Montecillo v Reynes

G.R. No.138018. July 26, 2002 Issue:

Art. 1318 - Requisites of Contract WoN the failure of Montecillo to pay the 47,000 as consideration for
the lot prevented the existence of the contract.

Facts:
·         Respondents Ignacia Reynes and Spouses Abucay filed a
complaint for Declaration of Nullity and Quieting of Title against
petitioner Rido Montecillo.
Held:
Yes, the Supreme Court holds that the failure of Montecillo to pay
the purchase price of the lot ceases the contract to exist.

·         Reynes signed a Deed of Sale in favor to Montecillo in Under Article 1318 of the Civil Code, “there is no contract unless the
consideration for P47,000.00 purchase price payable within one following requisites concur: (1) Consent of the contracting parties;
month from the signing of the Deed of Sale. (2) Object certain which is the subject matter of the contract; (3)
Cause of the obligation which is established.”
·         Reynes further alleged that Montecillo failed to pay the
purchase price after the lapse of the one-month period, prompting Where the deed of sale states that the purchase price has been paid
Reynes to demand from Montecillo the return of the Deed of Sale. but in fact has never been paid for lack of consideration. This has
Since Montecillo refused to return the Deed of Sale, Reynes been the well-settled rule as early as Ocejo Perez & Co. v. Flores:
executed a document unilaterally revoking the sale and gave a copy
In that case at bar, the agreed purchase price in consideration of the
of the document to Montecillo.
lot in questioned has in fact never been paid by Monticillo to the
·         Subsequently, Reynes signed a Deed of Sale transferring to the Reyes. Hence, the deed of sale is null and void ab initio as such a
Abucay Spouses the entire Mabolo Lot, at the same time confirming sale is non-existent or cannot be considered consummated.
the previous sale of a 185-square meter portion of the lot.
           Thus, the petition is DENIED.
·         Respondents, receiving  information that the Register of
Deeds of Cebu City issued Certificate of Title No. 90805 in the name
of Montecillo for the Mabolo Lot, argued that “for lack of
consideration there was no meeting of the minds” between Reynes
and Montecillo. Thus, the trial court should declare null and void ab
initio Montecillo’s Deed of Sale, and order the cancellation of
Certificate of Title in the name of Montecillo.
HEIRS OF DR. MARIO S. INTAC and ANGELINA MENDOZA-INTAC,
Petitioners, v. COURT OF APPEALS and SPOUSES MARCELO ROY,
JR. and JOSEFINA MENDOZA-ROY and SPOUSES DOMINADOR
LOZADA and MARTINA MENDOZA-LOZADA, Respondents.
GR No. 173211
FACTS:
During the lifetime of Ireneo Mendoza (Ireneo), he executed a deed
of absolute sale involving a property located in Bagong Pag-asa,
Quezon City in favor of spouses Angelina and Mario Intac (spouses
Intac). Consequently, TCT No. 242655 was issued in favor of the
spouses Intac. The deed was executed because the spouses Intac
needed to borrow the title of the property and to use the same as
collateral for their loan application.
Respondents Josefina Mendoza-Roy and Martina Mendoza-Lozada,
heirs of the late Ireneo, sought the cancellation of TCT No. 242655
claiming that the sale was only simulated, and therefore, void.
Both the RTC and the CA declared that the deed of absolute sale
was null and void and ordered the cancellation of TCT No.
242655.Hence, this present recourse.
ISSUE: Whether or not the deed of absolute sale was a simulated
contract or a valid agreement?
HELD: The Court finds no merit in the petition.
CIVIL LAW: simulated contract
Accordingly, for a contract to be valid, it must have three essential
elements: (1) consent of the contracting parties; (2) objectcertain
which is the subject matter of the contract; and (3) cause of the
obligation which is established. In a contract of sale, its perfection is
consummated at the moment there is a meeting of the minds upon
the thing that is the object of the contract and upon the price.
Consent is manifested by the meeting of the offer and the
acceptance of the thing and the cause, which are to constitute the
contract.
If the parties state a false cause in the contract to conceal their real
agreement, the contract is only relatively simulated and the parties
are still bound by their real agreement. Hence, where the essential
requisites of a contract are present and the simulation refers only to
the content or terms of the contract, the agreement is absolutely
binding and enforceable between the parties and their successors in
interest.
In absolute simulation, there is a colorable contract but it has no
substance as the parties have no intention to be bound by it. The
main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or
in any way alter the juridical situation of the parties. As a result, an GALANG, Respondents*
MVC v. Stalwart Management
absolutely simulated or fictitious contract is void, and the parties
GR No. 157439
may recover from each other what they may have given under the
contract. FACTS:
- As alleged by Multi-Ventures, Stalwart borrowed P9,000,000 from
Multi-Ventures, with interest and for purposes of expediency,
this transaction was denominated by the parties as a sale of Land
In the case at bench, the Court is one with the courts below that no Bank bonds from Stalwart to Multi-Ventures as shown in a
valid sale of the subject property actually took place between the Confirmation of Agreement. The Bonds, as Multi-Ventures say only
alleged vendors, Ireneo and Salvacion; and the alleged vendees, serve as partial collateral for the payment of the loan.
Spouses Intac. There was simply no consideration and no intent to Multi-Ventures suspects that Stalwart will renege on its loan
obligation with Multi-Ventures impelling Multi-Ventures to file the
sell it.
present petition before this Court for reformation in order to
express the true intent of the parties, i.e., that the ostensible sale of
Petition is DENIED. the
bonds is actually a loan agreement.
-Countering Multi-Ventures arguments, Stalwart denied all
allegations and affirmed the intent of the parties that the
(Reformation of Instrument) transaction they
G.R. No. 157439 July 4, 2007 had was really a sale of Land Bank bonds. Supporting this statement
MULTI-VENTURES CAPITAL and MANAGEMENT CORPORATION, is the fact presented that Multi-Ventures and Stalwart are
Petitioner. engaged in dealing and trading government securities.
vs. -RTC Ruling: Reformation is proper from Contract of Sale to Contract
STALWART MANAGEMENT SERVICES CORPORATION, MARIAN G. of Loan.
TAJO, CESAR TAJO and ARIANA -CA Ruling: Reversed RTC decision. No reformation needed. The
GALANG, Respondents* transaction was that of a sale.
(Reformation of Instrument)
G.R. No. 157439 July 4, 2007 ISSUE/S:
MULTI-VENTURES CAPITAL and MANAGEMENT CORPORATION, -WON the contract entered into between Multi-Ventures Capital
Petitioner. and Management Corporation and Stalwart Management Services
vs. Corporation is one of loan or sale?
STALWART MANAGEMENT SERVICES CORPORATION, MARIAN G.
TAJO, CESAR TAJO and ARIANA

HELD:
- The Court ruled to sustain the CA’s ruling affirming that the subject
transaction between Multi-Ventures and Stalwart is that of a
sale of Land Bank bonds.
- Under Article 1359, in order that an action for reformation of
instrument may prosper, the following requisites must concur:
(1) there must have been a meeting of the minds of the parties to
the contract;
(2) the instrument does not express the true intention of the
parties; and
(3) the failure of the instrument to express the true intention of the
parties is due to mistake, fraud, inequitable conduct or accident.
-The burden of proof devolves on the party asserting that the
instrument did not express the true intention of the parties and so
needs
to be reformed. The presumption is that an instrument sets out the
true agreement of the parties thereto and that it was executed for
valuable consideration. Multi-Ventures failed to overturn the
presumption of validity of the contract and it also failed to discharge
the
burden of proving that the true intention of the parties has not
been expressed.
-The argument of Multi-Ventures is that the buy-back arrangement
in the letter of Stalwart where it will purchase back the bonds at
11,557,972.60 proves that the transaction between them is that of a
loan. Because if it was not, why would Stalwart pay a higher
price of P11,557,972.60 when it only received as consideration
therefrom was only P9,000,000?
-The Court did not find merit in the argument and said that the buy-
back arrangement only corroborates the fact that the transaction
was of sale. For if the bonds were only to serve as a collateral for
the loan, why would respondent offer to buy them back from
petitioner if they were not sold in the first place? Obviously,
ownership of the bonds had been transferred from respondent to
petitioner on January 11, 1991; for if it were not so and the bonds
were merely being held by petitioner as a security for the payment
of the alleged loan, then ownership would have remained with
respondent and there would have been no need to buy it back.
- In addition, the Court took notice of a subsequent transaction
made by Multi-Ventures of using the Land Bank bonds as collateral
for an investment from AFP Mutual Benefits Association, Inc. which
is evidently an act of ownership.
-Lastly, Multi-Ventures failed to establish existence of the third
requisite which is, the failure of the instrument to express the true
intention of the parties is due to mistake, fraud, inequitable conduct
or accident. Absent any proof of mistake, fraud, inequitable
conduct or accident, the Confirmation of Agreement dated January
11, 1991 remains the best evidence to ascertain the real intent of
the parties.
Bentir v. Leande
G.R. No. 128991, 12 April 2000
FACTS:
Respondent Leyte Gulf Traders, Inc. filed a complaint about a
reformation of an instrument, specific performance, annulment of
conditional sale and damages with prayer for a writ of injunction
against petitioners Yolanda Rosello-Bentir and the spouses Samuel
and Charito Pormida.
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. According to 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 Pormada and Charito
Pormada. Respondent corporation questioned the sale alleging that
it had a right of first refusal. It filed civil 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.
corporation had ten (10) years from 1968, the time when the
contract of lease was executed, to file an action for reformation.
Sadly, it did so only on May 15, 1992 or twenty-four (24) years after
the cause of action accrued, hence, its cause of action has become
stale, hence, time-barred.
Doctrine:
Reformation of an instrument is that remedy in equity by means of
which a written instrument is made or construed so as to express or
conform to the real intention of the parties when some error or
mistake has been committed.

Petitioners filed their answer alleging that the inadvertence of the
lawyer who prepared the lease contract is not a ground for
reformation. They further contended that respondent corporation is
guilty of laches for not bringing the case for reformation of the lease
contract within the prescriptive period of ten (10) years from its
execution.
ISSUE:
The right of reformation is necessarily an invasion or limitation of
the parol evidence rule since, when a writing is reformed, the result
is that an oral agreement is by court decree made legally effective.
Prescription is intended to suppress stale and fraudulent claims
arising from transactions which facts had become so obscure from
the lapse of time or defective memory.

Whether or Not the action for reformation has not yet prescribed.

RULING:

No. The Action for Reformation has prescribed. Prescription is

intended to suppress fraudulent claims arising from transactions like
the facts had become so obscure from the lapse of time or defective
memory. Our law and jurisprudence set such limitations, among
which is laches. A suit for reformation of an instrument may be
barred by lapse of time. The prescriptive period for actions based
upon a written contract and for reformation of an instrument is ten
(10) years under Article 1144 of the Civil Code. Respondent