Same; Same; Redemption price where mortgagee is a banking
institution.—As set forth in its title, Act No. 3135 was promulgated "to
VOL. 36, DECEMBER 289
18, 1970
Ponce de Leon vs.
Rehabilitation Finance
Corporation
No. L-24571. December 18, 1970.
JOSE L. PONCE DELEON,
plaintiff-appellant, vs. REHABILITATIONFINANCECORPOR
ATION, defendant-appellant and third-party
defendant-appellant, ROSALINASORIANO,TEOFILA SORIAN
O and REV.FR.EUGENIO R. SORIANO, third-party
plaintiffs-appellants.
Civil Law; Mortgage; Presumption of regularity of mortgage
deed.—The mere oral unsupported testimony of an interested party is
not sufficient to overcome the legal presumption of the regularity of the
mortgage deed, a contract celebrated with all the legal requisites under
the safeguard of a notarial certificate (Naval, et al. vs. Enriquez, 3 Phil.
670-672). Such unsupported testimony of the interested party is not
that clear, strong and convincing evidence beyond mere preponderance
of evidence, required to show the falsity or nullity of a notarial
document. (Sigue, et al. vs. Escaro, CA, 53 Q.C. 1161; Jocson vs.
Ratacion, G.R. No. 41687; Palanca vs. Chillanchin vs. Coquinco, G.R.
No. L-1355; Robinson vs. Villafuerte, 18 Phil. 171).
Remedial Law; Legal Redemption; Sheriff's Sale; Price in a sheriffs
sale.—Where there is the right to redeem, inadequacy of price should
not be material, because the judgment debtor may re-acquire the
property or else sell his right to redeem and thus recover any loss he
claims to have suffered by reason of the price obtained at the execution
sale. As the trial court had correctly observed: Mere inadequacy of the
price obtained at the sheriff's sale unless shocking to the conscience will
not be sufficient to set aside the sale if there is no showing that, in the
event of a regular sale, and, in forced sales, low prices are usually
offered. (I Moran's Rules of Court, pp. 834-835).
regulate the sale of property under special powers inserted in or
annexed to real estate mortgages." Section 6 thereof provided that in all
cases of "extrajudicial sale x x x
290
2 SUPREME COURT
90 REPORTS
ANNOTATED
Ponce de Leon vs.
Rehabilitation Finance
Corporation
made under the special power hereinbefore referred to, "the
property sold may be redeemed within" one year from and after the date
of the sale x x x." Act No. 4118 amended Act No. 3135 by merely adding
thereto three (3) new sections. Upon the other hand, Rep. Act No. 337,
otherwise known as "The General Banking Act," is entitled "An
act Regulating Banks and Banking Institutionsand for other purposes."
Section 78 thereof limits the amount of the loans that may be given by
banks and banking or credit institutions on the basis of the appraised
value of the property given as security, as well as provides that, in the
event of foreclosure of a real estate mortgage to said banks or
institutions, the property sold may be redeemed "by paying the amount
fixed by the court in the order of execution," or the amount judicially
adjudicated to the creditor bank. This provision had the effect of
amending section 6 of Act No. 3135, insofar as the redemption price is
concerned, when the mortgagee is a bank or a banking or credit
institution, said section 6 of Act No. 3135 being, in this respect,
inconsistent with the above-quoted portion of section 78 of Rep. Act No.
337.
Statutory Construction; Special law prevails.—The conflict between
the two (2) laws (Act No. 3135 as amended and Rep. Act No. 337) must
be resolved in favor of Rep. Act No. 337, both as a special and as the
subsequent legislation.
Negotiable Instruments Law; Promissory Notes; Time for payment
not indicated in promissory note.—When a promissory note expresses
"no time for payment," it is deemed "payable on demand."
 Civil Law; Obligations and Contracts; Debtor cannot avail of Art. had impliedly admitted—were estopped to question—the validity and
1174, Civil Code, in an obligation to pay.—The debtor's obligation was regularity of the sheriff's sale. (Tiaoqui vs. Chaves, L-10086, May 20,
merely generic, namely, to pay certain sums of money to the RFC. As 1957, quoting from 59 C.J.S. p. 1372).
the trial judge had aptly put it: In the instant case, there was an
obligation on the part of the debtor to pay his loan, independently of the APPEAL from a decision of the Court of First Instance of Rizal.
purpose for which the money loaned was intended to be used and this
obligation to pay continues to subsist notwithstanding the fact that it The facts are stated in the opinion of the Court.
may have become impossible for the debtor to use the money loaned for
the particular purpose that was intended (Milan vs. Rio y Olabarrieta, CONCEPCION, C.J.:
45 Phil. 718). There is hence no ground for declaring the amortizations
due on the principal loan since October, 1952 as extinguished due to Appeal from a decision of the Court of First Instance of Rizal, the
fortuitous event or to grant plaintiff a reasonable time to pay the due dispositive part of which reads:
amortizations. "IN VIEW OF THE FOREGOING, the Court hereby renders judgment
Land Registration Act; Original certificate of title does not dismissing plaintiff's complaint with costs against plaintiff; ordering
291 plaintiff Jose Ponce de Leonto pay the defendant RFC the amount of
FIVE HUNDRED TWENTY-NINE THOUSAND TWO HUNDRED
VOL. 36, SIXTY FIVE PESOS AND FIFTY FOUR (P529,265.54) CENTAVOS,
DECEMBER 18, 1970 91 with interest at six percent per annum from November 24, 1954 until
Ponce de Leon vs. fully paid, the further sum of ONE HUNDRED EIGHTY (P180.00)
PESOS per month from May 20, 1955 until plaintiff vacates the house
Rehabilitation Finance and lot at Taft Avenue, Pasay City, and FIVE THOUSAND (P5,000.00)
Corporation PESOS as damages for the injunction and costs.
establish time of acquisition.—The title to said property was not a
292
transfer certificate of title, but an original one, issued in accordance
with a decree which, pursuant to law, 292 SUPREME COURT
merely confirms a pre-existing title. Said original certificate of title REPORTS
does not establish, therefore, the time of acquisition of the property of ANNOTATED
the registered owner thereof.
Civil Law; Conjugal Partnership; Proof of acquisition during
Ponce de Leon vs.
marriage, a condition sine qua non.—Article 160 of the Civil Code must Rehabilitation Finance
be construed in relation to Articles 153 to 159 of the same Code, Corporation
enumerating the properties "acquired x x x during the marriage" that
"The Court declares the mortgage of one-half of the lot covered by
constitute the conjugal partnership. Consequently therewith, the party
Original transfer certificate of title No. 8094 of the lands records of
who invokes this presumption must first provethat the property in
Rizal Province belonging to the third-party plaintiffs,
controversy was acquired during the marriage. In other words, proof of
namely Rosalina Soriano, Rev. Fr. Eugenio Soriano and
acquisition during coverture is a condition sine qua non for the
Teofila Soriano del Rosario null and void and the sheriff's sale in favor
operation of the presumptionin favor of conjugal partnership.
of the RFC of said one-half share likewise null and void."1

Same; Estoppel; Attempts to redeem constitute implied admission of

validity.—Defendants, by their repeated requests for time to redeem As correctly set forth in said decision, the main facts are:
"On August 14, 1945, herein plaintiff Jose L. Ponce deLeon and 1
Record on Appeal, p. 133.
Francisco Soriano, father of third-party plaintiffs Teofila Soriano del
293
Rosario, Rosalina Soriano and Rev. Fr. Eugenio Soriano, obtained a
loan for P10,000.00 from the Philippine National Bank (PNB), Manila,
VOL. 36, DECEMBER 18, 1970 293
mortgaging a parcel of land situated at Barrio Ibayo, Municipality of Ponce de Leon vs. Rehabilitation FinanceCorporatio
Parañaque, Rizal, covered by original certificate of title No. 8094 of the n
land records of Rizal Province in the name of Francisco Soriano,
was executed on October 8, 1951 by Jose L. Ponce deLeon, his wife
married to Tomasa Rodriguez, as security for the loan (Exhibit
Carmelina Russel, and Francisco Soriano. The same parties signed a
15-Soriano). On August 16, 1945, Ponce de Leon gave P2,000.00
promissory note (Exhibit 'A') for P495,000.00, with interest at 6% per
to Soriano from the proceeds of the loan (Exhibit 'N'). The loan was
annum payable on installments every month for P28,831.64 in
subsequently increased to P17,500.00 and an amendment to the real
connection with the mortgage deed. Before the mortgage deed was
estate mortgage, Exhibit '15-Soriano,' was executed
signed, the Notary Public, Fe-lipe Cuaderno, Jr. before whom it was
by Jose L. Ponce deLeon and Francisco Sorianoon March 13, 1946
acknowledged, translated it in Tagalog to Francisco Soriano, who
(Exhibit '16-Soriano').
thereafter affixed his signature to the document. At the time that
"On May 4, 1951, Jose L. Ponce de Leon filed with
Fran-cisco Soriano signed the mortgage deed, Exhibit 'A', his spouse
the Rehabilitation FinanceCorporation (RFC for short) Manila, his
Tomasa Rodriguez was already dead leaving as her heirs, her children
loan application, Exhibit '1-RFC,' for an industrial loan, for putting up a
namely, Rosalina, Teofila and Rev. Fr. Eugenio So-riano, none of whom
sawmill, in the amount of P800,000.00 offering as security certain
signed the said mortgage deed or the promissory note.
parcels of land, among which, was the parcel
"The mortgage deed specifically stipulated that the proceeds thereof
which Ponce de Leon and Sorianomortgaged to the PNB. The
shall be used exclusively for the purchase of machinery and equipment,
application stated that the properties offered for security for the RFC
construction of buildings and the payment of obligations and that the
loan are encumbered to the PNB, Bacolod, and to Cu Unjieng Bros. The
release of the amounts loaned shall be at the discretion of the RFC. In
properties offered for security to the RFC were inspected by the
view of these conditions, the RFC paid Poncede Leon's obligations of
appraisers of the latter, who submitted the following appraisals:
P100,000.00 to the PNB; P30,000.00 to Cu Unjieng Bros.; and P5,000.00
"1. Land P480,228.00 to Arturo Colmenares. From the balance of P360,000.00, the sum of
P352,000.00 was released to Jose L. Ponce de Leon at various
........................................................ amounts during the period from December, 1951 to July 1952. The
"2. Building P 12,000.00 checks covering these releases were issued
................................................... to Jose L. Ponce de Leon in view of the authority given to him in
writing by Francisco Soriano and Carmelina Russel (Exhibit
"3. Machinery & equipment .................... P 67,101.00 '33-A-Soria-no,' Exhibit 'A' and Exhibit '16-RFC').
"4. Transportation equipment P 14,000.00 "On March 12, 1952, Jose L. Ponce de Leon and his wife
................... Carmelina Russel executed an addendum to the chattel mortgage for
machineries and equipments (Exhibit 'F').
Total ...................... P573,329.00
"None of the amortization and interests which had become due was
(Exh. '6-aRFC') paid and for this reason, the RFC took steps for the extra-judicial
"The application was approved for P495,000.00 and the mortgage foreclosure of the mortgaged properties consisting of real estates and
contract (Exhibit 'A', also '16-RFC & '33-Soriano') the sawmill and its equipments of Ponce de Leon situated in two
_______________ places in Samar. The RFC was the purchaser of all the mortgaged
properties in the ensuing sheriff's sales, with the exception of two
parcels of land situated in Ba-colod City which were purchased by
private individuals. Many items of the mortgaged machineries and
equipments could not be found. The parcels of land mortgaged were sold
as follows:
" 1 ) Nineparcels at Bacolod City .......... P78,800.00
"2) Two parcels acquired by private
individuals................................................ P 5,790.00
"3) Two parcels at Pasay City with
improvements . .............................. P15,000.00
294
294 SUPREME
COURT
REPORTS
ANNOTATED
Ponce de Leon vs. Rehabilitation Finance Corporation
"4) The land of Soriano at Parañaque,
Rizal ......................................................... P10,000.00
"5) The Machineries & equipments that
were left ................. ............................ P 6,000.00
"The Sheriff sold the land covered by original certificate of Title No.
8094 in the name of Francisco Soriano, married to Tomasa Rodriguez,
on June 15, 1954 and the deed of sale, dated April 19, 1955 was
executed by the sheriff in favor of the purchaser thereof, the RFC,
including all the other properties sold (Exhibit '15-RFC,' also
'54-Soriano').
"Previous to the expiration of the one-year period of redemption,
Francisco Soriano, through Teofila Soriano del Rosario offered to
repurchase the Soriano lot for P14,000.00 and on June 14, 1955, the
last day for the redemption of the lot, Francisco Soriano, in company
with his daughter, Rosalina and Teofila, went to see Mr. Bernardo,
Chief of the assets department of the RFC, and offered to redeem said
lot for P14,000.00 but the offer was rejected and they were told to
participate in the public sale of the land to be conducted by the
RFC. Jose L. Ponce de Leondid not offer to redeem the mortgaged
properties sold at anytime before the expiration of the period of
redemption.
"The RFC scheduled a public sale of the lot registered in the name of
Francisco Soriano and of the other lots which the RFC acquired in the
Sheriff's sale for February 20, 1956 in view of the inability
of Ponce de Leon or Soriano to legally redeem the properties sold by
the Sheriff within the one year period after the sale.
"On February 18, 1956, JoseL. Ponce de Leon instituted the
present action alleging that there was delay in the releases of the
amount of the loan; that the RFC withheld the amount of P19,000.00
from the loan until it had verified whether Poncede Leon had still an
unpaid indebtedness to the defunct Agricultural and Industrial Bank,
the RFC's predecessor, and this was paid only after one year had
passed; that the typhoon in October and November, 1952 had caused
destructions to his sawmills and hampered his operations for which
reason, he asks, in his complaint, that the amortizations on his
obligations which became due since October, 1952 be declared
extinguished; that the sheriff's sales be declared null and void because
the properties were sold at grossly inadequate prices and that said sales
were not conducted in accordance with law; that the RFC be compelled
to account for his machineries and equipments at his lumber mill in
Calbayog and to reimburse him for the value of the unaccounted
machineries and equipments; that the RFC be ordered to pay him
actual and moral damages for P105,000.00
295
VOL. 36, DECEMBER 18, 1970 295
Ponce de Leon vs. Rehabilitation FinanceCorporatio
n
and costs. De Leon asked for the issuance of a writ of preliminary
injunction to restrain the RFC from carrying out its contemplated
public sale. The Court set the petition for injunction for hearing but no
one appeared for the RFC at the hearing thereof so that the Court had
to issue the preliminary injunction prayed for. De Leon caused notice of
lis pendens to be recorded in relation with this case.
"The RFC filed its answer sustaining the legality of the mortgage
and Sheriff's sales and counter-claimed that Ponce de Leon be ordered
to pay the deficiency claim representing the balance of the latter's
indebtedness, rental of the lot and house at Taft Avenue, Pasay City
occupied by Ponce de Leon and damages.
"Subsequent to the filing of Ponce de Leon's complaint against the
RFC, Francisco Soriano wrote a letter, dated February 20, 1956, to the
President asking the latter's intervention so that the projected sale on
the same date to be conducted by the RFC may be suspended insofar as
the lot in his name is concerned and that he be allowed to redeem it
(Exhibit '27-Soriano'). This letter was referred by the Executive Office
to the RFC, which sent a letter, Exhibit '29-Soriano', to
Francisco Sorianoinforming the latter that he could redeem his former
property, for not less than its appraised value of P59,647.05, payable
20% down and the balance in ten years, with 6% interest. Soriano did
not redeem the lot under the conditions of the RFC. He then filed a
third-party complaint in this case with the RFC
and Jose L. Ponce de Leon as the third-party defendants. Due to the
death of Francisco Soriano, he was substituted as third-party plaintiff
by his children, namely, Teofila Soriano del
Rosario, Rosalina Soriano and Rev. Fr. Eugenio Soriano.
"The Sorianos contend that the mortgage in favor of the RFC and
promissory note signed by Francisco Sorianolacked the latter's consent
and was without consideration insofar as Francisco Soriano is
concerned and hence null and void as to him and his children; that the
lot covered by original certificate of title No. 8094 in the name of
Francisco Sorianobelonged to the conjugal partnership of the latter
and his wife, Tomasa Rodriguez, now deceased, and since the latter was
already dead when the mortgage was executed and her children who
have thus inherited her share have not signed the mortgage contract
and promissory note, at least, the one-half share of the lot belonging
now to the Sorianosisters and brothers, the thirdparty plaintiffs,
have not been legally included in the mortgage to the RFC so that the
latter had not acquired said one-half share in the sheriff's sale. The
Sorianos further ask that they be allowed to redeem the remaining
one-half share, that which
296
296 SUPREME COURT REPORTS ANNOTATED
Ponce de Leon vs. Rehabilitation FinanceCorporatio
n
the amount for which the RFC acquired the whole lot in the sheriff's
sale. The third party-plaintiffs also ask that Poncede Leon be ordered
to reimburse them for whatever amount they may use in redeeming the
lot and expenses incident thereto and that Ponce de Leon and the
RFC be made to pay them moral damages which their father suffered
and attorney's fees.
"Answering the third-party complaint, the RFC
and Poncede Leon affirm the legality of the mortgage deed insofar
as Soriano is concerned. The RFC further contends that the mortgage
was binding on the whole Soriano lot and that there was no valid
redemption of this lot.
"Ponce de Leon interposed a counterclaim for various sums of
money allegedly received from him by Francisco Sorianoand the
present third-party plaintiffs."
2
In due course, the lower court rendered judgment the dispositive
part of which is quoted at the beginning of this decision. Said
court held that the typhoons in October and November 1952 did
not relieve the plaintiff from his obligations under the promissory
note and the deed of mortgage in favor of the RFC; that the
sheriff's sale of the mortgaged properties is valid; that the RFC
need not account for the machineries and equipment of the
sawmill in Samar or reimburse the value of such machinery and
equipment as may be unaccounted for, they having become
property of the RFC, owing to plaintiff's failure to exercise the
right of redemption in accordance with law; that neither may he
recover damages from the RFC for the alleged delay in the
releases made by the same, since their contract stipulates that
the proceeds of the loan shall be released at the discretion of the
Mortgagee and plaintiff's offer of redemption came long after the
expiration of the period therefor, and was not for the full amount
of plaintiff's liability, which he, moreover, asked to be reduced and
wanted to pay in installments; and that, accordingly, plaintiff has
no right to recover any damages.
 Upon the other hand, the court found that plaintiff should pay:
(1) rentals for the use of the mortgaged property (house and lot)
at Pasay City, after the title thereto had
_______________
2
Record on Appeal, pp. 103-112
297
VOL. 36, DECEMBER 297
18, 1970
Ponce de Leon vs.
Rehabilitation Finance
Corporation
senting the balance of plaintiff's obligation in favor of the
RFC—which, as of November 24, 1954, amounted to
P583,-270.49, plus 10% thereof, as stipulated penalty, or the
aggregate sum of P641,597.54—after deducting therefrom the
sum of P112,332.00 for which the mortgaged properties had been
sold, (3) apart from the sum of P5,000.00, as damages for the
injunction issued, at his behest, and the costs.
As regards the third party complaint of the Sorianos, the lower
court: (1) overruled their claim to the effect that
Francisco Soriano had signed the promissory note and the deed
of mortgage in favor of the RFC without knowledge of the
contents thereof and without any consideration therefor; but (b)
held that, being registered in the name of "Francisco Soriano,
married to Tomasa Rodriguez," the property covered by original
certificate of title No. 8094—hereinafter referred to as the
Parañaque property—is presumed to belong to the conjugal
partnership of said spouses, and that, the RFC having failed to
offset this presumption, the mortgage on and the sale of the
property by the sheriff are null and void as to one-half (1/2)
thereof.
Moreover, the court declared: (a) that the RFC was justified in
rejecting the offer, made by the Sorianos, to redeem said property
for, pursuant to section 78 of Republic Act No. 337, redemption
could be effected "only by paying the amount fixed in the order of
execution"; (b) that plaintiff's counterclaim against the Sorianos is
barred by the statute of limitations; (c) that neither may he
recover damages from the Sorianos, their alleged bad faith not
bound to pay damages to the RFC, the action of the former
against the latter not being altogether unjustified.
All of the parties—namely, plaintiff, JosePonce de Leon,
defendant, Rehabilitation FinanceCorporation, hereinafter
referred to as RFC (now Development Bank of the Philippines),
and RosalinaSoriano, Fr. Eugenio Soriano and
Teofila Soriano del Rosario, hereinafter referred to as the
Sorianos—have appealed from said decision. 297
298
298 SUPREME COURT
REPORTS
ANNOTATED
Ponce de Leon vs.
Rehabilitation Finance
Corporation
Appeal of the Sorianos
The Sorianos maintain that the lower court erred: (1) in holding
that the promissory note and the deed of mortgage executed by
Francisco Soriano in favor of the RFC are valid as regards
one-half of the Parañaque property; (2) in ruling that the
extrajudicial sale thereof to the RFC is valid as to the
aforementioned one-half of said property; (3) in not sentencing the
RFC to allow the redemption of such half of said property by the
Sorianos, as heirs of the deceased Francisco Soriano, for one-half
of the sum of P10,000 for which the whole lot was sold to the RFC,
or, at least, for the whole sum of P10,000; (4) in not declaring that
section 78 of Rep. Act No. 337 is unconstitutional and in holding
that the same, instead of Act No. 3135, as amended by Act No.
4118, is the law applicable to the case; (5) in considering that the
case of Villar v. dePaderanga is authoritative or controlling in the
3 on the pretext that he would see if it were valid; that she gave it
case at bar; (6) in not sentencing the plaintiff and the RFC to pay
damages to the Sorianos; (7) in not ordering the RFC to return
OCT No. 8094, covering the Parañaque property, to the Sorianos,
free from any lien or encumbrance: and (8) in denying the motion
for reconsideration of the Sorianos.
The latter's first assignment of error is predicated upon the
theory that, when the promissory note and the deed of mortgage
in question were executed by Francisco Soriano, he was
somewhat absent-minded, owing to senility, he being then a
septuagenarian, apart from illiterate, for he could write only his
name; that he was persuaded to sign said promissory note and
deed of mortgage thru fraud, deceit and undue influence, and did
not know the true nature of these instruments when he affixed
his signatures thereon; and that said instruments are also null
and void for lack of cause and consideration. In this connection,
the appealed decision has the following to say:
"The third-party plaintiffs ask that the mortgage deed and promissory
note be declared null and void with respect to Francisco Soriano for
lack of consent and consideration. It is
_______________
3
97 Phil. 604, 609.
299
VOL. 36, DECEMBER 18, 1970 299
Ponce de Leon vs. Rehabilitation FinanceCorporatio
n
claimed that Francisco Sorianowas made to believe
by Poncede Leon when he signed the mortgage deed and the
promissory note that these were documents releasing his land from the
previous mortgage in favor of the PNB and that Francisco Soriano did
not receive a single centavo out of the RFC loan.
"The principal witness on the above allegation of
the thirdparty plaintiffs is Rosalina Soriano, who testified that her
father, Francisco was an old man who was absent-minded; that in
1945, Ponce de Leon merely borrowed her father's certificate of title
to Ponce de Leonwho never returned the certificate and it turned out
that the latter mortgaged it to the PNB by deceiving her father in
signing the mortgage contract; that in 1951, her father received a
sheriff's notice that the land would be foreclosed; that her father went
to see Ponce de Leon in Negros but the latter assured him that
nothing would happen to his land; that in October, 1951, she and her
father went to see Ponce de Leon; that when the latter told her father
that the property was mortgaged to the RFC, her father got angry
at Ponce deLeon saying that the latter fooled him
but Ponce de Leonassured him that he would redeem the land but he
failed to do so.
"Ponce de Leon denied having deceived Francisco Soriano into
signing the mortgage deed covering his land, saying that the
transaction was with the full and complete knowledge and
understanding of Francisco Soriano. He was supported by Felipe
Cuaderno, Jr., the Notary Public, who notarized the mortgage deed, who
said that he explained and translated into Tagalog, a language known
and spoken by Francisco Soriano, the mortgage deed.
"The fact that Francisco Soriano may have been absentminded
could not be said to have the effect of vitiating his consent to the
mortgage deed because the execution and signing of a contract is not a
matter that concerns past events in which absent-mindedness may be
taken into account. Besides, the testimony of Rosalina Soriano to the
effect that her father told Ponce de Leon that the latter fooled him
shows that the old man Soriano could remember past events, for if
truly absentminded, Francisco would not recollect what he claims to be
what really took place at the RFC office as testified to by Rosalina.
"Neither could Francisco Soriano be considered feebleminded if we
believe the testimony of Rosalina which shows Soriano's
determination to see to it that the wrong done him was righted and that
his property may not be taken away from him, for according
to Rosalina, he even went to Negros alone to see Ponce deLeon he
received the Sheriff's notice of fore-
300
300 SUPREME COURT REPORTS ANNOTATED
Ponce de Leon vs. Rehabilitation FinanceCorporatio evidence beyond mere preponderance of evidence, required to show the
falsity or nullity of a notarial document (Sigue, et al. v. Escaro, CA, 53
n
Q.C. 1161; Jocson v. Ratacion, G.R. No. 41687, Palanca v. Chillanchin v.
closure and as shown by his alleged going to see Ponce deLeon a Coquinco, G.R. No. L-1355; Robinson v. Villafuerte, 18 Phil. 171).
number of times about his land and of his enlisting the aid of Ramon "With reference to the contention that there was no consideration
Lacson received by Francisco Soriano out of the mortgage contract and the
"The Sorianos stress that, according to Felipe Cuaderno, Jr., the promissory note executed in connection there-
Notary Public, when the latter asked Francisco Soriano, after he had
translated the mortgage deed into Tagalog if he (Francisco) understood 301
it, it was Ponce de Leon who said that the old man already (k)new it. VOL. 36, DECEMBER 18, 1970 301
But, granting that this was what happened, yet, Ponce de Leon vs. Rehabilitation FinanceCorporatio
Francisco Soriano would certainly have protested against the
statement of Ponce de Leon if Francisco did not really know what the n
transaction was about or he would have told Cuaderno that the with, this is a matter which concerned merely
document was not in accordance with the agreement between him Francisco Soriano and Jose L. Ponce deLeon for
and Ponce deLeon considering that the document was already Francisco Sorianohad expressly in writing (Exhibit '33-a-Soriano')
translated to the old man by Cuaderno in the Tagalog language authorized Jose L. Ponce deLeon to have the check or checks
which Sorianounderstood. covering the amount of the mortgage issued in the name of
"Besides, if Ponce de Leonreally deceived Francisco Soriano into said Jose L. Ponce deLeon. Whatever arrangements the latter and
signing the mortgage deed and promissory note so much so that in Francisco Soriano may have had with respect to the amounts thus
October, 1951, the old man Soriano was so angry given by the RFC on account of the mortgage is not the concern of the
at Ponce de Leonthat he told the latter that he fooled him as testified RFC if Ponce de Leondid not in fact give any portion of the amount to
to by Rosalina Soriano, then why was it that Ponce de Leon was Francisco Soriano. At any rate, there is ample evidence to show that
wade one of the sponsors of the thanksgiving mass of the Neo-Prysbeter Francisco Soriano received part of the consideration of the loan from
Rev. Fr. Eugenio Soriano, the old man's son and one of the present the RFC. It will be recalled that part of this loan was paid for the
third-party plaintiffs? The conduct of the Sorianos in obligation of Francisco Soriano and Poncede Leon to the Philippine
making Ponce deLeon one of the sponsors in the thanksgiving mass of National Bank secured by a mortgage of the lot in the name of
Rev. Fr. Eugenio Soriano in which Ponce de Leon spent a considerable Francisco Soriano. That Francisco Soriano received portions of this
amount for the big feast that followed the mass is inconsistent with the PNB loan from Ponce de Leon is shown by the fact that on August 16,
Sorianos' claim that Ponce de Leon had hoodwinked 1945, Francisco Sorianoreceived the amount of P2,000.00
Francisco Sorianointo signing the mortgage instrument and the from Ponce de Leon,evidenced by the receipt exhibit 'N', and this
promissory note. amount must have been part of the P10,000.00 consideration of the
"Moreover, the mere oral unsupported testimony PNB mortgage because this mortgage was executed on August 11, 1945
of Rosalina Soriano, an interested party and one of the plaintiffs or two days before Soriano received from Poncede Leon the amount of
herein, is not sufficient to overcome the legal presumption of the P2,000.00 on August 16, 1945.And two days thereafter, on August 18,
regularity of the mortgage deed, a contract celebrated with all the legal 1945, Francisco Soriano again received from Ponce de Leon the
requisites under the safeguard of a notarial certificate (Naval, et al. v. amount of P350.00 as shown by the receipt exhibit '0-3' and, on April
Enriquez, 3 Phil. 670-72). Such unsupported testimony of the interested 27, 1945, the amount of P1,000.00 was received by
party Rosalina Soriano is not that clear, strong and convincing Francisco Soriano from Ponce de Leonas shown by his receipt exhibit
'0-1' to pay the mortgage on his lot to Apolonio Pascual. On March 12,
1952, Francisco Soriano received the amount of
P3,000.00 from de Leon as shown by the check exhibit 'X-2' and on
June 3, 1952 the amount of P50.00 as shown by the check exhibit
'X-6' and P200.00 on October 22, 1952 as shown by the check exhibit
'X-7'. Rosalina Soriano herself received P50.00 on March 30,
1952 from Ponce de Leon as shown by the check marked Exhibit 'X-3'
and third-party plaintiff Rev. Eugenio Sorianoreceived P100.00 on
March 3, 1952 as shown by the checkexhibit 'X-1' and P50.00 on March
13, 1952 as shown by exhibit 'X-4'. There is therefore no ground for
declaring the mortgage contract and promissory note invalid for lack of
consideration insofar as Francisco Soriano and his children are
concerned." 4 P45,000.00 was sold for P15,000.00 and in Cu Unjieng & Sons v.
The facts thus relied upon by His Honor, the Trial Judge, are
borne out by the record, and We are fully in accord with the
conclusions drawn therefrom.
_______________
4
Record on Appeal pp. 120-127. Italics ours.
302
302 SUPREME COURT
REPORTS
ANNOTATED
Ponce de Leon vs.
Rehabilitation Finance
Corporation
In support of their second assignment of error, the Sorianos
maintain that the sum of P10,000, for which the Parañaque
property was sold to the RFC, is ridiculously inadequate,
considering that said property had been assessed at P59,647.05.
This pretense is devoid of merit, for said property was subject to
redemption and:
"x x x where there is the right to redeem x x x—inadequacy of price
should not be material, because the judgment debtor may re-acquire the
property or else sell his right to redeem and thus recover any loss he
claims to have suffered by reason of the price obtained at the execution
sale." 5
Then, again, as the trial court had correctly of served:
"But, mere inadequacy of the price obtained at the sheriff's sale unless
shocking to the conscience will not be sufficient to set aside the sale if
there is no showing that, in the event of a regular sale, a better price can
be obtained. The reason is that, generally, and, in forced sales, low
prices are usually offered (1 Moran's Rules of Court, pp. 834-835).
Considering that in Gov't. of P.I. v. Sorna, G.R. No. 32196, wherein
property worth P120,000.00 was sold for only P15,000.00, in Philippine
National Bank v. Gonzales, 45 Phil. 693, wherein property valued at
Mabalacat Sugar Co., 58 Phil. 439, property worth P300,000.00 to
P400,000.00 was sold for P177,000.-00, the Court cannot consider the
sale of the Bacolod properties, the Taft Avenue house and lot and the
Parañaque property of the Sorianos null and void for having been sold
at inadequate prices shocking to the conscience and there being no
showing that in the event of a resale, better prices can be obtained."
6
The third, fourth and fifth assignments of error of the Sorianos
refer to the amount for which they feel entitled to redeem the
aforementioned property.
It will be recalled that, before the expiration of the redemption
period, Teofila Soriano del Rosario offered to repurchase said
property for P14,000; that she and her sister Rosalina reiterated
the offer on the last day of said period; and that the offer was
rejected by the RFC, whose action was upheld by the lower court,
inasmuch as sec. 78 of Rep. Act 337 provides that, "(i)n the event
of foreclosure x x x
_______________
Barrozo v. Macaraeg, 83 Phil. 378, 381. Italics ours.
5
6
Record on Appeal, pp. 115-116. Italics ours.
303
VOL. 36, DECEMBER 303
18, 1970
 Ponce de Leon vs.
Rehabilitation Finance
Corporation
the mortgagor or debtor whose real property has been sold at
public auction x x x for the x x x payment of an obligation to any
bank, banking, or credit institution, x x x shall have the right x x
x to redeem the property by paying the amount fixed by the court
in the order of execution, x x x," not the amount for which it had
been purchased by the buyer at public auction. We have already
declared that" xxx (o)nly foreclosure of mortgages to banking
institutions (including
the Rehabilitation FinanceCorporation) and those
made extrajudicially are subject to legal redemption, by express
provision of statute, x x x" and, although neither an ordinary
7 Rehabilitation Finance
bank nor the RFC was involved in the case in which this
pronouncement had been made, the same was relevant to the
subject-matter of said case and to the issue raised therein. At any
rate, We reiterate the aforementioned pronouncement, it being in
accordance with law, for, pursuant to Rep. Act No. 337:
"x x x The terms 'banking institution' and 'bank', as used in this Act, are
synonymous and interchangeable and specifically include
banks, banking institutions, commercial banks, savings banks,
mortgage banks, trust companies, building and loan associations,
branches and agencies in the Philippines of foreign banks, hereinafter
called Philippine branches, and all other corporations, companies,
partnerships, and associations performing banking functions in the
Philippines."8
The Sorianos insist that the present case is governed, not by Rep.
Act No. 337, but by Act No. 3135, as amended by Act No.
4118—pursuant to which, in relation to section 465 of Act No.
190, the redemption may be made by "pairing the purchaser
the amount of his purchase," with interest and taxes—the deed of
real estate mortgage in favor of the RFC having allegedly been
executed and the aforementioned property having been sold
pursuant to said Acts Nos. 3135 and 4118.
The conclusion drawn by the Sorianos from these facts is
untenable. As set forth in its title, Act No. 3135 was promulgated
"to regulate the sale of property under special powers inserted in
or annexed to real estate mortgages,"
_______________
7
Villar v. de Paderanga, 97 Phil. 64, 609.
8
Rep. Act No. 337, Sec. 2. Italics ours.
304
304 SUPREME COURT
REPORTS
ANNOTATED
Ponce de Leon vs.
Corporation
Section 6 thereof provides that in all cases of "extrajudicial sale
xxx made under the special power hereinbefore referred to," the
property sold may be redeemed within "one year from and after
the date of the sale x x x." Act No. 4118 amended Act No. 3185 by
merely adding thereto three (3) new sections. Upon the other
hand, Rep. Act No. 337, otherwise known as "The General
Banking Act," is entitled "An Act Regulating Banks and Banking
Institutions and for other purposes." Section 78 thereof limits the
amount of the loans that may be given by banks and banking or
credit institutions on the basis of the appraised value of the
property given as security, as well as provides that, in the event of
foreclosure of a real estate mortgage to said banks or institutions,
the property sold may be redeemed "by paying the amount fixed
by the court in the order of execution," or the amount judicially
adjudicated to the creditor bank. This provision had the effect of
amending section 6 of Act No. 3135, insofar as the redemption
price is concerned, when the mortgagee is a bank or a banking or
credit institution, said section 6 of Act No. 3135 being, in this
respect, inconsistent with the above-quoted portion of section 78
of Rep. Act No. 337. In short, the Parañaque property was sold
pursuant to said Act No. 3135, but the sum for which it is
redeemable shall be governed by Rep. Act No. 337, which
partakes of the nature of an amendment to Act No. 3135, insofar
as mortgages to banks or banking or credit institutions are
concerned, to which class the RFC belongs. At any rate, the
conflict between the two (2) laws must be resolved in favor of Rep.
Act No. 337, both as a special and as the subsequent legislation.
9
The sixth, seventh and eighth assignments of error made by
the Sorianos are mere consequences of those already disposed of.
Hence, no further discussion thereof is necessary.
Plaintiff's Appeal
Plaintiff Ponce de Leonalleges that the lower court has
_______________
9
Nepomuceno v. RFC (DBP), L-14897, November 23, 1960.
305
VOL. 36, DECEMBER 305
18, 1970
Ponce de Leon vs.
Rehabilitation Finance
Corporation
erred: (1) "in not setting aside the foreclosure sales on the
mortgage contract dated October 8, 1951"; (2) "in stating that the
proceeds of the foreclosure sales were conscionable"; (3) in not
granting Ponce de Leon's claim for adjustment and not "giving
him a reasonable time to pay whatever obligations he may have";
(4) in not granting him damages nor directing the return of his
properties; (5) "in not ordering a new trial for the purpose of
adjusting" his "obligations and determining the terms and
conditions of his obligation"; and (6) in not granting his claim
against the Sorianos.
With respect to his first assignment of error, plaintiff
maintains that his promissory note Exhibit A was not yet overdue
when the mortgage was foreclosed, because the installments
stipulated in said promissory note have "no fixed or determined
dates of payment," so that the note is unenforceable and "the RFC
should have first asked the court to determine the terms,
conditions and period of maturity thereof."
In this connection, it should be noted that, pursuant to Exhibit
A, the total sum of P495,000 involved therein shall be satisfied in
quarterly installments of P28,831.64 each—representing interest
and amortization—and that, although the date of maturity of the
first installment was left blank, the promissory note states that
the "date of maturity (was) to be fixed as of the date of the last
release," completing the delivery to the plaintiff of the sum of
P495,000 lent to him by the RFC. He now says that this sum of
P495,000 has not, as yet, been fully released by the RFC. But this
is contrary to the facts of record, for, during the trial, his counsel,
Atty. Jose Orozco, made the following admission:
"Out of the loan of P495,000.00, the following were paid to the creditors
of Jose Ponce deLeon: P100,000.00 to the PNB, P30,000.00 to Cu
Unijeng Bros., P5,000.00 to Arturo Colmenares, P1,000.00 to Lorenzo
Balagtas. The total amount paid to the creditors is P136,000.00 which
were taken out of the proceeds of P495,000,00. The rest were allpaid in
the name of JosePonce de Leon." 10
_______________
10
T.s.n., p. 45, hearing of Jan. 3, 1957. Italics ours.
306
306 SUPREME COURT
REPORTS
ANNOTATED
Ponce de Leon vs.
Rehabilitation Finance
Corporation
In short, part of the sum of P495,000 had been delivered by the
RFC to the creditors of the plaintiff and Francisco Soriano, as
agreed upon by them, in payment of their outstanding
obligations, and the balance of said sum of P495,-000 was turned
over to the plaintiff, with the written authorization and
conformity of Francisco Soriano. This is borne out by the fact
that, prior to the institution of this case, plaintiff had not
complained of failure of the RFC to fully release the
aforementioned sum of P495,000. Indeed, in his own complaint
herein, he merely alleged a "delay in the release." Even so, he
impliedly admitted that the first installment was due in October
1952—or, more specifically, on October 24, 1952, this being the
date given therefor in the letter-demands of the RFC, the
accuracy of which were not questioned by the plaintiff—so that
the last release made by the RFC to complete the sum of
P495,000 must have taken place on July 24, 1952, although, in
answer to a question propounded to him, by his own counsel, as
regards the date he "received the total amount granted by the
RFC," plaintiff said—on the witness stand—he "believed that it
was in the last part or quarter of 1953." At this juncture, it is
noteworthy that plaintiff claims the right to a suspension of
payment or an extension of the period to pay the RFC owing to
the typhoons that had lashed his sawmill in October and
November 1952, thus indicating clearly that the amount of the
loan extended to him and Francisco Soriano had then been fully
released by the RFC three (3) months before October 1952 and
that the first installment under the promissory note Exhibit A
was due that month, as claimed by the RFC.
At any rate, Annex A, in effect, authorized the RFC to fix the
date of maturity of the installments therein stipulated, which is
allowed by the Negotiable Instruments Law and when a 11
promissory note expresses "no time for
_______________
11
SEC. 13. When date may be inserted.—Where an instrument expressed to be
payable at a fixed period after date is issued undated, or where the acceptance of
an instrument payable at fixed period after sight is undated, any holder may insert
therein the true date of issue or acceptance, and the instrument shall be payable
accordingly. The insertion of a wrong date does not avoid the instrument in the
hands of a subsequent holder
307
VOL. 36, DECEMBER 307
18, 1970
Ponce de Leon vs.
Rehabilitation Finance
Corporation
payment," it is deemed "payable ondemand." 12
Under his second assignment of error, plaintiff maintains that
the aggregate price of P112,332.00, for which the mortgaged
properties had been sold at public auction, is unconscionable, said
properties being allegedly worth P1,-202,976. This premise is
inaccurate.
It should be noted that plaintiff and Francisco Soriano were
granted a P495,000 loan on the security, not only, of
the existing properties offered as guarantee, but, also, on that of
assets—appraised at P570,000—yet to be acquiredby plaintiff,
partly with money thus received from the RFC and partly with
his own funds. After obtaining said loan and receiving the amount
thereof, less the sum of P 136,000 applied to the payment of
outstanding obligations, plaintiff failed to purchase the
machinery and equipment he had promised to get, or to set up the
constructions he had undertaken to make. Moreover, the RFC
found that
_______________
in due course; but as to him the date so inserted is to be regarded as the true
date.
SEC. 14. Blanks, when may be filled.—Where the instrument is wanting in any
material particular, the person in possession thereof has a prima facie authority to
complete it by filling up the blanks therein. And a signature on a blank paper
delivered by the person making the signature in order that the paper may be
converted into a negotiable instrument operates as a prima facie authority to fill it
up as such for any amount. In order, however, that any such instrument, when
completed, may be enforced against any person who became a party thereto prior to
its completion, it must be filled up strictly in accordance with the authority given
and within a reasonable time. But if any such instrument after completion, is
negotiated to a holder in due course, it is valid and effectual for all purposes in his
hands, and he may enforce it as if it had been filled up strictly in accordance with
the authority given and within a reasonable time.
12
SEC.7. When payable on demand.—An instrument is payable on demand—
1. (a)Where it is expressed to be payable on demand, or at sight or on
presentation; or
2. (b)In which no time for payment is expressed.
Where an instrument is issued, accepted, or indorsed when overdue, it is, as
regards the person so issuing, accepting, or indorsing it, payable on demand.
308
308 SUPREME COURT
REPORTS
ANNOTATED
Ponce de Leon vs.
Rehabilitation Finance
Corporation
were originally appraised at P492,288.00, were actually worth
P172,530.00 only. Again, a good part of the machinery and
equipment existing in one of the mortgaged lands, when it was
inspected before the granting of the loan, were subsequently lost
or missing, and those that remained were, at the time of the sale
to the RFC, in bad shape, so that the appraised value thereof was
then estimated at P10,000 only. Under these circumstances, it is
clear that the lower court did not err in approving the sale of the
mortgaged properties for the aggregate sum of P112,332.
As regards his third assignment of error, it is urged by the
plaintiff that he is entitled to a "suspension of payment," or a
postponement of the date of maturity of his obligation to pay, in
view of the typhoons that had "practically wiped out" his sawmill
in Samar during the months of October and November 1952. This
claim is predicated upon Article 1174 of our Civil Code, reading:
"x x x Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which, though foreseen, were
inevitable.
Plaintiff cannot avail of the benefits of this provision since he was
not bound to deliver the aforementioned sawmill, or any other
specific thing damaged or destroyed by the typhoons, to the RFC.
His obligation was merely generic, namely, to pay certain sums of
money to the RFC, at stated intervals. As His Honor, the Trial
Judge, had aptly put it:
"x x x in the instant case, there was an obligation on the part of the
debtor to pay his loan, independently of the purpose for which the
money loaned was intended to be used and this obligation to pay
continues to subsist notwithstanding the fact that it may have become
impossible for the debtor to use the money loaned for the particular
purpose that was intended (Milan v. Rio y Glabarrieta, 45 Phil. 718).
There is hence no ground for declaring the amortizations due on the
principal loan since October, 1952 as extinguished due to fortuitous
event or
309
VOL. 36, DECEMBER 18, 1970 309
Ponce de Leon vs. Rehabilitation FinanceCorporatio
n
to grant plaintiff a reasonable time to pay the due amortizations as
asked for by Ponce de Leon in his complaint." 13
Being mere corollaries to his first three assignments of error,
which cannot be sustained, plaintiff's fourth, fifth and sixth
assignments of error must have the same fate.
Defendant's Appeals
The RFC contends that the lower court erred: (1) in holding that
the Parañaque property is presumed to belong to the conjugal
partnership of Mr. and Mrs. Francisco Soriano; (2) in failing to
give due weight to the testimony of Gregorio Soriano, and in
holding that the same is insufficient to overcome the presumption
in favor of the conjugal nature of said property; (3) in failing to
consider that the Sorianos are now estopped from questioning the
validity of the mortgage on and the foreclosure sale of said
property; (4) in annulling the mortgage insofar as one-half of said
property is concerned, despite the finding that part of the
proceeds of the RFC loan was paid to settle the PNB loan secured
by the same property; and (5) in holding that the mortgage
thereon and the sheriff's sale thereof to the RFC are null and void
as regards onehalf of said property. These assignments of error
may be reduced to one, namely, that the lower court erred in
voiding the sale to the RFC of the Parañaque property, upon the
ground that the same formed part of the conjugal partnership of
Mr. and Mrs. Francisco Soriano.
In this connection, it appears that the property was registered
in the name of "Francisco Soriano, married to Tomasa
Rodriguez," and that based upon this fact alone—without any
proof establishing satisfactorily that the property had
been acquired during coverture—the lower court presumed that it
belongs to the conjugal partnership of said spouses. We agree
with the RFC that the lower court has erred in applying said
presumption.
We should not overlook the fact that the title to said property
was not a transfer certificate of title, but an
_______________
13
Record on Appeals, p. 114. Italics ours.
310
310 SUPREME COURT
REPORTS
ANNOTATED
Ponce de Leon vs.
Rehabilitation Finance
Corporation
original one, issued in accordance with a decree which, pursuant
to law, merely confirms a pre-existing title. Said original
14
certificate of title does notestablish, therefore, the timeof
acquisition of the Parañaque property by the registered owner
thereof.
Then, again, the lower court applied said presumption, having
in mind, presumably, Article 160 of our Civil Code, which reads:
"x x x All property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains exclusively to the
husband or to the wife."
This provision must be construed in relation to Articles 153 to 159
of the same Code, enumerating the properties "acquired x x x
during the marriage" that constitute the conjugal partnership.
Consistently therewith, We have held that "the party who invokes
this presumption must first prove that the property in
controversy was acquired during the marriage. In other
words, proof of acquisition during coverture is a condition sine
qua non for the operation of the presumption in favor of conjugal
partnership." It had, earlier, been declared, that "(t)he
15 16
presumption under Article 160 of the Civil Code refers to
property acquired during the marriage x x x." We even added
that, there being "no showing as to when the property in question
was acquired x x x the fact that the title is in the wife's name alone
is determinative." This is borne out by the fact that, in the
previous cases applying said presumption, it was duly 17
established that the property in question therein had
been acquired during coverture. Such
_______________
14
Section 38, Act 496; Maloles v. Director of Lands, 25 Phil. 548; Verzosa v.
Nicolas, 29 Phil. 425; Government v. Triño, 50 Phil 708; Misamis Lumber Co. v.
Director of Lands, 57 Phil. 881.
15
Cobb-Perez v. Lantin, L-22320, May 22, 1968.
16
Maramba v. Lozano, L-21533, June 29, 1967.
17
Flores v. Flores, 48 Phil. 288, 289-290; Pratts v. Menzi, 53 Phil. 51,
53; Espiritu v. Bernardino, 58 Phil. 902; Benavides v. Tordilla, 5,9 Phil. 918; Reyes
v. llano, 63 Phil. 629, 639, Commonwealth v. Sandiko, 72 Phil. 258, 259; Guinoo v.
Court of Appeals, 97 Phil. 235, 238.
311
VOL. 36, DECEMBER 311 "improper motive" in testifying as he did. After all, the Sorianos
18, 1970 are, likewise, nieces of Gregorio Sorianoand he was not the party
allegedly accused by them.
Ponce de Leon vs.
Again, this witness testified in a straightforward manner, and
Rehabilitation Finance disclosed a good number of details bearing the ear-
Corporation _______________
was, also, the situation obtaining in Servidad v. Alejandrino cited18
18
52 O.G. 2031.
in the decision appealed from. 19
Record on Appeal, pp. 128-129.
The case at bar is differently situated. The Sorianos have not
succeeded in proving that the Parañaque propertywas acquired 312

"during the marriage" of their parents. What is more, there is 312 SUPREME COURT
substantial evidence to the contrary. REPORTS
Gregorio Sorianotestified that his first cousin, ANNOTATED
Francisco Soriano, had acquired said property from his Ponce de Leon vs.
parents, long before he got married. In this connection, the lower
Rehabilitation Finance
court, however, said that:
"x x x the credibility of this witness is subject to doubt for it was shown Corporation
that he had an improper motive in testifying against the third-party roborated, not only by Felipe Cuaderno, Jr. and OCT No. 8094,
plaintiffs because he had a niece who was prosecuted by the third-party but, also, by the testimony of third-party
plaintiffs for estafa, x x x."
19
plaintiff Rosalina Soriano. Indeed, Felipe Cuaderno, Jr.—an
assistant attorney and notary public of the RFC, before whom the
This observation is, to our mind, hardly justifiable. To begin with,
deed of mortgage was acknowledged—testified that, in a
when counsel for the Sorianos asked the witness whether or not
conference he had before the execution of the promissory note and
his grandchild or grandniece Flordeliza Clemente had been
the deed of mortgage in favor of said institution,
accused of "estafa" by the Sorianos, counsel for the RFC objected
Francisco Soriano assured him that the Parañaque property was
thereto, and the court sustained the objection, upon the ground
"his own separate property, having acquired it from his deceased
that the question was "irrelevant". As a consequence, there
father by inheritance and that his children have nothing to dowith
is noevidence of the prosecution of Flordeliza Clemente by the
the property." This was, in effect, confirmed by no less
Sorianos. What is more, the ruling of the court declaring the
than RosalinaSoriano, for she stated, on cross-examination,
matter "irrelevant" to the present case rendered it unnecessary
that her father, Francisco Soriano, "was born and x x x raised" in
for the RFC to prove that said prosecution—if it were a fact—had
said property, so that—contrary to her testimony in chief—he
nothing to do with the testimony of Gregorio Soriano. It would,
could not have told her that he and his wife had bought it, as the
therefore, be less than fair to the RFC to draw an inference
Sorianos would have Us believe.
adverse thereto resulting from the absence of evidence to this
Needless to say, had the property been acquired by them
effect. At any rate, said prosecution does not necessarily warrant
during coverture, it would have been registered, in the
the conclusion that Gregorio Soriano was impelled by an
name not of "Francisco Soriano, married to Tomasa Rodriguez,"
but of the spouses "Francisco Sorianoand Tomasa Rodriguez."
In Litam v. Espiritu, We quoted with approval the following
20
observation made in the decision under review therein:
"Further strong proofs that the properties in question are the
paraphernal properties of Marcosa Rivera, are the very Torrens Titles
covering said properties. All the said properties are registered in the
name of 'Marcosa Rivera, married to Rafael Litam.' This circumstance
indicates that the properties in question belong to the registered owner,
Marcosa Rivera, as her paraphernal properties, for if they were
conjugal, the titles covering the same should have been issued in the
names of Rafael Litam and Marcosa Rivera. The words 'married to
Rafael Litam' written after the name of Marcosa Rivera, in each of the
above mentioned titles are merely descriptive of the civil status of
Marcosa Rivera, the registered owner of the properties covered by said
titles."
The records further show that on August 16, 1945—or two (2)
days after the execution of the deed of mort-
_______________
20
100 Phil. 364, 376. Italics ours.
313
VOL. 36, DECEMBER 313
18, 1970
Ponce de Leon vs.
Rehabilitation Finance
Corporation
gage for P10,000 in favor of the
PNB—Francisco Soriano received P2,000 from plaintiff herein;
that, early in 1951, Francisco Soriano received a letter informing
him that the PNB mortgage on the Parañaque property would be
foreclosed, unless the debt guaranteed therewith were settled;
that, accordingly, his children came to know of the mortgage in
favor of the PNB; that on October 8, 1951, said mortgage was
transferred to the RFC; that, thereafter, or from March to October
1952, Francisco Soriano and his
children, Rosalina Soriano and Eugenio Soriano, received
several sums of money, aggregating P3,450, from plaintiff herein;
that the latter, moreover, spent over P6,000 on the occasion of the
ordination of third-party plaintiff, Eugenio Soriano, as a priest,
on April 20, 1952; that plaintiff, also, paid the bills of
Francisco Soriano in the Singian Clinic when he fell sick in
1953; and that the former had, likewise, paid the real estate tax
on the Parañaque property from 1947 to 1952.
Under these circumstances, it is difficult to believe that the
Sorianos did not know then of the mortgage constituted by
Francisco Soriano, on October 8, 1951, in favor of the RFC. In
fact, RosalinaSoriano testified that when, that month,
Francisco Soriano and she conferred with the plaintiff, he stated
that the Parañaque property was mortgaged to the RFC,
whereupon her father got angry at the plaintiff and said that he
had fooled him (Francisco Soriano). Being thus aware of said
mortgage since October 1951, the Sorianos did not question its
validity—until January 12, 1957, when they filed in this case
their third-party complaint in intervention—as regards, at least,
one-half of the Parañaque property, which they now claim to be
their mother's share in the conjugal partnership. Worse still, after
the foreclosure salein favor of the RFC, they tried to redeem the
propertyfor P14,000, and, when the RFC did not agree thereto,
they even sought the help of the Office of the President to effect
said redemption.
Their aforementioned failure to contest the legality of the
mortgage for over five (5) years and these attempts to redeem the
property constitute further indicia that the same
belonged exclusively to Francisco Soriano, not to the
314
314 SUPREME COURT
REPORTS
ANNOTATED
 Ponce de Leon vs. 21
Tiaoqui v. Chaves, L-10086, May 20, 1957, quoting from 59 C.J.S. p. 1372: "By
claiming a right to redeem, or availing himself of a statutory stay, or by seeking to
Rehabilitation Finance impress a trust on the property in the hands of the purchaser, one affims the
Corporation validity of the sale and may not assail it; x x x." Italics ours.
22
Tolentino v. Philippine Land Improvement Co., Inc., L-2469, September 30,
conjugal partnership with his deceased wife, Tomasa Rodriguez. 1950 (Unreported) Italics ours.
Apart from the fact that said attempts to redeem the property 23
Philippine National Bank v. Mallorca, L-22538, October 31, 1967. Italics ours.
constitute an implied admission of the validity of its sale—and, 315
hence, of its mortgage to the RFC—there are authorities to the VOL. 36, DECEMBER 315
effect that they bar the Sorianos from assailing the same.
"x x x defendants, by their repeated requests for time to redeem 18, 1970
had impliedly admitted—and were estopped to question—the validity Ponce de Leon vs.
and regularity of the Sheriff's sale."
21
Rehabilitation Finance
"The petitioner himself believed that the company had a right to
cancel, because in March, 1932, i.e., after the cancellation, he proposed
Corporation
the repurchase of the property, and the company agreed to resell it to Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Tee
him x x x. Unluckily he could make no down payment and the hankee, Barredo and Villamor, JJ., concur.
repurchase fell through. Wherefore, it is now too late for him to question Dizon and Makasiar, JJ., are on leave.
the cancellation, inasmuch as he practically ratified it, x x x."
22

"The fact that Mallorca failed to exercise her right of redemption, Decision affirmed with modification.
which she sought to enforce in a judicial court, ends her interest to the ANNOTATION
land she claims, and, doubtless, estopsher from denying PNB's CONTRACTS
mortgage lien thereon." 23

It is thus clear that the lower court erred in annulling the RFC 1. Subject Matter
mortgage on the Parañaque property and its sale to the RFC as
Court's jurisdiction cannot be the object of contracts.—A probate
regards one-half of said property, and that the decision appealed
court, or any other court of justice for that matter, cannot and
from should, accordingly, be modified, by eliminating therefrom
never does, enter into any contract or agreement regarding its
the second paragraph of its dispositive part, quoted earlier in this
jurisdiction much less to barter it away wholly or
decision.
partially. Seifert vs. Bachrach, 79 Phil. 748.
With this modification and that of other pertinent parts of the
Contract over political rights is void.—We agree with the lower
decision appealed from, the same is hereby affirmed in all other
court in adjudging the contract or agreement in question a nullity.
respects, with the costs of this instance against
Among those that may not be the subject matter (object) of
plaintiff, Jose L. Ponce deLeon and third-party
contracts are certain rights of individuals, which the law and
plaintiffs, RosalinaSoriano, Teofila Sorianodel Rosario and
public policy have deemed wise to exclude from the commerce of
Father Eugenio Soriano. It is so ordered.
_______________
man. Among them are the political rights conferred upon citizens,
including, but not limited to, one's right to vote, the right to
present one's candidacy to the people and to be voted to public
office, provided, however, that all the qualifications prescribed by
law obtain. Such rights may not, therefore, be bargained away or
surrendered for consideration by the citizen nor unduly curtailed
with impunity, for they are conferred not for individual or private
benefit advantage but for the public good and interest. Saura vs.
Sindico,107 Phil. 336.
Qualifications for certain public offices may not be enlarged or
reduced by agreement.—Constitutional and statutory provisions
fix the qualifications of persons who may be eligible for certain
elective public offices. Said requirements may neither be enlarged
nor reduced by mere agreements between private parties. A voter
possessing all the
316
316 SUPREME COURT
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qualifications required to fill an office may, by himself or through
a political party or group, present his candidacy without further
limitations than those provided by law.
"Every voter has a right to be a candidate for public office if he possesses
the qualifications required to fill the office. It does not necessarily follow
that he can be the candidate of a particular political party. The statute
provides when and how one may be a candidate of a political party. If he
cannot fill the requirement so as to be the candidate of the political party
of his choice, he may still be a candidate at the general election by
petition. The right of the voter to vote at the general election for whom he
pleases cannot be limited." (Roberts vs. Cleveland, Sec. of State of the
State of New Mexico, 48 NM 226, 149 P [2d] 120, 153 ALR 635, 637-638)
(Italics supplied.)
In common law, certain agreements in consideration of the
withdrawal of candidates for office have invariably been
condemned by the courts as being against public policy, be it a
withdrawal from the race for nomination, or, after nomination,
from the race for election. (See notes in 37 LRA [N.S.] 289 and
cases cited therein; 18 Am. Jur. Sec. 352, pp. 399-400).
In the case at hand, plaintiff complains on account of
defendant's alleged violation of the "pledge" in question by filing
her own certificate of candidacy for a seat in the Congress of the
Philippines and in openly and actively campaigning for her
election. In the face of the preceding considerations, we certainly
cannot entertain plaintiff's action, which would result in limiting
the choice of the electors to only those persons selected by a small
group or by party bosses. Id.
When Pendleton and Monsale cases distinguished from case at
bar.—The case of Pendleton vs. Pace, 9 S.W. (2nd) 437, cited by
the appellant, is clearly inapplicable. The court there only
sanctioned the validity of an agreement by the opposing
candidates for nomination setting aside and re-submitting the
nomination for another primary election on account of the protest
or contest filed by the losing candidate in the first primary
election. To abandon the contest proceedings, the candidates for
nomination agreed to submit again their nomination to the
electors in a subsequent primary.
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VOL. 36, DECEMBER 317
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Ponce de Leon vs.
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Appellant likewise cites and quotes a portion of our ruling in
Monsale vs. Nico, G.R. No. L-2539, May 28, 1949, to the effect
that it is not incompetent for a candidate to withdraw or annul
his certificate of candidacy. This is not in point, for while we
stated there that he may do so, there being no legal prohibition
against such a voluntary withdrawal, it does not follow, nor did
we imply any where in the decision, that in case there is any
agreement or consideration for such a withdrawal, said
agreement or consideration should be held valid or given
effect. Id.
Market stall as subject matter of contract.—The appellant
finally argues that since appellee was only a month-to-month
lessee of the market stall in question, and in view of the
provisions of Ordinance No. 6 of the Municipality of Batangas
prohibiting a person from occupying and selling in any stall of the
public market without permission of the local market officers, the
occupancy of the stall could not be the subject-matter of a valid
contract between parties, unless it was approved and ratified by
the municipal authorities. Held: This contention might be
meritorious if it were sought to enforce the contract in question
against the municipality, or over its objection. But such is not the
case. In the absence of protest from the market officials, there is
no reason why the contract between the parties should not be
carried out, as agreed between them. The fact remains that the
market officials admitted the preferential right of the actual
occupants to a renewal of their leases, and it was the waiver of
this preference by the appellee that permitted appellant to obtain
possession of the stall. The contract in question bound her to
make a similar waiver upon demand by the appellee. With this
arrangement the market officials had nothing to do. Mercado vs.
Aguilar,L-666, June 28, 1947.
Stipulation as to venue is valid.—Last contention of the
plaintiff is that the clause regarding venue "is against public
policy and therefore illegal." This is plainly unmeritorious. The
Rules of Court expressly permit this stipulation concerning venue
(Sec. 4, Rule 5), which had been approved in Central
Azucarera vs. De Leon, 56 Phil. 169 and Navarro vs. Aguila, 66
Phil. 604.Barreros vs. Phil-
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318 SUPREME COURT
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Ponce de Leon vs.
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ippine Engineering Corporation, L-6500, Sept. 16, 1954, 95 Phil.
960(unrep.)
Prohibition against impairment of contracts is not
absolute.—The prohibition contained in constitutional provisions
against impairing obligation of contracts is not an absolute one
and is not to be read with literal exactness like a mathematical
formula. Such provisions are restricted to contracts with respect
to property, or some object of value, and confer rights which may
be asserted in a court of justice, and have no application to
statutes relating to public subjects within the domain of the
general legislative powers of the State, and involving the public
rights and public welfare of the entire community affected by it.
They do not prevent a proper exercise by the State of its police
powers. By enacting regulations reasonably necessary to secure
the health, safety, morals, comfort or general welfare of the
community, even the contracts may thereby be affected; for such
matter cannot be placed by contract beyond the power of the State
to regulate and control them. (Ongsiako vs. Gamboa, 86 Phil.
50.) Ilusorio vs. Court of Agrarian Relations, 17 SCRA
25; Zaballero-Tady vs. Rural Bank of Lucena, Inc., 18 SCRA 1073.
The inexistence of a contract is permanent and incurable and
cannot be the subject of prescription.—Mapalo vs. Mapalo, 17
SCRA 114.
Transaction is determined by its nature.—A transaction is
determined by the nature thereof. The nature of the agreement
being inherent in the agreement itself, exists from the very
moment the transaction was entered into. Thus, "except as to
bona fide city purchasers without notice and those standing in
similar relations, on the reformation of an instrument, the
general rule is that it relates back to and takes effect from the
time of its original execution, especially as between the parties
themselves." (76 C.J.S. par. 93) Cosio vs. Palileo, 17 SCRA
196; Air France vs. Carrascoso, 18 SCRA 155.
The test as to whether a given agreement constitutes an
unlawful machination or a combination in restraint of trade is
whether, under the particular circumstances of the case
319
VOL. 36, DECEMBER 319
18, 1970
Ponce de Leon vs.
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and the nature of the particular contract involved in it, the
contract is, or is not, reasonable.—Filipinas Cia. de Seguros vs.
Mandanas,17 SCRA 391.
Termination of stevedoring contract.—Where a shipping
company terminated its stevedoring contract with a union
because of the latter's inefficient service, it cannot be said that
the termination was in bad faith or as a retaliation for the union's
demand for a collective bargaining contract. Nor can said
termination be considered union interference. Allied Free
Workers' Union (PLUM) vs. Compañia Maritima, 19 SCRA 258.
Articles 20 and 21 of the New Civil Code which justify a
creditor's claim for damages against the debtor and third persons,
who executed contracts intended to defraud the creditors, have
retroactive effect.—People's Bank and Trust Co. vs. Dahican
Lumber Company,20 SCRA 84.
When court should not fix the period for performing an
obligation.—Where the issue raised in the pleadings was whether
the seller of the land was given in the contract of sale a
reasonable time within which to construct the streets around the
perimeter of the land sold, the court, in an action for specific
performance to compel the construction of said streets or for
recovery of damages, cannot fix a period within which the seller
should construct the streets. The court should determine whether
the parties had agreed that the seller should have reasonable
time to perform its part of the bargain. If the contract so provided,
then there was a period fixed, a "reasonable time", and all that
the court should have done was to determine if that reasonable
time had already elapsed when the suit was filed. If it had passed,
then the court should declare that the petitioner had breached the
contract, as averred in the complaint, and fix the resulting
damages. On the other hand, if the reasonable time had not yet
elapsed, the court perforce was bound to dismiss the action for
being premature. But in no case can it be logically held that,
under the pleadings, the intervention of the court to fix the period
for performance was warranted, for Article 1197 of the New Civil
Code is precisely predicated on the absence of any period
320
320 SUPREME COURT
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Ponce de Leon vs.
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fixed by the parties. Gregorio Araneta, Inc, vs, Phil. Sugar Estates
Development Co., Ltd., 20 SCRA 330.
Power of court to fix period.—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 will) 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. Id.; Air France vs. Carrascoso, 18 SCRA 155.
Alteration of the contract must be material in order that surety
may be released.—For the purpose of releasing a surety's
obligation, there must be a material alteration of the contract in
connection with which the bond is given. There must be a change
which imposes new obligation on the party promising or which
takes away some obligation already imposed, changing the legal
effect of the original contract and not merely the form thereof. A
surety is not released by a change in the contract which does not
have the effect of making its obligation more onerous. National
Shipyards & Steel Corp. vs. Torrento,20 SCRA 427.
Acts showing ratification of contract for services.—The
ratification of a contract may be express or implied. Implied
ratification may take diverse forms, such as by silence or
acquiescence; by acts showing approval or adoption of the
contract; or by acceptance and retention of benefits flowing
therefrom. Acuña vs. Batac Producers Cooperative Marketing
Association, Inc.,20 SCRA 526.
Where allegations of complaint show ratification of contract for
services.—A complaint should not be dismissed on the ground
that the contract for services, on which plaintiff's action was
based, was allegedly not ratified by the Board of Directors of
defendant corporation, where the complaint contains sufficient
allegations indicating approval or subsequent ratification of said
contract by the Board. Id.
321
VOL. 36, DECEMBER 321
18, 1970
Ponce de Leon vs.
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Charge of duress should be treated with caution.—The charge of
duress in the execution of a conveyance of land should be treated
with caution. Duress, like fraud, is not to be lightly laid at the
door of a man already dead. Vda. de Rodriguez vs. Rodriguez, 20
SCRA 908.
Simulated contracts.—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. Thus, where a person, in order to place his property
beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and
control of the property; hence, the deed of transfer is but a
sham. Id.
Simulated contracts distinguished from fraudulent
contracts.—Simulated contracts are fictitious contracts.
Fraudulent contracts are serious, real and intended for the
attainment of a prohibited result. Simulation is intended to hide
the violation of the law. Id.
Bad faith, defined.—Bad faith does not simply connote bad
judgment or negligence; it imports a dishonest purpose or some
moral obliquity and conscious doing of wrong; it means breach of
a known duty through some motive or interest or ill-will; it
partakes of the nature of fraud. Board of Liquidators vs. Heirs of
Maximo Kalaw,20 SCRA 987.
Resolutory condition under Article 1308 of the New Civil
Code.—Article 1308 of the Civil Code creates no impediment to
the insertion in a contract for personal services of a resolutory
condition permitting the cancellation of the contract by one of the
parties. Such a stipulation does not make either the validity or
the fulfillment of the contract dependent upon the will of the
party to whom is conceded the privilege of cancellation; for where
the contracting parties have agreed that such option shall exist,
the exercise of the option is as much in the fulfillment of the
contract as any other act which may have been the subject of the
agreement. Indeed, the cancellation of a contract in accordance
with conditions agreed upon beforehand is fulfillment. Phil.
Banking Corp. vs. Lui She, 21 SCRA 52.
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322 SUPREME COURT
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A provision in a lease contract that the lessee, at any time before he
created any building on the land may rescind the lease can hardly
be regarded as a violation of Article 1308 of the Civil Code. Id.
When a lease contract to an alien is invalid.—If an alien is
given not only a lease of, but also an option to buy, a piece of land,
by virtue of which the Filipino owner cannot sell or otherwise
dispose of his property, this to last for 50 years, then it becomes
clear that the arrangement is a virtual transfer of ownership
whereby the owner divests himself in stages not only of the right
to enjoy the land (jus possidendi, jus utendi, jus fruendi, and jus
abutendi), but also of the right to dispose of it (jus
disponendi)—rights the sum total of which make up ownership. It
is just as if today the possession is transferred, tomorrow the use,
the next day the disposition, and so on, until ultimately all the
rights of which ownership is made up are consolidated in an alien.
If this can be done, then the constitutional ban against alien
landholding in the Philippines, as announced in Krivenko vs.
Register of Deeds (79 Phil. 461) is indeed in grave peril. Id.
Exception to pari delicto doctrine.—It does not follow that
because the parties are in pari delicto they will be left where they
are without relief. Article 1416 of the Civil Code provides as an
exception to the rule of in pari delicto that "when the agreement
is not illegal per se but is merely prohibited, and the prohibition
by law is designed for the protection of the plaintiff, he may, if
public policy is thereby enhanced, recover what he had paid or
delivered." Id.
Courts are not bound by title or name given to contracts by
parties.—To determine the nature of the contract, courts do not
have or are not bound to rely upon the name or title given it by
the contracting parties, should there be a controversy as to what
they really had intended to enter into, but the way the
contracting parties do or perform their respective obligations
stipulated or agreed upon be shown and inquired into, and should
such performance conflict with the name or title given the
contract by the
323
VOL. 36, DECEMBER 323
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Ponce de Leon vs.
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parties the former must prevail over the latter.Balbas vs.
Domingo, 21 SCRA 444.
2. Consideration
When P1 and other valuable consideration were held
sufficient.—Where the two deeds of sale of mining claims each
mentions P1, and other valuable consideration, the receipt
whereof was acknowledged, to be the consideration. That
consideration was held sufficient. Dumaguin vs. Reynolds, 92
Phil. 66.
Effect of false consideration.—The expression of a false cause
or consideration in the contract does not make it nonexistent, and
it shall only be a ground for an action for nullity as provided by
Article 1276 and confirmed by Article 1301 of the Old Civil Code.
The effect of a false consideration is limited to making the
contract voidable. Manresa cited in Concepcion vs. Sta. Ana, 87
Phil. 787.
Validity of survivorship agreement.—The survivorship
agreement here involved is prima facie valid. It is an aleatory
contract supported by a lawful consideration—the mutual
agreement of the joint depositors permitting either of them to
withdraw the whole deposit during their lifetime, and
transferring the balance to the survivor upon the death of one of
them. It is covered by Article 1790 of the Civil Code.
Furthermore, it is well established that a bank account may be so
created that two persons shall be joint owners thereof during
their mutual lives, and the survivor taking the whole on the
death of the other. The right to make such joint deposits has
generally been held not to be done away with by statutes
abolishing joint tenancy and survivorship generally as they
existed at common law.Rivera vs. People's Bank & Trust Co., 73
Phil. 546.
Pure liberality as consideration.—Pure liberality is a
consideration recognized by the Civil Code. No other
consideration is entertained in donations. Seifert vs. Bachrach, 79
Phil. 748.
Succession and administration.—Conformity is consent.
According to a universal law, recognized in our Civil Code,
324
324 SUPREME COURT
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consent is the source of obligations. That a party has given her
conformity as an act "of pure liberality on her part," does not
change the nature of the legal effect of the consent given.
Commitment so made with her conformity cannot be dismissed on
the ground that it was given as "pure liberality" or for any other
motive. Provided the consent was freely given and regardless of
the motive behind the act, it gives rise to all proper legal
effects. Id.
Right of owner to dispose of all her properties.—The conveyance
or sale of the parcels of land to the defendant was voluntarily
made by the deceased to him. As the deceased had no forced heir,
she was free to dispose of all her properties as absolute owner
thereof, without further limitations than those established by law,
and the right to dispose of a thing involves the right to give or
convey it to another without any consideration. The only
limitation established by law on her right to convey said
properties to the defendant without any consideration is, that she
could not dispose of or transfer her property to another in fraud of
her creditors. Concepcion vs. Sta. Ana, 87 Phil. 787.
Where the consideration is contrary to law, etc., the contract is
void and no cause of action arises.—The first assignment of error
is untenable. If the consideration for the promissory note upon
which plaintiff's cause of action relies were contrary to law,
morals, good customs, public policy or public order, the contract
between the parties thereto would legally be "inexistent and void
from the beginning." (Article 1409, par. 1, Civil Code of the
Philippines.) Inasmuch as the finding of the lower court, on this
point, was based upon petitioner's own evidence it was proper to
consider the same in the decision appealed from. The petitioner
could not be entitled to a judgment in his favor if his own proof
showed that he has no cause of action, because the contractual
relation upon which his claim relies is inexistent, from a legal
viewpoint. Garrido vs. Cardenas, 103 Phil. 435.
When lack of demand indicative of payment.—If Antonio or
Mercedes, as appellants now claim, has not paid his or her share
in the consideration, Don Mariano would have also demanded
from any one of them the resale of the
325
VOL. 36, DECEMBER 325
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Ponce de Leon vs.
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property, in the same way that Rosario was required. The fact
that Don Mariano did not do so shows that both paid their shares
to his full satisfaction. Cui vs. Cui, 100 Phil. 913.
Motive may be the consideration of the contract.—Appellant
seeks to differentiate between the alleged liberality of Lopez, as
causa for the donation in her favor, and his desire for cohabiting
with appellant, as motives that impelled him to make the
donation, and quotes from Manresa and the jurisprudence of this
Court on the distinction that must be maintained
between causa and motive (De Jesus vs. Urrutia and Co., 33 Phil.
171). It is well to note, however, that Manresa himself (Vol. 8, pp.
641-642), while maintaining the distinction and upholding the
inoperativeness of the motives of the parties to determine the
validity of the contract, expressly excepts from the rule those
contracts that are conditioned upon the attainment of the motives
of either party.
"*** distinctión importantísima, que impide anular el contrato por la
sola influencia de los motivos a no ser que se hubiera subordinado al
cumplimiento de estos como condiciones la eficacia de aquel."
The same view is held by the Supreme Court of Spain, in its
decisions of February 4, 1941, and December 4, 1946, holding that
the motive may be regarded as causa when it predetermines the
purpose of the contract.
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. Liguez vs. Court
of Appeals, 102 Phil. 577.
Cohabitation as an illicit causa in donation.—Appellant
vigorously contends that the Court of First Instance as well as the
Court of Appeals erred in holding the donation void for having an
illicit causa or consideration. It is argued that under Article 1274
of the Civil Code of 1889 (which was the governing law in 1943,
when the donation was executed), "in contracts of pure
beneficence the consid-
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326 SUPREME COURT
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eration is the liberality of the donor," and that liberality per
se can never be illegal, since it is neither against law or morals or
public policy.
The flaw in this argument lies in ignoring that under Article
1274, liberality of the donor is deemed causa only in those
contracts that are of "pure" beneficence; that is to say, contracts
designed solely and exclusively to procure the welfare of the
beneficiary, without any intent of producing any satisfaction for
the donor; contracts, in other words, in which the idea of
self-interest is totally absent on the part of the transferor. For
this very reason, the same Article 1274 provides that in
remuneratory contracts, the consideration is the service or benefit
for which the remuneration is given, causa is not liberality in
these cases because the contract or conveyance is not made out of
pure beneficence, but "solvendi animo." In consonance with this
view, this Supreme Court in Philippine Long Distance Telephone
Co. vs. Jeturian, L-7756, July 30, 1955, like the Supreme Court of
Spain in its decision of 16 February 1899, has ruled that bonuses
granted to employees to excite their zeal and efficiency, with
consequent benefit for the employer, do not constitute donation
having liberality for a consideration.
Here the facts as found by the Court of Appeals (and which we
can not vary) demonstrate that in making the donation in
question, the late Salvador P. Lopez was not moved exclusively by
the desire to benefit appellant Conchita Liguez, but also to secure
her cohabiting with him, so that he could gratify his sexual
impulses. This is clear from the confession of Lopez to the
witnesses Rodriguez and Bagay, that he was in love with
appellant, but her parents would not agree unless he donated the
land in question to her. Actually, therefore, the donation was but
one part of an onerous transaction (at least with appellant's
parents) that must be viewed in its totality. Thus considered, the
conveyance was clearly predicated upon an
illicit causa. Liguez vs. Court of Appeals, 102 Phil. 577.
 When consideration is not the dismissal of the criminal case,
contract valid.—The case of Reyes vs. Gonzales (45 O.G. 831)
refers to a deed of mortgage with a false causa
327
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the true consideration for which was the release of the accused in
a criminal case or the dismissal of the same. Besides it did not
appear that said accused admitted either the offense charged or
their liability, and in consequence of said contract, "the
investigation was stifled." Precisely, this Court refused to apply
therein the view taken in Hibberd vs. Rhode and McMillian (32
Phil. 476) because McMillian—the same manner as Camus, in the
case at bar, but, unlike the accused in the Gonzales case—had
been investigated and his obligation to pay the complainant was
admitted. Needless to say, the undisputed obligation of Camus to
refund to Garrido the sum of P2,000 is sufficient consideration for
the execution of Exhibit A, and, as respondent's testimony
suggests, was his only consideration therefor. Garrido vs.
Cardenas, 103 Phil. 435.
Contract in consideration of dismissal of criminal case.—The
case of Hibberd vs. Rhode and McMillian (supra), relied upon by
appellant, is not in point. The amount of the note involved in that
case represented the value of merchandise admittedly received by
one McMillian from Brand & Hibberd. The latter claimed that
McMillian was a mere depository of said goods and that he had
misappropriated the same. Even prior, therefore, to his alleged
misappropriation, McMillian was civilly liable for the full amount
of said note, there being no allegation that goods had been lost or
destroyed thru force majeure. In the case under consideration, the
liability of Ramirez is based exclusively upon an alleged criminal
act—although the same gave rise to two (2) liabilities, one
criminal and another civil, which were enforceable separately,
and independently of each other (Articles 30 and 33, Civil Code of
the Philippines)—and the consideration for Exhibit B was the
dismissal of the corresponding criminal action against him, thus
seeking to defeat the administration of justice. In the Hibberd
case, this Court specifically found that there had been "no
agreement to interfere with the due administration of criminal
justice." Monterey vs. Gomez,L-11082, Oct. 31, 1958, 104 Phil.
1059 (unrep.).
Contract for payment of money in consideration of dismissal of
criminal case is void ab initio.—Id.
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Consideration in counterbond.—It is evident that the counterbond
executed jointly by Raymundo Manalastas with Laura Dinio,
Exhibit "C", was executed by them in order to secure the bond by
the Philippine Guaranty Co., Inc. in favor of Laura Dinio. The fact
that the bond was for the benefit of Laura Dinio, and not for
Raymundo Manalastas, jointly or singly, does not mean that the
counter-bond was executed by Manalastas without any valuable
consideration. The consideration in such case is that which
supports the principal debtor's obligation (Pyle vs. Johnson, 9
Phil. 249). xxx (See also Enriquez de la Cavada vs. Diaz, 37 Phil.
982; Acuña vs. Veloso, 50 Phil. 241.)
The execution of the bond by the Philippine Guaranty Co., Inc.,
petitioner herein, in favor of Laura Dinio, is therefore, the
consideration for the execution of the counter bond by Raymundo
Manalastas. It is not necessary that such consideration, the
execution of the bond by the Philippine Guaranty Co., Inc.,
redound directly to the benefit of Raymundo Manalastas, it is
enough that it was favorable to Laura Dinio. Philippine Guaranty
Co., Inc. vs. Dinio,102 Phil. 991.
Where agreement was not in avoidance of criminal
case.—While under paragraph 2 of the agreement the avoidance
of the criminal case appears to be the reason for one of the
defendants' entering into the agreement, under paragraph 3 the
appellant merely bound himself to pay, jointly and severally with
the said defendant, the latter's accounts. It is thus seen that
appellant's assumption of a joint and several liability cannot in
any way be interpreted or based upon the so-called illegal
consideration of "stifling a criminal prosecution" against the
defendant. Basic Books (Phil.), Inc. vs. Lopez,16 SCRA 291.
Contracts without cause or consideration.—The rule under the
Civil Code, be it the old or the new, is that contracts without a
causa or consideration produce no effect whatsoever. (Art. 1275,
Old Civil Code; Art. 1352, New Civil Code.) Nonetheless, under
the Old Civil Code, the statement of a false consideration renders
the contract voidable, unless it is proven that it is supported by
another realand
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licit consideration. (Art. 1276, Old Civil Code)Mapalo vs.
Mapalo, 17 SCRA 114.
The action for annulment of a contract on the ground of falsity
of consideration shall last four years, the term to run from the date
of the consummation of the contract. (Art. 1301, Old Civil
Code.)—Id.
A contract that states a false consideration is one that has in
fact a real consideration but the same is not the one stated in the
document. (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 354.)—Id.
Where there was in fact no consideration, the statement of one
in the deed will not suffice to bring it under the rule of Article 1276
of the Old Civil Code as stating a false
consideration.—Id.; Calderon vs. Medina, 18 SCRA 583.
A contract of purchase and sale is void and produces no effect
whatsoever where the same is without causa or consideration in
that the purchase price, which appears thereon as paid, has in fact
never been paid by the purchaser to the vendor.—Id.
The consideration need not pass from one party to the other at
the time a contract is executed because the promise of one is the
consideration for the other.—Philippine Banking Corporation vs.
Lui She, 21 SCRA 52.
3. Consent
When duress is present.—According to the Civil Code, there is
duress or intimidation when one of the contracting parties is
inspired by a rational and well-grounded fear of suffering an
imminent and serious injury to his person or property, or the
person or property of his spouse, descendants or ascendants. (Art.
1267, Civil Code.) Reyes vs. Zaballero, L-3561, May 23, 1951.
Error of law not vitiating consent.—At any rate her error, if
any was an error of law which ordinarily does not vitiate
contractual consent. Vda. de Villacorte vs. Mariano, 89 Phil. 342.
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Casual, not incidental, fraud vitiates consent.—It must be noted
that fraud is manifested in illimitable number of degrees or
gradations, from the innocent praises of a salesman about the
excellence of his wares to those malicious machinations and
representations that the law punishes as a crime. In consequence,
article 1270 of the Spanish Civil Code distinguishes two kinds of
(civil) fraud, the casual fraud, which may be a ground for the
annulment of a contract, and the incidental deceit, which only
renders the party who employs it liable for damages. This Court
has held that in order that fraud may vitiate consent, it must be
the casual (dolo causante) not merely the incidental (dolo
incidente), inducement to the making of the contract. (Art. 1270,
Spanish Civil Code; Hill vs. Veloso, 31 Phil. 180.) Woodhouse vs.
Halili, 93 Phil. 526.
Consent given out of pure liberality as binding.—Conformity is
consent. According to a universal law, recognized in our Civil
Code, consent is the source of obligations. That a party has given
her conformity as an act "of pure liberality on her part," does not
change the nature of the legal effect of the consent given.
Commitment so made with her conformity cannot be dismissed on
the ground that it was given as "pure liberality," or for any other
motive provided the consent was freely given and regardless of
the motives behind the act, it gives rise to all proper legal
effects.Seifert vs. Bachrach, 79 Phil. 748.
Acts of seller indicating that his consent was freely given.—The
deed of sale Exhibit A was executed by Don Mariano Cui, Antonio
Cui and Mercedes Cui deRamas on March 8, 1946 in the City of
Cebu, and by Rosario Cui and her husband Dr. Irineo
Encarnacion in the City of Manila on March 20, 1946. The
consideration of the sale was P64,000 plus the reservation of the
right in favor of Don Mariano "to enjoy the fruits and rents of the
same" as long as he lives. It appears however that, while in said
deed of sale it is stated that Don Mariano has acknowledged
receipt of said consideration of P64,000, the same is not true with
regard to the share of Rosario Cui. So Don Mariano went to
Calapan, Mindoro in July, 1946 to collect from Rosario her share
of the purchase price amounting
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to P20,000. Rosario then excused herself from going ahead with
the sale alleging as reason that she needed that money she had to
rehabilitate her electric plant in Calapan and also because Cebu
was very far from Mindoro where they had already their
permanent residence. Not being able to pay her share in the
consideration of the sale, Don Mariano demanded from her the
resale of her interest. This was done when she went to Manila on
October 11, 1946 to execute the deed of resale in favor of Don
Mariano. This attitude of Don Mariano is very significant insofar
as his state of mind is concerned. It shows that he was fully
conscious of what was transpiring and of the transaction he was
executing so much so that he went to the extent of demanding
from Rosario the resale of her interest when she failed to pay her
share in the consideration of the sale. Cui vs. Cui, 100 Phil. 913.
Weakness of mind not caused by insanity not a ground for
avoiding a contract.—Id.
Contract signed thru fraud voidable.—Citing the case of Tan
Tua vs. Yu Biao Sontua, 56 Phil. 707, plaintiff argues that one
who signs a contract is presumed to know its contents and if he
does not understand it, it is his duty to secure the assistance of
some reliable person to explain it to him. It appears, however,
that plaintiff took it upon himself to explain the document to
defendant so that the latter, unaware that he was being induced
to sign a disadvantageous contract, could not have thought that
the situation called for outside assistance. The fact then remains
that, as the trial court has correctly found, plaintiff by falsely
representing that defendant was being made to sign an
agreement whose term or duration coincided with his
undertaking under clause 15 of the lease, succeeded in having
defendant sign a contract which otherwise he would not have
signed. Consent given through mistake or fraud is void (Art. 1330,
New Civil Code), and there is fraud when through insidious words
or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would
not have agreed to (Art. 1338, idem). In the circumstances, We
hold that the lower court rightly applied the law when it avoided
the
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document in question. Lopez vs. Ong, L-9021, May 31, 1957, 101
Phil. 1236(unrep.).
Threat to withdraw further credit not sufficient to avoid
contract.—Plaintiff also contends that the Bank had intimated
that it would not extend to him or his enterprises further credit
facilities unless he settles the former debt of the Red Star Stores,
Inc. Even if this were true, the same cannot constitute duress
that might invalidate the settlement, for there is nothing
improper for a bank to decline further credit to any person or
entity as a means to enforce the collection of its accounts if such is
necessary to protect its investment. In fact, such is the practice
followed by most banking institutions for it goes a long way in the
determination of the paying capacity of those who deal with them.
Moreover, the banking business in the Philippines is extremely
competitive. There are other banks that are opened for business
whose facilities plaintiff may avail of in case the threat is carried
out and if plaintiff is a good business risk he could certainly find
accommodation in any one of them if he so desires. The fact that
plaintiff was then under indictment for treason does not change
the situation. This is rather a further reason for defendant to
adopt a more stringent measure against plaintiff because of the
belief, grounded or otherwise, that collection of the account might
be frustrated. Such circumstance should not be considered as a
desire on the part of defendant to harass or aggravate the alleged
political or financial difficulties of plaintiff.
Plaintiff likewise contends that the officials of the Bank have
threatened him with reprisals in the sense that unless he settles
his account they would make use of their influence to prevent him
from engaging in business in the Philippines. Not only is this
claim inherently untenable but it was flatly denied by the officials
of that Bank, certainly, plaintiff has not been able to indicate in
what manner does defendant or its officials expect to carry out
the threat imputed to them. Berg vs. National City Bank of New
York, 102 Phil. 309.
Threat to institute court action does not constitute
duress.—With regard to the first charge, we see nothing improper.
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It is a practice followed not only by banks but even by individuals
to demand payment of their accounts with the threat that upon
failure to do so an action would be instituted in court. Such a
threat is proper within the realm of the law as a means to enforce
collection. Such a threat cannot constitute duress even if the
claim proves to be unfounded so long as the creditor believes that
it was his right to do so. This charge has no legal basis. Id.
Vendee who spent the price is estopped from annulling a sale
executed under duress.—Appellant's outstanding obligations
amounting to P100,000.00 had been paid out of the purchase
price, with the result that, even disregarding the statement of
Sieichi Tagawa, a mutual friend of Hashiba and Imamura, that
the appellant was constrained to sell his house because of
financial difficulties (Exh. C), the fact remains that he actually
reaped the benefits of the transactions. As this Court had said: "A
party that is able to carry out an act redounding to its exclusive
benefit simultaneously with the assailed contract, cannot
successfully claim in the latter case to have acted mechanically
under the influence of violence or intimidation (Reyes vs.
Zabal-lero, L-3561, May 23, 1951; Martinez vs. Hongkong &
Shanghai Bank, 15 Phil. 252; Vales v. Villa, 35 Phil. 769)." And in
the case of Fernandez vs. Brownell, supra, the pronouncement
was laid down that "Even if we concede that the sale was
executed through threat and intimidation by Mori the action for
annulment was waived and the contract ratified by the plaintiff's
action in depositing the check for the purchase price and
withdrawing the money from time to time." Liboro vs. Rogers, 106
Phil. 404.
General duress exercised by Japanese military forces does not
nullify certain contractual acts.—Id.
Collective duress is not sufficient to annul contract of sale.—As
a final argument in annulling the deed of sale in question the
lower court held that the transaction being between the military
occupant and inhabitant of the occupied territory, over a property
that was a war necessity, duress may be presumed and no
evidence of a particular coercive act is necessary. In numerous
cases decided before this particularly Philippine Trust Co. vs.
Luis Ara-
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neta, 46 O.G. 4254; People vs. Bagalawis, 44 O.G. 2655; and
People vs. Quilloy, L-2313, Jan. 10, 1951, this Court has already
rejected the theory of "collective" or "general" duress allegedly
exercised by the Japanese military occupant over the inhabitants
of this country as a ground to invalidate acts that would
otherwise be valid and voluntary if done in times of
peace. Fernandez v. Mcgrath, 96 Phil. 411.
Fact of party negativing violence and intimidation.—A party
that is able to carry out an act redounding to its exclusive benefit
simultaneously with the assailed contract, can not successfully
claim in the latter case to have acted mechanically under the
influence of violence or intimidation destroying its free agency
(Reyes vs. Zaballero, L-3561, May 23, 1951; Martinez vs.
Hongkong & Shanghai Bank, 15 Phil. 252; Vales vs. Villa, 35
Phil. 769. Id.
Compulsory acceptance of military notes does not imply
duress.—We have already said that Araneta, Inc. applied for
payment. Applying for payment implies voluntariness which is
incompatible with alleged duress and coercion. But even if we
consider the attitude of the Japanese occupation authorities in
viewing with disfavor, even hostility, any act of rejecting of
payment of obligations in Japanese military notes, as influencing
creditors in accepting payment of debts in said notes, this
Tribunal has already held that payment of pre-war obligations in
Japanese military notes and accepted by the creditors though in
compliance with the orders of the Japanese military occupant
enjoining acceptance of said military notes under severe penalty
for non-acceptance, cannot be considered as made under collective
and general duress; because an act done pursuant to the laws or
orders of competent authorities can never be regarded as executed
involuntarily, or under duress or illegitimate constraint or
compulsion that invalidates the act. (Phil. Trust Co. vs. Luis Ma.
Araneta, L-3734, March 7, 1949.) Cia. General deTabacos vs.
Araneta, L-6650, Jan. 31, 1955.
Consent reluctantly given.—We notice in this regard that
Acasio does not question his wife's authority to bind him by her
acts. He only argues that her payment of P100 as
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found by the Court of Appeals did not constitute an agreement of
lease "for it was made under circumstances that certainly negated
consent" referring, obviously, to her paying "with a certain degree
of reluctance." Nevertheless, as pointed out in appellee's brief,
such reluctance did not have the legal effect of preventing the
formation of a contract.
"There must, then, be a distinction to be made between a case where a
person gives his consent reluctantly and even against his good sense
and judgment, and where he, in reality, gives no consent at all, as where
he executes a contract or performs an act against his will under a
pressure which he cannot resist. It is clear that one acts as voluntarily
and independently in the eye of the law when he acts reluctantlyand
with hesitation as when he acts spontaneously and joyously. Legally
speaking he acts as voluntarily and freely when he acts wholly against
his better sense and judgment as when he acts in conformity with them.
Between the two acts there is no difference in law." (Vales vs. Villa, 35
Phil. 789.)
Acasio vs. Corporacion delos PP. Dominicos deFilipinas, 100 Phil.
523.
Contract where consent is vitiated by fraud, etc., is merely
voidable.—A contract where consent is vitiated by mistake,
violence or intimidation, is not void ab initio but is merely
voidable (Art. 1330, new Civil Code). More than that, under the
law, a contract entered into under those circumstances is binding
upon the parties unless annulled by proper action in court. And
the contract is even susceptible of ratification (Art. 1390, Idem)
Article 1330 of the new Civil Code is merely based on Article 1265
of the Spanish Civil Code while Article 1390 of the new Civil Code
was taken from Article 1330 of the Spanish Civil Code. The new
provisions simply clarify the law. Rio Grande Rubber Estate Co.,
Inc. vs. Board of Liquidators, 104 Phil. 863.
Signing contract without fully knowing its stipulations does not
vitiate consent.—Granting arguendo that respondents signed the
instrument in the belief and upon the principal's
misrepresentation that their liability thereunder would only be
for one year, such fact can not also be favorably considered on
their behalf. The disputed indemnity agreement had been
presented to respondents for
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their signature. They could have read it and been informed that
the nature and extent of the undertaking is not as simple as the
principal would put it, had they wanted to. Instead, they chose to
rely completely on the information furnished by the principal and
affixed their signatures to the instrument without so much as
knowing the exact terms thereof. That they discovered too late
their error can hardly be blamed on anybody. Prudence would
dictate a man to acquaint himself first with the "fine prints" of a
contract before stamping his approval thereto. As it is, the fact
remains that respondents signed the agreement binding
themselves to indemnify the company for whatever payment it
may make under the original bond. Their having signed the
instrument without fully knowing its contents, when they could
have easily done so, cannot be considered to have vitiated their
consent and make their act involuntary. Manila Surety & Fidelity
Co., Inc. vs. Villarama, 107 Phil. 891.
When the consent to a contract was fraudulently obtained, the
contract is voidable.—Mapalo vs. Mapalo, 17 SCRA 114.
A contract between two persons cannot bind another not a party
thereto, merely because he is aware of such contract and has acted
with knowledge thereof.—-Manila Port Service vs. Court of
Appeals, 20 SCRA 1214.
4. Capacity of Parties
Contract entered into by person under guardianship.—Even in the
execution of contracts, in the absence of a statute to the contrary,
the presumption of insanity and mental incapacity is only prima
facie and may be rebutted by evidence; and a person under
guardianship for insanity may still enter into a valid contract and
even convey property, provided it is proven that at the time of
entering into said contract, he was not insane or that his mental
defect, if mentally deranged, did not interfere with or affect his
capacity to appreciate the meaning and significance of the
transaction entered into by him. Dumaguin vs. Reynolds, 92 Phil.
66.
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Guardian of minor ratified contract of compromise.—It is said
that the minors were not parties to Exhibit A. However, it has
been seen that through their duly appointed guardian ad
litemthey ratified that compromise in open court, when not only
the guardian but the oldest two of the children as well personally
appeared and expressed their conformity to the proposed sale.
This ratification validated the agreement as effectively as if the
minors or their guardian ad litem had signed it. Escoto vs.
Arcilla, 89 Phil. 199.
Contracts entered into by minors nearing majority who pretend
they are of age are valid.—But plaintiff contends that the need of
cession executed by him jointly with Luz Hermosa adjudicating to
the latter the property in question in order to facilitate its sale to
the defendant is null and void lor the reason that at the time it
was executed by him on November 18, 1947 he was still a minor
and so the cession did not have any legal effect. We fail to see how
this contention can be sustained it appearing that at the time be
and his aunt Luz executed said deed of cession, he was almost of
age, or was already 20 years, 11 months and 3 days old. As this
Court said in the case of Mercado vs. Espiritu, 37 Phil. 215: "The
courts have laid down the rule that the sale of real estate, effected
by minors who have already passed the ages of puberty and
adolescence and are near the adult age when they pretend to have
already reached their majority, while in fact they have not, is
valid, and they cannot be permitted afterwards to excuse
themselves from compliance with the obligations assumed by
them or to seek their annulment." Hermosa vs. Zobel, 104 Phil.
769.
Estoppel applied to contracts of minors nearing the age of
majority.—Moreover, after he and his aunt Luz had executed the
aforesaid deed of cession, they filed a joint petition with the
probate court wherein they explained the reason why the cession
had to be made in favor of Luz Hermosa and requested that said
deed be approved. And after considering the reasons advanced by
them, the court approved the cession in the following wise: "It
having been shown that for the best interest of the estate the
deed
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of cession executed by Luz Hermosa Nuñez and Fernando
Hermosa, Jr. in favor of Luz Hermosa Nuñez on November 18,
1947 in the City of Manila and acknowledged before a Notary
Public should be approved by the court; upon motion of the
counsel for the heirs, the said cession is hereby approved"
(Exhibit 10). Plaintiff is therefore now estopped from disputing
the validity of said cession. As this Court aptly said: "The
circumstance that, about one month after the date of the
conveyance, the appellee informed the appellants of his minority,
is of one moment, because appellee's previous misrepresentation
had already estopped him from disavowing the contract."
(Suan vs. Alcantara, 47 O.G. 4561.) Hermosa vs. Zobel,104 Phil.
769.
5. Perfection of Contract
Contract was perfected upon acceptance of offer.—It can be taken
for granted, as contended by the defendants, that the option
contract was not valid for lack of consideration. But it was, at
least, an offer to sell, which was accepted by letter, and of this
acceptance the offeror had knowledge before said offer was
withdrawn. The concurrence of both acts—the offer and the
acceptance—could at all events have generated a contract, if none
there was before (Arts. 1254 and 1262 of the Civil Code).
(Zayco vs. Serra, 44 Phil. 331.) Atkins, Kroll & Co., Inc. vs. B.
Cua Hian Tek, 102 Phil. 948.
Acceptance of offer to sell gives rise to bilateral contract of
sale.—An option is unilateral: a promise to sell at the price fixed
whenever the offeree should decide to exercise his option within
the specified time. After accepting the promise and before he
exercises his option, the holder of the option is not bound to buy.
He is free either to buy or not to buy later. In this case, however,
upon accepting herein petitioner's offer a bilateral promise to sell
and to buy ensued, and the respondent ipso factoassumed the
obligation of a purchaser. He did not just get the right
subsequently to buy or not to buy. It was not a mere option then;
it is a bilateral contract of sale. Id.
Offer to buy or sell may be withdrawn before
acceptance.—Ordinarily an offer to buy or sell may be with-
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drawn or countermanded before acceptance, even though the offer
provides that it will not be withdrawn or countermanded, or
allows the offeree a certain time within which to accept it, unless
such provision or agreement is supported by an independent
consideration.(77 CJS 636.) Id.
Bilateral contract to sell and to buy created upon
acceptance.—The argument manifestly assumes that only a
unilateral promise arose when the offeree accepted. Such
assumption is a mistake, because a bilateral contract to sell and
to buy was created upon acceptance. So much so that B. Cua Hian
Tek could be sued, had he backed out after accepting, by refusing
to get the sardines and/or to pay for their price. Indeed, the word
"option" is found neither in the offer nor in the acceptance. On the
contrary Exhibit B accepted "the firm offer for the sale" and adds,
"the undersigned buyer has immediately filed an application for
import license x x x." Id.
Where party made four separate offers each one is complete and
separable from the others.—With respect to the first argument, it
is worthy of notice that the proposal submitted by petitioner
consisted of several items, among which are: (a) one for P389,980,
for the "complete construction of the office building" in question,
"including (1) all electrical installations; and (2) all plumbing
installations"; (b) another for P358,480, for the "complete
construction of the office building only," excluding,therefrom, the
electrical and plumbing installations; (c) a third one for P18,900,
for the "electrical installations only," excluding, therefore, the
building and its plumbling installations; and (d) a fourth item for
P12,600, for the "plumbing installations only," excludingtherefore,
the building and its electrical installations.
 Each one of these items was complete in itself, and, as such, it
was distinct, separate and independent from the other items. The
award in favor of petitioner herein, implied, therefrom, neither
a modification of his offer nor a partialacceptance of the fourth
item of his bid, which item constituted a complete offer or
proposal on the part of petitioner herein. The effect of said
acceptance was to perfect a contract, upon notice of the award to
petitioner
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herein. Valencia vs. Rehabilitation FinanceCorporation, 103
Phil. 444.
Construction contract is perfected upon contractor's receipt of
notice of the award.—Petitioner's brief says that he understood or
believed that upon expiration of said bond, on June 15, 1952, his
bid, likewise, lapsed. This allegation is refuted by petitioner's
conduct. Upon receipt of notice of the award in his favor,
petitioner did not object thereto upon any ground whatsoever. He
did not even say that his offer had expired already or had been
modified. On the contrary, he replied expressing his "thanks and
appreciation" for the award, although he stated, also, that it
would be "to the advantage" of respondent to award the plumbing
installations "to the contractor of the main building." What is
more, in his answer to respondent's complaint, petitioner alleged,
by way of special defense, that, upon notice of the award in his
favor, he "prepared all the necessary equipment, materials and
plumbers to do and perform the plumbing installations" in
question. For this reason, he alleged, also, in his answer, that he
"should be the one entitled to damages" inasmuch as respondent
"Awarded to Sanchez & Antigua Engineering, x x x the contract
for plumbing installation x x x without prior notice" to petitioner
"who is the first awardee," and set up a counterclaim for damages
thus allegedly caused to him. These acts of petitioner herein show,
beyond doubt, that, upon receipt of notice of the award of June 22,
1952, he knew that the contract between him and respondent had
become perfected, and that he must have felt, accordingly, that
his bid was still good at that time. Id.
A sale is perfected from the moment the parties agree on the
price and subject-matter.—The fourth item of appellant Fojas's
counterclaim is for the amount of P4,000 as refund due for alleged
overpayment to the National Rice and Corn Corporation on 400
sacks of C-1 or "binlid" rice, stating that while he bought such
kind of rice at a price of P30 per sack, the next day, the same kind
of rice was sold to other retailers and the public at P20.00 per
sack. He now claims the difference of P10.00 per sack. Aside from
the fact that this has not been satisfactorily established by evi-
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dence, there is no law which would sanction such a refund. From
the moment the parties agreed upon the kind of rice and the price
thereof, they are deemed to have entered into a perfected contract
of purchase and sale, the terms and conditions of which may not
be held to depend on subsequent events or acts of the parties
unless the contrary is stipulated. The mere fact that the vendor
thereafter sells an object of the same kind to another at lesser
price is no ground for the previous vendee to be entitled to claim
the excess, his contract being independent of the others. National
Rice and Corn Corporation vs. Fojas, L-11517, April 3,
1958, 103 Phil. 1131 (unrep.).
Accepted offer constitutes perfected contract.—The Government,
through the Quezon City Engineer has as late as 1955
acknowledged the financial obligation of the Government, and
even offered to pay it, and what is more, the offer was duly
accepted by Herrera, thereby constituting a contract, and a
renewal of the obligation. Herrera vs. Auditor General,102 Phil.
875.
No perfected contract because offer was not accepted.—We
understand that the main and decisive issue involved in the
appeal is whether the defendant definitely accepted the offer of
plaintiff for exchange. Examining the letter of the supposed
acceptance, we agree with the trial court that the tenor of said
letter cannot be construed as an acceptance on the part of the
defendant. Appellant contends that the clause "we are willing to
accept the proposition, in which case please see our Mr. F.J.
Domantay, of the Property Department for possible arrangement"
implied acceptance. We disagree. We believe that said clause does
not in any manner show that defendant had definitely accepted
the offer. The phrase "willing to accept" does not mean acceptance
x x x the defendant merely expressed active interest in the
proposed barter because perhaps it could make use of the sawmill
and that it had more surplus tractors than it had need for. In
other words, everything was indefinite and in a fluid state,
requiring further consideration, perhaps even bargaining, and
that is why the letter of May 5, 1952, speaks merely "of a possible
arrangement." This is certainly far from the acceptance claimed
by the
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Corporation
appellant. Meads vs. Land Settlement and
Development Corporation, 98 Phil. 119.
The notice of acceptance is not necessary when a contract of
guaranty becomes binding.—Once a principal contract is
perfected, the subsidiary contract of guaranty becomes effective
and binding and no notice of acceptance by the creditor to the
guarantor is necessary for its validity. Macondray & Co., Inc. vs.
Fiñon, 2 SCRA 1109.
Contracts take effect only between the parties
thereto.—Contracts take effect only between the parties thereto,
except in some specific instances provided by law where the
contract contains some stipulation in favor of a third person
which is known as a stipulation pour autruior a provision in favor
of a third person not a party to the contract. Under this doctrine,
a third person is allowed to avail himself of a benefit granted to
him by the terms of the contract, provided that the contracting
parties have clearly and deliberately conferred to favor upon such
person. Consequently, a third person, not a party to the contract,
has no action against the parties thereto, and cannot generally
demand the enforcement of the same. Bonifacio Bros., Inc. vs.
Mora, 20 SCRA 261.
When contracts deemed consummated.—Where a complaint
averred the sale of a house and land, that consideration therefor
was paid, and that by reason of such sale, the vendee performed
acts of ownership thereon, the facts thus alleged are constitutive
of a consummated contract. Iñigo vs. Estate of Adriana Maloto,21
SCRA 246.
6. Validity and Effect
Laborers cannot be deprived of their rights by contracts.—The
Philippine Labor Federation (with 185 members) presented a
petition to the Bogo-Medellin Milling Co., asking for increase of
wages and better working conditions. As no agreement was
reached between the milling company and the Federation, the
question was submitted to the Court of Industrial Relations. The
Luy-A Association (with 459 members) intervened in the case and
moved that said Court dismiss the petition of the Federation on
the ground
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Corporation
that the milling company and Luy-A Association had already
entered into a contract which excludes any other contract that
may be entered into with any other entity or persons. Held: The
Luy-A Association and the milling company, by excluding the
members of said Federation who were already working for the
company, by said contract, illegally deprived the members of the
Federation of their right to ask for higher wages and better
working conditions, which deprivation may, in some cases even
amount to expelling them from the company's service without just
cause for if their demands are ignored and they have no recourse
to the Court of Industrial Relations and the courts of justice they
may have to sever their connections with the company. Our laws
recognize and protect the rights of laborers to petition for better
conditions, to resort to the courts, and even to strike in proper
cases. It is a part of the right to petition. Labor laws have been
enacted to protect the right of laborers to seek better working
conditions, creating the Court of Industrial Relations to pass upon
the petitions of laborers for that purpose. This fundamental
human right cannot be nullified by contract, especially when the
laborers concerned are not parties to it. Luy-A Allied Workers'
Association vs. Court of Industrial Relations, 88 Phil. 562.
Reduction of rate of exchange of military notes was held
contrary to public policy.—By the contract in question the parties
reduced the rate of exchange between the two currencies from par
to one to ten. "This reduction is contrary to the law or public
policy promulgated by the Japanese military authorities, or the
Philippine Executive Commission." Therefore, the consideration
was false and illicit and the contract was void ab initio,according
to Articles 1255, 1275, 1276 and 1278 of the Civil Code. Tanda vs.
Aldaya, 89 Phil. 497.
Lease of fishpond by a municipality.—The leases here in
question were void for lack of approval by the provincial governor
as required by section 2196 of the Revised Administrative Code.
And even if the provincial governor had approved these leases,
they would still be void after the first five years, because under
sections 2323 and 2319 of the Revised Administrative Code, no
municipality can
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Corporation
enter into any lease of fishponds for more than five years. Acts
executed contrary to the provisions of the law are void except in
cases where the law itself orders their validity. As these leases
were contrary to law, they were void. Municipality of Hagonoy vs.
Evangelista, 73 Phil. 586.
No estoppel attaches to validate a contract that in itself is
contrary to law.—The purchaser acted undoubtedly under the
erroneous impression that legal redemption, as noted by the
sheriff on the deed, was valid, accepting thus the deed without
any objection whatsoever. But, as a general rule, and under the
circumstances of the case, no estoppel attaches to validate a
contract or any part thereof that in itself is contrary to
law. Abarro vs. De Guia, 72 Phil. 245.
Building contract exempting owner from payment of wages is
null and void.—The fact that according to the building contract,
the owner of the building shall not respond to any claim, for
wages not paid, does not exempt the owner of the building from
the obligation to pay jointly and severally the salary of the
watchman, because such contract is null and void for being
contrary to the purpose of Act No. 3959.Fernandez vs. Garcia, 92
Phil. 592.
Bona fide possessor of public land can be a landlord
thereof.—Alfafara vs. Mapa, 95 Phil. 125.
No suit for performance of illegal contract.—"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." (Pomeroy's Equity Jurisprudence, Vol. 3, 5th ed., p. 728.) It
is true that this doctrine is subject to one important limitation,
namely, "whenever public policy is considered as advanced by
allowing either party to sue for relief
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Ponce de Leon vs.
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Corporation
against the transaction" (Idem, p. 733). But not all contracts
which are illegal because opposed to public policy come under this
limitation. The cases in which this limitation may apply only
"include the class of contracts which are intrinsically contrary to
public policy—contracts in which the illegality itself consists in
their opposition to public policy, and any other species of illegal
contracts in which, from their particular circumstances,
incidental and collateral motives of public policy require relief."
Examples of this class of contracts are usurious contracts,
marriage-brokerage contracts and gambling contracts. (Idem,pp.
735-737.) Rellosa vs. Gaw Chee Hun, 93 Phil. 827.
Contract against the Constitution.-—It is illegal not because it
is against public policy but because it is against the Constitution.
Nor may it be contended that to apply the doctrine of pari
delicto would be tantamount to contravening the fundamental
policy embodied in the constitutional prohibition in that it would
allow an alien to remain in the illegal possession of the land,
because in this case the remedy is lodged elsewhere. To adopt the
contrary view would be merely to benefit petitioner and not to
enhance public interest. Id.
Party to illegal contract cannot enforce his illegal object.—A
party to an illegal contract cannot come into a court of law and
ask to have his illegal objects carried out. The law will not aid
either party to an illegal agreement; it leaves the parties where it
finds them. The rule is expressed 'In pari delicto potior est
conditio defendentis.' (Bough and Bough vs. Cantiveros and
Hanopol, 40 Phil. 210, 216.) Id.
Invalid employment contract does not preclude recovery of
overtime pay.—The argument that the nullity or invalidity of the
employment contract precludes recovery by the laborers of any
overtime pay is untenable. The Eight-Hour Labor Law, in
providing that "any agreement or contract between the employer
and the laborer or employee contrary to the provisions of this Act
shall be null and void ab initio," obviously intended said provision
for the benefit of the laborers or employees. The employer can-
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ANNOTATED
Ponce de Leon vs.
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Corporation
not, therefore, invoke any violation of the Act to exempt him from
liability for extra compensation. This conclusion is further
supported by the fact that the law makes only the employer
criminally liable for any violation. It cannot be pretended that, for
the employer to commit any violation of the Eight-Hour Labor
Law, the participation or acquiescence of the employee or laborer
is indispensable, because the latter in view of his need and desire
to live, cannot be considered as being on the same level with
employer when it comes to the question of applying for and
accepting an employment. Manila Terminal Co., Inc. vs. Court of
Industrial Relations, 91 Phil. 625.
Lawful tenancy contracts proposed by owner of land must be
respected.—If the contracts of tenancy proposed by the owners are
not forbidden by specific provisions of the Tenancy Law and are
not injurious to the tenants, they must be respected. And tenants'
refusal to sign them is a just cause for their
dismissal. Bulasag vs. Ramos, 85 Phil. 330.
Sale vitiated by fraud is only voidable and not void ab
initio.—Assuming that the consent of Ong Shu to the sale in favor
of Soto was obtained by the latter through fraud and deceit, the
contract was not thereby rendered void ab initio, but only
voidable by reason of the fraud, and Article 1390 expressly
provides that:
"ART. 1390. The following contracts are voidable or annullable, even
though there may have been no damage to the contracting parties:
1. (1)Those where one of the parties is incapable of giving consent
to a contract;
2. (2)Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper
action in court. They are susceptible of ratification." (Civil Code.)
Agreeably to this provision, Article 1506 prescribes:
"ART. 1506. Where the seller of goods has a voidable title thereto, but
his title has not been avoided at the time of the sale, the buyer acquires
a good title to the goods, provided he
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Ponce de Leon vs. Rehabilitation FinanceCorporatio
n
buys them in good faith, for value, and without notice of the seller's
defect of title." (Civil Code.)
Hence, until the contract of Ong Shu with Soto is set aside by a
competent court (assuming that the fraud is established to its
satisfaction), the validity of appellant's claim to the property in
question can not be disputed, and his right of the possession
thereof should be respected. Chua Hai vs. Kapunan, Jr., 104 Phil.
110.
Court action is necessary to annul voidable
contract.—Plaintiff's claim that the sale is inexistent or void ab
initiocannot be sustained, it appearing that out of its
consideration of P370,000.00 plaintiff applied the amount of
P93,928.56 to pay its pre-war indebtedness to the Agricultural
and Industrial Bank and distributed the balance of P276,071.44
among its stockholders. This is a clear indication that the sale,
even if vitiated, is merely voidable and as such cannot
have reversible effectsunless proper action is brought for its
annulment. As this court has aptly said:
"Had the plaintiff desired to set aside the contracts of conveyance made
by his father, he should have instituted a special action for that
purpose. (Arts. 1300 to 1314, Civil Code.) He can not have said
documents annulled in a subsidiary action. x x x . One who desires to
recover lands as the owner from another upon the theory that the deeds
held by the other are null and void, must first ask that such alleged
fraudulent deeds be set aside." (Llacer vs. Muños de Bustillo and
Achaval, 12 Phil. 328, 334).
Rio Grande Rubber Estate Co., Inc. vs. Board of Liquidators, 104
Phil. 863.
Promise to pay pre-war debt already paid in Japanese war
notes was held valid.—The validity of the payments made by
plaintiff to the Bank of Taiwan, Ltd., in settlement of its pre-war
obligation to the defendant Bank is not denied or questioned by
the latter, but as it did not in fact receive any money thus paid by
plaintiff to the Bank of Taiwan, it naturally contends that it
suffered thereby the corresponding loss. Consequently, when
plaintiff wanted to renew commercial transactions with the
defendant the latter refused to grant to the former any
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Ponce de Leon vs.
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Corporation
credit facilities unless and until plaintiff would indemnify it for
said loss. Of course, plaintiff did not like this but had finally to
yield to defendant's demand because that was the only way to
secure new credit facilities from defendant and avoid the greater
damage that would result from the paralyzation of its business.
We can infer from the averments of the complaint that plaintiff
preferred to lose something in order to obtain further gains in his
business rather than lose everything by having said business
paralyzed. It is thus seen that the issuance of the promissory
notes for the payment of the aggregate sum of P48,298.13 plus
interests thereon, which amounted to P3,238.78, or a total of
P51,536.91, was for a licit and valid consideration. Chiu Chiong &
Co., Inc. vs. National City Bank of New York, 99 Phil. 745.
Municipal contract not approved by governor as required by
law is merely voidable.—Municipality of Camiling vs. Lopez, 99
Phil. 187.
Mere lapse of time does not give efficacy to void
contract.—Eugenio vs. Perdido, 97 Phil. 41.
Contract to work for approval of foreign exchange application is
contrary to public policy.—Tee vs. Tacloban Electric & Ice Plant
Co., Inc., 105 Phil. 168.
Contracts detrimental to public interest are void.—Sy Suan vs.
Regala, 105 Phil. 1024.
10% fee on dollar allocations is void.—We find undeniable that
the contract in question sought to be enforced by the respondent
and assailed by petitioners as null and void for being against
public policy, is what is commonly known as 10% contracts which
the press decries and the public condemns as inimical to public
interest. We can take judicial notice that this kind of contract
sprouted as a result of the controls imposed by the government on
imports and dollar allocations, despite the enunciated
government policy that applications for imports and foreign
exchange should be considered and acted upon strictly on the
basis of merit of each application and without the intervention of
intermediaries, which policy is revealed by Sections 15 and 18 of
Republic Act No. 650. Id.
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Unenforceable contract.—Appellant may not insist on his
reinstatement simply because, as he claims, he agreed to resign
on the assurance that he would be taken back once he was cured.
That agreement, as already noted above, was disapproved by
defendant's general manager on the ground that it stipulated
something that was contrary to law. which was that the appellant
employee was thereby waiving his right to compensation on
account of his illness. The attempted agreement was therefore
unenforceable. Robles vs. Visayan Estevedore Trans. Co., L-10620,
May 15, 1959, 105 Phil. 1312 (unrep.).
Municipal corporation is not estopped to assail contract
which is against public policy.—San Diego vs. Municipality of
Naujan, 107 Phil. 118.
Tenancy contract which is contrary to Sec. 19 of Republic Act
No. 1199 is void.—Philippine National Bank vs. Ramirez, 109
Phil. 775.
 Invalid stipulation in compromise agreement does not render
whole agreement void.—The question that suggests itself is
whether the invalid provisions render void the whole
agreement. Held: The invalid stipulations are independent of the
rest of the terms of the agreement and can easily be separated
therefrom without doing violence to the manifest intention of the
parties. This being so, the legal terms of the contract can be
enforced (Art. 1420, New Civil Code). Velayo vs. Court of
Appeals, 107 Phil. 587.
A contract illegally dispossessing a tenant is void—Datu vs.
Cabangon,108 Phil. 243.
Mortgagor bears the loss of goods mortgaged.—As the
mortgagee does not become the owner of the property mortgaged
and the ownership thereof remains with the mortgagor, therefore,
under the maxim, res periit domino suo, the mortgagor-owner
bears the loss of the thing mortgaged. The principal obligation is
not extinguished by the loss of the mortgaged property. Warner,
Barnes & Co., Ltd. vs. Flores, 1 SCRA 881.
When stockholders are liable for obligations contracted
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Ponce de Leon vs.
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Corporation
by the corporation.—Wherever the corporate entity is being used
as an alter ego or business conduit for the sole benefit of the
stockholders, or to defeat public convenience, justly wrong,
protect fraud, or defend crime, the individual stockholders may be
held liable for the obligations contracted by
the corporation. McConnel vs. Court of Appeals, 1 SCRA 722.
A contract of guaranty is not a formal contract and is valid in
whatever form it may be.—A contract of guaranty is not a formal
contract and is valid in whatever form it may be, provided that it
complies with the statute of frauds. Macondray & Co., Inc. vs.
Piñon, 2 SCRA 1109.
Acceptance of unilateral promise to sell without
consideration.—An accepted unilateral promise to sell, not
supported by any consideration distinct from the price, does not
produce a binding enforceable contract of sale. The offer in this
case, as well as the acceptance, both lack a most essential
element—the manner of payment of the purchase price. Hence,
the offer to sell may be withdrawn without the offeror committing
any breach of contract. Navarro vs. Sugar Producers Cooperative
Marketing Association, Inc., 1 SCRA 1180.
Validity as to form.—Contracts are binding in whatever form
they may have been entered into. An exchange of land is valid
although not in writing. Nor is registration necessary for the
validity of the exchange if the rights of innocent third parties or
subsequent transferees are not involved.Lopez vs. Auditor
General,20 SCRA 655.
Validity of lease or option to buy real estate to an alien.—A
lease to an alien for a reasonable period is valid. So is an option
giving an alien the right to buy real property on condition that he
is granted Philippine citizenship. Aliens are not completely
excluded by the Constitution from the use of lands for residential
purposes. Since their residence in the Philippines is temporary,
they may be granted temporary rights such as a lease contract
which is not forbidden by the Constitution. Should they desire to
remain here forever and share our fortune and misfortune, Fil-
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Ponce de Leon vs.
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Corporation
ipino citizenship is not impossible to acquire.Philippine
Banking Corporation vs. Lui She, 21 SCRA 52.
7. Compromise
An onerous compromise agreement should be interpreted in favor
of the greatest reciprocity of interests.—Rodriguez vs. Belgica, 1
SCRA 611.
When agreement to transmit one-half of conjugal share is a
contract as to future inheritance.—A document signed by the
testator's wife, promising that she would respect and obey all the
dispositions in the latter's will, and that she would hold one-half
of her share in the conjugal assets in trust for the heirs and
legatees of her husband in his will, with the obligation of
conveying the same to such of his heirs or legatees as she might
choose in her last will and testament, is a compromise and at the
same time a contract with sufficient cause or
consideration. Blas vs. Santos, 1 SCRA 899.
8. Construction and Interpretation
A—Generally
Unwise or disastrous contracts.—The plaintiff says in another
part of his lengthy brief that the use he was able to make of the
Japanese money paid him by defendant was much less than he
had expected. This complaint seems to run counter to the
plaintiff's vehement protest that the Japanese war notes were
illegally depreciated in the contract. However, setting aside this
apparent inconsistency in the plaintiff's position, the plaintiff is
not entitled to a rescission or to a discount on the basis of the
benefit he actually derived from the purchase price. The law does
not relieve a party from the effects of an unwise, foolish, or
disastrous contract, entered into with all the required legal
formalities and with full awareness of what he was doing. The
trial court affirmatively found that no fraud or deception had
been perpetrated by the defendant on the plaintiff. The
well-demonstrated high intelligence of the plaintiff, his legal
acumen and good grasp of the intricacies of law, precludes every
possibility of his having been duped. Tanda vs. Aldaya, 89 Phil.
497.
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ANNOTATED
Ponce de Leon vs.
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Corporation
Interest is not presumed.—Defendant has agreed to pay interest
only up to the date of maturity, or until March 31, 1934. As the
contract is silent as to whether after that date, in the event of
non-payment, the debtor would continue to pay interest, no legal
presumption as to such interest can be indulged, for this would be
imposing upon the debtor an obligation the parties have not
chosen to agree upon. Article 1755 of the Civil Code provides that
"interest shall be due only when it has been expressly
stipulated." Jardenil vs. Solas, 73 Phil. 626.
Construction of stipulation regarding venue.—The contract
sued on contains this stipulation: "It is hereby expressly agreed
that any legal action arising out of this contract, or in connection
with the property made the subject hereof, may at the option of
the Seller be brought in the Courts of the City of Manila." The
plaintiff argues that such agreement refers only to suits brought
or to be brought by the Corporation, the seller, and not to suits
brought by the purchaser. We find the argument to be unfounded.
The stipulation refers to "any action," obviously by either party to
the contract. There is no valid reason why it should only apply to
actions by one side. Borreros vs. Philippine
Engineering Corporation, 95 Phil. 960(unrep.).
Body of letter, not heading, is controlling.—Plaintiff's counsel
makes capital out of the fact that defendant's letter, Exhibit C, is
given the heading of "Cancellation of Dealer's Contract." The body
of the letter, however, shows that plaintiff has had no contract at
all. The body of the letter, not its title, governs. The counsel
explained that the heading was made by a "layman" and this to which the law attaches a definite meaning as in the instant
seems to be correct. Exconde vs. International Harvester Co. of the case, cannot by the courts be arbitrarily supplied by what their
Philippines, 92 Phil. 221. own notions of justice or equity may dictate.Jardenil vs. Solas, 73
Motive and cause in contracts distinguished.—The agreement Phil. 626.
cannot be declared void merely because appellant's motive in C—Intent of Parties
assuming obligation thereunder was to help save one of the Presumption is that document expressed parties'
defendants from a criminal case. Particular motives of the parties intention.—The parties have the burden of proof to overcome the
in entering into a contract are different from the cause thereof strong presumption that the document she and her co-sellers
(Article 1351, New Civil Code). Cause is the essential reason signed expressed their true intention. Vda. deGonzales vs.
which moves the Santos, 87 Phil. 471.
353 Intention of parties is indicated by what their words
VOL. 36, DECEMBER 353 express.—Whether evidenced by a public instrument or a private
18, 1970 document, the contract is what the words of the parties indicate.
Ponce de Leon vs. It will not avail the defendant to say, "but my intention was not
what my words express." Id.
Rehabilitation Finance 354
Corporation 354 SUPREME COURT
contracting parties to enter into the contract (General REPORTS
Enterprises, Inc. vs. Lianga Bay Logging Co., L-18487, August ANNOTATED
31, 1964). It is the immediate, direct and proximate reason which
justifies the creation of an obligation through the will of the Ponce de Leon vs.
contracting parties (3 Castan 4th ed., p. 347). In the case at bar Rehabilitation Finance
the cause of the agreement was the existing account of one of the Corporation
defendants with appellee. It was mere liberality or gratuitousness Parol evidence bearing on collateral agreements is
that moved appellant to oblige himself severally with the said admissible.—Where the provisions of a written contract are
defendant. Basic Books (Phil.), Inc. vs. Lopez, 16 SCRA 291. ambiguous, and there is sufficient evidence showing the existence
B—Where Terms are Clear of other agreements collateral thereto, such parol evidence is
Contract, whose terms are clear, should be given full force and admissible to prove the real agreement of the
effect.—As the contract is clear and unmistakable and the terms parties. Coscolluela vs. Valderrama, 2 SCRA 1095; Calderon vs.
employed therein have not been shown to belie or otherwise fail to Medina, 18 SCRA 583.
express the true intention of the parties, and that the deed has Ambiguous provisions of a contract are construed against the
not been assailed on the ground of mutual mistake which would party who drafted the same.—Where the provisions of a contract
require its reformation, same should be given its full force and are ambiguous, such ambiguity must be construed against the
effect. When a party sues on a written contract and no attempt is party who drafted the same; and it appearing that the contract in
made to show any vice therein, he cannot be allowed to lay any question was drafted by appellant's counsel, any ambiguity
claim more than what its clear stipulation accord. His omission,
therein must be construed against appellant. Coscolluela vs.
Valderrama,2 SCRA 1095.
Stipulation pour autrui.—The question of whether a third
person has an enforceable interest in a contract must be settled
by determining whether the contracting parties intended to
tender him such an interest by deliberately inserting terms in
their agreement with the avowed purpose of conferring a favor
upon such third person. The fairest test to determine whether the
interest of a third person in a contract is a stipulation pour
autrui or merely an incidental interest, is to rely upon the
intention of the parties as disclosed by their contract. Bonifacio
Bros., Inc. vs. Mora, 20 SCRA 261; Nielson & Company, Inc. vs.
Lepanto Consolidated Mining Company, 18 SCRA 1040.
D—Considering Other Agreement of Parties
Prior draft considered in determining intent of parties to
contract.—The trial court did not consider this draft on the
principle of integration of jural acts. We find that the principle
invoked is inapplicable, since the purpose of considering the prior
draft is not to vary, alter, or modify the agreement, but to discover
the intent of the parties thereto and the circumstances
surrounding the execution of the contract. The issue of fact is, did
plaintiff represent to defendant that he had an exclusive
franchise? Certainly, his acts or statements prior to the
agreement are essential and relevant to the determination of
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Ponce de Leon vs.
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Corporation
said issue. The act or statement of the plaintiff was not sought to
be introduced to change or alter the terms of the agreement, but
to prove how he induced the defendant to enter into it—to prove
the representations or inducements, or fraud, with which or by
which he secured the other party's consent thereto. These are
expressly excluded from the parol evidence rule. (Bough and
Bough vs. Cantiveros and Hanopol, 40 Phil. 209; Port Banga
Lumber Co. vs. Export & Import Lumber Co., 26 Phil. 602; III
Moran 221, 1952 rev. ed.). Fraud and false representations are an
incident to the creation of a jural act, not to its integration, and
are not governed by the rules on integration. Where parties
prohibited from proving said representations or inducements, on
the ground that the agreement had already been entered into, it
would be impossible to prove misrepresentation or fraud.
Furthermore, the parol evidence rule expressly allows the
evidence to be introduced when the validity of an instrument is
put in issue by the pleadings (Sec. 22, par. [a], Rule 123, Rules of
Court), as in this case. Woodhouse vs. Ha-lili, 93 Phil. 526.
E—Strict Liberal Construction
Pacto de retro sale construed as equitable mortgage.—There is
no merit in petitioner's contention that the Court of Appeals erred
in ordering the sale of the land in case of nonpayment of the
judgment, on the ground that the contract relied upon by the
respondent, not having been registered in accordance with the
Land Registration Act, cannot operate as a mortgage so as to
justify its fore-closure. The contract, evidencing
a pacto de retro sale which is unquestionably more
disadvantageous to the petitioner, has been held to be an
equitable mortgage and, from its very nature, the lien thereby
created ought not to be defeated by requiring compliance with the
formalities necessary to the validity of a voluntary real estate
mortgage, as long as the land remains in the hands of the
petitioner and the rights of innocent third parties are not affected.
In the case of Correa vs. Mateo and Icasiano (55 Phil. 79),
wherein an unrecorded pacto de retro sale was construed as an
equitable mortgage, it was hold that
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ANNOTATED
 Ponce de Leon vs.
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Corporation
the plaintiff had the right "within sixty days after final judgment,
for a failure to pay the amount due and owing him, to foreclose
his mortgage in a proper proceeding and sell all or any part of the
ten parcels of land to satisfy his debt."Zubiri vs. Quijano, 74 Phil.
47.
Ownership of property conditionally transferred to vendee upon
execution.—Where the contract conditionally transfers ownership
to the vendee upon its execution, the property is not merely given
as security for a loan; and the contract is not one of equitable
mortgage but a sale subject to a resolutory condition. Rodriguez,
Sr. vs. Francisco, 2 SCRA 648.
F—Considering Situation of Parties—Surrounding
Circumstances
Where circumstances indicated sale of whole estate for a lump
sum.—It seems plain from all the attending circumstances that
the dominant and paramount thought in the minds of the parties
during and at the end of the negotiation was a sale of the entire
property owned by the sellers for a gross amount. x x x In a sale
involving an extensive agricultural estate containing
undetermined lots of different classes, unappraised
improvements, barrio lots and roads and standing crop, it was
well nigh difficult, not to say impossible, to conclude a transaction
technically and strictly by the hectare. Such form of sale would
leave the parties in uncertainty on the amount to be added to or
taken from the price in the ensuing readjustment in the event of
discrepancy in the assumed area. Such form of sale would be
fraught, as the parties ought to have realized, with extreme
difficulties and harassing controversies.
xxx The recital in the deed of sale, that the vendors conveyed
"todo su derecho, interes, y participacion en la Hacienda
Esperanza," literally and properly construed, was a conveyance of
the whole estate in the property in the absence of any limitations
denoting intent to convey a less interest. Gonzales vs. Santos, 87
Phil. 471.
Interpretation of a clause in insurance contract regard-
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ing repair of damaged vehicle.—The clause in an insurance policy,
authorizing the owner of the damaged vehicle to contract for its
repair does not mean that the repairman is entitled to collect the
cost of repair out of the proceeds of the insurance. It merely
establishes the procedure that the insured has to follow in order
to be entitled to indemnity for repair.Bonifacio Bros., Inc. vs.
Mora, 20 SCRA 261.
G—Practical Construction by Parties
Interpretation of clause regarding transportation costs.—We
have the fact that the plaintiffs had voluntarily paid this cost of
transportation from Isabela to Hinigaran for a period of at least
ten years, without complaint or protest. Assuming for a moment
that the agreement of the parties on the payment of this cost of
transportation as evidenced by clause 22 were not clear, the fact
that defendant company had been collecting and plaintiffs had
been paying voluntarily those charges, will show that the parties
understood the agreement in that manner. True, three of the
planters testified that at the beginning when the sugar was
transported in trucks to the port of San Gregorio, the expenses for
transportation was borne by the the planters themselves and the
trial court believed him and held that his testimony is supported
by the evidence. We are not in a position to overrule and change
that finding of the trial court. Feria vs. Isabela Sugar Co., Inc., 92
Phil. 1065 (unrep.).
H—Construed as a Whole
 Circumstances showing that contract is one of sale, not of
agency.—In our opinion, the circumstances of record sufficiently
indicate a sale. First, no commission was paid. Second, Exhibit 1
says that "if balance is not paid within 48 hours of notification,
merchandise may be resold by the Universal Trading Co. and the
deposit forfeited." "Resold" implies the goods had been sold to
Chua Ngo. And forfeiture of the deposit is incompatible with a
contract of agency. Third, immediately after executing Exhibit 1
wherein oranges were quoted at $6.30 per box, Universal Trading
Co. placed an order for purchase of the same with
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Gabuardi Company at $6.00 per box. If Universal Trading Co.
was agent of Chua Ngo, it could not properly do that. Inasmuch
as good faith is to be presumed, We must hold that Universal
Trading Co. acted thus because it was not acting as agent of Chua
Ngo, but as independent purchaser from Gabuardi Co. Fourth,
the defendant charged the plaintiff the sum of P218.87 for 3
1/2% salestax, thereby implying that their transaction was a sale.
Fifth, if the purchase of the oranges had been made on behalf of
Chua Ngo, all claims for losses thereof against the insurance
company and against the shipping company should have been
assigned to Chua Ngo. Instead, the defendant has been pressing
such claims for itself. Chua Ngo vs. Universal Trading Co.,87
Phil. 331.
I—Construing Provisions of Contract
Where deed was construed as conveying whole property.—The
recital in the deed of sale, that the vendors conveyed "todo su
derecho, interes y participatión en la Hacienda Esperanza,"
literally and properly construed, was a conveyance of the whole
estate in the property in the absence of any limitations denoting
intent to convey a less interest. Gonzales vs. Santos, 87 Phil. 471.
Real estate sold for lump sum.—Upon the question of law of
whether upon a sale of real property in gross and for a lump sum,
the purchaser may be entitled to an equitable reduction in the
price in proportion to what is lacking in the area as designated in
the contract, the trial court credited the defendant the sum of
P3,824 upon the evidence that the fishpond purchased by him
was only eight (8) hectares when it was described in the contract
to contain "una extencion superficial de once (11) hectares,
treinta y echo (38) areas, y setenta y siete (77) centiareas, poco
mas a menos." The question is controlled by Article 1471 of the
Civil Code which provides that "in case of the sale of real estate
for a lump sum and not at the rate of a specified price for each
unit of measure or number there shall be no increase or decrease
of the price even if the area or number be found to be more or less
than that stated in the contract." The transaction here in-
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(Exh. D), one for a lump sum and not at a specified price for each
unit of measure, and therefore, no reduction can be authorized
although the area was less than what was stated in the contract.
There are instances in which equitable relief may be granted to
the purchaser, as where the deficiency is very great, for, under
such circumstances, gross mistake may be inferred. (Asian vs.
Jalandoni, 45 Phil. 296). But, in the instant case, were are
satisfied that, although the shortage amounts to practically
one-fourth of the total area, the purchase clearly intended to take
the risk of quantity, and that the area has been mentioned in the
contract, merely for the purpose of description. From the
circumstances that the defendant, before her purchase of the
fishpond, had been in possession and control thereof for two years
as a lessee, she can rightly be presumed to have acquired a good
estimate of its value and area, and her subsequent purchase
thereof must have been premised on the knowledge of such value
and area. Accordingly, she cannot now be heard to claim an
equitable reduction in the purchase price on the pretext that the
property is much less than she thought it was. Garcia vs.
Velasco, 72 Phil. 248.
A clear stipulation does not need any construction.—In our
opinion, the purpose of the parties in making that stipulation is to
defer the payment of the claim until after the share of Fred M.
Harden in the assets of the conjugal partnership shall have been
determined in order that said defendant may not be burdened
with the liability to pay it during the pendency of the
receivership. Be it as it may, the fact remains that the terms of
the stipulation are clear and it is a well known rule of statutory
construction that when the terms of a contract are clear there is
no room for interpretation. Dalupan vs. Harden, 90 Phil. 417.
Management contract containing provisions which are in the
nature of stipulations "pour autrui" is binding to one not a party
thereto.—Section 15 of the Arrastre Management Contract
containing provisions, which are in the nature of stipulations
"pour autrui," entered into by and be-
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tween the Manila Port Service and the Bureau of Customs on 29
February 1956 pursuant to the provisions of Act No. 3002, as
amended by Act No. 3851, Commonwealth Act No. 285 and
Republic Act No. 140, limiting the former's liability for loss,
destruction or damage to any cargo while under its custody or
control to P500.00 for each package, unless the value be otherwise
specified or manifested and the corresponding arrastre charges
have been paid, is binding upon the consignee who was not a
party thereto or signatory thereof. Smith, Bell & Co., Ltd. vs.
Manila Port Service, 1 SCRA 1007.
J—Provision as to Time
Debtor cannot make payment before the time stipulated.—The
only question is whether or not, under the terms of the contract,
the loan may be paid on or before March 31, 1948. The court
rendered judgment holding the contract to be unilateral, and that
the period therein fixed for payment of the loan is for the benefit
of the debtor, who, for that reason, may make payment before
May 27, 1952. This judgment is wrong. The contract of loan
expressly stipulates that payment shall be made on May 27, 1952.
Article 1127 of the Civil Code provides that—"whenever a term is
fixed in obligations it is presumed as established for the benefit of
the creditor and the debtor, unless from their tenor or some other
circumstances, it should appear that it has been established for
the benefit of one or the other." According to this provision, the
term is presumed to be for the benefit of both debtor and creditor,
and, therefore, debtor cannot make payment before the time
stipulated, without the consent of the creditor. The presumption,
of course, is rebuttable. Osorio vs. Salutillo, 87 Phil. 356.
K—Particular Words and Phrases
When contract referred to whole lot, not to a part thereof.—The
appellants have adopted the theory that the expressions "where it
is constructed," "wherein the house is constructed," and "where it
stands," found in conditions (a) and (b) hereinbefore quoted,
convey the idea that the appellee was to remain in possession
only of the portion
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covered by his house. This is untenable, considering that, if it was
so intended, the parties would have employed the term "portion"
or "part," instead of the word "lot," especially in view of the fact
that the property which was the subject matter of the decision of
May 27, 1947, was a parcel of residential land containing an area
of about 409.62 square meters, and in view of appellants'
admission that, at the time of the signing of the amicable
settlement, said lot was not subdivided. David vs. Castro, 89 Phil.
310.
Inclusion of "after-acquired properties."—The stipulation in a
mortgage contract that properties, which the mortgagor may
acquire, construct, install, attach or use in its lumber concession,
shall be subject to the mortgage lien is a common and logical
provision in cases where the original properties mortgaged are
perishable or subject to inevitable wear and tear or were intended
to be sold or used but with the understanding that they would be
replaced with others to be thereafter acquired by the mortgagor.
Such a stipulation is lawful and not immoral and is intended to
maintain, insofar as possible, the original value of the properties
given as security. People's Bank and Trust Co. vs. Dahican
Lumber Company, 20 SCRA 84.
L—Miscellaneous
Contract for services referring to assessed value of property is
subject to litigation.—Reyes vs. De la Cruz, L-12729, March 30,
1959.
Ambiguity in contract resolved against party causing
am-biguity.—Another aspect of the case bears consideration. It
was the plaintiff-appellant who prepared the contract for services.
Being a lawyer, he knew the meaning and value of every word or
phrase used in said contract. If the parties, including himself,
really had in mind not the assessed value but the market value, it
would have been so easy for him to have used and inserted said
phrase, "market value," in order to remove and avoid all
ambiguity and uncertainty. We reproduce with favor what the
lower court said on this point:
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"It has been proven that the plaintiff himself was the person who
prepared the document, Exhibit A. Therefore, if there is any ambiguity
or obscurity in the interpretation and meaning of said contract, the
same 'shall not favor the party who caused the obscurity.' (Art. 1377 of
the Civil Code corresponding to Art. 1288 of the Spanish Civil Code of
1889) Yatco vs. El Hogar Filipino, 67 Phil. 610; Calanoc vs.
Phil.-American Life Ins. Co., 52 O.G. 191, 192."
Reyes vs. De la Cruz, 105 Phil. 372.
Ambiguity in compromise agreement.—There is, to be sure,
ambiguity in the provision of the compromise agreement in
question as a result of the explanatory clause ("that is, to make
such real estate purchase and to course the same to the plaintiff
as realtor") inserted after the phrase "should he fail thereof"
which follows the statement of appellee's obligation. But following
the rule that ambiguities or obscure clauses in contracts cannot
favor the one who has caused them (Art. 1377, New Civil Code)
and it appearing that the compromise agreement was drawn by
appellant through his counsel, with the paragraph in dispute
creating an obligation in his favor, the ambiguity found therein
must be construed in favor of herein appellee. (H.E. Heacock
Co. vs. Macondray & Co., 42 Phil. 205; Asturias Sugar
Central vs. The Pure Cane Molasses Co., 57 Phil. 519; Halili vs.
Lloret, 50 O.G. 2493.) Ildefonso vs. Sibal, 106 Phil. 287.
Ambiguity in bond construed against surety company.—If it
should be argued that the stipulation could be interpreted either
as a condition precedent only, or as both condition precedent and
prescription, then we would hold: it appearing that the bond was
executed in a form prepared by the surety company, any
ambiguity in the document must be interpreted against it (Art.
1288, C.C., Heacock vs. Macondray, 42 Phil. 205). Pao Chuan
Wei vs. Nomorosa, 103 Phil. 57.
When 3-month period in surety bond was construed as
establishing a condition precedent, not a limitation of action.—Id.
Written agreement prevails over supposed understanding.
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—In defendant-appellant's first assignment of error, it is claimed
that the contemporaneous act of the defendant-appellant in
paying the taxes under Section 142(d) of the National Internal
Revenue Code, showed that it was the intention of the parties
that defendant-appellant should only pay for such taxes. We find
no merit in this contention because the agreement expressly
provides that the buyer should pay any and all taxes for both
denatured and refined alcohol, which agreement is inconsistent
with the alleged understanding. Canlubang Sugar Estate vs.
Standard Alcohol Co. (Phil.), Inc., 103 Phil. 1113 (unrep.).
Interpretation of contract for sale of goods in mass.—Invoice
No. 7770 of the Surplus Property Commission dated 28 May 1948
(Appendix A, Exhibits C & 2) which recites—
"Sold to: MR. FERNANDO VILLA-ABRILLE 27 Victory, Manila
All movable goods located at CMD-3 Area, Samar Naval Base,
Guiuan, Samar, consisting more or less of the following: 21 Revolving
Cranes, etc."
could and can have no other meaning than that "all movable
goods located at CMD-3 Area, Samar Naval Base, Guiuan,
Samar," were sold to the appellee Villa-Abrille. The phrase
"consisting more or less of the following" followed by enumeration
of articles sold does not mean that whatever excess article or
articles not included in the enumeration is not included in the
sale to the appellee Villa-Abrille and may be sold to another
bidder by the Surplus Property Commission. This interpretation
is in consonance with article 6 of the terms and conditions of the
sale appearing at the back of Surplus Property Commission
Invoice No. 7770. Tomassi vs. Villa-Abrille, 104 Phil. 310.
Interpretation of contract by Commissioner of Customs has
persuasive value.—While the interpretation of the agreement
above given by the Commissioner of Customs is not binding upon
the courts, same has persuasive value. Sun Bros. & Co. vs.
Manila Port Service, 107 Phil. 988.
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When words of contract appear contrary to evident intention of
parties, latter prevails.-—The mere mention of Lot No. 1357 in the
contract to sell, the final deed of sale and the certificate of title in
favor of the herein petitioner is not conclusive that the property
sold to him is the lot located at barrio Bagbag. For as has been
elucidated, the parties meant Lot 1155 at the población. Article
1370 of the Civil Code provides that if the words in a contract
appear to be contrary to the evident intention of the parties, the
latter prevails over the former. Bijis vs. Legaspi, 107 Phil. 512.
General description in chattel mortgage after enumeration of
specific articles construed.—We may notice in the agreement,
moreover, that the phrase in question is found after an
enumeration of other specific articles. It can thus be reasonably
inferred therefrom that the "furniture, fixtures and equipment"
referred to are properties of like nature, similarly situated or
similarly used in the restaurant of the mortgagor located in front
of the San Juan de Dios Hospital at Dewey Boulevard, Pasay
City, which articles can be definitely pointed out or ascertained by
simple inquiry at or about the premises. Note that the limitation
found in the last paragraph of Section 7 of the Chattel Mortgage
Law on "like or substituted properties" makes reference to those
"thereafter acquired by the mortgagor and placed in the same
depository as the property originally mortgaged," not to those
already existing and originally included at the date of the
constitution of the chattel mortgage. A contrary view would
unduly impose a more rigid condition than what the law
prescribes, which is that the description be only such as to enable
identification after a reasonable inquiry and
investigation. Saldaña vs. Phil. Guaranty Co., Inc., 106 Phil. 919.
Exception on contract of sale in public instrument equivalent to
delivery.—Here there has been not only actual but constructive
delivery of the property. Actual because, as already said, when the
contract of sale was entered into, a portion of the building was
already actually occupied by defendant as lessee, which
possession was converted
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into that of owner from the date of the execution of the sale. And,
then, as the contract was made through a public instrument, that
is also equivalent to delivery of the property, if from the contract
the contrary does not appear. Here not only nothing to the
contrary appears, but it could be inferred that the intention was
to transfer the ownership of the building immediately.
Thus, the law provides that the parties may stipulate that the
ownership of the thing shall not pass to the purchaser until he
has fully paid the stipulated price (Art. 1478, new Civil Code).
Here no such stipulation appears in the contract. The fact that it
was agreed that the balance of the purchase price shall be paid
upon approval and release of the facility loan to be applied from
the ACCFA does not evince a contrary intention. In the absence of
such stipulation, the general rule embodied in Article 1477 should
apply. The exception shall be strictly construed (Francisco,
Statutory Construction, 1950 ed., p. 304; citing 69 CJ sec. 643, pp.
1092-1093). Tan Boon Diok vs. Aparri Farmers' Cooperative
Marketing Association, Inc.,108 Phil. 1181 (unrep.).
Proviso in arrastre contract construed.—A proviso (provided
that such claim, etc.) refers to the clause or distinct portion of the
enactment which immediately precedes it (82 CJS 887) and
restricts the general operation of the enacting part of the section
to which it is attached or of the matter which precedes it.
(Sutherland Statutory Construction, Vol. II, 3rd ed., pp. 469, 470
and 474.)
The matter which precedes the proviso here discussed is the
suit against the contractor, and the enacting part to which it
(proviso) is attached, directs that "the contractor shall be released
from x x x liability unless suit x x x is brought within a period of
one year etc." The proviso could not have referred to "or from the
date when the claim for the value of such goods have been
rejected," because that portion is incomplete, expresses no
directive, constitutes no enactment to be restricted by such
proviso. Consunji vs. Manila Port Service, L-15551, Nov. 29, 1960.
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Literal meaning of stipulations in contract are controlling if terms
thereof are clear.—The law provides that if the terms of a contract
are clear and leave no doubt regarding the intention of the
contracting parties, the literal meaning of its stipulations shall
control. (Art. 1370 of the New Civil Code; 1281 of the old Civil
Code). The contract executed by respondent Pacific Commercial
Co. provides: "That for and in consideration of the sum of Four
Thousand Pesos (P4,000.00) x x x the Pacific Commercial
Company hereby sells, transfers, conveys and quit claims unto
Ramon Lacson, x x x all its right, title to and interests in the
parcels of land described as follows x x x." Petitioner however,
argues that the insertion in the deed of sale of the clause "That on
or about August 23, 1939, the Pacific Commercial Co. obtained a
judgment in its favor and against Ramon Lacson x x x in Civil
Case No. 11525 of the CFI of Iloilo x x x and that by virtue of the
judgment in Civil Case No. 11525 aforesaid writ of execution was
issued and the Provincial Sheriff levied upon the parcels of land
and on the sugar quota allocated to Hda. Sta. Maria x x x" all that
the judgment had decreed in favor of respondent company in said
Civil Case No. 11525 was included in said transfer. We do not
share the view taken by the petitioner. The above clause was
merely inserted in the deed to trace the source of the rights, title
to and interests in the parcels of land. Lacson vs. Court of
Appeals, 109 Phil. 462.
Clear terms of contract cannot be changed by
interpretation.—These two instruments are very clear in their
terms, where duly signed by both parties in the presence of two
witnesses and acknowledged before a notary public and recorded.
We see no reason whatever for varying the terms thereof. (60
Phil. 157). Belisario vs. Vda. deZulueta, 98 Phil. 990(unrep.).
Where there is a clerical error.—It seems clear to us that the
writing of the figure 15% in the above clause as the percentage to
be retained by the lessee is a plain clerical mistake, the said 15%
being therein described as the share of the rent corresponding to
the lessee as
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co-owner, and there is no question that as there were four
co-owners, each should be entitled to 25% of the rent. Nothing
appears in the contract denoting any intention to reduce Arencio
Palacio's share to 15% in consideration of the fact that the
common property was leased to him, and no plausible reason has
been given why such reduction should be made. We find no merit
in the suggestion that the said reduction may have been due to
the fact that the price of copra was high at the time the lease was
made, for no such idea is intimated in the contract and the
contract already provides for an automatic increase of rent to
specified figures in cases of rise in the price of copra. In short, a
reasonable interpretation of the clause demands that the "15%"
therein written should be read as "25%" this being the true
percentage to be retained by the lessee as his share of the rent as
co-owner.
x x x We think it sufficient that two of the co-owners and
lessors have concurred in the lessee's interpretation of the clause
in question that the amount the lessee was to retain from the
rental is "25%" the share corresponding to him as co-owner, and
not 15% as erroneously written in the said clause. This
interpretation they have expressed not only in their letter to the
lessee but also in their answer filed by them in court. Palacios vs.
Palacios, 98 Phil. 991(unrep.).
Ambiguous terms of insurance policy are construed strictly
against insurer.—While, as a general rule, "the parties may limit
the coverage of the policy to certain particular accidents and risks
or causes of loss, and may expressly except other risks or causes
of loss therefrom" (45 C.J.S. 781-782), however, it is to be desired
that the terms and phraseology of the exception clause be clearly
expressed so as to be within the easy grasp and understanding of
the insured, for if the terms are doubtful or obscure the same
must of necessity be interpreted or resolved against the one who
has caused the obscurity. (Art 1377, new Civil Code.) And so it
has been generally held that the "terms in an insurance policy,
which are ambiguous, equivocal or uncertain x x x are to be
construed strictly in favor of the
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insured and most strongly against the insurer, and liberally in
favor of the insured so as to effect the dominant purpose of
indemnity or payment to the insured, especially where a
forfeiture is involved." (29 Am. Jur. 181) The reason for this rule
is that the "insured usually has no voice in the selection or
arrangement of the words employed and that the language of the
contract is selected with great care and deliberation by experts
and legal advisers employed by, and acting exclusively in the
interest of the insurance company." (44 C.J.S. 1174.) Calanoc vs.
Court of Appeals, 98 Phil. 79.
Ambiguity of policy; construction and interpretation.—By
reason of the exclusive control of the insurance company over the
terms and phraseology of the contract, the ambiguity must be
held strictly against the insurer and liberally in favor of the
insured, specially to avoid a forfeiture (44 C.J.S. 1166-1175; 29
Am. Jur. 180). "Insurance is, in its nature, complex and difficult
for the laymen to understand. Policies are prepared by experts
who know and can anticipate the bearing and possible
complications of every contingency. So long as insurance
companies insist upon the use of ambiguous, intricate and
technical provisions, which conceal rather than frankly disclose,
their own intentions, the courts must, in fairness to those who
purchase insurance, construe every ambiguity in favor of the
insured." (Algoe vs. Pacific Mut. L. Ins., 91 Wash. 324, L.R.A.
1917A, 1237) "An insurer should not be allowed, by the use of
obscure phrases and exceptions, to defeat the very purpose for
which the policy was procured." (Moore vs. Aetna Life Ins.
Co., L.R.A. 1915D, 264). Qua Chee Gan vs. Law Union and Rock
Insurance Co., Ltd., 98 Phil. 85.
Contractual limitations in insurance.—We may state that
contractual limitations contained in insurance policies are
regarded with extreme jealousy by courts, and will be strictly
construed against the insurer and should not be permitted to
prevent a recovery when their just and honest application would
not produce that result (46 C.J.S. 273) Eagle Star Insurance Co.,
Ltd. vs. Chia Yu, 96 Phil. 696.
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Consideration of love and affection is not the criterion in
determining kind of donation.—Howard vs. Padilla, 96 Phil.
983(unrep.).
Donation mortis causa.—Analyzing carefully the provisions of
the donation in question, we would at once notice that the
intention of the donor is not to transmit the ownership of the
property donated immediately to the donee because of certain
reservations and conditions contained therein, while on the other
hand, some of the characteristics we have pointed above are
clearly discernible. Thus, we note that in the third paragraph of
the donation the donor employs the words "to take effect after his
death," while in paragraph one of the conditions therein
enumerated, we find the following: "This donation shall produce
effect only by and because of the death of the donor, the property
herein donated to pass title after the donor's death." These
phrases are very significant. They connote only the thing: the
intention to transfer ownership after the death of the donor. As
we have already stated,, those words or phrases should be given
their ordinary meaning or connotation unless the donation
contains some qualifying and modifying provisions that may alter
their meaning, and here there is none. If at all what we find is
something which further strengthens our conclusion that such is
the unmistakable intent of the donor as shown by the inclusion of
a condition in the donation naming the donee as his true and
lawful attorney with express authority to sell or otherwise dispose
of the property "in the name of the donor," this is a characteristic
which negatives any idea of immediate transfer of ownership. It
evinces an intention to retain the ownership of the property
during the lifetime of the donor. This is a clear indication that the
donation in question is mortis causaor one to take effect after
death. Id.
Determination of whether donation is inter vivos or mortis
causa.—To our mind, the main consideration to be borne in mind
in determining if a donation is inter vivos or mortis causa is: Did
the donor intend to transfer the ownership of the property
donated upon the execution of
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the donation? If this is so, as reflected from the provisions
contained in the donation, then it is inter vivos,otherwise it is
merely mortis causa, or one made to take effect after death. In
this connection, what this Court has said in a recent case as to
how a donation should be interpreted is interesting (Heirs of Juan
Bonsato, et al. vs. The Court of Appeals, et al., L-6600). There we
said that if the donation is mortis causa the document should
reveal any or all of the following characteristics: (1) Convey no
title or ownership to the transferee before the death of the
transferor; or, what amounts to the same thing, that the
transferor should retain the ownership (full or naked) and control
of the property while alive (Vidal vs. Posadas, 58 Phil.
108; Guzman vs. Ibea, 67 Phil. 633); (2) That before his death, the
transfer should be revocable by the transferor at will, ad
nutum;but revocability may be provided for indirectly by means of
a reserved power in the donor to dispose of the properties
conveyed (Bautista vs. Sabiniano, L-4326, November 18, 1952);
(3) That the transfer should be void if the transferor should
survive the transferee.'' Id.
Increase of amount of rental.—Paragraph 4 of Annex A
explicitly declares that "the price of the lease shall be twelve
(12%) percent annually net of the assessed value" of the leased
property. Consequently, the rental was meant to bear said
proportion to the assessed value, whether the same was increased
or reduced. The succeeding clause, "which parcel of land is now
assessed at P41,330, for the year 1946," does not limit the above
quoted sentence, immediately preceding the same. The words
"now" and "for the year 1946" clearly imply that said clause
merely indicates the exact amount upon which the rental at the
beginning of the lease, in 1946 shall be computed. The aforesaid
clause does not propose to establish a fixed rental, for, otherwise,
it would have simply stated that, for purposes of computation of
the rental, the property leased was assessed at P41,330. In fact, it
would have been unnecessary—if the lessee's theory were correct,
and it isn't—to fix the basis for said computation. Instead, the
par-
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ties would have stipulated specifically the exact amount of the
rental. Cacho Hermanos, Inc. vs. Prieto, 98 Phil. 980 (unrep.).
 9. Form of Contract
Standard Specifications for Highways form part of
contract.—Appellant maintains that said Article 98 of the
Standard Specifications for Highways and Bridges does not form
part of his contract with the Government (Exh. D). This
contention is not only groundless, but, also, contrary to the
express provisions of his aforementioned contract, Exhibit D,
Article 1 of which explicitly provides: "That the advertisement,
instructions to bidders, general conditions, Commonwealth Act
No. 138, R.A. No. 76 and Republic Act No. 602, Specifications,
Proposed and Letter of Acceptance hereto attached, together with
the plans relating thereto, the original thereof are on file in the
office of the Highway District Engineer at Roxas City are hereby
made, and acknowledged by the parties hereto to a part of this
agreement."
Borda vs. Tabalon, 108 Phil. 278.
When contract is partly in writing and partly oral, it is oral
contract.—It is generally recognized that to be a written contract,
all its terms must be in writing; so that a contract partly in
writing and partly oral is, in legal effect, an oral contract (Fey vs.
Loose Wiles Biscuit Co., 75 P. 2d 810; People vs. Newcomer, et al.,
157 NE 240; 12 Am. Jur. 550).Manuel vs. Rodriguez, Sr.,108 Phil.
1.
Why statute of frauds is not applicable to executed
contracts.—Where a parol contract of sale is adduced not for the
purpose of enforcing it, but as a basis of the possession of the
person claiming to be the owner of the land, the statute of frauds
is not applicable in the same way that it does not apply to
contracts which are either totally or partially performed upon the
theory that there is a wide field for the commission of frauds in
executory contracts which can only be prevented by requiring
them to be in writing, a fact wihich is reduced to a minimum in
executed contracts because the intention of the parties
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becomes apparent by their execution. Pascual vs. Realty
Investment, Inc., 91 Phil. 257.
Agreements invalid unless made in writing.—The appellee
notes that Section 335 of the Code of Civil Procedure which is the
source of Section 21, Rule 123, has the caption "Agreements
invalid unless made in writing." He argues that, by inference, the
agreements mentioned therein are valid if in writing. The caption
is misleading, as has been pointed out in Conlu vs. Araneta (15
Phil. 387), Gallemit vs. Tabiliran (20 Phil. 241), and others,
because the section speaks of evidence—not validity. Anyway, the
caption of Section 21, Rule 123, is actually "agreements which
must be evidenced by writing" which represents the true principle
established by the rule. Now, as a contract mentioned in the
statute of frauds is not per se null and void simply because it is
not written (Conlu vs. Araneta; Gallemit vs. Tabiliran, etc.) it
follows converso, that such contract does not per se become valid
simply because it is written.Bas vs. De los Reyes, 87 Phil. 78.
Sale of land in private instrument is valid.—The formal
objection to the deed of sale is of no moment. We agree with the
trial judge that had not this instrument been notarized at all, the
same would have been fully effective as between the parties
under Article 1261 of the Old Civil Code in force at the time of the
conveyance. All the elements of a valid contract were present:
subject matter, capacity and consent of the parties, and lawful
consideration.Soriano vs. Latoño, 87 Phil. 757.
Party who may invoke statute of frauds in a pacto de retro sale
of land.—In the first place, the statute of frauds or Rule 123,
Section 21 of the Rules of Court apply only to executory contracts
and only to their enforcement. Both the extensions of the period of
repurchase and the extensions of the lease contract are no longer
executory, because they have already been performed and
consummated. What plaintiff-appellee seeks in this action is not
to enforce these extensions of the period to repurchase and the
period of the lease, but to compel defendant-appellant to execute
the corresponding deed of sale by public instrument of the land
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sold to her still with the right to repurchase up to 1949, so that
said instrument could be properly registered in the office of the
Register of Deeds, because she discovered that since 1935 when
Agripina received her certificate of title, the land had become
registered land under the provisions of Act 496 and so all deeds of
sale of the same to operate must be duly recorded. Furthermore,
it is for the vendee and lessor of the property in question rather
than for the defendant-appellant vendor and lessee to invoke the
provisions of the statute of frauds, because the former is the one
prejudiced by the extension of the period to repurchase and the
lease. If said vendee-lessor chose to deny or not to recognize the
extensions of repurchase and the lease, for the reason that they
were not reduced to writing, then the sale became absolute and a
consolidation of her title ensued when the defendant-appellant
vendor failed to make the repurchase in 1935, 1939 and 1944 as
found by the trial court; equally, the lease expired on those dates
when it was not renewed. So that, the appellee became the
absolute owner of the land and could recover possession of the
same from the appellant. For this reason, we do not quite
understand the legal import of the theory of appellant, but one
thing we are sure, that her invoking the provisions of the statute
of frauds is untenable. Cocjin vs. Libo,91 Phil. 777.
Where verbal agreement exists between joint tenants.—Here
there was no transfer of the homestead or part thereof at any
time after the approval of the application and before the issuance
of the patent. It was a joint tenancy and both the petitioner and
the respondent occupied, cleared and cultivated the homestead
applied for by the respondent since 1917 or at the latest since
1922. It is not an alienation or encumbrance "from the date of the
approval of the application and for a term of five years from and
after the date of the issuance of the patent or grant," because the
joint tenancy came into existence before the filing of the
application, the approval thereof and the issuance of the grant or
patent. It is unfair for the respondent not to live up to the verbal
understanding had with the petitioner and confirmed by him and
his wife
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in a document executed on 28 January 1930. Gauiran vs.
Sahagun, 93 Phil. 227.
Proof of agreement in consideration of marriage.—-It will be
perceived that the statute of frauds merely provides for rules of
evidence referring to the form of contracts. Whereas the above
civil law articles (Arts. 1328 and 633) concern the substantial
validity of the contract or transaction. In other words, by virtue of
the statute of frauds, the agreement in consideration of marriage
could be proved by the memorandum; but the effect of such
private writing is governed by the Civil Code. Bas vs. De los
Reyes Vda. de Bas, 87 Phil. 78.
Contracts must appear in a public document.—Acts and
contracts, which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable
property, must appear in a public document. Pornellosa vs. Land
Tenure Administration, 1 SCRA 375.
10. Performance
Delay in the performance of reciprocal obligations.—The fact that
the petitioner itself purchased various spare parts both for the
sawmill and the landing barges in order to complete them is a
clear admission on its part of its failure to deliver the sawmill and
the barges complete. The obligation of the party of the first part to
deliver the lumber in exchange for the equipment was to accrue
or become due "thirty days after the installation of the sawmill."
But the delay in said installation is not attributable to the party
of the first part, but to the party of the second part, which had not
complied with its obligation to deliver the equipment and
machinery "in good running condition." The responsibility for the
resulting delay in the delivery of the lumber may not, therefore,
be laid at the door of the party of the first part but at that of the
party of the second part, which had failed to live up to its
obligation. This attempted modification of the contract, by
allowing the party of the second part to accept surplus materials
instead of the lumber was, to a great extent, the cause
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for the belated delivery of the lumber. Philippine Operations,
Inc. vs. Auditor General, 94 Phil. 868.
Impossibility of performing condition of bail bond.—It is the
settled law of this class of cases that the bail will be exonerated
where the performance of the condition is rendered impossible by
the act of God, the act of the ob-ligee, or the act of
law. People vs. De la Cruz, 93 Phil. 487.
Failure to deliver copra a generic thing due to alleged force
majeure is not excusable.—Having this view in mind, it is
apparent that the copra which appellants claim to have gathered
and stored in a bodega at San Ramon, Samar, sometime in
December 1947, in fulfillment of their contract, and which they
claim was later destroyed by storm, in the supposition that the
claim is true, cannot be deemed to be the one contemplated in the
contract. It may be the one chosen by appellants in the exercise of
the discretion given to them under the contract, which they could
exercise in a manner suitable to their interest and convenience,
but cannot certainly be considered as the copra contemplated by
the parties in the contract. And this must be so because the copra
contemplated in the contract is generic and not specific. It
appearing that the obligation of appellants is to deliver copra in a
generic sense, this obligation cannot be deemed extinguished by
the destruction or disappearance of the copra stored in San
Ramon, Samar. Their obligation subsists as long as that
commodity is available. A generic obligation is not extinguished
by the loss of a thing belonging to a particular genus. Genus
nunquan perit. Manresa explains the distinction between
determinate and generic thing in his comment on Article 1096 of
the Civil Code of Spain, saying that the first is a concrete,
particularized object, indicated by its own individuality, while a
generic thing is one whose determination is confined to that of its
nature, to the genus ( genero) to which it pertains, such as a
horse, a chair. These definitions are in accord with the popular
meaning of the terms defined. Bunge Corp. vs. Camenforte &
Co., 91 Phil. 861.
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Alleged fortuitous cause is not an excuse for failure to deliver
generic thing.—Id.
Where failure to deliver sugar was not excused.—In the case
of Tu Tek & Co. vs. Gonzales, 29 Phil. 384, it appeared that the
plaintiff advanced P3,000.00 to defendant in payment of 600
piculs of sugar. The contract in writing did not specify that sugar
was to come from the crop on defendant's land which was
destroyed. It was held that the sugar to be sold not having been
segregated, the sale was not perfected and the loss of the crop,
even though through force majeure, did not extinguish
defendant's obligation to deliver the
sugar. De Leon vs. Soriano, 87 Phil. 193.
Failure of crops due to Huk troubles is not an excuse for the
nondelivery of the palay stipulated in the con-tract.—The
defendants averred that their failure to pay the exact quantities
of palay promised for 1944, 1945 and 1946 was due to the "Huk
troubles in Central Luzon which rendered impossible full
compliance with the terms of the agreement"; and it was
contended that "inasmuch as the obligations of the defendants to
deliver the full amount of the palay is depending upon the
produce as this is in the nature of an annuity, * * * the obligations
of the defendants have been fully fulfilled by delivery in good
faith all that could be possible under the circumstances." Except
as to quantity and quality, the first of which is itself generic, the
contract sets no bounds or limits to the palay to be paid, nor was
there even any stipulation that the cereal was to be the produce of
any particular land. Any palay of the quality stipulated
regardless of origin or however, acquired (lawfully) would be
obligatory on the part of the obligee to receive and would
discharge the obligation. It seems therefore plain that the alleged
failure of crops through alleged fortuitous cause did not excuse
performance. Id.
Failure to comply with contract of lease by reason of war.—It,
therefore, appears that the failure of appellee to comply with the
terms of the contract not only for the
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crop-year 1941-1942 but also for the other crop years covered by
the enemy occupation is due to war, or to its effects, and to other
factors which would not have been foreseen or avoided by
appellee, which in the light of the authorities and precedents on
the matter are deemed to be sufficient cause to justify the
non-fulfillment by the appellee of the terms of his contract of
lease with the appellants, and to relieve him of all his
responsibility therefor. This is more so if we take into account the
fact that to produce or mill sugarcane at that time was contrary
to public policy as it would be giving aid and comfort to the enemy
and was in violation of a specific order emanating from our
legitimate government to forestall any help that may be rendered
to the enemy in his war effort, it being an undisputed fact that
sugar is essential not only to feed the enemy but as raw material
for fuel to bolster up his war machine. De Castro vs. Longa, 89
Phil. 581.
Inherent impossibility of selling rental obligation during
wartime.—The non-payment of rent would not work to rescind the
contract. The failure of the lessee to pay rent during the war was
due to impossibility inherent in the nature of the thing to be
performed. In this aspect of the contract the payment was the
very thing promised by the lessee, the very foundation, the sole
consideration of the contract for the lessor, and the lessee's failure
to make good the promise was due to causes over which it had no
control and for which it was in no manner at fault. The war led to
its officers' incarceration or interment and prevented them from
receiving cash from their principal or from working to earn
money. Reyes vs. Caltex Phil., Inc., 84 Phil. 654.
Failure of contractor to comply with building contract.—The
petitioner argues that as the respondent had sold on credit to the
contractor, the principal debtor, construction materials on a
thirty-day basis thereby entering into another contract with the
latter without the surety's consent, the surety may not presently
be charged. There is no merit to the contention. First, the
thirty-day basis is not
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an accepted fact. And second, as directly stated by the Court of
Appeals, "if the appellee (respondent) had supplied construction
materials and advanced money to appellant contractor to pay
labor and materials, it was to help him fulfill his part on the
contract. Appellant contractor did not send the building materials
and funds to pay the labor as called for in the contracts. That
failure on the part of appellant contractor was a violation of the
contracts, the performance of which appellant surety company
undertook to guarantee by its bonds." Luzon Surety Co., Inc. vs.
Tamparong, L-49161, Dec. 29, 1950.
Where vendee's alleged insolvency did not justify vendor's
default.—Abeto and Flores, on the other hand, contend that they
were excused from delivering copra on November 18, 1946,
because the appellee was insolvent, in that part of the purchase
price of the 159,834 kilos of copra delivered to the appellee
remained unpaid, reliance being placed on articles 1466 and 1467
of the Old Civil Code. The contention is untenable, it appearing
that there is no conclusive proof showing that Abeto and Flores,
in definite terms, had warned the appellee that they would not
deliver the copra called for in their contract until they were sure
of being paid in accordance with said contract. Moreover, even
assuming that the appellee still owed Abeto and Flores something
upon account of the 159,834 kilos of copra delivered before
November 18, 1948, said fact is not a positive evidence of
insolvency, not to mention the circumstance that the contract is
essentially a cash transaction, 95% of the purchase price being
required to be paid in cash and only 5% by an irrevocable letter of
credit. Of course, the appellee was not to be expected to tender
payment before the presentation of the documents called for in
the contract, namely commercial invoice, on board bills of lading,
and wage certificate and/or survey report. Visayan Distributors,
Inc. vs. Flores, 92 Phil. 145.
Where factual impossibility did not excuse
non-performance.—Recalling that the contracts provided for the
construction of a railroad "whenever the contour of the land, the
curves, and elevations permit the same," and that such
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then arises if the defendant can excuse itself on this ground, or if
the plaintiff can recover from the defendant for damages for
breach of contract, through inability to mill cane. It is elemental
that the law requires parties to do what have agreed to do. If a
party charges himself with an obligation possible to be performed,
he must abide by it unless performance is rendered impossible by
the act of God, the law or the other party. A showing of more
inconvenience, expected impediments, or increased expenses is
not enough. Equity cannot relieve from bad bargains simply
because they are such. So one must answer in damages where
impossibility is only so in fact. (Thoroborow vs. Whitacre, 2 Ld.
Raym. [1164], 92 E.R. 270; Reid vs. Alaska Packing Co. [1903], 43
Or. 429; Columbus Ry & Power Co. vs. Columbus[1919], 249 U.S.
399.) DeCastro vs. Longa, 89 Phil. 581.
Failure to sell five booklets.—Under the contract, it was the
duty of the plaintiff to buy five booklets if she wanted to win the
award offered by the defendant prior to the closing date of the
sales of the tickets. She knew, as it is to be expected, that the
tickets may be sold out in no time and must have taken the
necessary precaution to insure herself of the required number of
tickets. This is her own lockout. If she fails to take this precaution
and the tickets are all sold out before the closing date, she alone
can be blamed. This is the only reasonable interpretation that can
be given to the requirement of the contract that the agent must
purchase "no less than five booklets of tickets before the close of
sales of tickets each draw." Atienza vs. Philippine Charity
Sweepstakes, 90 Phil. 478.
Where vendor failed to prove that he could deliver the
stipulated copra.—Abeto and Flores contend that they had the
copra called for in their contract with the appellee on November
18, 1946, but that they refused to deliver the same on the ground
that the appellee was insolvent and failed to guarantee the
payment of the purchase price by a letter of credit called for in the
contract,—a contention
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also availed of by the Surety. It is very significant, however, that
Abeto and Flores had not made in their answer even the slightest
hint that they had copra in the port of Romblon on November 18,
1946. Upon the other hand, they merely invoked the defense that
the contract of Novem-ber 9, 1946, was cancelled by another
agreement made on November 22, 1946, calling for the delivery of
only 500 tons of copra, and that, at any rate, their failure to
comply with the contract of November 9, 1946, was excused
by force majeure(the abrogation of the copra trade agreement
between the U.S. and the Philippines). Even in their letter to
counsel for the appellee (Exhibit 1), Abeto and Flores absolutely
failed to mention the alleged fact that they had the necessary
quantity of copra on the date specified in their contract. Visayan
Distributors, Inc. vs. Flores, 92 Phil. 145.
Period within which obligation to construct streets on land
occupied by squatters would be performed.—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 circumstance 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. Gregorio Araneta, Inc. vs. Phil. Sugar Estates
Development Co., Ltd., 20 SCRA 330.
11. Renewal and Extension
Tacit renewal of lease.—Tacit renewal (tácita reconducción) is not
a contract without term entered into by the parties, but an
implied renewal of a previous contract.
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A tacit renewal takes place only if before the expiration of fifteen
days after the expiration of the term of a previous contract of
lease, no demand to recover the possession of the property leased
from the tenant has been made by the landlord or lessor. There
can not be a tacit renewal without a prior contract. Ledesma vs.
Pictain, 79 Phil. 95.
Renewal of stockbroker's bond.—The surety of the brok-er in
the present case informed the Director of Commerce that "the
term of said bond is hereby renewed for another period of one
year from October 26, 1935 to October 26, 1936." It is evident that
the surety considered the renewal an accomplished fact. The
letter of the Director of Commerce did not object to the renewal,
but merely wanted a compliance with the formal requisite, that
is, that the original and a duplicate be filed with his office. Held:
That these letters sufficiently complied with the legal requisites
for the continuance of the terms of the original bond. The renewal
was perfected through these letters. Form is generally not
necessary for the binding force of a contract, a meeting of the
minds being sufficient. In this case, the bond need not be in a
public instrument, but any writing is sufficient. Director of
Bureau of Commerce vs. Rodriguez, 74 Phil. 33.
Extension of contract of lease by court.—But defendant claims
that the trial court should have at least extended his contract of
lease for a reasonable period as a matter of equity to enable him
to recover the losses he had sustained through the fault of the
plaintiffs. However, the trial court cannot possibly grant the
extension requested, first because under the lease contract the
period of lease can only be renewed for another year upon mutual
agreement of the parties, which is sadly lacking here, and,
second, because defendant himself volunteered to return the
Burke Building to the plaintiffs, reserving to himself only that
portion which he was actually
occupying. Desbarats vs. DeVera, 88 Phil. 762.
12. Novation
Novation of contract.—Appellant's suggestion that the
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promissory note in question was novated in August 1948, in that
the appellee promised to pay in 1950 and to put up securities,
deserves no serious consideration. The complaint is based on the
note executed on August 16, 1939, and makes no mention
whatsoever of the alleged novation. The suggestion, made for the
first time in appellant's opposition to the motion to dismiss, is
obviously an afterthought. Aranzanso vs. Martinez, 88 Phil. 536.
Novation of contract of sale.—Where the compromises agreed
upon by the parties failed to materialize because the plaintiffs
changed their mind and declined to accept the sum agreed upon
in the amicable settlement, the original contract of sale of
property subject to some conditions has been novated and has
ceased to be binding upon the parties. Litton vs. Luzon Surety
Co., Inc., 90 Phil. 783.
Where pacto de retro sale was novated.—Our conclusion that
there was novation of the contract pacto de retro sale in 1932
when plaintiffs secured the title to the property and defendant
acquiesced in such issuance of title, his right being limited to an
option to repurchase the property within a fixed period, renders
consideration of the errors assigned unnecessary. If plaintiffs
became owners of the land in 1932 and defendant a mere lessee
with option to buy, certainly the provisions of the new Civil Code
may not be invoked in his favor. Cojuangco vs. Gonzales, 93 Phil.
718.
Novation does not require a special form.—Id.
13. Liabilities—Penalty, Interest, Etc.
Duty to minimize damages.—An obligee is in duty bound to
minimize the damages for which he intends to hold any obligor
responsible. A party injured by a breach of contract cannot
recover damages for any loss which he might have avoided with
ordinary care. Coco Planters Investment Corp. vs. Banayo,L-8069,
June 23, 1942.
Liability beyond the limit fixed in contract.—The doctrine of
quasi-contract invoked by the Court of Appeals
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does not apply, for here there is an express contract by which Mrs.
Tangco has set a limit to her liability at P45,000, later increased
by P1,300 for extra work done at her request. To extend her
liability beyond this limit, some thing more than what appears in
the findings of fact of the Court of Appeals would be necessary,
such as, among other things, Mrs. Tangco's consent to the doing of
the extra work and knowledge on her part that the contractor
expected payment for the same. Tangco vs. Court of Appeals,89
Phil. 395.
Penal clause of contract strictly construed.—As regards the
penal clause contained in the two deeds of mortgage herein
involved, we agree to the following finding of the Court a quo:
"The attempt made by the plaintiff to pay the obligation before
the arrival of the term fixed for the purpose may be wrong; but it
may be attributed to an honest belief that the term was not
binding and not to a desire to modify the contract." This penal
clause should be strictly construed. Ponce de Leon vs. Syjuco,
Inc., 90 Phil. 311.
Forfeiture not favored in law or equity.—It is hardly reasonable
to say that the appellant would be negligent in making the
deposit in court of the rental for the month of May, knowing that
by such neglect and under one view entertained by some members
of the Court, they were going to lose not only the possession of the
lot but also that of their new seventy-five-thousand-peso building,
including title thereto; or, under the other view, that the
(appellants) would be ordered to tear the building down and
remove the materials, both of which alternative would be
extremely onerous. Besides the loss of the building in favor of the
appellees would be equivalent to a forfeiture, and forfeitures are
not favored either in law or in equity. A forfeiture cannot be had
on grounds other than those specified in the contract. (17 C.J.S.
Sec. 407, pp. 894-896.) Yu Phi Khim vs. Amparo, 86 Phil. 441.
Payment of interest must be expressly stipulated.—No interest
is due unless it is expressly stipulated (Art. 1755,
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Civil Code). As under the contract the lender took possession of
the lands and reaped the fruits thereof, it must have been
thought by the parties that it was unfair to make the borrower
pay interest in addition. Velez vs. Balzanza, 73 Phil. 630.
Penalty takes place of interest.—Where the penalty is to be paid
if and when the mortgagor pays the mortgage before the
expiration of the four-year period provided in the mortgage
contract, the penalty is designed to take the place of the interest
which the creditor would be entitled to collect if the duration of
the mortgage has not been cut short and from which interest the
debtor has been relieved. Gregorio Araneta, Inc. vs. De Paterno,91
Phil. 787.
If principal obligation is void, then penal clause is also
void.—The principal obligation being void, the accessory
obligation, namely, the penal clause sought to be enforced by the
plaintiff is void. The nullity of the principal obligation carries
with it that of the penal clause. The penal clauses in question
being void because of the invalidity of the principal contract of
lease, and considering that the defendant cannot be held to have
confirmed these contracts because they were not susceptible of
confirmation, it is clear that the parties should be left where they
are. The courts will aid neither of them to enforce any stipulation
in these contracts. Municipality of Hagonoy vs. Evangelista,73
Phil. 586.
Indemnity for the violation of terms of the mortgage.—The
aforementioned acts of the defendant have inured to the benefit of
the plaintiff, Ernest Berg. It is clear, however, that such acts
could not have been understood by the parties to the deed of
mortgage as a "violation" of the rights of the mortgage. Hence, the
special indemnity stipulated in said deed, for the event of
violation thereof, could not have been intended to apply to a
situation like the one under consideration. Berg vs. Teus, 96 Phil.
102.
Where selling price of land was not unconscionable and clause
was enforced.—Petitioners also contend that as the
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assessed value of the land in 1939, when the contract was
celebrated, was P4,281, the selling price of P3,000, agreed upon is
unconscionable and therefore, the penal clause should be
considered as not written, and petitioners should be allowed to
exercise the right to repurchase on equitable considerations. And
in support of this contention, counsel presented evidence to show
that the market price of the land in 1940, the year the period of
redemption was supposed to expire, was fourteen times more
than the money paid for it by respondent such that, if that should
be taken as basis, the value of the land would be P43,004.50.
While this contention may have some basis when considered with
reference to an absolute contract of sale, it loses weight when
applied to a contract of sale, with pacto de retro, where the price
is usually less than in absolute sale for the reason that in a sale
with pacto de retro the vendor expects to reacquire or redeem the
property sold. Another flaw we find is that all the evidence
presented refers to sales which were executed in 1940 and 1941
and none was presented pertaining to 1938, or its neighborhood,
when the contract in question was entered into. And the main
reason we find for not entertaining this claim is that it involves a
question of fact and as the Court of Appeals has found that the
price paid for the land is not unreasonable as to justify the
nullification of the sale, such findings, in an appeal by certiorari,
is final and conclusive upon this court.Amigo vs. Teves, 96 Phil.
252.
Liability for risks not enumerated in the contract.—The failure
of the defendant insurance company to include death resulting
from a boxing match or other sports among the prohibitive risks
leads to the conclusion that it did not intend to limit or exempt
itself from liability for such death. (Brams vs. New York Life Ins.
Co., 299 Pa. 11, 148 Atl. 855; Jolley vs. Jefferson Standard Life
Ins. Co., 95 Wash. 683, 294 Pac. 585.) Dela Cruz vs. Capital Ins.
& Surety Co., Inc., 17 SCRA 559.
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14. Annulment and Rescission
A—Annulment
Parties in action for annulment of contract.—Failure to state a
cause of action may be asserted at any stage of the proceedings
but not later than the trial. (Moran, Comments on the Rules of
Court, 3rd ed., Vol. 1, p. 172 citing De Jesus vs.
Manglapus, L-527, May 28, 1948). It is here beyond question that
the defense of failure to state a cause of action was not pleaded in
any motion to dismiss, in the answer filed in the trial court, or at
any time during the trial; neither was it raised in the brief filed
for respondent Dimaguiba in the Court of Appeals, and the point
was brought up for the first time during the oral argument in the
Court of Appeals. By express mandate of Section 10 of Rule 9,
said defense was waived, and the Court of Appeals therefore
erred in basing its decision of affirmance upon the fact that the
petitioners are not the proper parties who may seek the
annulment of sales in question. Reyes vs. Court of Appeals, 95
Phil. 952(unrep.).
Who may bring an action for annulment.—He who is not a
party to a contract, or an assignee thereunder, or does not
represent those who took part therein, has under Articles 1257
and 1302 of the Civil Code no legal capacity to challenge the
validity of such contract. Concepcion vs. Sta. Ana, 87 Phil. 787.
Mistake of law does not render contract voidable.—Mistake of
law does not make a contract voidable, because ignorance of the
law does not excuse anyone from its compliance (Art. 2, Civil
Code; 8 Manresa, 646, 24 ed.). That the petitioners did not know
the prohibition against partition of the conjugal partnership
property during marriage (Art. 1432, Civil Code), is no valid
reason why they should ask for the annulment of the sales made
in Exhibits C and D and recognized in Exhibit 1. DeLuna vs.
Linatoc, 74 Phil. 15.
Where mistake did not vitiate sale.—The defendant
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bought a specific article and agreed to pay P3,200 for it. The fact
that the article is not as large as he thought it was does not
relieve him from the necessity of paying that price. It was just
such cases as this that Article 1471, paragraph 1 of the Civil Code
was intended to cover. If the defendant intended to buy a meter,
he should have so stated in the contract. (Goyena vs.
Tambunting, 1 Phil. 490).Vda. de Gonzales vs. Santos,87 Phil.
471.
Evidence as to mistake of one of the parties.—Contracts
solemnly and deliberately entered into may not be overturned by
inconclusive proof or by reason of mistakes of one of the parties to
which the other in no way has contributed. Id.
At any rate, her error, if any, was an error of law which
ordinarily does not vitiate contractual
consent.—Vda. de Villacorta vs. Mariano, 89 Phil. 342.
Where contract is void there is nothing to annul.—It appearing
that the sale made by the deceased to the defendant is alleged to
be fictitious, with absolutely no consideration, it should be
regarded as a non-existent, not merely a null contract. And there
being no contract between the deceased and the defendants, there
is in truth nothing to annul by action. The action brought cannot
thus be for annulment of contract, but is one for recovery of a
fishpond, a real action that should be, as it has been brought in
Pampanga, where the property is located. Pascual vs. Pascual, 73
Phil. 561.
Remedy under Rule 38 to set aside agreement.—Where the
agreement to vacate the lot in question was entered into by the
petitioner against his will, he should have availed himself of the
remedy so provided by Rule 38 to annul the same instead of
resorting to petition for certiorari and prohibition.Flores vs.
Palacio, 83 Phil. 626.
 Where there was a mere error, not a deliberate
misrepresentation in a contract of sale.—Respondents' allegation
that the petitioner violated the contract of the sale with the
Philippine Shipping Administration on the ground of
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misrepresentation, petitioner having alleged in said contract that
his father was a naturalized Filipino, is without merit. Such was
not a deliberate misrepresentation but an error which any person
not versed in the law is prone to commit. It is clear that petitioner
merely meant that his father was a Filipino citizen by operation
of law and not by birth. Chiongbian vs. De Leon, 82 Phil. 771.
Misrepresentation in the execution of contract of sale.—Pilar
Bautista is admittedly an intelligent woman with business
experience, and it is fair to assume that she would not sign the
deed of sale covering her property of considerable size and value
without ascertaining its terms and conditions. Indeed, there is
enough evidence on record to show that Pilar not only read the
document herself but called her daughter to read it aloud, even
before the signing of the contract in the office of the Register of
Deeds of Manila, but this assertion seems to be more unlikely
than the theory of the defendants, considering, as already stated,
her intelligence and business experience. At any rate, as aptly
pointed out by the defendants, the alleged misrepresentation
could not have been decisive in the execution of the deed of sale,
the material and important factor undoubtedly being the
adequacy of the price offered and paid; and there is no
controversy on the latter point. Bautista vs. Isabelo,93 Phil. 843.
Fraud that would vitiate contract.—It must be noted that fraud
is manifested in illimitable number of degrees or gradations, from
the innocent praises of a salesman about the excellence of his
wares to those malicious machinations and representations that
the law punishes as a crime. In consequence, Article 1270 of the
Spanish Civil Code distinguishes two kinds of (civil) fraud, the
causal fraud, which may be a ground for the annulment of a
contract, and the incidental deceit, which only renders the party
who employs it liable, for damages. This court has held that in
order that fraud may vitiate consent, it must be the causal (dolo
causante), not merely the incidental (dolo incidente), inducement
to the making of the contract (Art.
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1270, Spanish Civil Code; Hill vs. Veloso, 31 Phil.
160). Woodhouse vs. Halili, 93 Phil. 526.
False representation of a party.-—If he was guilty of a false
representation, this was not the causal consideration, or the
principal inducement, that led plaintiff to enter into the
partnership agreement. Id.
Fraud in execution of contract is incidental matter.—Id.
Contract obtained thru fraud.—There is no clear evidence to
show that said gifts and payments of money had actually the
effect of persuading Balbina Baguio to sign a contract which she
did not intend to execute, or the contents of which she was not
aware, nor are they of such a nature that could vitiate a contract
which is valid in every other respect. Preston vs. Surigao
Consolidated Mining Co., Inc., 92 Phil. 1070 (unrep.).
Action filed by brother to annul contract of sale executed by his
deceased sister.—The deceased sister has not transmitted to her
brother any right arising from the contract of conveyance or sale
of her lands to the defendants, and therefore the brother cannot
file an action to annul such contract as representative of the
deceased. Concepcion vs. Sta. Ana, 87 Phil. 787.
Annulment of contract may be brought only by real parties in
interest.—We declared in Cook vs. McMicking (27 Phil. 10):
"nullity of a deed or contract may be taken advantage of only by
persons who bear such relation to the parties to the contract that
it interferes with their rights and interests." Hence, nullity of the
extrajudicial partition may only be invoked by Crispina Dee—not
by plaintiff. Lim vs. Dee Hao Kim, 102 Phil. 1171(unrep.).
Annulment of contract on the ground of duress or
intimidation.—In order to cause the nullification of acts executed
during the occupation, the duress or intimidation must be more
than the "general feeling of fear" on the part of the occupied over
the show of might by the occupant. There must be specific acts or
instances of such nature and magnitude as to have, of themselves
caused fear
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or terror upon the subject thereof, in order that his execution of
the questioned deed or act can not be considered
voluntary. Vda. de Lacson vs. Granada, 1 SCRA 876; De la
Paz vs. Garcia, 18 SCRA 779; Armentia vs. Patriarca, 18 SCRA
1253.
Stipulation whereby student cannot transfer to another school
without refunding scholarship in cash is null and void.—The
stipulation in a contract, between a student and the school, that
the student's scholarship is good only if he continues in the same
school, and that he waives his right to transfer to other school
without refunding the equivalent of his scholarship in cash, is
contrary to public policy and, hence, null and void, because
scholarships are awarded in recognition of merit and to help
gifted students in whom society has an established interest or a
first lien, and not to keep outstanding students in school to
bolster its prestige and increase its business potential. Cui vs.
Arellano University, 2 SCRA 205.
Action for annulment should be filed within four years from
discovery of fraud.—The four years within which an action to
annul a contract on the ground of fraud may be filed is counted
from the discovery of the fraud and not from the execution of the
contract. Descutido vs. Baltazar, 1 SCRA 1174.
An action to set aside a contract which is void ab initio does not
prescribe.—Trigal vs. Tobias, 2 SCRA 1154.
A resolutory condition in a contract for personal services
permitting the cancellation of the contract by one of the contracting
parties is valid.—Allied Free Workers' Union (PLUM) vs.
Compañia Maritima, 19 SCRA 258.
Annulment of contract on the ground of intimidation.—An
action to annul a contract on the ground of duress, which is a
mere vice or defect of consent, must be brought within four years
after it had ceased. Where the intimidation ceased 28 years before
the action for annulment was filed and nine years had passed
after the person, who allegedly employed intimidation had died,
the action has prescribed.
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Moreover the plaintiff had entered into a series of subsequent
transactions which confirmed the contracts, which she is seeking
to annul on the ground of duress. Her action is clearly
barred. Vda. deRodriguez vs. Rodriguez, 20 SCRA
908; Armentia vs. Patriarca, 18 SCRA 1253.
B—Rescission
Rescission is not permissible for casual breach of contract.—It is a
principle too well-known that "rescission will 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." (Song Fo Co. vs.
Hawaiian-Philippines Co., 47 Phil. 821). Tuason vs. Tuason,
Jr., 88 Phil. 428.
Right of owner to dispose of all her properties.—The conveyance
or sale of parcels of land to the defendant was voluntarily made
by the deceased to him. As the deceased had no forced heir, she
was free to dispose of all her properties as absolute owner thereof,
without further limitation than those established by law, and the
right to dispose of a thing involves the right to give or convey it to
another without any consideration. The only limitation
established by law on her right to convey said properties to
defendant without any consideration, is, that she could not
dispose of or transfer her property to another in fraud of her
creditors. Concepcion vs. Sta. Ana, 87 Phil. 787.
Action by forced heir to rescind contract.—The forced heir of
the deceased had no right to institute as representative of the
decedent, an action of nullity of a contract made by the decedent
to defraud her creditors, because such a contract being considered
illicit under Article 1305 of the Civil Code the deceased herself
had no right of action to annul it and recover the properties she
had conveyed to the defendant. But the forced heir could in such
case bring an action to rescind the contract under Article 1291 (3)
of the Civil Code. Id.
Where action for annulment of sale is secondary to action to
recover real property.—The prayer for the annulment
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or rescission of the sale does not operate to efface the
fundamental and prime objective and nature of the action, which
is to recover real property. The annulment of the sale is only
secondary. At any rate, being absolutely void, entitled to no
authority or respect, the sale may be impeached in a collateral
proceeding by any one with whose rights and interests it conflicts.
There is no presumption of validity.Inton vs. Quintana, 81 Phil.
97.
Mutual return by contracting parties of what they received
under the contract does not refer to innocent third
parties.—Dia vs. Finance & Mining Investment Corp., 83 Phil.
675.
When seller performs his obligations under contract of sale,
buyer cannot rescind it.—Co Cho Chit vs. Hanson, Orth &
Stevenson, Inc., 103 Phil. 956.
After the vendor has delivered the thing chosen by the vendee,
the latter cannot rescind the sale.—Id.
When action for rescission becomes a prejudicial question.—If
the right of action for unlawful detainer would be subordinated to
the action for rescission of the compromise agreement, then the
latter would be a prejudicial question and the proceedings in the
former would have been suspended until the final disposition of
the action for rescission. The summary nature of the remedy of
unlawful detainer would thus be completely defeated or
destroyed. The lawmaking body could not have intended such
result. Leonor vs. Sycip, 1 SCRA 1215.
Action for rescission is not required upon breach of
compromise.—The party aggrieved by the breach of a compromise
agreement may, if he chooses, bring the suit contemplated or
involved in his original demand, as if there had never been any
compromise agreement, without bringing an action for rescission,
for he may regard the compromise agreement as already
"rescinded." Id.
Effect of failure to protest against notice of rescission.—The
silence of one of the contracting parties, and his failure to protest
against the notice of rescission made by
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the other, in which the grounds therefor were specified, suggest
admission of the veracity and validity of the latter's
claim. Pellicer vs. Ruiz, 2 SCRA 160.
Effect of debtor's failure to apply any portion of loan obtained to
payment of purchase price.—The non-application to the payment
or even amortization of the balance of the purchase price of any
portion of the agricultural loans obtained by the debtor, as well as
his failure to apply his share of the crops to the payment of the
loan, sufficiently warrants the exercise, by the creditor, of the
right to rescind the contract. Id.
Rescission by judicial action may be granted only where the
breach complained of is so substantial.—Philippine Amusement
Enterprises, Inc. vs. Natividad, 21 SCRA 284.
15. Reformation
Mutual mistake must be clearly proven.—Relief by way of
reformation of a written agreement will not be granted unless the
proof of mutual mistake is of the clearest and most satisfactory
character. The amount of evidence necessary to sustain a prayer
for relief where it is sought to impugn a fact in a document is
always more than a mere preponderance of the
evidence. Vda. deGonzales Mondragon vs. Santos, 87 Phil. 471.
Reformation of lease instrument.—It is also to be noted that
this is not a case in which a reasonable rental is to be fixed in the
discretion of the court. It is a case of reformation of a contract
voluntarily agreed into on the ground that the rental agreed upon
exceeds that fixed by law. Here again it was the respondents who
had the burden of proof that the law was violated, as they hold
the affirmative of a proposition, i.e., that the rentals are
excessive. They must prove said affirmation. In this respect also
we believe that respondents have not adduced the evidence
necessary to overcome the evidence submitted by the
petitioner. Velasco vs. Court of Agrarian Relations, 109 Phil. 642.
The function of reformation is not to make a new con-
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tract for the parties, but only to make the instrument speak their
genuine intention—Cosio vs. Palileo, 17 SCRA
196.—ATTY.MARIA LUISA MENDOZA and JOJO MA.LACSON.
Notes.—(a) Inadequacy of price as ground for annulling
execution sale.—A judicial sale under foreclosure is not to be set
aside for mere inadequacy of price unless the inadequacy is so
great as to shock the conscience, or unless there are other
circumstances making the sale unjust (Warner, Barnes & Co. vs.
Santos, 14 Phil. 446; National Bank vs. Gonzalez,45 Phil.
693; Navarro vs. Navarro, 76 Phil. 122; Bank of the Philippine
Islands vs. Green, 52 Phil. 491).
Furthermore, in order to annul a judicial sale, conducted
regularly and confirmed by the court, upon ground of lesion
through inadequacy of price, it must appear from the record that
a higher price could be obtained for the property or that there was
fraud in the sale (La Urbana vs. Belando,54 Phil. 930; Guerrero
vs. Guerrero, 57 Phil. 442).
But while inadequacy of price alone does not justify the setting
aside of a judicial sale, yet when such inadequacy is very great
and there are slight circumstances tending to show that
interested parties were misled or by accident or mistake were
prevented from attending the sale, or preventing it, it may be set
aside (Iturralde vs. Velasquez, 41 Phil. 886).
In Del Rosario vs. Villegas, 49 Phil. 634, it was held that where
a provincial sheriff, guided by a letter of the attorneys for the
judgment creditor and by data furnished by certain merchants in
order to fix prices for the execution of a judgment, not subject to
execution but also arrogated to himself powers which belonged
only to the court, his acts were illegal and void; and therefore the
sale of the two parcels of land in question, based upon sums
resulting from arbitrary and illegal estimate of prices, is also null
and void.
See also De Leon vs. Salvador, L-30871, Dec. 28, 1970, reported
in this volume.
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