances therein averred, the courts cannot even in equity grant
the relief sought.
TITLE:
G.R. No. 107112 February 24, 1994 NAGA TELEPHONE CO., INC. (NATELCO) AND
LUCIANO M. MAGGAY, petitioners,vs. THE COURT OF APPEALS AND
CAMARINES SUR II ELECTRIC COOPERATIVE, INC. (CASURECO II), respondents.
PONENTE:
NOCON, J.:
FACTS OF THE CASE:
On November 1, 1977, Naga Telephone Co., Inc. (NATELCO) entered into a contract with
Camarines Sur II Electric Cooperative, Inc. (CASURECO II) where it is stipulated that
NATELCO will use the electric light posts of CASURECO II for the operation of
NATELCO’s telephone service. In return, NATELCO agreed to install 10 telephone
connections for the use by CASURECO II, free of charge. After the enforcement of the
contract for over 10 years, on January 2, 1989, CASURECO II filed against NATELCO for
reformation of the contract with damages on the ground that it is too one-sided in favor of
NATELCO. It argued that after 11 years of NATELCO’s use of the posts, the telephone
cables strung by them became heavier with the increase in the volume of their subscribers,
worsened by the fact that their linemen bore holes through the posts which caused the
posts to be destroyed during typhoons.

RTC of Naga City ruled in favor of the CASURECO ordering the reformation of the
agreement ordering the defendants to pay plaintiff's electric poles in Naga City and in the
towns of Milaor, Canaman, Magarao and Pili, Camarines Sur and in other places where
defendant NATELCO uses plaintiff's electric poles, the sum of TEN (P10.00) PESOS per
plaintiff's pole, per month beginning January, 1989. Petitioners appealed to the Court of
Appeals. In the decision dated May 28, 1992, respondent court affirmed the decision of the
trial court, but based on different grounds to wit: (1) that Article 1267 of the New Civil
Code is applicable and (2) that the contract was subject to a potestative condition which
rendered said condition void
Whether the subject to a potestative condition in favor of petitioners

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals dated
May 28, 1992 and its resolution dated September 10, 1992 are AFFIRMED.
Yes. Petitioners' allegations must be upheld in this regard. A potestative condition is a

condition, the fulfillment of which depends upon the sole will of the debtor, in which case,
the conditional obligation is void. Based on this definition, respondent court's finding that
the provision in the contract, to wit:(a) That the term or period of this contract shall be as
long as the party of the first part (petitioner) has need for the electric light posts of the
party of the second part (private respondent) . . ..is a potestative condition, is correct.
However, it must have overlooked the other conditions in the same provision, to wit:. . . it
being understood that this contract shall terminate when for any reason whatsoever, the
party of the second part (private respondent) is forced to stop, abandoned (sic) its
operation as a public service and it becomes necessary to remove the electric light post
(sic); which are casual conditions since they depend on chance, hazard, or the will of a
third person. In sum, the contract is subject to mixed conditions, that is, they depend
partly on the will of the debtor and partly on chance, hazard or the will of a third person,
which do not invalidate the aforementioned provision. Nevertheless, in view of our
discussions under the first and second issues raised by petitioners, there is no reason to set
aside the questioned decision and resolution of respondent court
TITLE:
G.R. No. 116896, May 5, 1997, PHILIPPINE NATIONAL CONSTRUCTION
CORPORATION, petitioner VS. COURT OF APPEALS, MA. TERESA S. RAYMUNDO-
ABARRA, JOSE S. RAYMUNDO, ANTONIO S. RAYMUNDO, RENE S. RAYMUNDO,
and AMADOR S. RAYMUNDO, respondents.
PONENTE:
DAVIDE, JR., J.:
FACTS OF THE CASE:

PNCC entered into the contract of lease with the respondents for 5 years commencing on
the date of issuance of the clearance by the Ministry of Human Settlements. Raymundo
demanded for the first annual rental fee and this is due and demandable upon the
extraction of the contract. The PNCC argued that the payment of the rental would
commence on the date of the issuance of an industrial clearance by the Ministry of Human
Settlements, and not from the date of signing of the contract. Raymundo refused PNCC’s
request for the pre-termination of the lease contract, claim aued that it was only to
obligated to pay

The trial court rendered a decision ordering petitioner to pay private respondents the
amount of P492,000 which represented the rentals for two years, with legal interest from 7
January 1986 until the amount was fully paid, plus attorney's fees in the amount of P20,000
and costs.
Court of Appeal affirmed the decision

Whether the petitioner should be released from the obligatory force of contract of
lease

No, the petitioner cannot take refuge since it is only applicable to obligations to do and to
give. The obligations to pay rentals or deliver the thing in a contract of lease, hence not
covered within the scope of Article 1266. The unforeseen event and causes are not legally
and physically impossible. It is a fundamental rule that contracts, once perfected, bind
both parties and obligations arising have the force of law between the parties and should
be complied with in good faith.
TITLE:
G.R. No. 104726 February 11, 1999 VICTOR YAM & YEK SUN LENT, doing business
under the name and style of Philippine Printing Works; Petitioners, vs. THE COURT
OF APPEALS and MANPHIL INVESTMENT CORPORATION, Respondents.
PONENTE:
MENDOZA, J.:
FACTS OF THE CASE:
Victor Yam and Yek Sun Lent obtained a loan of P300,000 denominated as Industrial
Guarantee and Loan Fund (IGLF) from Manphil Investment Corporation. On April 2, 1985,
Manphil was placed under receivership by the Central Bank. Yam and Sun paid on July 31,
1986 which was received by Central Bank. It contained a notation on the voucher that there
was already a full payment of IGLF loan. Manphil filed a collection case against the two
after they failed to pay the remaining balance. The two contended that through Manphil’s
president, it was agreed to condone the penalties and service charges.

The trial court rendered a decision in favor of respondents which was sustained by CA.

Whether there was condonation on petitioner’s loan

NO. The appointment of a receiver operates to suspend the authority of a corporation and
of its directors and officers over its property and effects, such authority being reposed in
the receiver. Sobrepeñas has no authority to condone the debt. The notation on the
voucher covering the check payment that a “full payment of IGLF loan” was made does
not bind respondent. It would have been different if the notated appeared in the receipt
issued by the corporation through its receiver, which would be an admission against
interest. Express condonation must comply the forms of donation. Where the value
exceeds Php 5,000, the donation and acceptance must be made in writing; otherwise, void.
TITLE:
G.R. No. L-22490, May 21, 1969, Gan Tion vs Court of Appeals
PONENTE:
Chief Justice Querube C. Makalintal
FACTS OF THE CASE:
GAN TION filed an ejectment case against his tenant ONG WAN SIENG for non-payment
of rents for two months, at P180 a month, or P360 altogether. ONG denied the allegation
and said that the agreed monthly rental was only P160, which he had offered to but was
refused by GAN. GAN TION filed certiorari to the Court of Appeals, where he pleaded
legal compensation, claiming that ONG WAN SIENG was indebted to him in the sum of
P4,320 for unpaid rents. CA accepted the petition but eventually decided in favor of ONG,
holding that although "respondent Ong is indebted to the petitioner for unpaid rentals in
an amount of more than P4,000.00," the sum of P500 could not be the subject of legal
compensation, it being a "trust fund for the benefit of the lawyer, which would have to be
turned over by the client to his counsel."
MTC of Manila rendered decision in favor of GAN, but CFI reversed the judgment and
dismissed the complaint. CFI ordered GAN to pay ONG Php 500.00 as attorney’s fees.
Whether there has been legal compensation between petitioner and respondent.
YES. WHEREFORE, the judgment of the Court of Appeals is reversed, and the writ of
execution issued by the Court of First Instance of Manila in its Civil Case No. 49535 is set
aside. Costs against respondent
The award is made in favor of the litigant, not of his counsel, and is justified by way of
indemnity for damages recoverable by the litigant in the cases enumerated in Article 2208
of the Civil Code. It is the litigant, not his counsel, who is the judgment creditor and who
may enforce the judgment by execution. Such credit, therefore, may properly be the subject
of legal compensation. Quite obviously it would be unjust to compel petitioner to pay his
debt for P500 when admittedly his creditor is indebted to him for more than P4,000.
TITLE:
G.R. No. L-74027, 07 December 1989, SILAHIS MARKETING CORPORATION vs.
INTERMEDIATE APPELATE COURT and GREGORIO DE LEON, doing business
under the name and style of “MARK INDUSTRIAL SALES”
PONENTE:
FERNAN, C. J.
FACTS OF THE CASE:

Gregorio de Leon (De Leon) sold and delivered to Silahis Marketing Corporation
(Silahis) various items of merchandise covered by several invoices in the aggregate amount
of Php22,213.75 payable within 30 days from date of the covering invoices. Consequently,
Silahis failed to pay its account. Repeated demands were made but to no avail. De Leon
then filed before the Court of First Instance (CFI) of Manila a complaint for collection of
said accounts, attorney’s fees and litigation costs.
Silahis, in his answer admitted the allegations insofar as the invoices were
concerned but presented a debit memo as his defense. He contends that under the debit
memo, he supposed to receive Php22,200 as commission from the sale of sprockets in the
amount of P111,000 made directly by De Leon to Dole Philippines Inc. He also claimed
that he was entitled to return the defective stainless steel found by his client, Borden
International Davao, and the same should be deducted from his account.

The CFI of Manila confirmed the liability of Silahis for the claim of de Leon and
ordered that it be partially offset by Silahis' counterclaim as contained in the debit memo
for unrealized profit and commission. De Leon appealed, the Intermediate Appellate Court
(IAC) set aside CFI’s decision and dismissed Silahis’ counterclaim for lack of factual or
legal basis.

Whether De Leon is liable to Silahis for the commission or margin for the direct sale
which the former concluded and consummated with Dole Philippines, Incorporated
without coursing the same through herein petitioner
NO - There is no evidence on record from which it can be inferred that there was
any agreement between the petitioner and private respondent prohibiting the latter from
selling directly to Dole Philippines, Incorporated. Definitely, it cannot be asserted that the
debit memo was a contract binding between the parties considering that the same, as
correctly found by the appellate court, was not signed by private respondent nor was there
any mention therein of any commitment by the latter to pay any commission to the former
involving the sale of sprockets to Dole Philippines, Inc. in the amount of P 111,000.00.
Compensation takes place when two persons, in their own right, are creditors and
debtors to each other. Article 1279 of the Civil Code provides that: "In order that
compensation may be proper, it is necessary that:
1. Each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
2. Both debts consist in a sum of money, or if the things due are consumable,
they be of the same kind, and also of the same quality if the latter has been
stated;
3. The two debts be due;
4. They be liquidated and demandable;
When all the requisites mentioned in Art. 1279 of the Civil Code are present,
compensation takes effect by operation of law, even without the consent or knowledge of
the creditors and debtors. Article 1279 requires, among others, that in order that legal
compensation shall take place, "the two debts be due" and "they be liquidated and
demandable." Compensation is not proper where the claim of the person asserting the set-
off against the other is not clear nor liquidated; compensation cannot extend to
unliquidated, disputed claim existing from breach of contract.
TITLE:
G.R. No. 116792 March 29, 1996
BANK OF THE PHILIPPINES ISLAND and GRACE ROMERO, petitioners,
vs. COURT OF APPEALS and EDVIN F. REYES, respondents.
PONENTE:
PUNO, J.
FACTS OF THE CASE:

Private respondent Edvin F. Reyes opened two (2) “AND/OR” Savings Account at
petitioner Bank of the Philippine Islands (BPI) Cubao, Shopping Center Branch. One is
with his wife and the other is with his grandmother, Emerita M. Fernandez. Private
respondent regularly deposits in the latter account the U.S. Treasury Warrants payable to
the order of Emerita as her monthly pension.
Emerita died in December 1989 without the knowledge of the U.S. Treasury Department,
so they still sent a U.S. Treasury Warrant for January 1990 in the amount of $377.003 or
P10,556.00. on January 4, 1990. Private respondent deposited the U.S. Treasury check to
BPI. The check was conditionally cleared and deposited to the joint account but was sent to
United States for further clearing.
In March 1990, private respondent closed the joint account and transferred its funds to his
joint account with his wife. In February 1991, private respondent was informed that the
treasury check was dishonored as it was discovered that Emerita died three (3) days prior
to its issuance and BPI was requesting him to return the money. In a telephone
conversation, the private respondent authorized the bank to debit the money from his joint
account with his wife, which the bank did. However, the private respondent refused to
execute a written authority.
The private respondent sued the bank demanding for the restitution the debited amount
claiming that because of the debit, he failed to withdraw his money when he needed them.
For its part, BPI contested the complaint averring that private respondent gave them
verbal authorization to debit the amount and that he refused to execute a written
authority.

TRIAL COURT: dismissed the complaint for lack of cause of action
CA: reversed the decision and ruled in favor of the private respondent
Whether the respondent court erred when it failed to rule that legal compensation is
proper
Yes. Compensation shall take place when two persons, in their own right, are creditors and
debtors of each other. Article 1290 of the Civil Code provides that “when all the requisites
mentioned in Article 1279 are present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even though the creditors and debtors
are not aware of the compensation.” Legal compensation operates even against the will of
the interested parties and even without the consent of them. Since this compensation takes
place ipso jure, its effects arise on the very day on which all its requisites concur. When
used as a defense, it retroacts to the date when its requisites are fulfilled.
Article 1279 states that in order that compensation may be proper, it is necessary:
“(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be
of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.”
The elements of legal compensation are all present in the case at bar. The obligors bound
principally are at the same time creditors of each other. Petitioner bank stands as a debtor
of the private respondent, a depositor. At the same time, said bank is the creditor of the
private respondent with respect to the dishonored U.S. Treasury Warrant which the latter
illegally transferred to his joint account. The debts involved consist of a sum of money.
They are due, liquidated, and demandable. They are not claimed by a third person.
It is true that the joint account of private respondent and his wife was debited in the case at
bar. We hold that the presence of private respondent’s wife does not negate the element of
mutuality of parties, i.e., that they must be creditors and debtors of each other in their own
right. The wife of private respondent is not a party in the case at bar. She never asserted
any right to the debited U.S. Treasury Warrant. Indeed, the right of the petitioner bank to
make the debit is clear and cannot be doubted. To frustrate the application of legal
compensation on the ground that the parties are not all mutually obligated would result in
unjust enrichment on the part of the private respondent and his wife who herself out of
honesty has not objected to the debit. The rule as to mutuality is strictly applied at law. But
not in equity, where to allow the same would defeat a clear right or permit irremediable
injustice.
IN VIEW HEREOF, the Decision of respondent Court of Appeals in CA-G.R. CV No. 41543
dated August 16, 1994 is ANNULLED and SET ASIDE and the Decision of the trial court in
Civil Case No. Q-91-8451 dated January 20, 1993 is REINSTATED. Costs against private
respondent.
TITLE:
G.R. No. 108052 July 24, 1996 PHILIPPINE NATIONAL BANK, petitioner, vs. THE
COURT OF APPEALS and RAMON LAPEZ,1 doing business under the name and style
SAPPHIRE SHIPPING, respondents.
PONENTE:
PANGANIBAN, J
FACTS OF THE CASE:
PNB appropriated the amounts of $2, 627.11 and P34,340.38 from remittances of Ramon
Lapez’ principals abroad. The first remittance was made by the NCB of Jeddah for the
benefit of Lapez to be credited to his account at Citibank; the second was from Libya, and
was intended to be deposited at Lapez account with PNB. Lapez made a written demand
for remittance of the equivalent of $2,627.11. There were two instances in the past that
Lapez’s account was doubly however, plaintiff’s claim has prescribed.
PNB made a demand upon Lapez for refund of the double or duplicated credits
erroneously made on his account.

RTC and CA ruled in favor of Lapez.
Whether the PNB was legally justified in making the compensation or set-off against the
two remittances coursed through it in favor of private respondent to recover on the double
credits it erroneously made in 1980 and 1981, based on the principle of solutio indebiti.
No, they were not. Article 1279 of the Civil Code provides: 'In order that compensation
may prosper, it is necessary:(1) That each one of the obligors be bound principally, and
that he be at the same time a principal creditor of the other;(2) That both debts consists in a
sum of money, or if the things due are consumable, they be of the same kind, and also of
the same quality if the latter has been stated;(3) That the two debts be due;(4) That they be
liquidated and demandable;(5) That over neither of them there by any retention or
controversy, commenced by third persons and communicated in due time to the debtor."'
In the case of the $2,627.11, requisites Nos. 2 through 5 are apparently present, for both
debts consist in a sum of money, are both due, liquidated and demandable, and over
neither of them is there a retention or controversy commenced by third persons and
communicated in due time to the debtor. The question, however, is, were both of the
obligors bound principally, and was each one of them a debtor and creditor of the other at
the same time?
Analyzing now the relationship between the parties, it appears that:(a) With respect to
Lapez being a depositor of PNB, they are creditor and debtor respectively(b) As to the
relationship created by the telexed fund transfers from abroad: A contract between a
foreign bank and local bank asking the latter to pay an amount to a beneficiary is a
stipulation pour autrui--a stipulation in favor of a third person.
Thus between PNB (as the local correspondent of the National Commercial Bank of
Jeddah) and Lapez as beneficiary, there is created an implied trust pursuant to Art. 1453 of
the Civil Code, quoted as follows: "'When the property is conveyed to a person in reliance
upon his declared intention to hold it for, or transfer it to another or the grantor, there is an
implied trust in favor of the person whose benefit is contemplated.
c) By the principle of solutio indebiti, Lapez, who unduly received something by mistake
(i.e., the 2 double credits, although he had no right to demand it), became obligated to PNB
to return what he unduly received.Thus, there was created between them a relationship of
obligor and obligee, or of debtor and creditor under a quasi-contract.
TITLE:
G.R. No. 128448 February 1, 2001
SPOUSES ALEJANDRO MlRASOL and LILIA E. MIRASOL, petitioners,
vs.THE COURT OF APPEALS, PHILIPPINE NATIONAL and PHILIPPINE
EXCHANGE CO., INC., respondent.
PONENTE:
QUISUMBING, J.:
FACTS OF THE CASE:
(PNB) financed the Mirasols' sugar production venture FROM 1973-1975 under a crop loan
financing scheme. signed Credit Agreements, a Chattel Mortgage on Standing Crops, and a
Real Estate Mortgage in favor of PNB.
PD 579 authorized (PHILEX) to purchase sugar allocated for export and authorized PNB to
finance PHILEX's purchases. Believing that the proceeds were more than enough to pay
their obligations, petitioners asked PNB for an accounting of the proceeds which it
ignored. Petitioners continued to avail of other loans from PNB and to make unfunded
withdrawals from their accounts with said bank. PNB asked petitioners to settle their due
and demandable accounts. As a result, petitioners, conveyed to PNB real properties by
way of dacion en pago still leaving an unpaid amount. PNB proceeded to extrajudicially
foreclose the mortgaged properties. PNB still had a deficiency claim.
Petitioners continued to ask PNB to account for the proceeds, insisting that said proceeds,
if properly liquidated, could offset their outstanding obligations. PNB remained adamant
in its stance that under P.D. No. 579, there was nothing to account since under said law, all
earnings from the export sales of sugar pertained to the National Government.
On August 9, 1979, the Mirasol filed a suit for accounting, specific performance, and
damages against PNB.
The trial court in favor of the plaintiffs and against the defendants Philippine National
Bank (PNB) On July 22, 1996, the Court of Appeals reversed the trial court
Whether the Honorable Court of Appeals committed manifest error in upholding the
validity of the foreclosure on petitioners property and in upholding the validity of the
dacion en pago in this case
NO, petitioners' arguments unpersuasive. Both the lower court and the appellate court
found that the Mirasols admitted that they were indebted to PNB in the sum stated in the
latter's counterclaim.26 Petitioners nonetheless insist that the same can be offset by the
unliquidated amounts owed them by PNB for crop years 1973-74 and 1974-75. Petitioners'
argument has no basis in law. For legal compensation to take place, the requirements set
forth in Articles 1278 and 1279 of the Civil Code must be present. Said articles read as
follows:
"Art. 1278. Compensation shall take place when two persons, in their own right, are
creditors and debtors of each other.
Art. 1279. In order that compensation may be proper, it is necessary:(1) That each one of
the obligors be bound principally, and that he be at the same time a principal creditor of
the other; (2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has been
stated; (3) That the two debts are due; (4) That they be liquidated and demandable; (5) That
over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor." compensation cannot take place where one
claim, as in the instant case, is still the subject of litigation, as the same cannot be deemed
liquidated. With respect to the duress allegedly employed by PNB, which impugned
petitioners' consent to the dacion en pago, both the trial court and the Court of Appeals
found that there was no evidence to support said claim. Factual findings of the trial court,
affirmed by the appellate court, are conclusive upon this Court.
TITLE:
G.R. No. L-29981 April 30, 1971 , Miller v. CA, 38 SCRA 642 (1971)
PONENTE:
CASTRO, J.:
FACTS OF THE CASE:
Millar obtained a favorable judgment condemning Antonio P. Gabriel to pay him the sum
of P1,746.98 with interest at 12% per annum for the date of the filing of the complaint, the
sum of P400 as attorney's fees, and the cost of suit. The lower court issued the the writ of
execution on the basis of which the sheriff seized the respondent's Willy's Ford jeep. The
respondent, however, pleaded with the petioner to release the jeep under an arrangement
whereby the respondent, to secure the payment of the judgement debt, agreed to mortage
the vechicle in favor of the petitioner. The petitioner agreed to the arrangement ; thus, the
parties executed a chattle mortgage on the jeep. Resolution of the controversy posed by
the petitionat the bar hinges entirely on a determination of whether or not the subsequent
agreement of the parties as embodied in the deed of the chattle mortage impliedly
novated the judgement obligation.

The lower court ruled that novation had taken place, and that the parties had executed the
chattel mortgage only "to secure or get better security for the judgment.
The respondent duly appealed the aforesaid order to the Court of Appeals, which set aside
the order of execution in a decision rendered on October 17, 1968, holding that the
subsequent agreement of the parties impliedly novated the judgment obligation in civil
case 27116.
Whether there is a valid Novation
No. substantial incompatibility between the mortgage obligation and the judgment
liability of the respondent sufficient to justify a conclusion of implied novation. The
stipulation for the payment of the obligation under the terms of the deed of chattel
mortgage serves only to provide an express and specific method for its extinguishment -
payment in two equal installments. The chattel mortgage simply gave the respondent a
method and more time to enable him to fully satisfy the the judgement indebtedness. The
chattel mortgage agreement in no manner introduced any substantial modification or
alternation of the judgement. Instead of extinguishing the obligation of the respondent
arising from the judgement, the deed of mortgage expressly ratified and confirmed the
existence of the same, amplifying only the mode and period for compliance by the
respondent. The defense of implied novation requires clear and convincing proof of
complete Incompatibility between the two obligations. The law requires no specific form
for an effective novation.
TITLE:
G.R. No. L-18411, December 17, 1966, Magdalena Estate, Inc., plaintiff-appellee vs
Antoni A. Rodriguez and Herminia C. Rodriguez, defendants-appellants.
PONENTE:
REGALA, J.:
FACTS OF THE CASE:

Spouses Rodriguez brought from Magdalena Estate Inc. a parcel of land in
Quezon City, they issued a promissory note in view of the unpaid balance on the purchase
price. On the same day, Spouses Rodriguez and Luzon Surety Co. Inc. paid to the
Magdalena Estate the sum of P5,000. Subsequently, Magdalena Estate demanded from
Spouses Rodriguez the payment of P655.89 corresponding to the alleged accumulated
interest on the principal. Due to the refusal of the Spouses to pay the said interest,
Magdalena Estate filed a suit in the Municipal Court of Manila to enforce the collection.
The court rendered judgment in favor of Magdalena Estate, ordering the Spouses to pay
the sum of P655.89 with interest at the legal rate from the date of the filling of the
complaint, until the whole amount is fully paid. The Spouses appealed to the CFI of
Manila, claiming that the pleadings do not show that there was demand made by the
Magdalena Estate for the payment of accrued interest and what could be deduced
therefrom was merely that Magdalena Estate demanded from Luzon Surety Co. Inc. , in its
capacity as surety. They further claimed that the unqualified acceptance of payment made
by the Luzon Surety Co. Inc. of P5,000 or only the amount of the principal obligation and
without exercising its right to apply a portion of P655.89 thereof to the payment of the
alleged interest due despite its presumed knowledge of its right to do so, Magdalena
Estate showed that it waived or condoned the interest due.

The CFI held Spouses Rodriguez liable and ordered them to pay jointly and
severally to the Magdalena Estate the sum of P655.89 plus legal interest thereon from date
of judicial demand, the sum of P100 as attorney’s fees and to pay the costs.

Whether there was a novation of the obligation
No, the rule is settled that novation by presumption has never been favored.
It needs to be established that the old and new contracts are incompatible in all points, or
that the will to novate appears by express agreement of the parties or in acts of similar
import. An obligation to pay a sum of money is not novated, in a new instrument wherein
the old is ratified, by changing only the terms of payment and adding other obligations not
compatible with the old one, or wherein the old contract is merely supplemented by the
new one. The mere fact that the creditor receives a guaranty or accepts payments from a
third person who has agreed to assume the obligation, when there is no agreement that the
first debtor shall be released from responsibility, does not constitute a novation, and the
creditor can still enforce the obligation against the original debtor. In this case, the surety
bond is not a new and separate contract but an accessory of the promissory note. The
judgment appealed from is affirmed with costs against the appellants.
TITLE:
Reyes v. Secretary of Justice, 264 SCRA 3 5 ( 1996)
PONENTE:
TORRES, JR., J.:
FACTS OF THE CASE:
Respondents. Elsa Reyes is the president of Eurotrust Capital Corporation, a domestic

corporation engaged in credit financing. Graciela Eleazar, is the president of B.E. Ritz
Mansion International Corporation, a domestic enterprise engaged in real estate
development. The other respondent, Armed Forces of the Philippines Mutual Benefit
Asso., Inc. , is a corporation duly organized primarily to perform welfare services for the
Armed Forces of the Philippines. Elsa Reyes alleges that Eurotrust and Bermic entered into
a loan agreement to finance the construction of Ritz Condominium and Gold Business
Park. Bermic issued 21 postdated checks to cover payments of the loan packages.
However, the checks were dishonored by the drawee bank, RCBC, due to stop payment
order made by Graciela Eleazar. Eleazar failed to make good dishonored checks,
prompting Reyes to file for BP 22 and Estafa. Meanwhile, respondent AFP-MBAI which
invested its funds with Eurotrust, found out that the amounts paid by AFP-MBAI to
Eurotrust for those securities were in turn lent by Elsa Reyes to Bermic and others. When
Eleazar came to know that the funds originally loaned by Eurotrust to Bermic belonged to
AFPMBAI, she requested a meeting with Eurotrust representatives. Thus, agreed that
Bermic would directly settle its obligations with the real owners of the fund-AFP-MBAI
and DECS-IMC. However, Graciela Eleazar later learned that Elsa Reyes continued to
collect on the PDCs issued contrary to their agreement. So, Bermic wrote to Eurotrust to
hold the amounts "in constructive trust" for the real owners. But Reyes continued to collect
on. Upon her counsel's advice, Eleazar had the payment stopped. Hence, her checks issued
in favor of Eurotrust were dishonored. After investigation, the Office of the Provincial
Prosecutor of Rizal issued a resolution dismissing the complaints filed by Elsa Reyes
against Graciela Eleazar on the ground that when the latter assumed the obligation of
Reyes to AFP-MBAI, it constituted novation, extinguishing any criminal liability on the
part of Eleazar.
The first Department of Justice Resolution dated January 23, 1992 which sustained the
Provincial Prosecutor's decision dismissing petitioner's complaints against respondent
Eleazar for violation of B.P. 22 and estafa ruled that the contract of loan between petitioner
and respondent Eleazar had been novated when they agreed that respondent Eleazar
should settle her firm's (BERMIC) loan obligations directly with AFP-MBAI and DECS-
IMC instead of settling it with petitioner Reyes.
Whether the contract of loan between petitioner and respondent Eleazar had been novated
when they agreed that respondent Eleazar should settle her firm's loan obligations directly
with AFPMBAI and DECS-IMC instead of settling it with petitioner Reyes
Admittedly, in order that a novation can take place, the concurrence of the following
requisites indispensable: 1. there must be a previous valid obligation, 2 there must be an
agreement of the parties concerned to a new contract, 3. there must be the extinguishment
of the old contract, and 4. there must be the validity of the new contract.
Upon the facts shown in the record, the last three essential requisites of novation are
wanting in the instant case. No new agreement for substitution of creditor war forged
among the parties concerned which would take the place of the preceding contract. The
absence of a new contract extinguishing the old one destroys any possibility of novation by
conventional subrogation, In concluding that a novation took place, the respondent court
relied on the two letters which, according to it, formalized the agreement that BERMIC
would directly settle its obligation with the real owners of the funds - the AFP MBAI and
DECS IMC. The fact that respondent Eleazar made payments to AFP-MBAI and the latter
accepted them does not ipso facto result in novation. There must be an express intention to
novate — animus novandi. 1 Novation is never presumed. Article 1300 of the Civil Code
provides inter alia that conventional subrogation must be clearly established in order that
it may take effect. Article 1293 of the Civil Code is explicit, thus: Novation which consists
in substituting a new debtor in the place of the original one, may be made even without or
against the will of the latter, but not without the consent of the creditor. Payment by the
new debtor gives him the rights mentioned in Articles 1236 and 1237. The consent of the
creditor to a novation by change of debtor is as indispensable as the creditor's consent in
conventional subrogation in order that a novation shall legally take place.
TITLE:
G.R. No. L-47369, June 30, 1987 JOSEPH COCHINGYAN, JR. and JOSE K.
VILLANUEVA, Petitioners vs. R&B SURETY AND INSURANCE COMPANY, INC.,
Respondent
PONENTE:
FELICIANO, J.
FACTS OF THE CASE:

In November 1963, Pacific Agricultural Suppliers, Inc (PAGRICO) was granted an
increase in its credit line with the Philippine National Bank (PNB) from Php400,000.00 to
Php 800,000.00 (The “Principal Obligation). PAGRICO submitted Surety Bond. No. 4765,
issued by respondent R&B Surety and Insurance Co., in the amount of Php400,000.00 in
favor of the PNB. There were two (2) identical indemnity agreements entered into with
R&B Surety’s Bond executed by the Catholic Church Mart (CCM) and by Petitioner Joseph
Cochingyan, Jr. and another agreement dated December 24, 1963 was executed by
PAGRICO in consideration of R&B Surety’s issuance of surety bond. In accordance with
both indemnity agreements, the indemnitors bound themselves jointly and severally to
R&B Surety to pay an annual premium of Php5,103.05 and “for the faithful compliance of
the terms and conditions setforth in said surety bond for a period beginning until the same
is cancelled and/or discharged. When PAGRICO failed to comply with its Principal
Obligation with the PNB, the latter demanded payment from R&B Surety of the sum
amounting to Php400,000.00, the full amount of the Principal Obligation. Hence, R&B
made a series of payments to PNB by virtue of that demand totalling to Php70,000.00
evidenced by detailed vouchers and receipts. Consequently, R&B Surety sent formal
demand letters to Petitioners Joseph Cochingyan, Jr. and Jose K. Villanueva for
reimbursement of the payments made to PNB and for a discharge of its liability to the PNB
under the Surety Bond. When Petitioners failed to heed its demands, R&B Surety brought
suit against Cochingyan, Jr. and Jose Villanueva, and Liu Tua Ben.

The lower court rendered a Decision in favor of R&B Surety, ordering Cochingyan
and Villanueva to pay the plaintiff, jointly and severally, the total amount of their liability
on Surety Bond No. 4765, at the interest rate of 6% per annum
Whether the Trust Agreement had extinguished by novation, the obligation of R&B
Surety to the PNB under the Surety Bond which, in turn, extinguished the obligations of
petitioners under the Indemnity Agreements

No. Novation is the extinguishment of an obligation by the substitution or change
of the obligation by a subsequent one which terminates it, either by changing its object or
principal conditions, or by substituting a new debtor in place of the old one, or by
subrogating a third person ot the rights of the creditor. Novation through a change of the
object or principal conditions of an existing obligation is referred to as objective (or real)
novation. Novation by change of either the person of the debtor or the creditor is
described as subjective (or personal) novation. Novation may also be both objective and
subjective (mixed) at the same time. In both objective and subjective novation, a dual
purpose is achieved - an obligation is extinguished and a new one is created in lieu thereof.
In the case at bar, applying the above principles, it is at once evident that the Trust
Agreement does not expressly terminate the obligation of R&B Surety under the Surety
Bond. On the contrary, the Trust Agreement expressly provides for the continuing
subsistence of that obligation by stipulating that “the trust agreement shall not in any
manner release” R&B Surety from its obligation under the Surety Bond.
Neither can the petitioners anchor their defense on implied novation. Absent an
unequivocal declaration of a pre-existing obligation, a showing of complete
incompatibility between the old and the new obligation (and nothing else) would sustain a
finding of novation by implication. But where, as in this case, the parties to the new
obligation expressly recognize the continuing existence and validity of the old one, where,
in other words, the parties expressly negated the lapsing of the old obligation, there can be
no novation. The issue of implied novation is not reached at all.
The appeal is DENIED for lack of merit and the Decision of the trial court is
AFFIRMED in toto.
TITLE:.
G.R. No. 79642. July 5, 1993. BROADWAY CENTRUM CONDOMINIUM
CORPORATION, Petitioner, v. TROPICAL HUT FOOD MARKET, INC. and THE
HONORABLE COURT OF APPEALS, Respondents.
PONENTE:
FELICIANO, J.:
FACTS OF THE CASE:

Broadway Centrum and Tropical Hut Food Market entered into a contract of lease wherein
Tropical Hut leases a portion of Broadway Centrum Commercial Complex. The contract is
to last for 10 years beginning 1981-1991. There were no problems during the 1st year of the
lease, however, in 982, Tropical requested for a rental rate reduction due to financial
difficulties. Negotiations between the 2 were made, Broadway agreed to a provisional and
temporary agreement where Tropical will pay a monthly rental of Php 60 000 or 2% of
gross receipts, whichever is higher, and return a portion of the leased space. After a few
months, Broadway sent Tropical a letter returning to the old rental rates. Tropical
requested that the reduced rental rates be maintained until its sales recovered. Broadway
denied this request and sought to enforce the original agreement. Tropical filed for a a
restraining order or preliminary injunction to prevent Broadway from invoking and
implementing Section 5 of their Lease Contract. Tropical alleged that the original Contract
of Lease had been novated in its principal conditions.
The RTC rendered judgement in favor of the plaintiff and against the defendant. The Court
of Appeals affirmed the decision of the trial court. The Court of Appeals held that the
letter-agreement dated 20 April 1982 had novated the principal conditions of the Lease
Contract. The Court of Appeals also held that the reduction in the rentals was not entirely
a gratuitous accommodation on the part of Broadway since the reduction of the leased
space by 466.56 square meters, possession of which was returned by Tropical to Broadway,
constituted valuable consideration for the reduction of rentals while the "low sales
volume" of Tropical continued. The Court of Appeals corrected a microscopic arithmetical
error committed by the trial court and in effect directed Tropical to pay, when its "low
sales volume" shall have been overcome.

Whether the provisional and temporary agreement between Broadway and Tropical
novated the original contract of lease
No. The Court ruled that the provisional and temporary agreement by Broadway and
Tropical did not partially nor totally novated their original contract. The non-specification
by Broadway of the period wherein the reduced rental rate would be enforced, only meant
that Broadway retained for itself the discretionary right to return to the original
contractual rates. It is clear in their agreement that the reduced rates must not be mistaken
as an amendment to their original contract. The Lease Contract also provided, among
other things, that the failure of the LESSOR to insist upon strict performance of any of the
terms, conditions and stipulations hereof shall not be deemed a relinquishment or waiver
of any right or remedy that said LESSOR may have, nor shall it be construed as a waiver of
any subsequent breach of, or default in the terms, conditions and covenants hereof, which
terms, conditions and covenants shall continue under this Contract and shall be deemed to
have been made unless expressed in writing and signed by the LESSOR.
TITLE:
G.R. No 147950 Dec. 11, 2003 California Bus Lines, INC., Petitioner VS State Investment
House, INC., Respondent
PONENTE:
Quisumbing, J.
FACTS OF THE CASE:

Delta Motors Corporation (Delta) applied for financial assistance from respondent State
Investment House, Inc., (SIHI) a domestic corporation engaged in the business of quasi-
banking. SIHI agreed to extend a credit line to Delta in three separate agreements, and the
latter eventually became indebted to the former.
Meanwhile, the petitioner (CBLI) purchased buses from Delta which were secured through
16 promissory notes. Unfortunately CBLI failed to meet its obligations to Delta. In order
to cover the obligations due, Delta issued a restructuring agreement, stipulating taking
over the management and operations in case of default.
On the other hand, Delta executed a Continuing Deed of Assignment of Receivables in

favor of SIHI as security for the payment of its obligations to SIHI per the credit
agreements. Subsequently, the loan agreements were restructured under a Memorandum
of Agreement in view of Delta’s failure to pay.
CBLI continued to have problems paying its debt to Delta. Delta executed a Deed of Sale
assigning to SIHI five (5) of the sixteen (16) promissory notes from California Bus Lines,
Inc. SIHI sent a demand letter to petitioner requiring remitting payments due on the
promissory notes. Petitioner replied informing respondent of the fact that delta had taken
over its management and operations

SIHI later filed for an urgent motion for the sale of the 16 buses. The RTC of Manila
initially ruled in favor of CBLI, discharging from liability on the five promissory notes. The
trial court likewise favorably ruled on CBLIs compulsory counterclaim.
SIHI appealed the decision to the Court of Appeals. The decision of the RTC of Manila was
reversed stating that the defendant-appellee CBLI was liable for the value of the five (5)
promissory notes subject of the complaint a quo less the proceeds from the attached sixteen
(16) buses.
Whether the restructuring agreement between Delta and CBLI did not substantially novate
the terms of the five promissory notes
Yes , Novation has been defined as the extinguishment of an obligation by the substitution
or change of the obligation by a subsequent one which terminates the first,either by
changing the object or principal conditions, or by substituting the person of the debtor, or
subrogating a third person in the rights of the creditor. For novation to take place, four
essential requisites have to be met, namely, (1) a previous valid obligation;(2) an
agreement of all parties concerned to a new contract; (3) the extinguishment of the old
obligation; and (4) the birth of a valid new obligation. Novation is never presumed, and
the animus novandi, whether totally or partially, must appear by express agreement of the
parties, or by their acts that are too clear and unequivocal to be mistaken.In this case, the
attendant facts do not make out a case of novation. The Restructuring agreement between
Delta and CBLI executed on October 7, 1981, shows that the parties did not expressly
stipulate that the restructuring agreement novated the promissory notes. Absent an
unequivocal declaration of extinguishment of the pre-existing obligation, only a showing
of complete incompatibility between the old and the new obligation would sustain a
finding of novation by implication. However,the court's review of its terms yields no
incompatibility between the promissory notes and the restructuring agreement. The court
finds CBLI liable for the value of the five (5)promissory notes subject of the complaint a
quo less the proceeds from the attached sixteen (16) buses.
TITLE:
G.R. No. 154127, ROMEO C. GARCIA, petitioner, vs. DIONISIO V. LLAMAS,
respondent.
PONENTE:
Panganiban, J.
FACTS OF THE CASE:
The herein respondent filed a complaint for sum of money and damages against the herein
petitioner. The complaint alleged that petitioner and de jesus borrowed from respondent
P400,000, on the same day executed a promissory note where they bound themselves
jointly and severally to pay the loan on or before 23 January 1997 with 5% interest per
month, that despite repeated demands, petitioner failed and refused to pay, and by reason
of their unjust refusal, respondent was compelled to engage the services of counsel to
whom he agreed to pay 25% of the sum to be recovered from petitioner, plus P2000 for
every appearance in court.
Petitioner Garcia, averred that he assumed no liability under the promissory note because
he signed it merely as an accommodation party for de jesus. However respondent asserted
that the loan remain unpaid for the reason that the check issued by de jesus bounced.
RTC ruled in favor of respondent and against petitioner who are hereby ordered to pay,
jointly and severally, the respondent. CA ruled that the RTC erred on its judgment-- no
novation when respondent accepted the check from De Jesus. The check was precisely to
pay for the loan that was coverd by the promissory noted. Respondent's acceptance of the
check did not serve to make De Jesus the sole debtor, because, (1) the obligation incurred
by him and petitioner was joint and several; and (2), the check which had been intended to
extinguish the obligation bounced upon its presentment

Whether the defense that petitioner was only an accommodation party had any basis
Petitioner avers that he signed the promissory note merely as an accommodation party;
and that, as such, he was released as obligor when respondent agreed to extend the term of
the obligation. This reasoning is misplaced, because the note herein is not a negotiable
instrument. By its terms, the note was made payable to a specific person rather than to
bearer or to order 31 — a requisite for negotiability under Act 2031, the Negotiable
Instruments Law (NIL). Hence, petitioner cannot avail himself of the NIL’s provisions on
the liabilities and defenses of an accommodation party. Besides, a non-negotiable note is
merely a simple contract in writing and is evidence of such intangible rights as may have
been created by the assent of the parties. 32 The promissory note is thus covered by the
general provisions of the Civil Code, not by the NIL.
Even granting arguendo that the NIL was applicable, still, petitioner would be liable for
the promissory note. Under Article 29 of Act 2031, an accommodation party is liable for the
instrument to a holder for value even if, at the time of its taking, the latter knew the former
to be only an accommodation party. The relation between an accommodation party and
the party accommodated is, in effect, one of principal and surety — the accommodation
party being the surety. 33 It is a settled rule that a surety is bound equally and absolutely
with the principal and is deemed an original promisor and debtor from the beginning. The
liability is immediate and direct
TITLE:
G.R. No. 126712 April 14, 1999
LEONIDA C. QUINTO, petitioner,
vs.PEOPLE OF THE PHILIPPINES, respondent.
PONENTE:
VITUG, J.:
FACTS OF THE CASE:
The defendant entrusted to the petitioner the following jewels with the corresponding
amount on the 23rd day of March 1977: One (1) set of marques with briliantitos - P 17,
000.00, One (1) solo ring (2 karats & 30 points) valued at value of P16000.00 and One (1)
diamond ring (rosetas) valued at P2,500.00. Specifying therein that it must be returned five
days after receipt the amount or the articles that are not sold. However, the petitioner
failed to return the same according to time, instead asking for another time which the
respondent allowed, but for the last six months the petitioner failed to return those articles
the former also ignored the demand letter of the respondent. This prompted the
respondent to file the case of stafa. On part of the petitioner it argued before the court that
they have a long standing business relationship citing among others those people who
failed to pay those jeweries but she brought those customers to the respondent to settle
their accounts. The lower court found the petitioner guilty of estafa beyond reasonable
doubt. Petitioner interpose an appeal CA on the ground that their agreement already
novated, on other hand affirmed the decision of the lower court and reject the contention
of the petitioner.

Lower court found the petitioner guilty of estafa. CA affirmed the decision

Whether the agreement between the petitioner and the respondent novated
TITLE:
G.R. No. 136729. September 23, 2003 ASTRO ELECTRONICS CORP. and PETER
ROXAS, Petitioners, v. PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, Respondent.
PONENTE:
AUSTRIA-MARTINEZ, J.:
FACTS OF THE CASE:
Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting to
P3,000,000.00 with interest and secured by three promissory notes. In each of these
promissory notes, it appears that petitioner Roxas signed twice, as President of Astro and
in his personal capacity. Philguarantee, with the consent of Astro, guaranteed in favor of
Philtrust the payment of 70% of Astro’s loan, subject to the condition that upon payment
by Philguarantee of said amount, it shall be proportionally subrogated to the rights of
Philtrust against Astro. As a result of Astro’s failure to pay its loan obligations, despite
demands, Philguarantee paid 70% of the guaranteed loan to Philtrust. Philguarantee filed
against Astro and Roxas a sum of money with the RTC of Makati. In his defense, Roxas
disclaims any liability on the instruments, that he merely signed the same in blank and the
phrases "in his personal capacity" and "in his official capacity" were fraudulently inserted
without his knowledge.
RTC of Makati erred in favor of Philguarantee. The trial court observed that if Roxas really
intended to sign the instruments merely in his capacity as President of Astro, then he
should have signed only once in the promissory note. In the appeal in Court of Appeals,
the Court of Appeals affirmed the RTC decision agreeing with the trial court that Roxas
failed to satisfactorily explain why he had to sign twice in the contract and therefore the
presumption that private transactions have been fair and regular must be sustained.

Whether Roxas should be jointly and severally liable (solidary) with Astro for the sum
awarded by the RTC
WHEREFORE, finding no error with the decision of the Court of Appeals dated December
10, 1998, the same is hereby AFFIRMED.
Yes. The three promissory notes uniformly provide: "FOR VALUE RECEIVED, I/We
jointly, severally and solidarily, promise to pay to PHILTRUST BANK or order . . ." An
instrument which begins with "I", "We", or "Either of us" promise to pay, when signed by
two or more persons, makes them solidarily liableAlso, the phrase "joint and several" binds
the makers jointly and individually to the payee so that all may be sued together for its
enforcement, or the creditor may select one or more as the object of the suit. Having signed
under such terms, Roxas assumed the solidary liability of a debtor and Philtrust Bank may
choose to enforce the notes against him alone or jointly with Astro. Also, Subrogation is
the transfer of all the rights of the creditor to a third person, who substitutes him in all his
rights. It may either be legal or conventional. Legal subrogation is that which takes place
without agreement but by operation of law because of certain acts. Instances of legal
subrogation are those provided in Article 1302 of the Civil Code. Conventional
subrogation, on the other hand, is that which takes place by agreement of the parties
TITLE:
G.R. No. 142838. August 9, 2001, ABELARDO B. LICAROS, Petitioner,
v. ANTONIO P. GATMAITAN, Respondent.
PONENTE:
GONZAGA-REYES, J.
FACTS OF THE CASE:
The Anglo-Asean Bank is a bank somewhere in Cat Heaven which receives fund
placements from different parts of the world and invests such deposits in money market
placements in HK, Europe and the United States. Licaros decided to make a fund
placement (USD 150K) with said bank sometime in the 1980's. Licaros encountered
tremendous difficulties in retrieving the investments he had put in.
Licaros then decide to seek the counsel of Antonio P. Gatmaitan (banker). Gatmaitan
voluntarily offered to assume the payment of Anglo-Asean's indebtedness to Licaros
subject to certain terms and conditions. The two executed a notarized MOA. Gatmaitan
presented to Anglo-Asean the MOA for the purpose of collecting. No formal response was
ever made by said bank.
Gatmaitan did not bother anymore to make good his promise to pay Licaros the PN.
Licaros felt that he had a right to collect on the basis of the PN regardless of the outcome of
Gatmaitan's recovery efforts.

RTC found Gatmaitan liable under the MOA and PN for P3,150K plus 12% interest·
CA reversed and held that Gatmaitan did not at any point become obligated to pay to
Licaros the amount stated in the PN.

Whether MOA is subjected to subrogation
Yes, Gatmaitan and Licaros had intended to treat their agreement as one of conventional
subrogation: "WHEREAS, the parties herein have come to an agreement on the nature,
form and extent of their mutual prestations which hey now record herein with the express
conformity of the third parties concerned" Had the intention been merely to confer the
status of a mere "assignee", there is simply no sense for them to have stipulated that the
same is conditioned on the "express conformity" thereto of Anglo-Asean Bank..
This provision which contemplates the signed conformity of Anglo-Asean Bank, taken
together with the preambulatory clause leads to the conclusion that both parties intended
that Anglo-Asean Bank should signify its agreement to the MOA.
The extinguishment of the old obligation is the effect of the establishment of a contract for
conventional subrogation. It is not a requisite without which a contract for conventional
subrogation may not be created provisions may not simply be disregarded or dismissed
TITLE:
G.R. No. 103590 January 29, 1993, GOVERNMENT SERVICE INSURANCE
SYSTEM, petitioner, vs. HON. COURT OF APPEALS, THE PROVINCIAL SHERIFF OF
CAVITE and VICTOR G. VALENCIA, respondents.
PONENTE:
Associate Justice Hilario G. Davide Jr.
FACTS OF THE CASE:
QRSI entered into a contract with the GSIS asking for financing loan for the construction
and development of a residential subdivision, comprising some 4,493 housing units at
Molino, Bacoor, Cavite, to be sold to GSIS members. QRSI entered into a construction
contract with VICTOR VALENCIA to develop the said subdivision. VALENCIA
demanded payment from QRSI after completion of his obligation. Despite repeated
demands, QRSI refused to pay. VALENCIA filed the complaint before RTC of Bacoor,
Cavite, which ordered QRSI to pay VALENCIA total amount of Php 766,061.70, while it
merely required GSIS to hold whatever amounts it has granted to, retained and obtained
for defendant QRSI, and to deliver the same to VALENCIA by way of payment to the
aforecited amount. VALENCIA filed a motion for execution, which was granted by RTC
whereby GSIS partially paid to VALENCIA total amount of P154,476.14 out of the retained
funds held for the account of QRSI. RTC later found that GSIS was holding more than
sufficient funds to pay the obligation of QRSI; hence must pay Valencia the amount
adjudged and covered by the writs of execution after deducting the partial payment
previously made. Court of Appeals held that GSIS allowed it to attain finality, it in effect
admitted that it has in its possession or control credits, monies, and interests belonging to
QRSI, and therefore obliged itself to pay QRSI’s obligation to VALENCIA as in fact, it did
make a partial payment thereto, which also constitutes as a waiver of the legal
compensation being invoked by GSIS. Supreme Court likewise DENIED the GSIS’s
petition because it failed to show that the CA’s decision is not supported by substantial
evidence and that the conclusions therein are contrary to law and jurisprudence.
Thereafter, VALENCIA moved for the issuance of an alias writ of execution for the amount
of P5,759,677.97. On 7 June 1990, RTC ordered GSIS to deposit in court or pay VALENCIA
the total amount of P2,567,374.06 which includes attorney’s fees, 12% interest and the
Performance Bond. GSIS filed before Court of Appeals a petition for certiorari and
prohibition regarding the writ of execution.
RULING OF LOWER AND APPELLATE COURTS
Court of Appeals promulgated its decision in favor of GSIS, holding that there has been a
grave abuse of discretion in the RTC's orders requiring the petitioner to the payment of
millions of pesos, in favor of VALENCIA, without regard to the amount that it actually
holds, if any, in favor of QRSI. However, upon VALENCIA’s motion for reconsideration
invoking that the petition filed before the appellate court is barred by estoppel based on
the partial payment made by GSIS, CA reversed its own Decision.

Whether GSIS can be held liable to pay amount more than what it actually holds for QRSI
No. WHEREFORE, the instant petition is GRANTED. The Resolution of Court of Appeals
of 15 January 1992 in CA-G.R. SP No. 24021 is SET ASIDE and its Decision therein of 28
June 1991 is hereby REINSTATED and AFFIRMED.
It is clear from RTC’s disposition that the GSIS's liability is limited to the holding of
whatever amount it "has granted to, retained and obtained for defendant Queen's Row"
and the "delivery" thereof to Valencia "by way of payment to the aforecited amount
ordered recovered by" Valencia. Beyond such amount, petitioner is no longer liable. It is
precisely for this reason that the trial court explicitly incorporated a proviso that petitioner
"shall not be personally liable for the said obligation of co-defendant Queen's Row, except,
as herein above-ordered." GSIS was not ordered to pay interest on the amount it was to
hold and deliver to Valencia or to pay attorney's fees. The trial court cannot, therefore,
without committing grave abuse of discretion, direct the petitioner to pay interest and
attorney's fees. To do so would be to vary the tenor of the judgment against the latter and
increase its liability, thereby rendering nugatory the above proviso. Such imposition
would mean, as in this case, the delivery of money to Valencia in excess of that belonging
to QRSI which the petitioner has been retaining. It is a settled general principle that a writ
of execution must conform substantially to every essential particular of the judgment
promulgated. Execution not in harmony with the judgment is bereft of validity. It must
conform, more particularly, to that ordained or decreed in the dispositive portion of the
decision.
TITLE:
G.R. No. L-36821, June 22, 1978, Jose P. Dizon, petitioner, vs Alfredo G. Gaborro
(Substituted by Pacita De Guzman Gaborro as Judicial Administratrix of the Estate of
Alfredo G. Gaborro) and the Development Bank of the Philippines, respondents.
PONENTE:
GUERRERO, J.:
FACTS OF THE CASE:
Petitioner Dizon was the owner of the 3 parcels of land, situated in Pampanga. He
constituted a first mortgage to the Development Bank of the Philippines to secure a loan,
and a second mortgage to the Philippine National Bank. Petitioner defaulted in the
payment of his debt, therefore DBP foreclosed the mortgage extrajudicially.Respondent
Gaborro became interested in the lands of Petitioner Dizon. But since the property is
already foreclosed by the DBP, they entered into a contract of “Deed of Sale with
Assumption of Mortgage”. They also entered into a second contract which is the “Option
to Purchase Real Estate”.After the execution of the said contracts, Respondent Gaborro
took possession of the 3 parcels of land. Respondent Gaborro made several payments to
the DBP and the PNB. He also introduced improvements, cultivated the lands, raised
sugarcane and other crops, and appropriated the produce to himself. He even paid the
land taxes.Petitioner Dizon, through his counsel, wrote a letter to Respondent Gaborro,
informing him that he is formally offering reimbursement to Respondent on what he paid
to the banks. Respondent did not agree to the demands of the Petitioner.Petitioner Dizon
instituted a complaint 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. That the real agreement was not for an absolute deed of
sale but for an equitable mortgage or conveyance by way of security for the
reimbursement or refund by Petitioner to Respondent of any and all sums which
Respondent may have paid on account of the mortgage debts in favor of the DBP and the
PNB.
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, with the understanding that, if he fails to do so
within the said period, then he is deemed to have lost his right over the lands forever.

Whether the contract shows the true agreement between the parties

No, the contract did not show the true agreement between the parties. The Court
held that the true intention of the parties is that Respondent will assume and pay the
indebtedness of Petitioner and in return Respondent shall enjoy possession and use of the
properties until Petitioner fully reimbursed him of the amounts paid to the financial
institutions. As noted by the SC, the agreement is one of those innominate contracts under
Article 1307 of the Civil Code, whereby the Petitioner and the Respondent agree “to give
and to do” certain rights and obligations respecting the lands and the mortgage debts of
the petitioner which would be acceptable to the bank but partaking of the nature of the
antichresis. The judgment appealed from is hereby affirmed with the modification that
petitioner Dizon is granted the right within one year from finality of this decision to a
reconveyance of the properties in litigation upon payment and reimbursement to
respondent estate of Gaborro of the amounts actually paid by Gaborro or his estate on
account of the principal only of Dizon's original loans with the Development Bank of the
Philippines and Philippine National Bank in and up to the total amount of P131,831.91,
under the terms and conditions set forth in the preceding paragraph with subparagraphs
(a) to (d), which are hereby incorporated by reference as an integral part of this judgment,
and upon the exercise of such right, respondent estate shall forthwith execute the
corresponding deed of reconveyance in favor of petitioner Dizon and deliver possession of
the properties to him.
TITLE:
G.R. No. 20732, September 26, 1924, C. W. ROSENSTOCK, as administrator of the estate
of H. W. ELSER, plaintiff-appellant, vs. EDWIN BURKE, defendant-appellant. THE
COOPER COMPANY, intervenor-appellee
PONENTE:
AVANCENA, J
FACTS OF THE CASE:

Burke owned a yacht known as Bronzewing. Elser, the plaintiff, negotiated for the
purchase of the yacht. The plan of Elser was to create a yacht club and sell it afterwards for
P120,000. P20,00 to be retained by Elser and P100,000 to be paid to Burke. Elser requested
that a voyage be down to the south using the said yacht for purposes of advertising and
creating opportunities for the sale. However, the yacht needed some repairs for the voyage
thus making the plaintiff pay for such repair. Elser never accepted the offer for the
purchase rather requested that the engine should replace thus asking for a loan of P20, 000.
Elser sent Burke a letter, telling him that in view of the attitude of Mr. Avery as to the loan
of P20,000 in connection with the installation of a new engine in the yacht, it was
impossible for him to take charge of the boat and he made delivery thereof to Burke. After
a talk with the bank manager Mr. Avery, they agreed that the yacht was to be sold to Elser
for the amount of P80,000. Elser agreed but stated in the letter dated April 3, 1922 that he is
in a position to entertain the purchase of the said yacht. Elser filed an action against Burke
to recover the value of the repairs made on the yacht which he had paid for.
The trial court ruled in favor of Elser and asked Burke to pay for the repairs. Elser is then
asked to comply with the conditions stated in the letter.
Whether the letter of April 3, 1922 was a definite offer to purchase
NO. The letter was not a definite offer. It was but a mere invitation to a proposal being
made to him, which might be accepted by him or not. He used such words as, “I am in
position and am willing to entertain the purchase of the yacht.” not “I want to buy the
yacht.”
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”. The word “entertain” applied to an act does not
mean the resolution to perform said act, but simply a position to deliberate for deciding to
perform or not to perform said act.
TITLE:
G.R. No. 125761, SALVADOR P. MALBAROSA, petitioner,
vs. HON. COURT OF APPEALS and S.E.A. DEVELOPMENT CORP., respondents.)
PONENTE:
CALLEJO, SR., J.:
FACTS OF THE CASE:

The petitioner tender his resignation as president of Philtectic Corporation and
Commonwealth Insurance Co., Inc. owned and controlled by respondent S.E.A.
Development Corporation (SEADC), effectively February 28, 1990. Louis Da Costa was the
president of the respondent Corporation and Commonwealth Insurance Co. He met with
the petitioner on two occasions, one of which was on February 5, 1990 to discuss the
amount of the 1989 incentive compensation petitioner was entitled to, and the mode of
payment thereof. Da Costa ventured that the petitioner would be entitled to an incentive
compensation in the amount of P395,000. On March 14, 1990, the respondent, through
Senen Valero, signed a letter-offer addressed to the petitioner stating the following: he was
entitled to an incentive compensation in the amount of P251,057.67, The 1982 Mitsubishi
Super saloon car assigned to you by the company shall be transferred to you at a value of
P220,000.00, and The membership share of our subsidiary, Tradestar International, Inc. in
the Architectural Center, Inc. will be transferred to you. The respondent required that if
the petitioner agreed to the offer, he had to affix his conformity on the space provided
therefor and the date thereof on the right bottom portion of the letter. March 16, 1990, Da
Costa met with the petitioner and handed to him the original copy of the March 14, 1990
Letter-offer for his consideration and conformity. Petitioner refused to sign the letter after
knowing that he is not entitled to P395,000.00 incentive compensation. He received the
original of the letter and wrote on the duplicate copy of the letter-offer retained by Da
Costa, the words: "Rec'd original for review purposes. Despite the lapse of more than two
weeks, the respondent had not received the original of the March 14, 1990 Letter-offer of
the respondent with the conformity of the petitioner on the space provided therefor. The
respondent decided to withdraw its March 14, 1990 Offer. The board asked the petitioner
to return the vehicle. On April 4, 1990, Philtectic Corporation, through its counsel, wrote
the petitioner withdrawing the March 14, 1990 Letter-offer of the respondent and
demanding that the petitioner return the car and his membership certificate in the
Architectural Center, Inc. within 24 hours from his receipt thereof. On April 7, 1990, the
petitioner wrote the counsel of Philtectic Corporation informing the latter that he cannot
comply with said demand as he already accepted the March 14, 1990 Letter-offer of the
respondent when he affixed on March 28, 1990 his signature on the original copy of the
letter-offer. The respondent, as plaintiff, filed a complaint against the petitioner, as
defendant, for recovery of personal property with replevin with damages and attorney's
fees. The lower court decided in favor of the respondent, citing, hat there existed no
perfected contract between the petitioner and the respondent on the latter's March 14, 1990
Letter-offer for failure of the petitioner to effectively notify the respondent of his
acceptance of said letter-offer before the respondent withdrew the same. The CA affirmed
the lower court.

The lower court decided in favor of the respondent, citing, hat there existed no perfected
contract between the petitioner and the respondent on the latter's March 14, 1990 Letter-
offer for failure of the petitioner to effectively notify the respondent of his acceptance of
said letter-offer before the respondent withdrew the same.
The CA affirmed the lower court.

1. Whether or not the petitioner successfully communicated his letter of acceptance of
the offer given by the company
2. Whether or not there is a valid withdrawal of the offer made of the respondent to
the petitioner

1. No. Under Article 1319 of the New Civil Code, the consent by a party is manifested
by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. It must be made known to the offeror. In the instant
case. There was no contract perfected between the petitioner and the respondent
corporation. Although the petitioner claims that he had affixed his conformity to the
letter-offer on March 28, 1990, the petitioner failed to transmit the said copy to the
respondent. It was only on April 7, 1990 when the petitioner appended to his letter
to the respondent a copy of the said March 14, 1990 Letter-offer bearing his
conformity that he notified the respondent of his acceptance to said offer. But the
respondent already withdrew the offer.
2. Yes. We do not agree with the petitioner. Implicit in the authority given to Philtectic
Corporation to demand for and recover from the petitioner the subject car and to
institute the appropriate action against him to recover possession of the car is the
authority to withdraw the respondent's March 14, 1990 Letter-offer. It cannot be
argued that respondent authorized Philtectic Corporation to demand and sue for
the recovery of the car and yet did not authorize it to withdraw its March 14, 1990
Letter-offer to the petitioner.
SC describe the acceptance in a contract
The SC pointed out in this case that the acceptance in a contract to make it valid must be
known to the offeror. The acceptance must be absolute, unconditional and without
variance of any sort from the offer. When the offeror has not fixed a period for the offeree
to accept the offer, and the offer is made to a person present, the acceptance must be made
immediately.
Withdrawal of offer
The offeror may withdraw its offer and revoke the same before acceptance thereof by the
offeree. The acceptance by the offeree of the offer after knowledge of the revocation or
withdrawal of the offer is inefficacious.
TITLE:
Sanchez v. Rigos, 45 SCRA 368 (1972)
PONENTE:
CONCEPCION, C.J.:
FACTS OF THE CASE:
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 within two (2) years
from said date with the understanding that said option shall be deemed "terminated and
elapsed," if "Sanchez shall fail to exercise his right to buy the property" within the
stipulated period. Inasmuch as several tenders of payment of the sum of Pl,510.00, made
by Sanchez within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former
deposited said amount with the CFI of Nueva Ecija and commenced against the latter the
present action, for specific performance and damages. The defendant 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".
The lower court rendered judgment ordering Mrs. Rigos to accept the sum judicially
consigned by him and to execute, in his favor, the requisite deed of conveyance. Hence,
this appeal by Mrs. Rigos
Whether Rigos is bound by Sanchez’ acceptance even though the option is not supported
by a separate consideration

Yes. The court ruled that the option did not impose upon plaintiff the obligation to
purchase defendant's property. The instrument executed is not a "contract to buy and sell."
It merely granted plaintiff an "option" to buy. Article 1479 must be read in relation to
Article 1354. Article 1354 applies to contracts in general, whereas the second paragraph of
Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral
promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar.
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. 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.
TITLE:
G.R. No. 111238 January 25, 1995, ADELFA PROPERTIES, INC., petitioner,
vs. COURT OF APPEALS, ROSARIO JIMENEZ-CASTAÑEDA and SALUD
JIMENEZ, respondents.
PONENTE:
REGALADO, J.:
FACTS OF THE CASE:

Private respondents and their brothers Jose and Dominador Jimenez were registered
owners of a parcel of land in Las Piñas. Jose and Dominador sold their share (1/2 parcel of
land) pursuant to “Kasulatan sa Bilihan ng Lupa” to petitioner, Adelfa Properties. Eastern
portion belonged to them while western portion belonged to Rosario and Salud. Adelfa
Properties (now owners of eastern portion) expressed interest in buying the western
portion by executing “Exclusive Option to Purchase” with ₱50,000.00 as option money.
Before petitioner could make payment, it received summons that the nephews and nieces
of private respondents filed an annulment of deed of sale. As a result, petitioner withheld
payment of full purchase price. Salud attributed the suspension of payment to “lack of
word of honor.” Francisca Jimenez was sent to see the counsel of petitioner to inform him
that they were cancelling the transactions. Subsequently, a Deed of Conditional Sale was
executed in favor of Emylene Chua. Private respondents’ counsel sent ₱25,000.00 refund of
the option money.

According to the RTC, agreement entered into was merely an option contract and the
suspension of payment by petitioner is a counter-offer which is tantamount to a rejection
of option. Thus, the sale to Chua was valid. CA ruled that failure of petitioner to pay the
purchase price in the period agreed upon was tantamount to election not to buy such land.

Whether the agreement between Adelfa Properties and private respondents strictly an
option contract
The contract between the parties is a contract to sell and not an option contract nor a
contract of sale. Two features which convince that parties never intended to transfer
ownership except upon full payment of purchase price: (1) the exclusive option to
purchase does not mention that petitioner is obliged to return possession or ownership of
property as consequence of non-payment; and (2) no delivery, actual or constructive, was
made to petitioner; option to purchase was not included in a public instrument which
would have effect of delivery. Neither did petitioner take actual, physical possession of the
property at any given time. With this regard, there was an implied agreement that
ownership shall not pass to the purchaser until he had fully paid the price. Also, the
alleged option money was actually earnest money since the amount was not distinct from
the cause or consideration for the sale of the property, but was itself a part thereof.
TITLE:
G.R. No. 128066, June 19, 2000
JARDINE DAVIES INC., petitioner,
vs.
COURT OF APPEALS and FAR EAST MILLS SUPPLY CORPORATION, respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 128069
PURE FOODS CORPORATION, petitioner,
vs.
COURT OF APPEALS and FAR EAST MILLS SUPPLY CORPORATION, respondents.
BELLOSILLO, J.:
PONENTE:
BELLOSILLO, J.:
FACTS OF THE CASE:
In 1992, petitioner PUREFOODS decided to install two 1500 KW generators in its food
processing plant in San Roque, Marikina City. A bidding for the supply and installation of
the generators was held. Out of the 8 prospective bidders who attended the pre-bidding
conference, only 3 bidders, namely, respondent FAR EAST MILLS SUPPLY
CORPORATION (FEMSCO), MONARK and ADVANCE POWER submitted bid proposals
and gave bid bonds.
In a letter dated 12 December 1992 addressed to FEMSCO President Alfonso Po,
PUREFOODS confirmed the award of the contract to FEMSCO. FEMSCO submitted the
required performance bond in the amount of P1,841,187.90 and contractor’s all-risk
insurance policy in the amount of P6,137,293.00 which PUREFOODS through its VP
Benedicto G. Tope acknowledged in a letter dated 18 December 1992.
However, in a letter dated 22 December 1992, PUREFOODS through its Senior VP Teodoro
L. Dimayuga unilaterally canceled the award as “significant factors were uncovered and
brought to their attention which dictate the cancellation and warrant a total review and re-
bid of the project. FEMSCO protested the cancellation of the award. Before the matter
could be resolved, PUREFOODS awarded the project and entered into a contract with
JARDINE NELL, a division of Jardine Davies, Inc. (JARDINE), which was not one of the
bidders.
FEMSCO sued PUREFOODS and JARDINE: PUREFOODS for reneging on its contract and
JARDINE for its unwarranted interference and inducement.
RTC- Pasig, granted JARDINE’s Demurrer to Evidence. The RTC ordered PUREFOODS to
indemnify FEMSCO. FEMSCO and PUREFOODS appealed to CA. FEMSCO appealed the
Resolution of the trial court which granted the Demurrer to Evidence filed by JARDINE
resulting in the dismissal of the complaint against it.
CA affirmed the Decision of the trial court. It also reversed the Resolution of the lower
court and ordered JARDINE to pay FEMSCO moral damages for inducing PUREFOODS
to violate the latter’s contract with FEMSCO. CA denied MR. Hence, these 2 petitions for
review.
Whether there was a valid acceptance of the offer
YES. Contracts are perfected by mere consent, upon the acceptance by the offeree of the
offer made by the offeror. 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 with good faith, usage and law. The
acceptance must not qualify the terms of the offer. However, the acceptance may be
express or implied. For a contract to arise, the acceptance must be made known to the
offeror. Acceptance can be withdrawn or revoked before it is made known to the offeror.
In the instant case, since PUREFOODS started the process of entering into the contract by
conducting a bidding, Art. 1326 of the Civil Code, which provides that “advertisements for
bidders are simply invitations to make proposals,” applies.
The 12 December 1992 letter of petitioner PUREFOODS to FEMSCO constituted acceptance
of respondent FEMSCO’s offer as contemplated by law. The tenor of the letter, i.e., “This
will confirm that Pure Foods has awarded to your firm (FEMSCO) the project,” could not
be more categorical. While the same letter enumerated certain “basic terms and
conditions,” these conditions were imposed on the performance of the obligation rather
than on the perfection of the contract.
TITLE:
G.R. No. L-20435, October 23, 1923, LUIS ASIAIN, plaintiff-appellant, vs. BENJAMIN
JALANDONI, defendant-appellee.
PONENTE:
MALCOLM, J.:
FACTS OF THE CASE:
ASAIN Sold a parcel of a land to appellant Jalandoni for P55,000.00. Asain indicated
that the land contains 25-30 hectares and crop of sugar cane planted which produces 2,000
piculs of sugar. Even in doubt about the actual size of the land in question Jalandoni paid
an initial down payment amounting to P30,000.00. Upon possession, Jalandoni ground the
sugarcane and surveyed the land and found that the land only measured 18.5 hectares and
produced 80 piculs. Due to the balance unpaid Asain filed an action for the recover the
sum of P25,000.00 before the Court of First Instance of Negros Occidental. Jalandoni on the
otherhand filed a counter complaint asking for the annulment of contract.
RULING OF THE LOWER COURT
The CFI ordered the annulment of contract and the refund of P30,000.00 and the return of
land and its title.
Whether Jalandoni may rescind the contract
The judgment was affirmed on the ground that both parties had acted by a mutual
mistake. Jalandoni is entitled to rescind the contract , in as much as the vendor did not
deliver a parcel of the land and the quality stipulated in the contract. Mutual mistake of
the contracting parties to sale in regards to the subject matter of the sale which is so
material as to go to essence of the contract , id a ground for relief and recission (Bighan vs
Madison)Mistake with reference to the subject-matter of the contract is such that, at the
optionof the purchaser is rescindable. Judgment is affirmed, without prejudice to the right
of the plaintiff to establish in this action in the lower court the amount of the rent of the
land pursuant to the terms of the complaint during the time the land was in the possession
of the defendant, and to obtain judgment against the defendant for that amount, with costs
against the appellant. So ordered.
TITLE:
G.R. No 126013 February 12, 1997 Spouses Heinzrich Theis and Betty Theis, Petitioners
VS. Honorable Court of Appeals, Honorable Eleuterio Guerrero, Acting Presiding Judge
Branch XVIII, Regional Trial Court, Tagaytay City, CALSONS DEVELOPMENT
CORPORATION, Respondents
PONENTE:
HERMOSISIMA, JR., J.
FACTS OF THE CASE:

Private respondent Calsons Development Corporation(CDC) owns 3 adjacent parcels of
land in Tagaytay city. CDC constructed a two-storey house on parcel no. 3 while parcel no.
1 and 2 remain idle. A problem occurred when an erroneous survey indicated the
interchange of TCT of the said properties wherein Parcel No. 3 was erroneously located in
Parcel No. 1 and the two idle lands in Parcel 4. Not knowing of the mistake, CDC sold to
the Petitioners (SPS Theis) parcel no. 4 for the price of P486,000.00 where the latter did not
immediately occupy it because they went to Germany. The petitioners went back to the
Philippines to look for vacant lots in Tagaytay and upon their trips they discovered that
Parcel No. 4 was owned by another person and also discovered that the lots actually sold
to them were parcel No. 2 and 3 where CDC constructed a two-storey house. To remedy
the mistake, CDC offered parcel No. 1 and 2 as these were precisely the two vacant lots
which CDC owned; however the Petitioners adamantly rejected the good faith offer and
insisted on taking Parcel No. 3 where the two-storey house is constructed prompting CDC
to file an action for annulment of deed of sale and reconveyance of the properties subject
thereof in the RTC of Tagaytay.

The RTC of Tagaytay rendered judgment in favor of the private respondent. Identifying
the core issue in the instant controversy to be the voidability of the contract of sale between
petitioners and private respondent on the ground of mistake, the trial court annulled said
contract of sale after finding that there was indeed a mistake in the identification of the
parcels of land intended to be the subject matter of said sale.
The petitioners sought for the reversal from the Court of Appeals, however, The CA did
not find the appeal meritorious and accordingly affirmed the trial court’s decision.
Whether a contract may be annulled where the consent of one of the contracting parties
was procured by mistake
Yes, the Court holds that where consent is given through mistake, the validity of the
contractual relations between the parties is legally impaired. Hence, the contract can be
annulled.
Under 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.
In the case at bar, there is a lack of full and correct knowledge about the thing. The mistake
committed by the CDC in selling parcel no. 4 to the Theis falls within the said provision.
Verily, such mistake invalidated its consent and as such, annulment of the deed of sale is
proper.
“Art. 1390. The following contracts are voidable or annullable, even though there may
have been no damage to the contracting parties:
(a) x x x (b) Those where the consent is vitiated by mistake, violence, intimidation, undue
influence, or fraud.
x x x”
CDC obviously committed an honest mistake in selling parcel no. 4. As correctly noted by
the Court of Appeals, it is quite impossible for CDC to sell the lot in question as the same is
not owned by it. The good faith of the CDC is evident in the fact that when the mistake
was discovered, it immediately offered two other vacant lots to the Theis or to reimburse
them with twice the amount paid. That petitioners refused either option left the CDC with
no other choice but to file an action for the annulment of the deed of sale on the ground of
mistake.
TITLE:
GR. No. 150179, HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO SEVILLA,
WILSON SEVILLA, WILMA SEVILLA, WILLINGTON SEVILLA, AND WILLIAM
SEVILLA, JR., HEIRS OF MARIA SEVILLA, NAMELY: AMADOR SEVILLA, JENO
CORTES, VICTOR CORTES, MARICEL CORTES, ALELEI* CORTES AND ANJEI**
CORTES, Petitioners,
v. LEOPOLDO SEVILLA, PETER SEVILLA, AND LUZVILLA SEVILLA, Respondents.
PONENTE:
Ynares-Santiago J.
FACTS OF THE CASE:

Filomena Almirol de Sevilla died, and left 8 children. She left 4 parcels of land. The
relevant parcel of land in this case is Parcel 1 (Lot No. 653). Respondent Leopoldo was the
son of Filomena and Felisa's nephew. He took care of his aunts (Honorata and Felisa) and
his mother Filomena when they lived with him and his family. Before Felisa died on July 6,
1988, she executed a last will and testament devising her 1/2 share in parcel 1 to her
nephew Leopoldo and his wife. On August 8, 1986, Felisa executed another document,
which was a Donation Inter Vivos, ceding to Leopoldo her 1/2 undivided share in Parcel 1.
This was accepted by Leopoldo. On Sept. 3, 1986, Felisa and Peter executed a Deed of
Extra-Judicial Partition, identifying and adjudicating the 1/3 share of Honorata (the
original owner of Parcel 1) to the heirs of Filomena and Felisa. Respondents Leopoldo,
Peter and Luzvilla obtained the cancellation of the TCT over Parcel 1, and the issuance of
the titles to Felisa and the heirs of Filomena. But these titles were left usnigned by the
Register of Deeds, because by then Peter Sevilla had not yet submitted a Special Power of
Attorney authorizing him to represent the other heirs of Filomena. Petitioner’s heirs of
William Sevilla and Maria Sevilla filed this case against the respondents Leopoldo et al. for
annulment of Deed of Donation and the Deed of Extrajudicial Partition, Accounting,
Damages with prayer for Receivership and for Partition of the properties of Filomena.
Respondents Leopoldo denied this, saying that Felisa was of sound mind and she freely
and voluntarily ceded her share in the said deeds, in consideration of his family's love,
affection, and services that he renedered to Felisa when he took care of her in the past.

RTC of Dipolog, Zamboanga del Norte upheld the validity of the Deed of Donation but
declared the Deed of Extra-judicial Partition unenforceable.
CA affirmed in toto the RTC decision. Heirs of William’s MR were denied.
Whether the Deed of Donation was void ab initio for being executed with fraud, undue
pressure and influence
No. Thereis no question that the Deed of Donation Felisa executed was valid. She was
already the owner of the lot and had already inherited the share of her sister, Honorata,
when Honorata died. So Parcel 1 is a present property whichFelisa could've validly
disposed of.The self-serving testimony of the petitioners are vague on what acts of
Leopoldo Sevilla constituted fraud and undue influence and on how these acts vitiated the
consent of Felisa Almirol. Fraud and undue influence that vitiated a party's consent must
be established by full, clear and convincing evidence; otherwise, the latters presumed
consent to the contract prevails. Neither does the fact that the donation preceded the
partition constitute fraud.
TITLE:
G.R. No. L-10462 March 16, 1916 ANDREA DUMASUG, plaintiff -appellee, vs. FELIX
MODELO, defendant-appellant
PONENTE:
TORRES, J
FACTS OF THE CASE:
In November, 1911, Modelo persuaded Dumasig to sign a document by falsely and

maliciously making her believe that it contained an engagement on plaintiff's part to pay
defendant a certain sum of money as expresses occasioned the latter by reason of a lawsuit
in which plaintiff Dumasug was one of the parties and was protected and aided by
defendant. Dumasug, who does not know how to write, signed by affixing her mark
thereto, believing in good faith that Modelo had told her the truth and that said document
referred to the expenses incurred by Modelo; but that three months after the execution of
said document, Modelo took possession of a carabao belonging to Dumasug and also of
two parcels of land. It finds out that the document Dumasig sign was an absolute deed of
sale. In response, Modelo sworn that the sale of carabao and parcel of land was in payment
of a debt of P333.49 which the plaintiff was owing him for money.
The Court of First Instance of Cebu held against the respondent and after the denial of
motion of reconsideration, the appeal was and transmitted to the Supreme Court
Whether the instrument of purchase and sale of two parcels of land and a plow carabao, is
null and void
For the foregoing reasons, whereby the errors assigned to the judgment appealed from are
deemed to have been refuted, said judgment should be as it is hereby, affirmed, with the
costs of this instance against the appellant.
Yes. In either case, the consent said to have been given by Andrea Dumasug in said
document is null and void, as it was given by mistake (arts. 1265 and 1266, Civil Code).
This error invalidates the contract, because it goes to the very substance of the thing which
was the subject matter of said contract, for, had the maker thereof truly understood the
contents of said document, she would neither have accepted nor authenticated it by her
mark.
TITLE:
G.R. No. 108472, 08 October 1999, MAXIMA HEMEDES vs. THE HONORABLE COURT
OF APPEALS, DOMINIUM REALTY AND CONSTRUCTION CORPORATION,
ENRIQUE D. HEMEDES AND R & B INSURANCE CORPORATION
PONENTE:
GONZAGA-REYES, J.
FACTS OF THE CASE:

Jose Hemedes executed a “Donation Inter Vivos with Resolutory Conditions” conveying
ownership of an unregistered parcel of land to his third wife, Justa Kausapin, with the
following conditions:
1. Upon death/re-marriage of the donee, title of the property will revert to his
children expressly designated in a public document; and
2. Absence express designation made by the done, title will automatically
revert to his legal heirs.
On 27 September 1960, Justa Kausapin executed a “Deed of Conveyance of

Unregistered Real Property by Reversion” in favor of Maxima Hemedes who subsequently
filed an application for registration and confirmation of title and later on issued in her
name Original Certificate of Title (OCT) No. (0941) 0-198. Thereafter, Maxima and her
husband obtained a loan from R & B Insurance using the subject property as security.
Eventually, the spouses defaulted payment, R & B Insurance extrajudicially foreclosed the
property. It was sold in public auction, declaring R&B Insurance as the highest bidder.
(OCT) No. (0941) 0-198 was cancelled and TCT No. 41985 was issued in favor of R & B
Insurance.
Meanwhile, on 27 May 1971 Justa Kausapin executed a “Kasunduan” transferring

ownership of the same land to Enrique D. Hemedes. The latter obtained two declarations
and paid the real property taxes. Thereafter, he sold the property to Dominium Realty and
Construction Corporation which leased the same to Asia Brewery Inc. Asia Brewery
constructed two warehouses costing about 2 million each. Upon learning, R & B Insurance,
through a letter, informed Asia Brewery that they owned the property as evidenced by
TCT No. 41985. Maxima Hemedes also sent a letter asserting her ownership of the subject
property by virtue of (OCT) No. (0941) 0-198. Another letter of the same date was sent to R
& B Insurance, denying the execution of any real estate mortgage in favor of the latter.
On 27 August 1981 Dominium and Enrique Hemedes filed before Court of First
Instance (CFI) of Biñan, Laguna, for the annulment of TCT No. 41985. They alleged that
Dominium was the rightful owner of the subject property by virtue of a deed of sale
executed by Enrique Hemedes. They also asserted that Justa Kausapin never transferred
the land to Maxima Hemedes.

The CFI of Biñan Laguna rendered judgment in favor of plaintiffs Dominium and
Enrique D. Hemedes. Both R & B Insurance appealed. The Court of Appeals affirmed the
assailed decision in toto and denied the Motion for Reconsideration filed by R&B
Insurance.

Whether the two conveyances effectively transferred ownership over the subject
land
The Supreme Court uphold the petitioner R&B Insurance’s assertion of ownership
over the property in dispute, as evidenced by TCT No. 41985, subject to the usufructuary
rights of Justa Kausapin, which encumbrances has been properly annotated upon the said
certificate of title. It further held that mere preponderance of evidence is not sufficient to
overthrow a certificate of a notary public to the effect that the grantor executed a certain
document and acknowledged the fact of its execution before him. To accomplish this
result, the evidence must be so clear, strong and convincing as to exclude all reasonable
controversy as to the falsity of the certificate, and when the evidence is conflicting, the
certificate will be upheld. In the present case, we hold that private respondents have failed
to produce clear, strong, and convincing evidence to overcome the positive value of the
"Deed Conveyance of Unregistered Real Property by Reversion" — a notarized document.
The mere denial of its execution by the donor will not suffice for the purpose.
TITLE:
G.R. No. 132415 January 30, 2002 MIGUEL KATIPUNAN, INOCENCIO VALDEZ,
EDGARDO BALGUMA and LEOPOLDO BALGUMA, JR., Petitioners,
vs. BRAULIO KATIPUNAN, JR., Respondent.
PONENTE:
SANDOVAL-GUTIERREZ, J.:
FACTS OF THE CASE:
Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door
apartment constructed thereon, which were occupied by lessees. Respondent assisted by
his brother petitioner Miguel entered into a Deed of Absolute Sale with brothers Edardo
Balguma and Leopoldo Balguma, Jr. ( co-petitioners), represented by their lawyer-father
involving the subject property for a consideration of P187,000.00. So, the title was
registered in the names of the Balguma brothers and they started collecting rentals
thereon.
Later, Braulio filed a complaint for annulment of the Deed of Absolute Sale, contending
that his brother Miguel, Atty. Balguma and Inocencio Valdez ( one of the petitioners)
convinced him to work abroad. Through insidious words and machinations, they made
him sign a document purportedly a contract of employment, which document turned out
to be a Deed of Absolute Sale. He further alleged that he did not receive the consideration
stated in the contract. He claimed that there was evident bad faith and conspiracy in taking
advantage of his ignorance, he being only a third grader.
Petitioners’ Denied the allegations: They say that respondent was aware of the contents of
the Deed of Absolute Sale and that he received the consideration involved; that he also
knew that the Balguma brothers have been collecting the rentals since December, 1985 but
that he has not objected or confronted them.
The RTC dismissed the complaint. But when the case was elevated, the decision of RTC
was reversed and it was held that Braulio was incompetent, has very low I.Q., illiterate
and has a slow comprehension. The CA based its decision on Arts.1332 and 1390 of NCC
and Sec. 2, Rule 92 of the Rules of Court, concerning the incompetence of a party in
contract.
Whether the contract entered into by Braulio Katipunan, Jr. and Atty Leopoldo Balguma,
Jr. is voidable
Yes. The contract entered into by respondent and petitioners was voidable pursuant to the
provisions of Article 1390 of the NCC.
A contract of sale is born from the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. This meeting of the minds speaks of
the intent of the parties in entering into the contract respecting the subject matter and the
consideration thereof. Thus, the elements of a contract of sale are consent, object, and price
in money or its equivalent. Under Article 1330 of the Civil Code, consent may be vitiated
by any of the following: (a) mistake, (2) violence, (3) intimidation, (4) undue influence, and
(5) fraud. The presence of any of these vices renders the contract voidable.
The circumstances surrounding the execution of the contract manifest a vitiated consent on
the part of respondent. Undue influence was exerted upon him by his brother Miguel and
Inocencio Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who
negotiated with Atty. Balguma. However, they did not explain to him the nature and
contents of the document. Worse, they deprived him of a reasonable freedom of choice. It
bears stressing that he reached only grade three. Thus, it was impossible for him to
understand the contents of the contract written in English and embellished in legal jargon
TITLE:
G.R. No. L-11513, December 4, 1917, LAMBERTO SONGCO, plaintiff-appellee,
vs. GEORGE C. SELLNER, defendant-appellant.
PONENTE:
STREET, J.
FACTS OF THE CASE:

Sellner and songco owned adjoining farms. Sellner decided to mill his cane at the central
within a short distance from his farm. However, the central owners were not sure that they
can mill his cane. Sellner learned that the central was going to mill Song’s cane, he came
into the idea of buying Song’s cane expecting to run his own cane in that same time the
other should be milled. Accordingly, he bought Songco’s cane as it stood in the fields for P
12 000 and executed 3 promissory notes of P 4 000 each. The 2 notes were paid and the
present action was instituted to recover upon the 3rd as Sellner alleges that the note was
obtained from him by means of false and fraudulent representations. Songco estimated
that the uncut cane would produce 3000 piculs of the sugar and that Sellner bought
believing this estimate to be correct. However, the net produce was far short from this
estimate.
The lower court rendered judgement in favor of the plaintiff; the defendant has appealed.

Whether Sellner is still liable for the 3rd promissory note

Yes. Although it is fairly shown that Songco knew at the time he made the representation
that he was greatly exaggerating the probable produce of his fields, the Court thinks that
Sellner was bound and that he must pay the price stipulated. The law allows considerable
latitude to seller's statements, or dealer's talk; and experience teaches that it is exceedingly
risky to accept it at its face value. By relying on Songco’s estimate, Sellner bound himself to
the terms stipulated in their contract. Since Sellner did so at his own peril, he must
therefore bear the consequences of his own imprudence.
TITLE:
G.R. No. L-29449, December 29, 1928, LEODEGARIO AZARRAGA, Plaintiff and
Appellee, vs. MARIA GAY, Defendant and Appellant.
PONENTE:
VILLAMOR, J.
FACTS OF THE CASE:
In January 1921, Plaintiff Azarraga sold two (2) parcels of land to the Defendant
Gay for the lump sum of Php47,000.00, payable in installments. The conditions of the
payment were: Php5,000.00 at the time of signing the contract; Php20,000.00 upon delivery
of the Torrens Title to the first parcel; Php10,000.00 upon delivery of Torrens Title to the
second parcel; and lastly the sum of Php12,000.00 one year after the delivery of Torrens
Title to the second parcel. Gay complied with the payment of Php5,000.00 and
Php20,000.00 pursuant to the agreement of the 1st parcel. However, despite delivery of the
Torrens Title by the vendor (Azarraga) of the 2nd parcel, Gay failed to pay the
Php10,000.00, neither did she pay the remaining Php12,000.00 one year after having
received the Torrens Title to the 2nd parcel. Hence, the plaintiff claims the sum of
Php22,000.00 with legal interest from the month of April 1921 on the sum of Php10,000.00,
and from April 1922 on the sum of Php12,000.00, until full payment of the amounts
claimed. Defendant alleges in defense that there was a misrepresentation as to the area of
the 2nd land which she believed has an area of 98 hectares but in fact has a real area of 60
hectares only, and thus made it appear in the the deed of sale and induced Defendant Gay
to bind herself to pay the price of Php47,000.00 for the two parcels of land. Hence, she is
entitled to a reduction in the price of two parcels in proportion to the area lacking.

The lower court held that neither the plaintiff nor the defendant gave any
importance to the area of the land in consenting to the contract in question, and that there
had been no fraud when the parties agreed to the lump sum for the two parcels of land,
ordered the defendant to pay the plaintiff the sum of Php19,300 with legal interest at (8%
per annum from April 30, 1921 on the sum of Php7,300.00 and from April 30, 1992, on the
sum of Php12,000.00. And finally dismissed the defendant’s cross complaint, without
special pronouncement as to costs.
As a question of fact the trial court found from the evidence adduced by the parties,
that the plaintiff had not practiced any deception in agreeing with the defendant upon the
sale of the two parcels of land.

Whether there was fraud misrepresenting the area of the 2nd parcel of land in the
agreement to the contract

None. There is no evidence of record that the plaintiff made false representations as
imputed to him by the defendant, the latter accepted such representations at her own risk
and she is the only one responsible for the consequences of her inexcusable credulousness.
In the case of Sonco vs. Sellnar, the court said: “Assertions concerning property which is
the subject of a contract of sale, or in regard to its qualities and characteristics, are the
usual and ordinary means used by sellers to obtain high price and are always understood
as affording to buyers no ground for omitting to make inquiries. A man who relies upon
such an affirmation made by a person whose interest might so readily prompt him to
exaggerate the value of his property does so at his peril, and must take the consequences of
his own imprudence.”
The defendant had ample opportunity to appraise herself of the condition of the
land which she purchased, and the plaintiff did nothing to prevent her from making such
an investigation as she deemed fit. When the purchaser proceeds to make investigations
by himself, and the vendor does nothing to prevent such investigation from being as
complete as the former might wish, the purchaser cannot later allege that the vendor made
false representations to him. Defendant knew that the area of the 2nd parcel was only
about 70 hectares is shown by the fact that she received the document Exhibit 4 before the
execution of the contract Exhibit A, and yet in spite of all this, she did not complain of
difference in the area of the 2nd parcel until the year 1926. Hence, no deceit was practiced,
as the trial court rightly found. Decision of the RTC is AFFIRMED.
TITLE:
G.R. No. 65922. December 3, 1991, Laureta Trinidad v. IAC, 204 SCRA 524 (1991)
PONENTE:
CRUZ, J
FACTS OF THE CASE:
Sometime in early 1969, petitioner Laureta Trinidad approached Vicente J. Francisco and
offered to buy the latter’s property. Francisco was willing to sell. Trinidad inspected the
house and lot and examined a vicinity map which indicated drainage canals along the
property. They agreed on the purchase price and the balance was to be paid in five equal
annual installments. Trinidad paid the installment for 2 succeeding years but asked for an
extension on the third year. However, she says she eventually decided not to continue
paying the amortizations because the house was flooded again. Upon her return from the
United States, requested an inspection from the City Engineer's office of Quezon City of
the subject premises to determine the cause of the flooding. The finding was that "the lot is
low and is a narrowed portion of the creek." Later, the petitioner filed her complaint
against Francisco alleging that she was induced to enter into the contract of sale because of
his misrepresentations. She asked that the agreement be annulled and her payments
refunded to her, together with the actual expenses she had incurred for the “annexes and
decorations” she had made on the house.
TRIAL COURT: The decision of the Court of First Instance ruled in favor of the Trinidad,
ordering, inter alia, that the contract be annulled.
IAC: The Intermediate Appellate Court reversed the lower court’s decision and ruled in
favor of the defendant.

Whether under the established facts, there was misrepresentation on the part of Francisco
to justify the rescission of the sale and the award of damages to the petitioner
No. The Supreme Court’s finding is that the fraud alleged by the petitioner has not been
satisfactorily established to call for the annulment of the contract.
First, it was the petitioner who admittedly approached the private respondent, who never
advertised the property nor offered it for sale to her.
Second, the petitioner had full opportunity to inspect the premises, including the drainage
canals indicated in the vicinity map that was furnished her, before she entered into the
contract of conditional sale.
Third, it is assumed that she made her appraisal of the property not with the untrained eye
of the ordinary prospective buyer but with the experience and even expertise of the
licensed real estate broker that she was. If she minimized the presence of the drainage
canals, she has only her own negligence to blame.
Fourth, seeing that the lot was depressed and there was a drainage lot abutting it, she
cannot say she was not forewarned of the possibility that the place might be flooded.
Notwithstanding the obvious condition of the property, she still decided to buy it.
Fifth, there is no evidence except her own testimony that two previous owners of the
property had vacated it because of the floods and that Francisco assured her that the house
would not be flooded again. The supposed previous owners were not presented as
witnesses and neither were the neighbors. Francisco himself denied having made the
alleged assurance.
Sixth, the petitioner paid the 1970 and 1971 amortizations even if, according to her
Complaint, “since 1969 said lot had been under floods of about one (1) foot deep," and
despite the floods of September and November 1970.
Seventh, it is also curious that notwithstanding the said floods, the petitioner still “made
annexes and decorations on the house," all of a permanent nature, for which she now
claims reimbursement from the private respondent.
Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is
presumed that “a person is innocent of crime or wrong” and that “private transactions
have been fair and regular.” While disputable, these presumptions can be overcome only
by clear and preponderant evidence. To repeat, it has not been satisfactorily established
that the private respondent inveigled the petitioner through false representation to buy the
subject property.
TITLE:
G.R. No. L-11872, December 1, 1917, DOMINGO MERCADO and JOSEFA MERCADO,
plaintiffs-appellants, vs. JOSE ESPIRITU, administrator of the estate of the deceased
Luis Espiritu, defendant-appellee.
PONENTE:
TORRES, J.:
FACTS OF THE CASE:
A contract made by Luis Espiritu 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.

The court rendered the judgment aforementioned, to which the plaintiffs excepted and in
writing moved for a reopening of the case and a new trial, exception was taken by the
petitioners, and the proper bill of exceptions having been presented.

Whether the deed of sale is valid when the minors presented were of legal age
The court declared that the contract of sale was valid, even if it were made and entered
into by minors, who pretended to be of legal age. The court stated that they will not be
permitted to excuse themselves from the fulfillment of the obligations contracted by them,
or to have them annulled.The ruling was in accordance with the provisions on law on
estoppel and Rule 123, Section 6 paragraph A which states that “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.
TITLE:
G.R. No. L-12471, April 13, 1959, Braganza vs. Villa Abrille
PONENTE:
Chief Justice César Fernando C. Bengzon
FACTS OF THE CASE:
ROSARIO BRAGANZA and her sons RODOLFO and GUILLERMO, borrowed Php
70,000.00 in Japanese War Notes from FERNANDO VILLA ABRILLE on October 30, 1944,
and promised in writing to pay him back Php10,000.00 in Legal Currency of the Philippine
Island, after 2 years when the war is over, or as soon as International Exchange has been
established in the Philippines, plus 2 % per annum. Because payment had not been made,
Villa Abrille sued them in March 1949 before the CFI of Manila. In their answer before the
CFI of Manila, defendants averred that their debt is only Php 40,000.00 only and not Php
70,000.00 as plaintiff asserted. They also averred that Guillermo and Rodolfo were minors
when they signed the promissory note.

CFI rendered judgment requiring the BRAGANZAs to pay solidarily VILLA
ABRILLE the sum of P10,000 plus 2 % interest, which the appellate court affirmed.

Whether Rodolfo and Guillermo Braganza could be legally bound by their
signatures in the promissory note, despite of being then minor
Yes. Accordingly, the appealed decision should be modified in the sense that
Rosario Braganza shall pay 1/3 of P10,000 i.e., P3,333.334 plus 2% interest from October
1944; and Rodolfo and Guillermo Braganza shall pay jointly to the same creditor the total
amount of P1,166.67 plus 6% interest beginning March 7, 1949, when the complaint was
filed. No costs in this instance.
There can be no question about the responsibility of Mrs. Rosario L. Braganza because the
minority of her consigners note release her from liability; since it is a personal defense of
the minors. However, such defense will benefit her to the extent of the shares for
whichsuch minors may be responsible, (Art. 1148, Civil Code).
From the minors' failure to disclose their minority in the same promissory note they
signed, it does not follow as a legal proposition that they will not be permitted thereafter to
assert it. They had no juridical duty to disclose their inability.
These minors may not be entirely absolved from monetary responsibility. In

accordance with the provisions of Civil Code, even if their written contact is unenforceable
because of non-age, they shall make restitution to the extent that they have profited by the
money they received. (Art. 1340) There is testimony that the funds delivered to them by
Villa Abrille were used for their support during the Japanese occupation. Such being the case,
it is but fair to hold that they had profited to the extent of the value of such money, which
value has been authoritatively established in the so-called Ballantine Schedule: in October
1944, P40.00 Japanese notes were equivalent to P1 of current Philippine money.
Wherefore, as the share of these minors was 2/3 of P70,000 of P46,666.66, they
should now return P1,166.67. Their promise to pay P10,000 in Philippine currency, (Exhibit
A) can not be enforced, as already stated, since they were minors incapable of binding
themselves. Their liability, to repeat, is presently declared without regard of said Exhibit
A, but solely in pursuance of Article 1304 of the Civil Code.
TITLE:
G.R. No. L-20659, November 3, 1923, MARIANO S. TUASON, plaintiff-appellant, vs.
CRISANTO MARQUEZ, defendant-appellee.
PONENTE:
MALCOLM, J.
FACTS OF THE CASE:

It appears that in either 1913 or 1914, a 35-year franchise was granted to the Lucena Electric
Company. The rights of the company passed to Crisanto Marquez (owner of electric light
plant of Lucena, Tayabas Sucesores del Lucena Electric), at a Sheriff sale in 1919. Marquez
later announced his intention to give up the franchise. Because of this, the Public Utility
Commissioner (PUC) cancelled said franchise. March 5, 1921 Marquez gave an option to
Antonio Tuason to purchase the plant for P14,400. The option was taken advantage of
Tuason and a contract was formulated and ratified before a notary public. Agreement: Pay
P2400 within 60 days, P12k within a year. The first was paid, but the second installment
has not been paid. The contract entered into by Tuason and Marquez included the clause:
The right of the franchise is conceded to the Compania for the exploitation (use) of the
industry for which it (the company) is dedicated Tuason was in possession of the plant
and it was run under the management of the Consolidated Electric Company for 16
months before it was sold to Gregorio Marquez for P5,501.57 under execution by reason of
a judgment in the Hermanos v. The Phil. Electric Light Company case. During the time the
plant was in Tuasons possession, he was permitted to operate the company pursuant to a
special license. Later on, a new franchise was granted by the PUC with certain conditions.
It was then that Tuason conceived the idea of bringing action against Marquez for a
rescission of their contract. Tuason claims 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 plant with a franchise, when the
defendant had already given up his rights to that franchise.
Court of First Instance absolved Marquez from complaint, and Tuason was ordered to pay
Marquez (P12240 + interest = P12k amount due on contract + P240 rent).
Whether Tuason may rescind the contract and claim damages
No. The contract, in making mention of the property, merely renewed a previous
inventory of the property. The franchise was not the determining cause of the purchase
and the status of such could have been ascertained at the office of the Public Utility
Commissioner.
The innocent non-disclosure of fact does not affect the formation of the contract or operate
to discharge the parties from their agreement. The doctrine estoppel by laches or
inexcusable delay in asserting a right and acquiescence in existing conditions are a bar to
legal action applies: Tuason operated the plant for 16 months without question and made
payment without protest.
TITLE:
G.R. No. 110672, September 14, 1999, Rural Bank of Sta. Maria, Pangasinan, petitioner,
vs The Honorable Court of Appeals, Rosario R. Rayandayan, Carmen R. Arseno,
respondents.
PONENTE:
GONZAGA-REYES, J.:
FACTS OF THE CASE:
A Deed of Absolute Sale with Assumption of Mortgage was executed between Behis
as vendor/assignor and Respondents Rayandayan and Arceno as vendees/assignees for the
sum of P250,000. Respondents together with Behis executed another agreement
embodying the real consideration of the sale of the land in the sum of
P2,400,000.Respondents negotiated with the principal stockholder of the bank, Engr.
Natividad for the assumption of the indebtedness of Behis and the subsequent release of
the mortgage on the property by the bank. Respondents did not show to the bank the
agreement with Behis providing with the real consideration of P2,400,000 for the sale of the
property to the former. According to Petitioner Bank, had it known of the real
consideration for the sale, it would not have consented into entering the Memorandum of
Agreement with Respondents as it was put in the dark as to the real capacity and financial
standing of private respondents to assume the mortgage from Behis. Petitioner pointed out
that it would not have assented as it could not expect respondents to pay the bank the
approximately P343,000 mortgage debt when private respondents have to pay at the same
time P2,400,00 to Behis on the sale of the land.

The RTC ruled that the MOA is valid.The case was elevated to the CA on certiorari.
The respondent Court affirmed the validity of the MOA dismissing the claim of the
respondent that their consent to the agreement made with respondents to assume the
mortgage of Manuel Behis, and awarding the respondents for damages.

Whether the Memorandum is voidable on the grounds of fraud
The Supreme Court held that the kind of fraud that will vitiate a contract refers to
those insidious words or machinations resorted to by one of the contracting parties to
induce the other to enter into a contract which without them he would not have agreed to.
Simply stated, the fraud must be the determining cause of the contract, or must have
caused the consent to be given. It is believed that the non-disclosure to the bank of the
purchase price of the sale of the land between private respondents and Manuel Behis
cannot be the "fraud" contemplated by Article 1338 of the Civil Code. From the sole reason
submitted by the petitioner bank that it was kept in the dark as to the financial capacity of
private respondents, we cannot see how the omission or concealment of the real purchase
price could have induced the bank into giving its consent to the agreement; or that the
bank would not have otherwise given its consent had it known of the real purchase price.
Secondly, pursuant to Article 1339 of the Civil Code, silence or concealment, by itself, does
not constitute fraud, unless there is a special duty to disclose certain facts, or unless
according to good faith and the usages of commerce the communication should be made.
Private respondents Rayandayan and Arceño had no duty, and therefore did not act in bad
faith, in failing to disclose the real consideration of the sale between them and Manuel
Behis. The petition is hereby denied and the decision of the Court of Appeals, dated March
17, 1993 is affirmed.
TITLE:
G.R. NO. L-14070, MARIA GERVACIO BLAS, MANUEL GERVACIO BLAS, LEONCIO
GERVACIO BLAS and LOIDA GERVACIO BLAS, Plaintiffs-Appellants, vs.
ROSALINDA 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, Defendants-Appellants
PONENTE:
LABRADOR, J.
FACTS OF THE CASE:

This action was instituted by plaintiffs against the administratrix of the estate of
Maxima Santos, 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. The complaint also prays for actual
damages in the amount of Php50,000.00. The alleged promise of the deceased Maxima
Santos is contained in a document executed by her on December 26, 1936 attached to the
complaint as Annex “H” and introduced at the trial as Exhibit “A”. The complaint also
alleges that the plaintiffs are 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, Blass 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. In lieu of this, Maxima executed a document where by she
intimated that hse understands the will of her husband; that she promises that she’ll 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 an of them
depending upon the respect, service, and treatment accorded to her by said heirs. In 1937
Simeon Blas died while Maxima died in 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. 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.

The trial court held that the plaintiffs-appellants in the case at bar are concluded by
the judgment rendered in the proceedings for the settlement of the estate of Simeon Blas
for the reason that the properties left by him belonged to himself and his wife Maxima
Santos; tha the project of partition in the said case, adjudicating to Maxima Santos one-half
as her share in the conjugal properties, is a bar to another action on the same subject
matter, Maxima Santos having become absolute owner of the said properties adjudicated
in her favor.
Whether the heirs can acquire the properties that Maxima promised them
YES. The heirs can acquire the properties that Maxima promised with them because
it was stated in Article 1347 that “No contract may be entered into upon future inheritance
except in cases expressly authorized by law.” In the case at bar the contract was
authorized by law because the promise made by Maxima to their heirs before she died is a
valid reason and it should be enforceable upon her death and her heirs can now acquire
the succession of the properties in issue.
TITLE:
Tanedo v. CA, 252 SCRA 80 (1996)
PONENTE:
PANGANIBAN, J.:
FACTS OF THE CASE:

Lazaro Tañedo executed a deed of absolute sale in favor of Ricardo Tañedo and Teresita
Barrera in which he conveyed a parcel of land which he will inherit. Upon the death of his
father he executed an affidavit of conformity to reaffirm the said sale. He also executed
another deed of sale in favor of the spouses covering the parcel of land he already
inherited. Ricardo registered the last deed of sale in the registry of deeds in their
favor.Ricardo later learned that Lazaro sold the same property to his children through a
deed of sale.
The trial court decided in favor of private respondents, holding that petitioners failed "to
adduce a proponderance of evidence to support (their) claim." On appeal, the Court of
Appeals affirmed the decision of the trial court, ruling that the Deed of Sale dated January
13, 1981 (Exh. 9) was valid and that its registration in good faith vested title in said
respondents.
Whether the Tañedo spouses have a better right over the property against the children of
Lazaro Tañedo
Since a future inheritance generally cannot be a subject of a contract, the deed of sale and
the affidavit of conformity made by Lazaro has no effect. The subject of dispute therefore is
the deed of sale made by him in favor of spouses Tañedo and another to his children after
he already legally acquired the property. Thus, although the deed of sale in favor of
private respondents was later than the one in favor of petitioners, ownership would vest in
the former because of the undisputed fact of registration. On the other hand, petitioners
have not registered the sale to them at all. Petitioners contend that they were in possession
of the property and that private respondents never took possession thereof. As between
two purchasers, the one who registered the sale in his favor has a preferred right over the
other who has not registered his title, even if the latter is in actual possession of the
immovable property.
TITLE:
G.R. No. L-11240 December 18, 1957 CONCHITA LIGUEZ, petitioner, vs.THE
HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL.,
respondents.
PONENTE:
REYES, J.B.L., J.:
FACTS OF THE CASE:

Conchita Liguez filed a complaint against the widow and heirs of the late Salvador P.
Lopez to recover a parcel of 51.84 hectares of land. . Plaintiff averred to be its legal owner,
pursuant to a deed of donation of said land, executed in her favor by the late owner,
Salvador P. Lopez. Petitioner argues that the property was donated to him by Lopez when
they cohabiting to each other when she was only 16 years old. The defense interposed was
that the donation was null and void for having an illicit causa or consideration, which was
the plaintiff’s entering into marital relations with Salvador P. Lopez, a married man.

The Court of First Instance made in favor in Lopez widow and wife . Court of Appeals
upheld the CFI decision stating that the deed of donation was inoperative and null and
void (1) because the husband, Lopez, had no right to donate conjugal property to the
plaintiff appellant; and (2) because the donation was tainted with illegal cause or
consideration, of which donor and donee were participants.

Whether the motive may be regarded as causa when it predetermines the purpose of the
contract
Yes. 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. Under the cited Art. 1274, liberality of the donor is
deemed causa only in contracts that are of “pure” beneficence, or contracts designed solely
and exclusively to procure the welfare of the beneficiary, without any intent of producing
any satisfaction for the donor.GV
In view of the foregoing, the decisions appealed from are reversed and set aside, and the
appellant Conchita Liguez declared entitled to so much of the donated property as may be
found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the
conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the
latter
TITLE:
G.R. No. L-33360 April 25, 1977, MAXIMINO CARANTES (Substituted by Engracia
Mabanta Carantes) vs.
COURT OF APPEALS, BILAD CARANTES, LAURO CARANTES, EDUARDO
CARANTES and MICHAEL TUMPAO
PONENTE:
CASTRO, C.J
FACTS OF THE CASE:

Mateo Carantes, original owner of Lot No. 44 situated at Loakan, Baguio City, died
in 1913. He was survived by his widow Ogasia, and six children, Bilad, Lauro, Crispino,
Maximino, Apung and Sianang. In 1930, the government expropriated a portion of Lot.
No. 44. It was subdivided into Lots. No. 44A to 44E for the purpose.
In 1913, Maximino was appointed the judicial administrator of the estate of Mateo.
Bilad, Lauro, Sianang, and Crisipino executed “Assignment of Right to Inheritance”
assigning to Maximino their rights over said lot in 1939. The stated monetary consideration
is P1.00. On same date, Maximino sold Lot Nos. 44B and 44C to the government. One year
later the Court of First Instance, upon joint petition of the Carrantes heirs, issued an order
cancelling O.C.T. No. 3 and TCT No. 2533 was issued in its place.
On 16 March 1940, Maximino registered the “Assignment of Right to Inheritance”.

Thus, TCT No. 2533 was cancelled and TCT No. 2540 was issued in his name. He then
executed a formal deed of Sale was also executed in favor of the government. TCT No.
2540 was cancelled and new titles were issued in favor of the government and Max,
respectively.
On 4 September 1958, Bilad, Lauro, and Crispino, along with the surviving heirs of
Apung and Sianang filed a complaint in the Court of First Instance (CFI) of Baguio City
claiming that the execution of the deed of assignment was attended by fraud.
The CFI Baguio City ruled that the action of the heirs had already prescribed since
an action on fraud prescribes on four years from discovery. The Court of Appeals reversed
and found that a constructive trust was created.

Whether the action already prescribes
YES. The Supreme Court held that the present action being one to annul a contract
on the ground of fraud, its prescriptive period is four years from the time of the discovery
of the fraud.
The weight of authorities is to the effect that the registration of an instrument in the
Office of the Register of Deeds constitutes constructive notice to the whole world, and,
therefore, discovery of the fraud is deemed to have taken place at the time of the
registration. 9 In this case the deed of assignment was registered on March 16, 1940, and in
fact on the same date T.C.T. No. 2533 in the names of the heirs of Mateo Carantes was
cancelled, and T.C.T. No. 2540 in the name of the petitioner was issued in lieu thereof. The
four-year period within which the private respondents could have filed the present action
consequently commenced on March 16, 1940; and since they filed it only on September 4,
1958, it follows that the same is barred by the statute of limitations.
In this case the ten-year prescriptive period began on March 16, 1940, when the
petitioner registered the deed of "Assignment of Right to Inheritance" and secured the
cancellation of the certificate of title in the joint names of the heirs of Mateo Carantes, and,
in lieu thereof, the issuance of a new title exclusively in his name. Since the present action
was commenced only on September 4, 1958, it is clear that the same is barred by extinctive
prescription.
TITLE:
G.R. No. 126376. November 20, 2003, Sps. Buenaventura et al v. CA, 416 SCRA 263 (2003)
PONENTE:
CARPIO, J
FACTS OF THE CASE:
Plaintiffs Consolacion, Nora, Emma and Natividad are children of defendant spouses
Leonardo Joaquin and Feliciana Landrito. The plaintiffs sought to declare null and void ab
initio certain deeds of sale of real property lots owned by the defendants to their seven (7)
other children which are co-defendants of the spouses.
In seeking the declaration of nullity of the said deeds of sale, the plaintiffs aver that (1)
there was no actual valid consideration; (2) if there was indeed a consideration, it was
considerably less than the actual value of the real properties in question; (3) the deeds of
sale do not reflect and express the true intent of the parties; and (4) the sale was the result
of a deliberate conspiracy designed to unjustly deprive the plaintiffs of their legitime.
TRIAL COURT: ruled in favor of the defendants and stated that “…the Deeds of Sale were
all executed for valuable consideration. This assertion must prevail over the negative
allegation of plaintiffs.” There is also the argument that plaintiffs do not have a valid cause
of action against defendants since there can be no legitime to speak of prior to the death of
their parents because the legitime of a compulsory heir is computed as of the time of the
death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime
while their parents live.
CA: affirmed the above decision of the trial court and add that “…their right to the
properties of their defendant parents, as compulsory heirs, is merely inchoate and vests
only upon the latter’s death. While still alive, defendant parents are free to dispose of their
properties, provided that such dispositions are not made in fraud of creditors.” Further,
the plaintiffs are clearly not parties to the deed of sale and are not principally or
subsidiarily bound thereby; hence, they have no legal capacity to challenge their validity.
1. Whether the Court of Appeals erred in not holding that the conveyance in question had
no valid consideration
2. Whether the Court of Appeals erred in not holding that even assuming that there was a
consideration, the same is grossly inadequate
No. The Supreme Court affirmed the decision of the Court of Appeals in toto and stated as
follows:
That if there is a meeting of the minds of the parties as to the price, the contract of sale is
valid despite the manner of payment, or even the breach of that manner of payment.—A
contract of sale is not a real contract, but a consensual contract. As a consensual contract, a
contract of sale becomes a binding and valid contract upon the meeting of the minds as to
price. If there is a meeting of the minds of the parties as to the price, the contract of sale is
valid, despite the manner of payment, or even the breach of that manner of payment. If the
real price is not stated in the contract, then the contract of sale is valid but subject to
reformation. If there is no meeting of the minds of the parties as to the price, because the
price stipulated in the contract is simulated, then the contract is void. Article 1471 of the
Civil Code states that if the price in a contract of sale is simulated, the sale is void.
Further, It is not the act of payment of price that determines the validity of a contract of
sale; Failure to pay the consideration is different from lack of consideration; Failure to pay
the consideration results in a right to demand the fulfillment or cancellation of the
obligation under an existing valid contract while lack of consideration prevents the
existence of a valid contract.—It is not the act of payment of price that determines the
validity of a contract of sale. Payment of the price has nothing to do with the perfection of
the contract. Payment of the price goes into the performance of the contract. Failure to pay
the consideration is different from lack of consideration. The former results in a right to
demand the fulfillment or cancellation of the obligation under an existing valid contract
while the latter prevents the existence of a valid contract.
TITLE:
G.R. No. L-27696 September 30, 1977 MIGUEL FLORENTINO, ROSARIO
ENCARNACION de FLORENTINO, MANUEL ARCE, JOSE FLORENTINO,
VICTORINO FLORENTINO, ANTONIO FLORENTINO, REMEDION
ENCARNACION and SEVERINA ENCARNACION, petitioners-appellants,vs.
SALVADOR ENCARNACION, SR., SALVADOR ENCARNACION, JR., and ANGEL
ENCARNACION, oppositors to encumbrance-petitioners-appelles.
PONENTE:
GUERRERO, J
FACTS OF THE CASE:
On May 22, 1964, the petitioners-appellants and the petitioners-appellees filed with CFI an
application for the registration under Act 496 of a parcel of agricultural land located at
Cabugao, Ilocos Sur. The application alleged among other things that the applicants are
the common and pro-indiviso owners in fee simple of the said land with the
improvements existing thereon; that to the best of the knowledge and belief, there is no
mortgage, hen or encumbrance of any kind whatsoever affecting said land, nor any other
person having any estate or interest thereon, legal or equitable, remainder, reservation at
in expectancy; that said applicants had acquired the aforesaid land thru and by inheritance
from their predecessors in interest, their aunt, Doña Encarnacion Florentino, and Angel
Encarnacion acquired their respective shares of the land thru purchase from the original
heirs, Jesus, Caridad, Lourdes and Dolores, all surnamed Singson, on one hand and from
Asuncion Florentino on the other. Exhibit O-1 embodied in the deed of extrajudicial
partition (Exhibit O), which states that with respect to the land situated in Barrio Lubong,
Dacquel, Cabugao, Ilocos Sur, the fruits thereof shall serve to defray the religious
expenses, was the source of contention in this case. Florentino wanted to include Exhibit
O-1 on the title but the Encarnacions opposed and subsequently withdrawn their
application on their shares, which was opposed by the former.
Court of First Instance of Ilocos Sur ruled in favor of the respondent. According to the CFI,
the self-imposed arrangement in favor of the Church is a simple donation, but is void since
the donee has not accepted the donation and Salvador Encarnacion, Jr. and Angel
Encarnacion had not made any oral or written grant at all so the court allowed the
religious expenses to be made and entered on the undivided shares, interests and
participations of all the applicants in this case, except that of Salvador Encarnacion, Sr.,
Salvador Encarnacion, Jr. and Angel Encarnacion.

Whether the lower own erred in concluding that the stipulation embodied in Exhibit O on
religious expenses is just an arrangement stipulation, or grant revocable at the unilateral
option of the co-owners
IN VIEW OF THE FOREGOING, the decision of the Court of First Instance of Ilocos Sur in
Land Registration Case No. N-310 is affirmed but modified to allow the annotation of
Exhibit O-1 as an encumbrance on the face of the title to be finally issued in favor of all the
applications (herein appellants and herein appellees) in the registration proceedings
below. In issue brought to the Supreme Court, YES, the court erred in concluding that the
stipulation is just an arrangement stipulation. It cannot be revoked unilaterally.The
contract must bind both parties, based on the principles (1) that obligation arising from
contracts have the force of law between the contracting parties; and (2) that there must be
mutuality between the parties band on their essential equality, to which is repugnant to
have one party bound by the contract leaving the other free therefrom. The stipulation
(Exhibit O-1) is part of an extrajudicial partition (Exh. O) duly agreed and signed by the
parties, hence the same must bind the contracting parties thereto and its validity or
compliance cannot be left to the will of one of them. The said stipulation is a stipulation
pour autrui. A stipulation pour autrui is a stipulation in favor of a third person conferring
a clear and deliberate favor upon him, and which stipulation is merely a part of a contract
entered into by the parties, neither of whom acted as agent of the third person, and such
third person may demand its fulfillment provided that he communicates his acceptance to
the obligor before it is revoked. Requisites: (1) that the stipulation in favor of a third
person should be a part, not the whole, of the contract, (2) that the favorable stipulation
should not be conditioned or compensated by any kind of obligation whatever; and (3)
neither of the contracting parties bears the legal representation or authorization of third
party.
TITLE:
G.R. No. L-23276 November 29, 1968 MELECIO COQUIA, MARIA ESPANUEVA and
MANILA YELLOW TAXICAB CO., INC., plaintiffs-appellees,
vs. FIELDMEN'S INSURANCE CO., INC., defendant-appellant
PONENTE:
CONCEPCION, C.J.:
FACTS OF THE CASE:

December 1, 1961, Fieldmen's Insurance Company, Inc. issued in favor of Manila.
Yellow Taxicab Co., Inc. (Manila) from December 1, 1961 to December 1, 1962.
Feb. 10, 1962, Insured’s taxicab driven by Carlito Coquia met
an accident as a result of w/c, the driver died. Insured filed for a claim of
P5k, Company then offered to pay P2k. Insured rejected such & made a
counter-offer of P4k but such was rejected. Thus, Insured & heirs of Carlito
filed a complaint against the Company to collect proceeds of the policy.

Trial court sentenced company to pay plaintiffs P4k + costs.

Whether there is a stipulation pour autrui that exempts the general rule that the parents
are not a party to the contract

YES. RTC affirmed. There is a stipulation that the Company "will indemnify any
authorized Driver who is driving the Motor Vehicle" of the Insured and, in the event of
death of said driver, the Company shall, likewise, "indemnify his personal
representatives." Typical of contracts pour autrui, this character being made more manifest
by the fact that the deceased driver paid 50% of the corresponding premiums, which were
deducted from his weekly commissions. Expressly stipulated and declared that it shall be
a condition precedent to any right of action or suit upon this Policy that the award by such
arbitrator, arbitrators or umpire of the amount of the Company's liability hereunder if
disputed shall be first obtained.
TITLE:
G.R. No. L-22404, PASTOR B. CONSTANTINO, plaintiff-appellant,
vs. HERMINIA ESPIRITU, defendant-appellee.
David Guevara for plaintiff-appellant.
PONENTE:
Dizon, J.
FACTS OF THE CASE:
Constantino alleged that he had, by a fictitious deed of absolute sale conveyed to Espiritu
for a consideration of P8,000.00, the two-storey house and four (4) subdivision lots in the
name of Pastor B. Constantino, married to Honorata Geukeko. This is with the
understanding that Espiritu would hold the properties in trust for their illegitimate son,
Pastor Constantino, Jr., still unborn at the time of the conveyance. Espiritu mortgaged said
properties to the Republic Savings Bank of Manila twice to secure payment of two loans,
one of P3,000.00 and the other of P2,000.00, and that thereafter she offered them for sale.
The complaint then prayed for the issuance of a writ of preliminary injunction restraining
Espiritu and her agents or representatives from further alienating or disposing of the
properties, and for judgment ordering her to execute a deed of absolute sale of said
properties in favor of Pastor B. Constantino, Jr., the beneficiary (who, at the filing of said
complaint, was about five years of age), and to pay attorney's fees in the sum of P2,000.00.
TCT No, 20714 in the name of plaintiff was partially cancelled and in lieu thereof, TCT No.
32744 was issued by the Register of Deeds of Rizal in the name of appellee Herminia
Espiritu.
Espiritu moved to dismiss the complaint on the ground that it stated no cause of action
because Pastor Constantino, Jr., the beneficiary of the alleged trust, was not included as
party-plaintiff, and on the further ground that cause of action was unenforceable under the
Statute of Frauds. Constantino argued argued that what was involved was an implied
trust under Art. 1453.

The trial court dismissed the complaint. Constantino then filed a motion for an amended
complaint, to have his son Pastor Jr. included in the suit. The trial court dismissed the
motion, and the case was appealed to the Supreme Court.
Whether the contract in question is not enforceable by action by reason of the provisions of
the Statute of Frauds
Yes, the contention that the contract in question is not enforceable by action by reason of
the provisions of the Statute of Frauds does not appear to be indubitable, it being clear
upon the facts alleged in the amended complaint that the contract between the parties had
already been partially performed by the execution of the deed of sale, the action brought
below being only for the enforcement of another phase thereof, namely, the execution by
appellee of a deed of conveyance in favor of the beneficiary thereunder.
TITLE:
G.R. No. 115117 JUNE 8, 2000, INTEGRATED PACKAGING CORP. vs. COURT
OF APPEALS
PONENTE:
QUISUMBING, J.:
FACTS OF THE CASE:
Petitioner and private respondent executed an order agreement whereby private

respondent bound itself to deliver to petitioner 3,450 reams of printing papers under
specified schedule of delivery. As of July 30, 1979, private respondent had delivered to
petitioner 1,097 reams of printing paper out of the total 3,450 reams stated in the
agreement. Petitioner alleged it wrote private respondent to immediately deliver the
balance because further delay would greatly prejudice petitioner. From June 5, 1980 and
until July 23, 1981, private respondent delivered again to petitioner various quantities of
printing paper amounting to P766,101.70. However, petitioner encountered difficulties
paying private respondent said amount. Accordingly, private respondent made a formal
demand upon petitioner to settle the outstanding account. Private respondent filed a
collection suit against petitioner for the sum of P766,101.70, representing the unpaid
purchase price of printing paper bought by petitioner on credit.
In its answer, petitioner denied the material allegations of the complaint. It alleged that
private respondent was able to deliver only 1,097 reams of printing paper which was short
of 2,875 reams, in total disregard of their agreement; that private respondent failed to
deliver the balance of the printing paper despite demand therefor, hence, petitioner
suffered actual damages and failed to realize expected profits.
The trial court rendered judgment declaring that petitioner should pay private respondent
the sum of P763,101.70 representing the value of printing paper delivered by private
respondent from June 5, 1980 to July 23, 1981. On appeal, the respondent Court of Appeals
reversed and set aside the judgment of the trial court.
Whether private respondent violated the order agreement
The transaction between the parties is a contract of sale whereby private respondent
(seller) obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds
itself to pay its equivalent (price). Both parties concede that the order agreement gives rise
to a reciprocal obligation such that the obligation of one is dependent upon the obligation
of the other. Reciprocal obligations are to be performed simultaneously, so that the
performance of one is conditioned upon the simultaneous fulfillment of the other. Thus,
private respondent undertakes to deliver printing paper of various quantities subject to
petitioner’s corresponding obligation to pay, on a maximum 90-day credit, for these
materials. Clearly, petitioner did not fulfill its side of the contract as its last payment in
August 1981 could cover only materials covered by delivery invoices dated September and
October 1980. Thus, private respondent did not violate the order agreement.
TITLE:
G.R. No. 120554 September 21, 1999, SO PING BUN, petitioner,
vs. COURT OF APPEALS, TEK HUA ENTERPRISES CORP. and MANUEL C. TIONG,
respondents.
PONENTE:
QUISUMBING, J.
FACTS OF THE CASE:

Tek Hua Trading Co, through its managing partner, So Pek Giok, engaged into four (4)
one-year lease agreements with lessor Dee C. Chuan & Sons Inc. with provisions for
month-to-month rental should the lessee continue to occupy the properties after the term.
In 1976, Tek Hua Trading Co. was dissolved, and the former members formed Tek Hua
Enterprises Corp., herein respondent. So Pek Giok, managing partner of the defunct
company, died in 1986. Petitioner So Ping Bun, his grandson, occupied the warehouse for
his own textile business. On March 1, 1991, private respondent Tiong sent a letter to
petitioner, demanding that the latter vacate the premises. Petitioner refused, and on March
4, 1992, he requested formal contracts of lease with DCCSI. The contracts were executed.
Private respondents moved for the nullification of the contract and claimed damages.

The petition was granted by the trial court and was upheld by the Court of Appeals

Whether So Ping Bun is guilty of tortuous interference of contract
Yes. The elements of tort interference are: a. Existence of a valid contract b. Knowledge on
the part of the third person of the existence of contract c. Interference of the third person
without legal justification or excuse. In this case, Trendsetter Marketing asked DCCSI to
execute lease contracts in its favor, and as a result petitioner deprived Tek Hua
Enterprising Corp. of the latter’s property rights. The 3 elements are sufficiently met. In
Gilchrist vs. Cuddy, it was held that there was no malice in the interference of a contract,
and the impulse behind one’s conduct lies in a proper business interest that in wrongful
motives, a party cannot be a malicious interferer. In the instant case, it is clear that
petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his enterprise at
the expense of respondent corporation. Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on record imputes deliberate
wrongful motives or malice on him.
TITLE:
G.R. No. L-27010 April 30 ,16969 Marlene Dauden-Hernaez, Petitioner represented by
R.M. Coronado and Associates VS Hon. Walfrido De Los Angeles, Judge of the Court of
First Instance of Quezon City, Hollywood Far East Productions, Inc., and Ramon
Valenzuela, respondents represented by Francisco Lavides
PONENTE:
Reyes, J.B.L., Acting C.J.
FACTS OF THE CASE:

Petitioner Marlene Dauden-Hernaez, a motion picture actress had filed a complaint against
respondents Hollywood Far East Productions Inc., and its President and General Manager,
Ramon Valenzuela to recover P14,700.00 representing a balance allegedly due for her
services as leading actress in two motion pictures produced by the company and to
recover damages to the Court of First Instance of Quezon City.

The CFI of Quezon City ordered the complaint to be dismissed because the plaintiff's claim
was not evidenced by any written document, either public or private and the complaint
was defective on its face for violating Art. 1356 and 1358 of the Civil Code as well as for
containing defective, alleged, petitions.

Whether a contract for personal services involving more than P500.00 was either invalid or
unenforceable
Consistent with the Spanish Civil Code in upholding spirit and intent of the parties over
formalities, in general, contracts are valid and binding from their perfection regardless of
whether they are oral or written.However, as provided in the 2nd
sentence of Art. 1356:
ART. 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.
Thus, the two exceptions to the general rule that the form is irrelevant to the binding effect
of a contract are:
(a)Solemn Contracts - contracts which the law requires to be in some particular form
(writing) in order to make them valid and enforceable.
Examples: Donation of immovable property (Art. 749) which must be in a public
instrument to be valid. in order "that the donation may be valid", i.e., existing or binding.2.
Donation of movables worth more than P5,000 (Art. 748)which must be in writing
otherwise they are void.(b)
Contracts that the law requires to be proved by some writing(memorandum) of its terms,
i.e. those covered by the old Statute of Frauds, now Article 1403(2) of the Civil Code.For
the latter example, their existence are not provable by mere oral testimony (unless wholly
or partly executed) and are required to be in writing to be enforceable by action in court.
However, the contract sued upon (compensation for services)does not come under either
exception. While the last clause of Article1358 provides that "all other contracts where the
amount involved exceeds five hundred pesos must appear in writing, even a private one."
Said Article does not provide that the absence of a 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.
TITLE:
G.R. No. L-47806, April 14, 1941, LEONCIO GABRIEL, petitioner, vs. MONTE DE
PIEDAD Y CAJA DE AHARROS and THE COURT OF APPEALS, respondents.
PONENTE:
LAUREL, J.
FACTS OF THE CASE:
Petitioner Leoncio Gabriel was employed as an appraiser of jewels inthe pawnshop of

Monte de Piedad from 1913 up to May 1933. OnDecember 31, 1932, he executed a chattel
mortgage to secure thepayment of the deficiencies which resulted from his erroneous
appraisalof the jewels pawned to the appellee, amounting to P14,679.07, with 6%interest.
Gabriel averred that the chattel mortgage was a part of a chemeon the part of Monte de
Piedad to cover up supposed losses incurred inits pawnshop department and that it was
based upon all non-existingsubject matter and non-existing consideration. With these,
Gabrielcontended that the provisions of the chattel mortgage contract werecontrary to law,
morals and public policy, and hence, such contract was ineffective and the principal
obligation secured by it is void. Respondent Monte de Piedad filed a complaint in the
Court of FirstInstance to recover the aforementioned sum less what had been paid
amounting to P3,333.25 and in case of default, to effectuate the chattel mortgage.
The lower court rendered judgment in favor of the Monte de Piedad against the herein
petitioner. Petitioner brought the case on appeal to the Court of Appeals, which affirmed
the judgment of the lower court in a decision rendered May 29, 1940.
1. Whether chattel mortgage void on the ground that it is contrary to law, morals and
public policy
2. Whether the chattel mortgage have a valid consideration
1. NO. Examining the contract at bar, the Court is of the opinion that it does not in any
way militate against the public good; neither does it contravene the policy of the law
nor the established interests of society. A contract is to be judge by its character, and
courts will look to thesubstance and not to the mere form of the transaction. The
freedom of contract is both a constitutional and statutory right and to uphold this right,
courts should move with all the necessary cautioncand prudence in holding contracts
void. A contract contrary to publiccpolicy is one that has a tendency to injure the
public, is against the public good, or contravenes some established interests of society,
or is inconsistent with sound policy and good morals, or tends clearly to undermine the
security of individual rights, whether of personal liability or of private property.
2. YES. There is a sufficient consideration in the contract as it was satisfactorily

established that it was executed voluntarily by Gabriel to guarantee the deficiencies
resulting from his erroneous appraisals of the jewels. A consideration is some right,
interest, benefit, or advantage conferred upon the promisor, to which he is otherwise
not lawfully entitled, or any detriment, prejudice, loss, or disadvantage suffered or
undertaken by the promisee other than to such as he is at the time of consent bound to
suffer.
TITLE:
G.R. No. 61594, September 28, 1990, Pakistan International Airlines Corporation,
petitioner, vs Hon. Blas F. Ople, in his capacity as Minister of Labor; Hon. Vicente
Leogardo, Jr., in his capacity as Deputy; Ethelynne B. Farrales and Maria Monyeen
Mamasig, respondents.
PONENTE:
FELICIANO, J.:
FACTS OF THE CASE:

Petitioner Pakistan International Airlines, a foreign corporation licensed to do
business in the Philippines, executed in Manila 2 separate contracts of employment, one
with private Respondent Farrales, and the other with private Respondent Mamasig.The
contracts became effective on January 1979, and provided for the duration of employment
and penalty, termination and the applicable law which is of Pakistan’s.Private
Respondents were trained in Pakistan and worked as flight attendants with base station in
Manila and flying assignments to different parts of the Middle East and Europe.1 year and
4 months prior to the expiration of contracts of employment, they received separate letters
informing them that their services would be terminated.Private Respondents jointly
instituted a complaint for illegal dismissal and non-payment of company benefits and
bonuses, against PIA with the then Minister of Labor and Employment. Several attempts at
conciliation were not fruitful.

The Regional Director ordered reinstatement and payment of full back wages or
in the alternative payment of their salaries for the remainder of the 3-year period. The
DeputyMinister affirmed the Regional Director’s order.

Whether only Pakistan’s laws and courts should govern

No, Philippine courts and administrative agencies are the proper forums for the
resolution of the contractual dispute. The relationship between Pakistan International
Airlines and its employees in this case is very much affected with public interest that the
applicable Philippine laws cannot be rendered illusory by the parties agreeing that some
other law should govern their relationship. Contracts were executed and partially
performed in the Philippines. Employees are Filipino citizens and residents and were
based in the Philippines. Pakistan International Airlines, although a foreign corporation is
licensed to do business in the Philippines. They did not plead and prove the applicable
Pakistani laws on the matter, it is presumed that these laws are the same as the Philippine
laws. Petition is dismissed for lack of merit.
TITLE:
G.R. No. L-15127, May 30, 1961, Emeterio Cui vs. Arellano University
PONENTE:
Chief Justice Roberto R. Concepcion
FACTS OF THE CASE:
EMETERIO CUI was a law student of ARELLANO UNIVERSITY, and was granted
scholarship. He was enrolled at ARELLANO from his first year up to the first semester of
his fourth year. The tuition fees he was paying every semester were all refunded to him by
ARELLANO. However, during his second semester, fourth year, when his uncle
FRANCISCO CAPISTRANO, the Dean of College of Law transferred to Abad Santos
University, he followed him and took his second semester thereat. After graduating, he
was required to submit his school records from ARELLANO UNIVERSITY, but the latter
would not release the same to him unless he pays for the Php 1,033.87 equivalent to the
amount refunded by ARELLANO to him when he was then a scholar. This was in
accordance with the contract he signed prior to the grant of his scholarship stipulating "IN
CONSIDERATION OF THE SCHOLARSHIP GRANTED TO ME BY THE UNIVERSITY, I
HEREBY WAIVE MY RIGHT TO TRANSFER TO ANOTHER SCHOOL WITHOUT
HAVING REFUNDED TO THE UNIVERSITY (DEFENDANT) THE EQUIVALENT OF
MY SCHOLARSHIP CASH.”
CUI was constrained to pay the said amount, in order that he could take the bar
examination in 1953, and brought the action before the CFI of Manila for recovery of said
amount, aside from P2,000 as moral damages, P500 as exemplary damages, P2,000 as
attorney's fees, and P500 as expenses of litigation.
The CFI ruled in favor of ARELLANO UNIVERSITY on the ground that it was unethical
for CUI to quit studying with ARELLANO UNIVERSITY without good reason.
Whether the contract signed by CUI waiving his right to transfer to another school without
refunding to ARELLANO UNIVERSITY the equivalent of his scholarships in cash, is valid
No. WHEREFORE, the decision appealed from is hereby reversed and another one shall be
entered sentencing the defendant to pay to the plaintiff the sum of P1,033.87, with interest
thereon at the legal rate from September 1, 1954, date of the institution of this case, as well
as the costs, and dismissing defendant's counterclaim. It is so ordered.
If Arellano University understood clearly the real essence of scholarships and the
motives which prompted the Bureau of Private Schools to issue Memorandum No. 38, s.
1949, it should have not entered into a contract of waiver with Cui on September 10, 1951,
which is a direct violation of said Memorandum and an open challenge to the authority of
the Director of Private Schools because the contract was repugnant to sound morality and
civic honesty.
Scholarship is awarded in recognition of merit not to keep outstanding students in

school to bolster its prestige. In the understanding of that university scholarships award is
a business scheme designed to increase the business potential of an education institution.
Thus conceived it is not only inconsistent with sound policy but also good morals. The
practice of awarding scholarships to attract students and keep them in school is not good
customs nor has it received some kind of social and practical confirmation except in some
private institutions as in Arellano University. The University of the Philippines which
implements Section 5 of Article XIV of the Constitution with reference to the giving of free
scholarships to gifted children, does not require scholars to reimburse the corresponding
value of the scholarships if they transfer to other schools. So also with the leading colleges
and universities of the United States after which our educational practices or policies are
patterned. In these institutions scholarships are granted not to attract and to keep brilliant
students in school for their propaganda mine but to reward merit or help gifted students
in whom society has an established interest or a first lien.
TITLE:
G.R. No. L-10551 March 3, 1917 IGNACIO ARROYO, plaintiff-appellant, vs.ALFRED
BERWIN, defendant-appellee.
PONENTE:
CARSON, J.
FACTS OF THE CASE:

Berwin is a procurador judicial (a person granted permission to appear before the courts
relating on behalf of clients, etc. without being a lawyer) in the law office of Atty. John
Bordman. Berwin represented Marcela Juaneza in the Justice of the Peace of Iloilo in
proceeding for a theft case filed by plaintiff Ignacio Arroyo. Marcela Juaneza lost then
appealed at the CFI of Iloilo.
On the day of the hearing at the CFI, Berwin requested Ignacio Arroyo to agree to dismiss
the criminal proceeding and thereafter stipulated in the presence of Roque Samson that "1)
his client, Marcela would recognize the plaintiff's ownership in the land situate on Calle
San Juan, Molo, Iloilo where Marcela ordred the cane (as in sugar cane) cut, which land
and which cut cane are referred to in the cause for the theft. Furthermore, they agreed that
"2) the plaintiff should obtain a Torrens title to said land and Marcela would not oppose
such application for registration". Provided that Arroyo would ask that the case be
dismissed against Marcela
Arroyo complied with the agreement. The case against Marcela was dismissed. Berwin did
not wish to comply with their agreement (Arroyo delivered to him the written agreement
for Marcela's signature but Berwin failed to give him back the same).
Arroyo filed for specific performance praying that judgment be rendered ordering Arroyo
to cause his client Marcela to sign the written agreement.
Court of First Instance dismissed this complaint on the ground of the illegality of the
consideration of the alleged contract, and without stopping to consider any other objection
to the complaint than that indicated by the court below, we are of opinion that the order
appealed from must be affirmed
Whether Berwin may be ordered to comply with the agreement
No. An agreement by the owner of stolen goods to stifle the prosecution of the person
charged with the theft, for a pecuniary or other valuable consideration, is manifestly
contrary to public policy and the due administration of justice. In the interest of the public
it is of the utmost importance that criminals should be prosecuted, and that all criminal
proceedings should be instituted and maintained in the form and manner prescribed by
law; and to permit an offender to escape the penalties prescribed by law by the purchase of
immunity from private individuals would result in a manifest perversion of justice.
Article 1255 of the Civil Code provides that: The contracting parties may make the
agreement and establish the clauses and conditions which they may dream advisable,
provided they are not in contravention of law, morals, or public order. Article 1275
provides that: Contracts without consideration or with an illicit one have no effect
whatsoever. A consideration is illicit when it is contrary to law and good morals.
The order entered in the court below should, therefore, be affirmed, with the costs of the
instance against the appellant. So ordered.
TITLE:
G.R. No. 126800, NATALIA P. BUSTAMANTE, Petitioner vs. SPOUSES RODITO F.
ROSEL and NORMA ROSEL, Respondents
PONENTE:
PARDO, J.
FACTS OF THE CASE:
Norma Rosel entered into a loan agreement with Natalia P. Bustamante in the
amount of One Hundred Thousand Pesos (Php100,000.00), payable for a period of two (2)
years, counted from March 1, 1987 with an interest rate of 18% per annum, and to
guarantee the payment thereof, they are putting as a collateral the Seventy (70) square
meters portion, inclusive of apartment therein of a parcel of land owned by the
Respondents Spouses with the condition that failure to pay such loan lender has the
option to buy or purchase the collateral for a total consideration of Two Hundred
Thousand Pesos (Php200,000.00) inclusive of borrowed amount and interest therein.
However, when the loan was about to mature on March 1, 1989, respondents proposed to
buy at the pre-set price of Php200,000.00, the seventy (70) square meters parcel of land
which was given as collateral to the loan. Petitioner, however, refused to sell and
requested for extension of time to pay the loan and offered to sell to respondents another
residential lot located at Road 20, Project 8, Quezon City, with the principal loan plus
interest to the used as down payment but respondent refused to extend the payment of the
loan and to accept the offered lot in Road 20. Hence, on March 1, 1989, petitioner tendered
payment of the loan to respondents which the latter refused to accept, insisting on
petitioner’s signing a prepared deed of absolute sale of the collateral.
The trial court ruled in favor of the Petitioner and denied the prayer of the
respondents for the execution of the deed of sale to convey the collateral in plaintiffs’
favor. The Court of Appeals reversed the Decision of the trial court

1. Whether Petitioner failed to pay the loan at its maturity date
2. Whether the stipulation in the loan contract was valid and enforceable
1. No. Petitioners met the stipulated date of March 1, 1989 and tendered payment but
respondents refused to accept said payment, petitioner consigned the amount with
the Trial Court. The SC noted the eagerness of the respondents in acquiring the
property given as collateral to guarantee the loan. The sale of the collateral is an
obligation with a suspensive condition. It is dependent upon the happening of an
event, without which the obligation to sell does not arise. Since the event did not
occur, respondents do not have the right to demand fulfillment of petitioner’s
obligation, specially where the same would not only be disadvantageous to
petitioner but would also unjustly enrich respondents considering the inadequate
consideration (Php200,000.00) for a 70 square meter property meter property
situated at Congressional Avenue, Quezon City;
Contracts have the force of law between contracting parties and must be complied
with in good faith, however, certain exceptions to the rule, specifically Article 1306
of the Civil Code, which provides:
“Article 1306. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary
to law, morals, good customs, public order, or public policy.”
2. No. The SC said that the stipulation is void. The intent of the creditor appears to be
evident, for the debtor is obliged to dispose of the collateral at the pre-agreed
consideration amounting to practically the same amount as the loan. In effect, the
creditor acquires the collateral in the event of non-payment of the loan. This is
embraced in the concept of pactum commissorioum, which is proscribed by law.
TITLE:
Garcia v. Bisaya, 97 Phil 609 (1955)
PONENTE:
REYES, A., J.:
FACTS OF THE CASE:
On May 20, 1952, Garcia filed a complaint against Bisaya alleging that on November 12,
1938, the latter executed a deed of sale; that the parcel of land in the deed was an
unregistered land, but in fact it is registered to a certain Sandoval – that despite demand
by Garcia, Bisaya refused to correct such error. Garcia prayed for judgment ordering
Bisaya to make the correction and reform the deed of sale. · Garcia denied executing the
deed of sale and pleaded prescription as a defense (10 years for written contracts). · Lower
court dismissed the case on the ground that Garcia’s action had already prescribed. ·
Garcia appealed that the case should not be dismissed on the ground of prescription since
he discovered the error in the deed of sale only recently.
Without trial on the merits and merely upon motion, the lower court dismissed the case on
the ground that plaintiff’s action had already prescribed. From this order plaintiff has
appealed directly to this Court.
Whether the case should be dismissed on the ground of prescription
No. Garcia could not have instituted his action to correct an error in the deed until that
error was discovered. It was not proven that the error was discovered more than ten years
before the action was filed. Hence, it should not be dismissed due to prescription. BUT, it
should be dismissed for lack of cause of action of the complaint. It failed to allege that the
deed does not express the real agreement of the parties. Such allegation is essential since
the objective in an action for reformation is to make an instrument conform to the real
agreement or intention of the parties. Courts do not reform instruments for the sake of it,
but to enable some party to assert rights under the reform. If reformation will be applied
by stating that the land is already covered by a TCT under Sandoval, what right will
Garcia be able to assert as a vendee? He would be in the position of knowingly purchased
a property not belonging to Bisaya, the vendor. Perhaps Garcia’s real grievance is that
Bisaya misled him that the land was unregistered. If that’s the case, the proper remedy is
not reformation but annulment of the contract (Art. 1359, par. 2) SC affirmed lower court’s
dismissal but for lack of cause of action of the complaint.
TITLE:
G.R. No. 128991. April 12, 2000, Bentir v. Leande, 330 SCRA 591 (2000)
PONENTE:
KAPUNAN, J
FACTS OF THE CASE:
Respondent Leyte Gulf Traders, Inc. (herein referred to as respondent corporation) alleged
that it entered into a contract of lease of a parcel of land with petitioner Bentir for a period
of twenty (20) years starting May 5, 1968. And according to the respondent corporation,
the lease was extended for another four (4) years or until May 31, 1992. On May 5, 1989,
petitioner Bentir sold the leased premises to petitioner spouses Samuel Pormida and
Charito Pormida. Respondent corporation questioned the sale alleging that it had a right of
first refusal, prompting the them (corporation) to file a case seeking the reformation of the
expired contract of lease on the ground that its lawyer inadvertently omitted to incorporate
in the contract of lease executed in 1968, the verbal agreement or understanding between
the parties that in the event petitioner Bentir leases or sells the lot after the expiration of
the lease, respondent corporation has the right to equal the highest offer. The petitioners
answered alleging that the inadvertence of the lawyer who prepared the lease contract is
not a ground for reformation and further contended that respondent corporation is guilty
of laches for not bringing the case for reformation of the lease contract within the
prescriptive period often (10) years from its execution.
RTC Judge Mateo M. Leanda ruled in favor of respondent Leyte Gulf Traders, Inc. saying
that the action for reformation had not yet prescribed. Stating further that a dismissal
would be “premature and precipitate,” denying Respondent Corporation of its right to
procedural due process. On June 10, 1996, respondent judge issued an order for status quo
ante, enjoining petitioners to desist from occupying the property.
Aggrieved, petitioners herein filed a petition for certiorari to the Court of Appeals seeking
the annulment of the order of respondent court with prayer for issuance of a writ of
preliminary injunction and temporary restraining order to restrain respondent judge from
further hearing the case and to direct respondent corporation to desist from further
possessing the litigated premises and to turn over possession to petitioners.
On January 17, 1997, the Court of Appeals, after finding no error in the questioned order
nor grave abuse of discretion on the part of the trial court that would amount to lack, or in
excess of jurisdiction, denied the petition and affirmed the questioned order. A
reconsideration of said decision was, likewise, denied on April 16, 1997.
Whether the complaint for reformation of instrument has prescribed
Yes. Even if we were to assume for the sake of argument that the instant action for
reformation is not time-barred, Respondent Corporation’s action will still not prosper.
Under Section 1, Rule 64 of the New Rules of Court, an action for the reformation of an
instrument is instituted as a special civil action for declaratory relief. Since the purpose of
an action for declaratory relief is to secure an authoritative statement of the rights and
obligations of the parties for their guidance in the enforcement thereof, or compliance
therewith, and not to settle issues arising from an alleged breach thereof, it may be
entertained only before the breach or violation of the law or contract to which it refers.
Here, respondent corporation brought the present action for reformation after an alleged
breach or violation of the contract was already committed by petitioner Bentir.
Consequently, the remedy of reformation no longer lies.
TITLE:
G.R. No. L-22487 May 21, 1969 ASUNCION ATILANO, CRISTINA ATILANO,
ROSARIO ATILANO, assisted by their respective husbands, HILARIO ROMANO,
FELIPE BERNARDO, and MAXIMO LACANDALO, ISABEL ATILANO and
GREGORIO ATILANO, plaintiffs-appellees, vs. LADISLAO ATILANO and
GREGORIO M. ATILANO, defendants-appellants.
PONENTE:
MAKALINTAL, J.:
FACTS OF THE CASE:

In 1916, Eulogio Atilano I acquired by purchase from one Gerardo Villanueva lot No. 535.
Atilano I subdivided land he owned into five parcels, identifying them as Lots 535-A to
535-E. He sold one parcel, designated as No. 535-E, to his brother Eulogio Atilano II for
P150. Lots 535-B, C and D were sold to other people, while he kept the remaining portion
of land, presumably covered by title 535-A for himself, which passed to defendant
Ladislao Atilano after Eulogio I passed away. In 1952, after his wife died, Atilano 2 wanted
to partition Lot 535-A among himself and his children. They had the land resurveyed, only
to find out their lot was actually 535E, and not 535-A, while the land that Ladislao had
inherited from Atilano 1 was 535-A, and not 535-E. Atilano 2 died, so his heirs instituted
an action against Ladislao offering up 535-A to Ladislao in exchange for 535-E, which they
alleged was what was written in their deed of sale. Ladislao’s defense was that the 1920
deed of sale to Atilano 2 was an involuntary error, and that the intention of the parties to
that sale meant to convey the lot correctly identified as 535-A, even if the deed stated 535-
E, on the basis that Atilano 1 had built a house on this lot and had even increased its area
while it was in his possession by purchasing a lot next to it, before it passed to Ladislao.
Trial court sentenced company to pay plaintiffs P4k + costs.

Whether the object of the deed of sale is lot No. 535-A and its designation as lot No. 535-E
was a simple mistake
YES. From the facts and circumstances, the object is lot No. 535-A and its designation as lot
No. 535-E in the deed of sale was a simple mistake in the drafting of the document.
The mistake did not vitiate the consent of the parties, or affect the validity and
binding effect of the contract between them. The new Civil Code provides a remedy
by means of reformation of the instrument. This remedy is available 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
In this case, the deed of sale executed in 1920 need no longer be reformed. The
parties have retained possession of their respective properties conformably to the real
intention of the parties to that sale, and all they should do is to execute mutual deed
of conveyance.
TITLE
G.R. No. 133643, June 6, 2002, SARMING petitioners, vs. DYrespondents.
PONENTE
QUISUMBING, J.
FACTS OF THE CASE
Petitioners are successors of Silveria Flores, while respondents are successors of
Alejandra Delfino. Lot 5734 is in possession of three siblings: Jose, Venancio, and Silveria.
Each occupies 1/3 portion.Lot 4163 is solely registered under the name of Silveria, but is
subdivided between Jose and Silveria. Two rows of coconut trees planted in the middle
serves as boundary line.
Alejandro delfino entered into contract of sale with the grand children of Jose,
owners of Lot 4163. Before the sale, Alejandra’s lawyer, Atty. Deogracias Pinili, called
Silveria and the heirs of Venancio to a conference. Silveria (co-owner of half of the land )
did not object to the sale of said portion to Alejandra Delfino. She delivered Original
Certificate of Title No. 4918-A, covering Lot No. 5734, and not the correct title covering Lot
4163. At that time, the parties knew the location of Lot 4163 but not the OCT Number
corresponding to said lot.
Alejandra Delfino immediately took possession and introduced improvements on

the purchased lot. After two years she discovered that what was designated in the deed,
Lot 5734, was the wrong lot. She immediately sought the assistance of Pinili who
approached Silveria and together they inquired from the Registry of Deeds about the
status of Lot 4163. They found out that OCT No. 3129-A covering Lot 4163 was still on file.
Alejandra Delfino paid the necessary fees so that the title to Lot 4163 could be released to
Silveria Flores, who promised to turn it over to Pinili for the reformation of the deed of
sale.
However, despite repeated demands, Silveria did not do so, prompting Alejandra
and the vendors to file a complaint against Silveria for reformation of the deed of sale with
damages before the Regional Trial Court of Negros Oriental, Branch 41, docketed as Civil
Case No. 3457.
RULING OF LOWER AND APPELATE COUR
The trial court ruled in favor of respondents. Silveria was ordered to enter into the
reformation of the contract. Petitioners appealed the decision to the Court of Appeals,
which affirmed the ruling of the trial court.
Whether reformation is proper
YES. 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.
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.
In this case at bar the requisite for valid action for reformation were duly satisfied.
There was a meeting of the minds between the parties to the contract but the deed did not
express the true intention of the parties due to 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.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 39401 is

AFFIRMED with MODIFICATION. It is hereby ordered that the document entitled
Settlement of Estate and Sale be reformed by changing the phrase "Lot 5734" to "Lot 4163"
found in the sixth paragraph of the deed, thereby ceding in favor of respondents one-half
portion of Lot 4163 instead of Lot 5734. The award to respondents of attorney’s fees in the
amount of P2,000 is affirmed. However, the award of actual damages in the amount of
P5,000 and of moral damages in the amount of P10,000 are both SET ASIDE. No
pronouncement as to costs.
TITLE:
Kasilag v. Rodriguez, 69 Phil 217 (1939)
PONENTE:
IMPERIAL, J.:
FACTS OF THE CASE:
Marcial Kasilag and Emiliana Ambrosio entered a contract of mortgage. The contract is for
the improvements of land acquired as homestead to secure the payment of the
indebtedness of P1,000 plus interest. The parties stipulated that Emilina Ambrosio was to
pay the debt with interest within 4 ½ years., and in such case, mortgage would not have
any effect. They also agreed that Emiliana Ambrosio would execute a deed of sale if it
would not be paid within 4 ½ years and that she would pay the tax on the land. After a
year, it turned out that she was not able to pay the tax. Hence, they entered a verbal
agreement. She conveyed to the latter the possession of the land on the condition that they
would not collect the interest of the loan, would attend to the payment of the land tax,
would benefit by the fruits of the land, & would introduce improvement thereof. These
pacts made by the parties independently were calculated to alter the mortgage a contract
clearly entered into, converting the latter into a contract of antichresis. The contract of
antichresis, being a real encumbrance burdening the land, is illegal and void because it is
legal and valid.
Court of Appeals came to the conclusion and so held that the contract entered into by and
between the parties, set out in the said public deed, was one of absolute purchase and sale
of the land and its improvements. And upon this ruling it held null and void and without
legal effect the entire Exhibit 1 as well as the subsequent verbal contract entered into
between the parties, ordering, however, the respondents to pay to the petitioner, jointly
and severally, the loan of P1,000, with legal interest at 6 per cent per annum from the date
of the decision.
Whether the petitioner should be deemed the possessor of the land in good faith because
he was unaware of any flaw in his title or in the manner of its acquisition by which it is
invalidated
Yes. From the facts found established by the Court of Appeals, we can neither deduce nor
presume that the petitioner was aware of a flaw in his title or in the manner of its
acquisition. Aside from the prohibition contained in section 116. This being the case, the
question is whether good faith may be premised upon ignorance of the laws. Gross and
inexcusable ignorance of law may not be the basis of good faith, but possible, excusable
ignorance may be such basis. It is a fact that the petitioner is not conversant with the laws
because he is not a lawyer. In accepting the mortgage of the improvements he proceeded
on the well-grounded belief that he was not violating the prohibition regarding the
alienation of the land. In taking possession thereof and in consenting to receive its fruits,
he did not know, as clearly as a jurist does, that the possession and enjoyment of the fruits
are attributes of the contract of antichresis and that the latter, as a lien, was prohibited by
section 116. These considerations again bring us to the conclusion that, as to the petitioner,
his ignorance of the provisions of section 116 is excusable and may, therefore, be the basis
of his good faith.
TITLE:
G.R. No. L-23002, CONCEPCION FELIX VDA. DE RODRIGUEZ, plaintiff-appellant,
vs. GERONIMO RODRIGUEZ., ET AL., defendants-appellees.
PONENTE:
REYES, J.B.L., J.:
FACTS OF THE CASE:
Concepcion Felix, widow of the late Don Felipe Calderon and with whom she had one
living child, Concepcion Calderon. She contracted marriage on June 20, 1929 to Domingo
Rodriguez, a widower with four children by a previous marriage, named Geronimo,
Esmeragdo, Jose and Mauricio, all surnamed Rodriguez. There was no issue in this second
marriage.
Prior to her marriage she was an owner of two fishponds located in the barrio of
Babañgad, municipality of Bulacan, Bulacan province. with a total area of 557,711 square
meters covered by OCT Nos. 605 and 807. Under date of January 24, 1934, Concepcion
Felix executed a deed of sale of the properties amounting to P2500.00 in favor of her
daughter. which the latter in turn appeared to have transferred to her mother and
stepfather by means of a document dated January 27, 1934.
On March 6, 1953, Domingo Rodriguez died intestate, survived by the widow, Concepcion
Felix, his children Geronimo Esmeragdo and Mauricio and grandchildren Oscar, Juan and
Ana, surnamed Rodriguez, children of a son, Jose, who had predeceased him. On March
16, 1953, Concepcion Felix-Domingo together with the deceased entered into an
extrajudicial settlement of estate, ½ of the property was divided to the surviving spouse,
children and grandchildren. The surviving spouse and the children and grandchildren of
Domingo entered into ended their co-ownership and enter into deed of partition in On
July 2, 1954, on On October 12, 1954, the Rodriguez children granted the usufruct to
Domingo’s widow of the ⅓ of the fishpond, but when she failed to delivered the
determined amount, domingo’s children endorse the matter to a lawyer.
This action triggered the surviving spouse of Domingo to file before the court of Bulacan
the The action to declare null and void the deeds of transfer of plaintiff's properties to the
conjugal partnership was based on the alleged employment or exercise by plaintiff's
deceased husband of force and pressure on her; that the conveyances of the properties —
from plaintiff to her daughter and then to the conjugal partnership of plaintiff and her
husband — are both without consideration. Thus, plaintiff prayed that the deeds of
transfer mentioned in the complaint be declared fictitious and simulated; that the
"Extrajudicial Settlement of Estate" be also declared null and void. In their separate
answers, defendants not only denied the material allegations of the complaint, but also set
up affirmative defenses for lack of cause of action, prescription, estoppel and laches.

The lower court ruled in favor of the defendants the respondents in this case, that
Concepcion Felix-Rodqriguez, that there was ratification or confirmation by the plaintiff of
the transfer of her property, by her execution (with the other heirs) of the extrajudicial
settlement of estate; that being a voluntary party to the contracts. plaintiff cannot recover
the properties she gave thereunder. Plaintiff's alternative cause of action was also rejected
on the ground that action for rescission of the deed of extrajudicial settlement should have
been filed within 4 years from its execution (on March 16, 1953).

Whether the conveyances in issue were obtained through duress, and were inexistent,
being simulated and without consideration.

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. 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. If this is true,
then the appellant and her daughter must have intended the two conveyances to be real
and effective.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.
Were the two conveyances from appellant to her daughter where without considerations
but evidence (exhibit A and B) show otherwise first conveyance was with P2,500.00 and
the second one was P3,000.00
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.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. 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.
TITLE:
G.R. No. 114950 December 19, 1995 RAFAEL G. SUNTAY, substituted by his heirs,
namely: ROSARIO, RAFAEL, JR., APOLINARIO, RAYMUND, MARIA VICTORIA,
MARIA ROSARIO and MARIA LOURDES, all surnamed SUNTAY, petitioners, vs.THE
HON. COURT OF APPEALS and FEDERICO C. SUNTAY, respondents.
PONENTE:
HERMOSISIMA, JR., J.:
FACTS OF THE CASE:

Federico Suntay is a wealthy landowner and rice miller from Bulacan. On it was a rice mill,
a warehouse and other improvements. Federico applied as a miller-contractor of the then
National Rice and Com Corporation (NARIC). Rafael prepared an absolute deed of sale
whereby Federico, for and in consideration of P20, 000.00 conveyed to Rafael said parcel of
land with all its existing structures. Federico claims that the sale was merely
fictitious/simulated and has been executed only for purposes of accommodation. Less than
three months after this conveyance, Rafael sold it back to Federico for the same amount of
P20,000. It was notarized by Atty. Herminio V. Flores. However, the said document was
not the said deed of sale but a certain "real estate mortgage of a parcel of land to secure a
loan of P3,500.00 in favor of the Hagonoy Rural Bank. It could not be found in the notarial
register as well. Federico through his new counsel requested that Rafael have TCT No. T-
36714 so that he can have the counter deed of sale in favor registered in his. But the request
was turned down. So Federico’s counsel filed a case in the CFI.

The Court of Appeals rendered judgment in affirmance of the trial court's decision, with a
modification. Federico was ordered to surrender the possession of the disputed property
to Rafael

Whether the deed of sale executed in favor of Rafael Suntay was valid

NO. Reasoning The history and relationship of trust, interdependence and intimacy
between the late Rafael and Federico is an unmistakable token of simulation. It has been
observed that fraud is generally accompanied by trust. - The late Rafael insisted that the
sale to him of his uncle's property was in fact a "dacion en pago" in satisfaction of
Federico's unpaid attorney's fees. But such claim cannot prosper. He did not even tell
Federico that he considered such to be his fee. Federico was also liquid enough to pay him.
- All circumstances point to the conclusion that such was simulated transaction.
A contract of purchase and sale is void and produces no effect whatsoever where the same
is without cause or consideration in that the purchase price, which appears thereon as
paid, has in fact never been paid by the purchaser to the vendor two veritable legal
presumptions: first, that there was sufficient consideration for the contract and, second,
that it was the result of a fair and regular private transaction. These presumptions if shown
to hold, infer prima facie the transaction’s validity, except that it must yield to the evidence
adduced.
TITLE:
G.R. No. L-7003, January 18, 1912, manuel Oria vs. Sheriff Mc Micking
PONENTE:
Associate Justice Sherman Moreland
FACTS OF THE CASE:
In the month of August, 1909, Gutierrez Hermanos brought an action Oria

Hermanos & Co. for the recovery of P147,204.28; before the CFI of Manila. In March, 1910
the plaintiff began another action against the same defendant for the recovery of
P12,318.57 in the same court.
Both actions were resolved by the CFI in favor of Gutierrez Hermanos and against Oria
Hermanos & Co. for the sum demanded in the complaint. The cause was appealed to the
Supreme Court and, the judgment therein having been affirmed, execution was issued
thereon and placed in the hands of the sheriff of Manila. Sheriff Mc Micking immediately
demanded that Tomas Oria, as liquidator of the firm of Oria Hermanos & Co. make
payment of the said judgment, to which he replied that there were no funds with which to
pay the same. Thereupon Sheriff Mc Micking levied upon the said steamer Serantes, took
possession of the same, and announced it for sale at public auction. Three days before the
sale, Gutierrez in this action presented to the sheriff a written statement claiming to be the
owner of the said steamship, and to have the right of possession of the same by reason of
the sale to him by Oria Hermanos & Co. of all of the property belonging to said company,
including the said steamer Serantes, as shown by the instrument above referred to the
quoted. Sheriff Mc Micking thereupon required Gutierrez Hermanos to present a bond for
his protection, which having been done, Sheriff Mc Micking proceeded to the sale of the
steamship. At the sale Gutierrez Hermanos became the purchaser, said company being the
highest bidder, and the sum which it paid being the highest sum bidden for the same.
Gutierrez Hermanos began the present action, praying for 1) the issuance of a preliminary
injunction to prevent the sale of the steamship; and, 2) the declaration that the Gutierrez
Hermanos is the owner of said steamship and is entitled to the possession of the same, and
that Sheriff Mc Micking be required to restore the same to the plaintiff and to pay P10,000
damages for its detention.
Upon the trial judgment was found in favor of Sheriff Mc Micking and against the
Gutierrez Hermanos, and the complaint was dismissed upon the merits with costs. From
that judgment this appeal is taken.
Whether the sale of the steamship Serantes from Oria Hermanos & Co. to Manuel Oria was
fraudelent
Yes. For these reasons the judgment is affirmed, without special finding as to costs.
In determining whether or not a certain conveyance is fraudulent the question in

every case is whether the conveyance was a bona fide transaction or a trick and contrivance
to defeat creditors, or whether it conserves to the debtor a special right. It is not sufficient
that it is founded on good consideration or is made with bona fide intent: it must have both
elements. If defective in either of these particulars, although good between the parties, it is
voidable as to creditors. The rule is universal both at law and in equity that whatever fraud
creates, justice will destroy. The test as to whether or not a conveyance is fraudulent is,
does it prejudice the rights of creditors? The case at bar presents every one of the badges of
fraud above enumerated. Tested by the inquiry, does the sale prejudice the rights of the
creditors, the result is clear.
Since the records shows that there was no property with which the judgment in
question could be paid, the defendants were obliged to resort to and levy upon the steamer
in suit. The court below was correct in finding the sale fraudulent and void as to Gutierrez
Hermanos in so far as was necessary to permit the collection of its judgment. As a corollary, the
court below found that the evidence failed to show that the plaintiff was the owner or
entitled to the possession of the steamer in question at the time of the levy and sale
complained of, or that he was damaged thereby. Defendant had the right to make the levy
and test the validity of the sale in that way, without first resorting to a direct action to
annul the sale. The creditor may attack the sale by ignoring it and seizing under his
execution the property, or any necessary portion thereof, which is the subject of the sale.
TITLE:
G.R. No. L-29155, May 13, 1970 Universal Food Corporation, petitioner, vs The Court of
Appeals, Magdalo V. Francisco Sr., and Victoriano N. Francisco, respondents.
PONENTE:
CASTRO, J.:
FACTS OF THE CASE:

Magdalo Francisco discovered and invented a formula or recipe for the manufacture
of a food seasoning sauce derived from banana fruit popularly known as “MaFran” Sauce.
He registered his trademark in his name as both owner and inventor of the said sauce with
the Bureau of Patents, but due to financial constraints he secured the financial assistance of
Tirso Reyes. After a series of negotiations, Reyes and his partners formed the corporation
known as the Universal Food Corporation. This also led to the execution of the contract
called “Bill of Assignment”. Magdalo was appointed as the Chief Chemist and he never
allowed anyone in the laboratory as he prepared the MaFran Sauce. He express
willingness to share the formula of the sauce, provided that it would be kept in a vault and
only be opened when he is already incapacitated to perform his duties as Chief Chemist,
but he never got what he asked. Due to an alleged scarcity and high prices of raw
materials, the secretary-treasurer of UFC issued a memorandum that the salary of
Magdalo should be stopped for the meantime until the corporation should resume
operations. Magdalo was not recalled to be back to work, so he filed an action for the
rescission of the Bill of Assignment and to declare that UFC should not have any right to
use the MaFran trademark and formula.

The trial court dismissed the complaint of Magdalo, so he appealed to the court of
appeals, which rendered judgment favorably for him.

Whether Magdalo is entitled for the rescission?

Yes, Magdalo is entitled for the rescission because under Art. 1383 of the Civil Code,
rescission cannot be demanded except when the party suffering damage has no other legal
means to obtain reparation. In this case the petitioner corporation violated the Bill of
Assignment by terminating the services of Magdalo without lawful and justifiable cause.
Thus, apart from the legal principle that the option to demand performance or ask for
rescission of a contract belongs to the injured party, the fact remains that the respondent
had no alternative but to file the present action for rescission and damages. The appealed
decision is reversed. The Bill of Assignment is hereby rescinded, and the defendant
corporation is ordered to return and restore to the plaintiff Magdalo V. Francisco, Sr. the
right to the use of his Mafran sauce trademark and formula, subject-matter of the Bill of
Assignment, and to this end the defendant corporation and all its assigns and successors
are hereby permanently enjoined, effective immediately, from using in any manner the
said Mafran sauce trademark and formula.
TITLE:
G.R. No. L-27343. February 28, 1979 MANUEL G. SINGSONG, JOSE BELZUNCE,
AGUSTIN E. TONSAY, JOSE L. ESPINOS, BACOLOD SOUTHERN LUMBER YARD,
and OPPEN, ESTEBAN, INC., Plaintiffs-Appellees, v. ISABELA SAWMILL,
MARGARITA G. SALDAJENO and her husband CECILIO SALDAJENO LEON
GARIBAY, TIMOTEO TUBUNGBANUA, and THE PROVINCIAL SHERIFF OF
NEGROS OCCIDENTAL, Defendants, MARGARITA G. SALDAJENO and her
husband CECILIO SALDAJENO, Defendants-Appellants.
PONENTE:
FERNANDEZ, J.
FACTS OF THE CASE:

Defendants Saldajeno, Garibay and Tubungbanua entered into a contract of partnership.
Later, Saldajeno withdrew and brought an action to dissolve the partnership. The suit
resulted in the execution of "Assignment of Rights with Chattel mortgage" in favor of
Saldajeno. Garibay and Tubungbanua, however, continued the business under the same
firm name. Meanwhile, plaintiffs extended credits to the partnership. Later, the chattel
mortgage was foreclosed and the mortgaged properties were sold at public auction to
Saldajeno, who in turn sold the same for P45,000. Plaintiffs sued defendants to recover the
sums of money they advanced to the partnership and asked for the nullity of the chattel
mortgage between Saldajeno and her former partners.

The trial court held that plaintiffs, the partnership’s creditors, had a preferred right over
the proceeds of the sale. The Court of Appeals certified the records of this case to the
Supreme Court considering that the resolution of this appeal involves purely questions or
question of law over which it has no jurisdiction.

Whether the Chattel Mortgage executed by Garibay in favor of Saljadeno was null and
void being in fraud of creditors
Yes. The contention of the appellant that the appleees cannot bring an action to annul the
chattel mortgage of the propertiesof the partnership executed by Leon Garibay and
Timoteo Tubungbanua in favor of Margarita G. Saldajeno has no merit.As a rule, a contract
cannot be assailed by one who is not a party thereto. However, when a contract prejudices
the rights of a third person, he may file an action to annul the contract. This Court has held
that a person, who is not a party obliged principally or subsidiarily under a contract, may
exercised an action for nullity of the contract if he is prejudiced in his rights with respect to
one of the contracting parties, and can show detriment which would positively result to
him from the contract in which he has no intervention. The plaintiffs-appellees were
prejudiced in their rights by the execution of the chattel mortgage over the properties of
the partnership "Isabela Sawmill" in favor of Margarita G. Saldajeno by the remaining
partners, Leon Garibay and Timoteo Tubungbanua. Hence, said appellees have a right to
file the action to nullify the chattel mortgage in question.
TITLE:
G.R. No. 3246, 9 February 1907, CADWALLADER & COMPANY vs. SMITH, BELL &
COMPANY and HENRY W. PEABODY & COMPANY
PONENTE:
TRACEY, J.
FACTS OF THE CASE:

In May 1902, the Pacific Export Lumber Company of Portland shipped upon the
steamer Quito 581 piles to the defendant, Henry W. Peabody & Company, at Manila. For
that sale, the consignee will receive a commission of one half of whatever sum was
obtained over $15 for each pile and 5% of the price of the piles sold. On August 2, Peabody
and Company wrote the agent of the Pacific Company at Shanghai that for lack of a
demand the piles would have to be sold at less than $15 per piece. In response, they
offered him $12 per piece which they accepted. Defendant then paid the Pacific Company
$6,972.00.
On July 9, it appeared that Peabody & Company had entered into negotiations with
the Insular Purchasing Agent for the sale of piles at $20 per piece. On the other hand, the
latter sold to the Government 213 piles at $19 each. More of them were afterwards sold to
the Government at the same figure. Thus, it is clear that at the time when the agents were
buying from their principal, these piles at $12 a piece on the strength of their
representation that no better price was obtainable, they had already sold a substantial part
of them at $19. In these transactions the defendant, Smith, Bell & Company, were
associated with the defendants, Henry W. Peabody & Company, who conducted the
negotiations, and are consequently accountable with them.

The defendants were allowed by the court a counterclaim of $6,993.80, from which
$2,063.16 was deducted for the plaintiff’s claim, leaving a balance of $4,930.64, in favor of
the defendants, for the equipment of which, to wit, 9,861.28 pesos, judgment was entered.
The defendants have not appealed.

Whether the contract of sale can be annulled on the ground of fraud
YES - Concealing from their principal the negotiations with the Government,
resulting in a sale of the piles at 19 per piece and in misrepresenting the condition of the
market, the agents committed a breach of duty from which they should benefit. The
contract of sale to themselves thereby induced was founded on their fraud and was subject
to annulment by the aggrieved party. (Civil Code, articles 1265 and 1269.) Upon
annulment the parties should be restored to their original position by mutual restitution.
(Article 1303 and 1306.) Therefore, the defendants are not entitled to retain their
commission realized upon the piles included under the contract so annulled. In respect of
the 213 piles, which at the time of the making of this contract on August 5 they had already
sold under the original agency, their commission should be allowed.
TITLE:
G.R. No. 12605 (September 7, 1918), Uy Soo Lim v. Tan Unchuan, 38 Phil 552 (1918)
PONENTE:
FISHER, J.
FACTS OF THE CASE:
Santiago Pastrano Uy Toco, married to Candida Vicares, died. Leaving a large estate to
his ,Candida Vivares, his daughters, Francisca Pastrano and Concepcion Pastrano, Chan
Quieg (Chinese impregnated by Santiago), and the plaintiff Uy Soo Lim (Son with Quieg).
In the terms of his will, Santiago attempted to dispose of the greater part of his estate in
favor of Uy Soo Lim. Since the children of Santiago were still minors, Basilio Bundan was
assigned as their guardian. On October 18, 1910, the court, in the matter of the aforesaid
guardianship, issued an order on the guardian, Basilio Uy Bundan, in which it was noted
that Francisca Pastrano had reached majority, that Concepcion Pastrano would reach her
majority in a few months, and that Uy Soo Lim had married and the guardian was
therefore ordered to present a plan of distribution of the estate in accordance with the
dispositions of the will of Santiago Pastrano, but Bunduan did not comply.
In 1922, Pastrano sisters opposed the distribution of the estate of Santiago, alleging that
Uy Soo Lim was not entitled to the amount of estate assigned him in the will because the
marriage of their father to Chan Quieg is null and void. Pastrano sisters further alleged
that since Uy Soo Lim is not a legitimate and incapable of being legitimated, his estate
should only be one-sixths and not seven-ninths. Uy Soo Lim appeared and stated that their
affair constitutes all forms of valid marriage in China.
An agreement was reached through Uy Soo Lim’s representative wherein he accepted

P82,000.00 and relinquished his rights, title and interest in the estate in favor of Francisca.
In 1914, Uy Soo Lim commenced the present action before the Court of First Instance of
Cebu for the purpose of rescinding the agreement and annul the contract which he had
sold and transferred to Francisca alleging, among others, that he was induced to accept the
deal by taking advantage of of his youth, passions and inexperience.

CFI: held that Uy Soo Lim was not induced by deceit, or undue influence to enter into the
contract.
Whether the contract is valid
YES. Positive statutory law, no less than uniform court decisions, require, as a condition
precedent to rescission of a contract on account of minority, that the consideration received
be refunded. We cite and quote as follows:
"ART. 1295 (Civil Code). Rescission obliges the return of the things which were the objects
of the contract, with their fruits and the sum with interest; therefore it can only be carried
into effect when the person who may have claimed it can return that which, on his part, he
is bound to do.
"ART. 1304 (Civil Code). When the nullity arises from the incapacity of one of the
contracting parties, the incapacitated person is not obliged to make restitution, except to
the extent he has profited by the thing or by the sum he may have received.
"ART. 1308 (Civil Code). While one of the contracting parties does not return that which he
is obliged to deliver by virtue of the declaration of nullity, the other cannot be compelled
to fulfill, on his part, what is incumbent "on him." Not only should plaintiff have refunded
all moneys in his possession upon filing his action to rescind, but, by insisting upon
receiving and spending such consideration after reaching majority, knowing the rights
conferred upon him by law, he must be held to have forfeited any right to bring such
action.
Article 1314, Civil Code, provides as follows:
'The action for nullity of a contract shall also be extinguished when the thing which is the
object thereof should be lost by fraud or fault of the person having the right to bring the
action. "If the cause of the action should be the incapacity of any of the contracting parties,
the loss of the thing shall be no obstacle for the action to prevail, unless it has occurred by
fraud or fault on the part of the plaintiff after having acquired capacity."
Plaintiff has disposed of the whol6 of the P85,000 which was paid him in consideration of
the execution of the contract he is now seeking to annul. The record establishes beyond
peradventure of doubt that he is utterly without funds to reimburse this consideration.
The contract involved herein is an executed contract. When plaintiff reached majority
there was P62,412.67 in esse, and, when suit was filed, the sum of P55,000. The "offer to
account" in paragraph 20 of the complaint, "if such accounting should be necessary," is not
the tender, or offer to produce or pay, which the law makes a condition precedent to
demanding equitable relief. Certainly it cannot be so construed in the present case, where
it is conclusively shown that plaintiff after reaching majority and after filing his action to
annul, proceeded to collect and dispose of the proceeds of such contract, reciting, as a
reason for such collection, that he had "no other funds." If plaintiff had succeeded in
having the contract set aside it would have left him in the same position as that in which
he stood when it was executed—that is to say, he would have been compelled to face the
contention that he was lawfully entitled to little or nothing. Had he made restitution of all
the money which came into his hands after he attained his majority, a decision in favor of
the claims of the widow and legitimate daughters of Santiago Pastrano would not have
been a wholly barren victory for them. By consuming the last centavo of the proceeds of
the contract plaintiff placed himself in a position where he was bound to enjoy the most
advantageous position whatever might be the outcome of the litigation. To give
countenance to such conduct would be to encourage deliberate bad faith.
For the reasons stated we are of the opinion that the judgment of the trial court is without
error, and it is, therefore, affirmed, with the costs of both instances. So ordered.
TITLE:
G.R. No. L-11231 May 12, 1958 ROSARIO CARBONNEL, plaintiff-appellant, vs. JOSE
PONCIO, RAMON INFANTE, and EMMA INFANTE, defendants-appellees.
PONENTE:
CONCEPCION, J
FACTS OF THE CASE:
Carbonnel bought a parcel of land (195 square meters, more or less, located in San Juan del
Monte, Rizal) from Poncio (P9.50 per sqm) excluding improvements thereon. Carbonnel
paid P247.26 and assumed Poncio's obligation with the Republic Savings Bank amounting
to P1,177.48, with the understanding that the balance would be payable upon execution of
the corresponding deed of conveyance.
One of the conditions of the sale was that Poncio would continue staying in said land for
one year, as stated in a document signed by him.
The lower court issued an order dismissing plaintiff's complaint, without costs, upon the
ground that her cause of action is unenforceable under the Statute of Frauds. The
counterclaims were, also, dismissed.
Whether the Statue of Frauds is applicable
NO. There are several circumstances indicating that Carbonnel's claim might not be
entirely devoid of factual basis. For instance, Poncio admitted in his answer that Carbonnel
had offered several times to purchase his land. The document he signed was also in the
Batanes dialect, which is what Poncio speaks. Said document states that Poncio would stay
in the land sold by him to Carbonnel for one year, from January 27, 1955, free of charge,
and that, if he cannot find a place where to transfer his house thereon, he may remain in
said lot under such terms as may be agreed upon.
The Statute of Frauds is applicable only to executory contracts, the reason being that in
executory contracts there is a wide field for fraud because unless they be in writing there is
no palpable evidence of the intention of the contracting parties. The statute has precisely
been enacted to prevent fraud. However, if a contract has been totally or partially
performed, the exclusion of parol evidence would promote fraud or bad faith, for it would
enable the defendant to keep the benefits already denied by him from the transaction in
litigation, and, at the same time, evade the obligations, responsibilities or liabilities
assumed or contracted by him. So if a contract for the sale of real estate is only partially
performed, the Statute of Frauds becomes inapplicable to such contract (the court may
therefore decree its specific performance or grant others equitable relief).
When the party concerned has pleaded partial performance, such party is entitled to a
reasonable chance to establish by parol evidence the truth of this allegation, as well as the
contract itself. If the evidence of record fails to prove clearly that there has been partial
performance, then the Court should apply the Statute of Frauds, if the cause of action
involved falls within the purview thereof. If the Court is, however, convinced that the
obligation in question has been partly executed and that the allegation of partial
performance was not resorted to as a devise to circumvent the Statute, then the same
should not be applied.
TITLE:
PNB v. Philippine Vegetable Oil Co., 49 Phil 857 (1927)
FACTS OF THE CASE
In 1920, the Philippine Vegetable Oil Co., Inc., found itself in financial straits. It was in debt
to the extent of approximately P30,000,000. The Philippine National Bank was the largest
creditor. The Vegetable Oil Company owed the bank P17,000,000. Over P13,000,000 were
due the other creditors. The Philippine National Bank was secured principally by a real
and chattel mortgage for P3,500,000. On January 10, 1921, the Vegetable Oil Company
executed another chattel mortgage in favor of the bank on its vessels Tankerville and H. S.
Everett to guarantee the payment of sums not to exceed P4,000,000. Mr. Whitaker (general
mager of Phil.Vegetable Oil Co.,Inc.,) made his first offer to pledge certain private
properties to secure the creditors of the Oil Company.
A receiver for the oil company was appointed by the Court of First Instance of Manila.
During the period of receivership, several important events took place. Between the
Vegetable Oil Company and its creditors, the latter transferred part of their claims against
the company to Whitaker in consideration of a trust deed of Whitaker’s property. The
Philippine National Bank was not a direct party to the agreement although the officials of
the bank had full knowledge of its accomplishment and the general manager of the bank
placed his O. K. at the end of the final draft.
on February 28, 1922, the receivership for the Vegetable Oil Company was
terminated. The bank suspended the operation of the Vegetable Oil Company in May,
1922, and definitely closed the Oil Company's plant on August 14, 1922. May 7, 1924, the
Philippine National Bank filed an action to foreclose its mortgage on the property of the
Vegetable Oil Company.The Vegetable Oil Company on its part countered with certain
special defenses which need not be described and with the interposition of a counterclaim
for P6,000,000. Phil. C. Whitaker presented a complaint in intervention.
The judgment rendered was in favor of the plaintiff and against the defendant
which was ordered to pay the sum of P15, 787,454.54, representing the liquidation between
the plaintiff and the defendant, with legal interest beginning with May 8, 1923, together
with P25, 000 attorney's fees, and costs, with the addition of the usual order to foreclose the
mortgage. The counterclaim of the defendant and the complaint in intervention were
dismissed.
Whether the mortgage was valid
NO (voidable). PNB entitled to money judgment for P14M with legal interest
against PVO. PNB could not legally secure a new mortgage by the accomplishment of
documents between its officers and the officers of PVO.
The Court noted that the PNB Charter provides that the General Manager can make,
with the advice and consent of the board of directors. The Court noted that prior to this
mortgage, the PNB already held three mortgages on PVO’s property. These mortgages
remain in effect and may be foreclosed. The evidence, documentary and oral, disclose no
binding promise, tacit or express, made by PNB to continue indefinitely its backing of
PVO.
The mortgage is voidable, whether based on its not having expressed PVO’s free
will, as disclosing undue influence, or constituting deceit on the part of PNB. The
mortgage was definitely perfect prior to the lifting of receivership pursuant to implied
promises that PNB would sustain operations of PVO. The mortgage was accomplished
when PNB was a dominating influence in the company’s affairs. It would be
unconscionable to allow PNB, after tying the hands of other creditors, to appropriate to
itself virtually all of PVO’s properties. While the mortgage could not have been executed
without the dissolution of the receivership, the same took place because the bank’s counsel
made it appear that PNB would continue to finance PVO’s operations, which it didn’t do.
Instead, the bank, within less than two months after recording of the mortgage, withdrew
its support from the PVO and closed its establishment.
Property was in custodia legis. Receiver was neither party to the mortgage, nor was
it authorized by the court to give consent to the mortgage. It is also doubtful whether the
court could/would give such authorization considering the desire to protect the rights of
all creditors and not just those of only one creditor. Mortgage was executed on Feb. 20,
1922. The receivership ended on Feb. 28, 1922.
The case will be remanded to the lower court for the entry of judgment and further
proceedings as herein indicated. Judgment affirmed in part and reversed in part, without
special finding as to costs in either instance.
TITLE
G.R. No. 118509 December 1, 1995 LIMKETKAI SONS MILLING, INC., petitioner,vs.
COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK
STORE, respondents.
PONENTE:
MELO, J
FACTS OF THE CASE:
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal
authority by BPI to sell the lot for P1,000.00 per square meter. This arrangement was
concurred in by the owners of the Philippine Remnants. On July 9, 1988, Revilla formally
informed BPI that he had procured a buyer, herein petitioner. On July 11, 1988, petitioner's
officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They were
entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin. Petitioner
asked that the price of P1,000.00 per square meter be reduced to P900.00 while Albano
stated the price to be P1,100.00. The parties finally agreed that the lot would be sold at
P1,000.00 per square meter to be paid in cash. Since the authority to sell was on a first
come, first served and non-exclusive basis, it may be mentioned at this juncture that there
is no dispute over petitioner's being the first comer and the buyer to be first served.
Two or three days later, the petitioner learned that its offer to pay on terms had been
frozen. Alfonso Lim went to BPI on July 18, 1988 and tendered the full payment of
P33,056,000.00 to Albano. The payment was refused because Albano stated that the
authority to sell... that particular piece of property in Pasig had been withdrawn from his
unit. The same check was tendered to BPI Vice-President Nelson Bona who also refused to
receive payment.
RTC of Pasig ruled that there was a perfected contract of sale between petitioner and BPI.
It stated that there was mutual consent between the parties; the subject matter is definite;
and the consideration was determined. It concluded that all the elements of a consensual
contract are attendant. It ordered the cancellation of a sale effected by BPI to respondent
National Book Store (NBS) while the case was pending and the nullification of a title
issued in favor of said respondent NBS. Upon elevation of the case to the Court of
Appeals, it was held that no contract of sale was perfected because there was no
concurrence of the three requisites enumerated in Article 1318 of the Civil Code. The
decision of the trial court was reversed and the complaint dismisse

Whether there was a perfected contract between petitioner Limketkai Sons Milling, Inc.
and respondent Bank of the Philippine Islands (BPI) covering the sale of a parcel of land,
approximately 3.3 hectares in area, and located in Barrio Bagong Ilog, Pasig City, Metro
Manila
WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and
SET ASIDE. The June 10, 1991 judgment of Branch 151 of the Regional Trial Court of The
National Capital Judicial Region stationed in Pasig, Metro Manila is REINSTATED except
for the award of Ten Million Pesos (P10,000,000.00) damages which is hereby DELETED.
Yes. The perfection of the contract took place when Aromin and Albano, acting for BPI,
agreed to sell and Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai,
agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there was the
earlier agreement between petitioner and the authorized broker. There was a concurrence
of offer and acceptance, on the object, and on the cause thereof. The phases that a contract
goes through may be summarized as follows: a. preparation, conception or generation,
which is the period of negotiation and bargaining, ending at the moment of agreement of
the parties; b. perfection or birth of the contract, which is the moment when the parties
come to agree on the terms of the contract; and c. consummation or death, which is the
fulfillment or performance of the terms agreed upon in the contract (Toyota Shaw, Inc. vs.
Court of Appeals, G.R. No. 116650, May 23, 1995).
TITLE:
Swedish Match v. CA, 441 SCRA 1 (2004)
G.R. No. 128120
PONENTE:
TINGA, J.:
FACTS OF THE CASE:

Swedish Match, AB (SMAB) is a corporation organized under the laws of Sweden, with 3
subsidiary corporations Phimco, Provident Tree Farms, Inc, and OTT/Louie (Phils,), Inc.
In 1988, STORA, its parent company, decided to sell SMAB and the latter’s worldwide
match, lighter and shaving products operation to Swedish Match NV (SMNV).
GM Antonio Litonjua of ALS Management and Development Corp. an interesting party
offered US$36 million.however after an exchange of information between CEO Rossi of
SMAB and Litonjua, the latter informed that they may not be able to submit their final
bid on the given deadline considering that the acquisition audit of Phimco and the
review of the draft agreements have not been completed.

The appellate court overturned the trial court’s Order dismissing the respondents’
complaint for specific performance and remanded the case to the trial court for further
proceedings.

Whether there was a perfected contract of sale between petitioners and respondents,
with respect to the Phimco shares

No, there was no perfected contract of sale since Litonjua’s letter of proposing
acquisition of the Phimco shares for US$36 million was merely an offer. Consent in a
contract of sale should be manifested by the meeting of the offer and acceptance upon
the thing and the cause which are to constitute the contract. The lack of a definite offer
on the part of the respondents could not possibly serve as the basis of their claim that the
sale of the Phimco shares in their favor was perfected, for one essential element of a
contract of sale needed to be certain --- the price in money or its equivalent. Obviously,
there can be no sale without a price. Respondents’ attempt to prove the alleged verbal
acceptance of their US$36 million bid becomes futile since there was in the first place no
meeting of the minds with respect to the price, and such was merely a preliminary offer.
Respondents’ failure to submit their final bid on the deadline set by the petitioners
prevented the perfection of the contract of sale.
TITLE:
G.R. No. L-11240 December 18, 1957 CONCHITA LIGUEZ, petitioner, vs.THE
HONORABLE COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET AL.,
respondents.
PONENTE:
REYES, J.B.L., J.:
FACTS OF THE CASE:
Conchita Liguez filed a complaint against the widow and heirs of the late Salvador P.
Lopez to recover a parcel of 51.84 hectares of land. . Plaintiff averred to be its legal owner,
pursuant to a deed of donation of said land, executed in her favor by the late owner,
Salvador P. Lopez. Petitioner argues that the property was donated to him by Lopez when
they cohabiting to each other when she was only 16 years old. The defense interposed was
that the donation was null and void for having an illicit causa or consideration, which was
the plaintiff’s entering into marital relations with Salvador P. Lopez, a married man.
The Court of First Instance made in favor in Lopez widow and wife . Court of Appeals
upheld the CFI decision stating that the deed of donation was inoperative, and null and
void (1) because the husband, Lopez, had no right to donate conjugal property to the
plaintiff appellant; and (2) because the donation was tainted with illegal cause or
consideration, of which donor and donee were participants

Whether the motive may be regarded as causa when it predetermines the purpose of the
contract
Yes. 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. Under the cited Art. 1274, liberality of the donor is
deemed causa only in contracts that are of “pure” beneficence, or contracts designed solely
and exclusively to procure the welfare of the beneficiary, without any intent of producing
any satisfaction for the donor.
In view of the foregoing, the decisions appealed from are reversed and set aside, and the
appellant Conchita Liguez declared entitled to so much of the donated property as may be
found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the
conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the
latter
TITLE:
G.R. No. L-1411, DIONISIO RELLOSA, Petitioner vs. GAW GHEE HUN, Respondent
PONENTE:
BAUTISTA, ANGELO J.
FACTS OF THE CASE:

Dionisio Rellosa sold to Gaw Chee Hun a parcel of land on February 2, 1944,
together with the house erected thereon, for the sum of Php25,000. Dionisio remained in
possession of the property under a contract of lease entered into the same date between the
same parties. Considering that Gaw Chee Hun, being a Chinese citizen, would obtain the
approval of the Japanese Military Administration since Japanese authorities prohibit an
alien from acquiring any private land not agricultural in nature during the occupation
unless the necessary approval is obtained from the Director General of the Japanese
Military Administration. However, said approval was not obtained and even if said
requirement were met, the sale would at all events be void under Article XIII, Section 5 of
our Constitution, which provides that no alien can acquire land. Hence, Dionisio Rellosa
instituted the present action seeking the annulment of the sale as well as the lease covering
the land and the house above-mentioned, and Gaw be ordered to return to Dionisio the
duplicate of the title covering the subject property. In defense by the defendant, the sale
was absolute and unconditional and was in every respect valid and binding between the
parties, it being not contrary to law, morals and public order, and that Dionisio is guilty of
estoppel in that, by having executed a deed of lease over the property, he thereby
recognized the title of Gaw Chee Hun to the property.

The trial court declared both the sale and the lease valid and binding and dismissed
the complaint and likewise ordered the plaintiff to turn over the property to the defendant
and to pay a rental of P50 a month from August 1, 1945 until property has been actually
delivered. As this decision was AFFIRMED in toto by the Court of Appeals

Whether the sale is null and void and Can Petitioner have the sale declared null and
void and recover the property considering the effect of the law governing rescission of
contracts
YES. The sale is null and void but because of in pari delicto, petitioner cannot
recover the said property.
In Pari Delicto. The proposition is universal that no action arises, in equity or at law,
from an illegal contract; no suit can be maintained for its specific performance, or to
recover the property agreed to be sold or delivered, or the money agreed to be paid, or
damages for its violation. The rule has sometimes been laid down as though it were
equally universal, that where the parties are in pari delicto, no affirmative relief of any kind
will be given to one against the other.
The SC holds that the sale in question is null and void, but plaintiff is barred from
taking the present action under the principle of pari delicto.
TITLE:
Frenzel v. Catitu, 406 SCRA 55 (2003)
PONENTE:
CALLEJO, SR., J.:
FACTS OF THE CASE:
Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He was so

enamored with Ederlina that he bought her numerous properties such as house and lot in
Quezon City and in Davao City. He also put up a beauty parlor business in the name of
Ederlina. Alfred was unaware that Ederlina was married until her spouse Klaus Muller
wrote a letter to Alfred begging the latter to leave her wife alone. When Alfred and
Ederlinas relationship started deteriorating. Ederlina had not been able to secure a divorce
from Klaus. The latter could charge her for bigamy and could even involve Alfred, who
himself was still married. To avoid complications, Alfred decided to live separately from
Ederlina and cut off all contacts with her. On October 15, 1985, Alfred wrote to Ederlinas
father, complaining that Ederlina had taken all his life savings and because of this, he was
virtually penniless. He further accused the Catito family of acquiring for themselves the
properties he had purchased with his own money. He demanded the return of all the
amounts that Ederlina and her family had stolen and turn over all the properties acquired
by him and Ederlina during their coverture.
On March 8, 2000, the CA rendered a decision affirming in toto the decision of the RTC.
The appellate court ruled that the petitioner knowingly violated the Constitution; hence,
was barred from recovering the money used in the purchase of the three parcels of land. It
held that to allow the petitioner to recover the money used for the purchase of the
properties would embolden aliens to violate the Constitution, and defeat, rather than
enhance, the public policy
Whether the petitioner could recover the money used in purchasing the several properties
No, even if, as claimed by the petitioner, the sales in question were entered into by him as
the real vendee, the said transactions are in violation of the Constitution; hence, are null
and void ab initio. A contract that violates the Constitution and the law, is null and void
and vests no rights and creates no obligations. It produces no legal effect at all. The
petitioner, being a party to an illegal contract, cannot come into a court of law and ask to
have his illegal objective carried out. One who loses his money or property by knowingly
engaging in a contract or transaction which involves his own moral turpitude may not
maintain an action for his losses. To him who moves in deliberation and premeditation, the
law is unyielding. The law will not aid either party to an illegal contract or agreement; it
leaves the parties where it finds them.
TITLE:
AM MT J 91-622 (19936), Ubarra v Mapalad,
PONENTE:
PER CURIAM:
FACTS OF THE CASE:
Complainant Atty. Manuel T. Ubarra, on behalf of his client Juanito A. Calderon, charges
Judge charges respondent, the Presiding Judge of the Municipal Trial Court (MTC) of
Pulilan, Bulacan, with grave misconduct, knowingly rendering an unjust judgment, the
violation of the Canons of Judicial Ethics and the failure to decide within the mandated
ninety-day-period Criminal Case No. 89-3905. This criminal case, entitled People of the
Philippines vs. Roberto Cruda, involves the charge of Grave Threats.
Judge Mapalad solemnized the marriage in her sala of his sister and Cruda as evidence of
the complainant is the marriage contract. Judge Mapalad, despite being related to the
accused through her sister, did not inhibit herself to the criminal case filed against him
(People v Cruda). On march 17, 1991 she promulgated the decision acquitting her
brother-in law. The complainant charged judge Mapalad on this basis.
Judge Mapalad on the other hand cited that her decision prompted that both of the parties,
her brother-in-law and the complainant are in pari-delicto.
Respondent Judge committed grave misconduct when she rendered an unjust decision in
Criminal Case No. 89-3905, wherein she acquitted accused Roberto Cruda for Grave
Threats. The Judge must maintain and preserve the trust and faith of the parties litigants.
He must hold himself above reproach and suspicion. At the very first sign of lack of faith
and trust to his actions, whether well grounded or not, the Judge has no other alternative
but to inhibit (sic) himself from the case. (Borromeo-Herrera vs. Borromeo, 152 SCRA 172
(1987) (sic).
Whether the decision of Judge Mapalad acquitting her brother-in-law in the crime of grave
threat on the ground that both of the party is in pari-delicto tenable.
No. Pari delicto doctrine, both parties are wrong and no actions against each other. The
application of the doctrine is misplaced since pari-delicto is in civil law and its application
in criminal cases is inapplicable. It is applicable to civil contracts governed by art. 1411 and
1412 under the Chapter on Void or Inexistent Contracts, and presupposes a situation
where the parties are in culpability similarly situated.
TITLE:
G.R. No. 109355 October 29, 1999 SERAFIN MODINA, Petitioner,
vs.COURT OF APPEALS AND ERNESTO HONTARCIEGO, PAUL FIGUEROA,
TEODORO HIPALLA AND RAMON CHIANG, MERLINDA CHIANG, Respondents.
PONENTE:
PURISIMA, J.:
FACTS OF THE CASE:

The parcel of land under the name of Ramon Chiang is in question since Mr. Chiang
claims that the land has already been sold by his wife to him. Mr. Chiang in turn sells this
land to Modina which are all evidenced by deed of sale. Modina then filed a Complaint for
Recovery of Possession with Damages before the Regional Trial Court of Iloilo City. On the
other hand, Merlinda, the wife of Ramon, also presented a complaint which is to make the
deed of sale between her husband and Modina null and void.

The Trial Court decided in favor of MERLINDA, ordering Serafin Modina to pay Ernesto
Hontarciego the sum of P44,500.00 as actual and compensatory damages plus the sum of
P5,000.00, for and as attorney's fees, with costs in favor of said defendants against the
plaintiff. On appeal; the Court of Appeals affirmed the aforesaid decision in toto.

Whether the sale between Ramon and Melinda was valid

NO. Art. 1490. The husband and the wife cannot sell property to each other, except:(1)
when a separation of property was agreed upon in the marriage settlements; or (2) when
there has been a judicial separation of property under Art. 191.
The exception to the rule laid down in Art. 1490 of the New Civil Code not having existed
with respect to the property relations of Ramon Chiang and Merlinda Plana Chiang, the
sale by the latter in favor of the former of the properties in question is invalid for being
prohibited by law. Not being the owner of subject properties, Ramon Chiang could not
have validly sold the same to plaintiff Serafin Modina. The sale by Ramon Chiang in favor
of Serafin Modina is, likewise, void and inexistent.

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COMPILATION OF CASE LAWS

Presented to the Faculty of College of Law

In Partial Fulfillment of the Requirements for the subject course

2|Page University of Caloocan City – College of Law

PAGE CASES ASSIGNED STUDENTS

13 Villaroel v. Estrada, 71 Phil 140 (1940) ALFEREZ, Jomar C.

15 Cristobal vs. Melchor, 78 SCRA 175; AGUADA, Lester C.

17 Secretary of the DPWH and District BOBIS, Romeo Jr. G.

19 DEVELOPMENT BANK OF THE CELESPARA, Joey D.

21 Insular Government vs. Aldecoa and Co., CORPUZ, Jael Iona D.

23 SOTERA PAULINO MARCELO, DE PEDRO, Isaias II L.

24 Barredo v. Garcia, 73 Phil 607 (1942) DEL ROSARIO, Christian S.

27 Mendoza v. Arrieta, 91 SCRA 113 (1979) ESTELLORE, Rose Ann B.

29 PSBA v. CA, 205 SCRA 729 (1992) FAJARDO, Queenzel I.

31 Amadora v. CA, 160 SCRA 315 (1988) GONZALES, Carilyn Mae M.

33 De Guia v. Manila Electric Co, 40 Phil 706 HIPOLITO, Ria N.

35 US v. Barias, 23 Phil 434 (1912 LACHICA, Jose Antonio

37 Sarmiento v. Sps. Cabrido, 401 SCRA 122 MACASPAC, Edgilin E.

3|Page University of Caloocan City – College of Law

39 Crisostomo v. CA, 409 SCRA 528 (2003 SALAZAR, Jayson F.

42 Fisher v. Robb, 69 Phil 101 (1939) SIMPLICIO, Prince Jonh Vincent G

44 Song Fo v. Hawaiian Philippines, 47 Phil TEPASE, Jimboy L.

46 Velarde v. CA, 361 SCRA 56 (2001) LACHICA, Jose Antoino A.

49 Woodhouse v. Halili, 93 Phil 526 (1953) VIDUYA-BONTIA, Mary Fritzie M.

51 Geraldez v. CA, 230 SCRA 329 (1994) ALFEREZ, Jomar C.

53 Gutierrez v. Gutierrez, 56 Phil 177 (1932) AGUADA, Lester C.

55 Vasquez v. Borja, 74 Phil 560 (1944) BOBIS, Romeo Jr. G.

57 Cetus Development Corp. v. CA, 176 SCRA CELESPARA, Joey D.

59 Santos Ventura Hocorna Foundation v. CORPUZ, Jael Iona

63 Abella v. Francisco, 55 Phil 447 (1931) DEL ROSARIO, Christian S.

65 Tengco v. CA, GR 49852, 19 Oct 1989 FAJARDO, Queenzel I.

67 Central Bank v. CA, 139 SCRA 46 (1985 GONZALES, Carilyn Mae M.

70 Chavez v. Gonzales, 32 SCRA 547 (1970) HIPOLITO, Ria N.

74 Telefast v. Castro, 158 SCRA 445 (1988 LACHICA, Jose Antonio

76 Arrieta v. NARIC, 10 SCRA 79 (1964) MACASPAC, Edgilin E.

79 Magat v. Medialdea, GR L-37120, 20 Apr SALAZAR, Jayson F.

84 Cristina Garments v. CA, 304 SCRA 356 TEPASE, Jimboy L.

86 Security Bank v. RTC Makati, 263 SCRA VIDUYA-BONTIA, Mary Fritzie M.

88 Almeda v. CA, 256 SCRA 292 (1996) ALFEREZ, Jomar C.

90 First Metro Investment v. Estate of Del Sol, AGUADA, Lester C.

93 Tanguling v. CA, 266 SCRA 78 (1997) CELESPARA, Joey D.

95 Song Fo v. Hawaiian Philippines, 47 Phil CORPUZ, Jael Iona D.

97 Boysaw v. Interphil Promotions, 148 SCRA DE PEDRO, Isaias II L.

99 U.P. v. de los Angeles, 35 SCRA 365 (1970) DEL ROSARIO, Christian S.

101 De Erquiaga v. CA, 178 SCRA 1 (1989) ESTELLORE , Rose Ann B.

104 Angeles v. Calasanz, 135 SCRA 323 (1985) FAJARDO, Queenzel I.

106 Ong v. CA, 310 SCRA 1 (1999) GONZALES, Carilyn Mae M.

107 Visayan Sawmill v. CA, 219 SCRA 3 78 HIPOLITO, Ria N.

111 Iringan v. CA, 366 SCRA41 (2001) MACASPAC, Edgilin E.

113 Vda. de Mistica v. Sps. Naguiat, 418 SCRA SALAZAR, Jayson F.

118 Siguan v. Lim, 318 SCRA 725 ( 1999) TEPASE, JimNAKPILboy L.

123 Republic v. Luzon Stevedoring, 21 SCRA ALFEREZ, Jomar C.

124 Dioquino v. Laureano, 33 SCRA 65 (1970) AGUADA, Lester C.

5|Page University of Caloocan City – College of Law

128 Austria v. CA, 39 SCRA 527 (1971) CELESPARA, Joey D.

130 NPC v. CA, GRL-47379, 161 SCRA334 CORPUZ, Jael Iona D.

132 Bacolod-Murcia Milling v. CA, 182 SCRA DE PEDRO, Isaias II L.

135 Philcomsat v. Globe Telecom, 429 SCRA DEL ROSARIO, Christian S.

137 Gonzales v. Heirs of Thomas, 314 SCRA FAJARDO, Queenzel I.

139 Coronel v. CA, 253 SCRA 15 (1996) HIPOLITO, Ria N.

141 Parks v. Province of Tarlac, 49 Phil 142 LACHICA, Jose Antonio

143 Central Philippines University v. CA, 246 MACASPAC, Edgilin E.