Dizon vs.

Gaborro, 83 SCRA 688-691 –

ARTICLE 1359
Facts:
Petitioner, Jose P. Dizon, was the owner of the three parcels of land,
situated in Mabalacat, Pampanga. He constituted a first
mortgage to DBP to secure a loan of P38,000.00 and a second
mortgage to PNB amounting P93,831.91.

Petitioner defaulted in the payment of his debt, therefore, the

Development Bank of the Philippines foreclosed the mortgage
extrajudicially. Gaborro became interested in the lands of Dizon. But
since the property was already foreclosed by the DPB. They then
entered into a contract captioned as “Deed of sale with assumption
of mortgage” and the second contract executed the same day, is
called “Option to Purchase Real Estate” After the execution of said
contracts, Alfredo G. Gaborro took possession of the three parcels of
land.

After the execution of the contract and its conditions to him,

Gaborro made several payments to the DBP and PNB. He improved,
cultivated the kinds raised sugarcane and other crops produce.

Jose P. Dizon through his lawyer, wrote a letter to Gaborro informing

him that he is formally offering reimburse Gaborro of what he paid
to the banks. Gaborro did not agreed to the demands of the
petitioner, hence, Jose P. Dizon instituted a complaint in the Court of
First Instance of Pampanga, alleging that the documents Deed of
Sale With Assumption of Mortgage and the Option to Purchase Real
Estate did not express the true intention and agreement between
the parties. Petitioner, contended that the two deeds constitute in
fact a single transaction that their real agreement was not an
absolute sale of the land but merely an equitable mortgage or
conveyance by way of security for the reimbursement or refund by
Dizon to Gaborro of any and all sums which the latter may have paid
on account of the mortgage debts in favor of the DBP and the PNB.

Issue:
Whether or not the contract showed the true agreement  between
the parties.

Held:
No. The court held that the true agreement between the plaintiff
and defendant is that the defendant would assume and pay the
indebtedness of the plaintiff to DBP and PNB, and in consideration
therefore, the defendant was given the possession and enjoyment of
the properties in question until the plaintiff shall have reimbursed to
defendant fully the amount of P131,831.91 plus 8% interest per
annum from October 6, 1959 until full payment, said right to be
exercised within one year from the date the judgment becomes
final, if he fails to do so within the said period, then he is deemed to
have lost his right over the lands forever.

Gabriel v. Monte de Piedad and CA

G.R. No. L-47806, 14 April1941

FACTS:

Petitioner Gabriel was employed as an appraiser of jewels in the pawnshop of Monte de Piedad. He
executed a chattel mortgage to secure the payment of the deficiencies which resulted from his
erroneous appraisal of the jewels pawned to the appellee, amounting to P14,679.07, with six percent
(6%) interest from said date. In this chattel mortgage, Gabriel promised to pay to Monte de Piedad
P300 per month until the sum of P14,679.07, with interest, is fully paid. In case of default to
effectuate the chattel mortgage, an action was instituted against Gabriel by Monte de Piedad in the
CFI. Gabriel denied the genuineness of the execution of the said chattel mortgage. By way of special
defense, he alleged:(1) the chattel mortgage was void because a) it is contrary to law, morals and
public policy; (b) he was made to sign it against his will and through misrepresentation where E.
Marco(Director-General) signed in behalf of Monte de Piedad without the latter’s authority,(c) the
subject matter and considerations of the mortgage do not exist, and(d) the payments already made
allegedly for the mortgage were in fact his salaries;(2) his acquittal in a criminal case that used the
chattel mortgage as evidence of his liability was a bar to the present civil case.

ISSUE:

Whether or not, the chattel mortgage executed by Gabriel is against public policy, law, or morals?

RULING:

No. The Chattel Mortgage does not violate the law, morals or public policy.

A contract is to be judge by its character, and courts will look to the substances and not to the mere
form of the transaction. The freedom of contract is both a constitutional and statutory right and to
uphold this right, courts should move with all the necessary caution and prudence in holding
contracts void. The term “public policy” is vague and uncertain in meaning, floating and changeable
in connotation. It may be said, however, that, in general, a contract which is neither prohibited by law
nor condemned by judicial decision, nor contrary to public morals, contravenes no public policy. In
the absence of express legislation or constitutional prohibition, a court, in order to declare a contract
void as against public policy, must find that the contract as to the consideration or thing to be done,
has a tendency to injure the public, is against the public good, or contravenes some established
interests of society, or is inconsistent with sound policy and good morals, or tends clearly to
undermine the security of individual rights, whether of personal liability or of private property.

Petitioner also contends that the chattel mortgage in question is void because it lacks consideration.
A consideration, in the legal sense of the word, is some right, interest, benefit, or advantage
conferred upon the promisor, to which he is otherwise not lawfully entitled, or any detriment,
prejudice, loss, or disadvantage suffered or undertaken by the promisee other than to such as he is
at the time of consent bound to suffer.

Examining the contract at bar, it was executed voluntarily to guarantee the deficiencies resulting
from the erroneous appraisals of the petitioner. A pre-existing admitted liability is a good
consideration for a promise. The fact that the bargain is a hard one will not deprived it of validity. The
exception to this rule in modern legislation is where the inadequacy is so gross as to amount to
fraud, oppression or undue influence, or when statutes require the consideration to be adequate.
The instant case does not fall within the exception.

Hence, the petition is hereby dismissed and the judgment sought to be reviewed is affirmed, with
costs against the petitioner.

Pakistan International Airlines v. Ople

G.R. No. 61594, 28 September 1990

FACTS:

Pakistan International Airlines Corporation (“PIA”), a foreign corporation licensed to do business in

the Philippines, executed in Manila two (2) separate contracts of employment, one with private
respondent Ethelynne B. Farrales and the other with private respondent Ma. M.C. Mamasig.

The contracts provided that (1) the Duration of Employment is for a period of 3 years, (2) PIA
reserves the right to terminate this agreement at any time by giving the EMPLOYEE notice in writing
in advance one month before the intended termination or in lieu thereof, by paying the EMPLOYEE
wages equivalent to one month’s salary; and (3) the agreement shall be construed and governed
under and by the laws of Pakistan, and only the Courts of Karachi, Pakistan shall have the
jurisdiction to consider any matter arising out of or under this agreement.

Farrales and Mamasig then commenced training in Pakistan and after such, they began discharging
their job functions as flight attendants with base station in Manila and flying assignments to different
parts of the Middle East and Europe.

Roughly one (1) year and four (4) months prior to the expiration of the contracts of employment, PIA
sent separate letters to private respondents advising both that their services as flight stewardesses
would be terminated. PIA claimed that both were habitual absentees, were in the habit of bringing in
from abroad sizeable quantities of “personal effects”.

Prior Proceedings:  Regional Director of MOLE ordered the reinstatement of private respondents

with full backwages or, in the alternative, the payment to them of the amounts equivalent to their
salaries for the remainder of the fixed three-year period of their employment contracts having
attained the status of regular employees.

On appeal the Deputy Minister of MOLE, adopted the findings of fact and conclusions of the
Regional Director and affirmed the latter’s award save for the portion thereof giving PIA the option, in
lieu of reinstatement, “to pay each of the complainants [private respondents] their salaries
corresponding to the unexpired portion of the contract[s] [of employment] . . .”

Hence, this instant Petition for Certiorari by PIA.

ISSUE:

Whether or not the provisions of the contract superseded the general provisions of the Labor Code

RULING:

No. The principle of freedom to contract is not absolute. Art. 1306 provides that stipulations by the
parties may be allowed provided they are not contrary to law, morals, good customs, public order &
policy. Thus, the principle of autonomy of contracting parties must be counterbalanced with the
general rule that provisions of the applicable law are deemed written into the contract.
In this case, the law relating to labor and employment is an area which the parties are not at liberty
to insulate themselves and their relationship from by simply contracting with each other.

ARROYO vs BERWIN
*PICTURE*
Bustamante v. Rosel
G.R. No. 126800, 29 November 1999

FACTS:

Petitioner entered into a loan agreement with the respondent wherein the former as the borrower
and the latter as the lender. The loan was secured by a parcel of land of the petitioner as a
collateral. In their agreement, it was stated that in the event that if petitioner herein fails to pay, the
respondent has the option to buy or purchase the collateral.  When the loan was about to mature,
respondents proposed to buy the collateral land on the amount stated in the loan agreement.
Petitioner herein refuse to sell and to execute a Deed of Absolute sale. When petitioner tendered
payment on the loan, respondent refuse to receive and demand the sale of the land. Rosel filed a
complaint in the RTC which rendered a decision denying the prayer for the issuance of the deed
sale. However, upon appeal to the Court of Appeals, the said decision was reversed. Hence, this
petition.

ISSUE:

Whether or not the stipulation in the loan contract was valid and enforceable. 

RULING:

 No.Contracts have the force of law between the contracting parties and must be complied with in
good faith. However, certain exceptions to the rule, specifically Article 1306 of the Civil Code, which
provides that “The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy.”

A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to acquire the
property given as security for the loan. This is embraced in the concept of pactum commissorium,
which is proscribed by law. The elements of pactum commissorium are as follows: (1) there should
be a property mortgaged by way of security for the payment of the principal obligation, and (2) there
should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of
non-payment of the principal obligation within the stipulated period.

In this case, the intent to appropriate the property given as collateral in favor of the creditor appears
to be evident, for the debtor is obliged to dispose of the collateral at the pre-agreed consideration
amounting to practically the same amount as the loan. In effect, the creditor acquires the collateral in
the event of non-payment of the loan. This is within the concept of pactum commissorium. Such
stipulation is void.

WHEREFORE, we GRANT petitioner’s motion for reconsideration and REVERSE the decision of the
Court of Appeals.
Daywalt v. Corp.
G.R. No. L-13505, 4 February 1919
FACTS:

Teoderica Endencia obligated herself to convey to Geo W. Daywalt a tract of land. The deed should
be executed as soon as the tittle of the land is perfected. There was a decree recognizing Teoderica
as the owner of land but the Torrens certificate was not issued until later. The parties met
immediately upon the entering of the decree and made a new contract.

There was a development of Teoderica’s land as the Torrens title was issued and in view of this
development she became reluctant to transfer the whole tract of land asserting that she never
intended to sell the large amount of land and that she was misinformed by the area of the land.

After the Torrens title was issued to Teoderica she gave it to the defendant company for safekeeping
in which the defendant did so. As Teodorica still retained possession of said property Father Sanz
entered into an arrangement with her whereby large numbers of cattle belonging to the defendant
corporation were pastured upon said land.

ISSUE:

Whether a person who is not a party to a contract for the sale of land makes himself liable for
damages to the vendee, beyond the value of the use and occupation, by colluding with the vendor
and maintaining him in the effort to resist an action for specific performance. 

RULING:

The Supreme Court held that the members of the defendant’s corporation, in advising and prompting
Teodorica Endencia not to comply with the contract of sale, were actuated by improper and
malicious motives.

In a fair conclusion on this feature of the case is that father Juan Labarga and his associates
believed in good faith that the contract could not be enforced and that Teodorica would be wronged
if it should be carried into effect. Any advice or assistance which they may have given was,
therefore, prompted by no mean or improper motive.

In the case at bar, as Teodorica Endencia was the party directly bound by the contract, it is obvious
that the liability of the defendant corporation, even admitting that it has made itself coparticipant in
the breach of the contract, can in no even exceed hers.

This leads us to consider at this point the extent of the liability of Teodorica Endencia to the plaintiff
by reason of her failure to surrender the certificate of title and to place the plaintiff in possession.
So Ping Bun v. CA
Facts:

In 1963, Tek Hua Trading Co. entered into lease agreements with lessor Dee C.
Chuan and Sons, Inc. involving four (4) premises in Binondo, which the
former used to store textiles. The agreements were for one (1) year, with
provisions for month-to-month rental should the lessee continue to occupy the
properties after the term. In 1976, Tek Hua Trading Co. was dissolved, and the
former members formed Tek Hua Enterprises Corp., herein respondent. So
Pek Giok, managing partner of the defunct company, died in 1986. Petitioner
So Ping Bun, his grandson, occupied the warehouse for his own textile
business, Trendsetter Marketing. On March 1, 1991, private respondent Tiong
sent a letter to petitioner, demanding that the latter vacate the premises.
Petitioner refused, and on March 4, 1992, he requested formal contracts of
lease with DCCSI. The contracts were executed. Private respondents moved
for the nullification of the contract and claimed damages. The petition was
granted by the trial court, and eventually by the Court of Appeals.

Issue:

(1) Whether So Ping Bun is guilty of tortuous interference of contract

(2) Whether private respondents are entitled to attorney’s fees

Held:

(1) Damage is the loss, hurt, or harm which results from injury, and damages
are the recompense or compensation awarded for the damage suffered. One
becomes liable in an action for damages for a nontrespassory invasion of
another's interest in the private use and enjoyment of asset if (a) the other has
property rights and privileges with respect to the use or enjoyment interfered
with, (b) the invasion is substantial, (c) the defendant's conduct is a legal
cause of the invasion, and (d) the invasion is either intentional and
unreasonable or unintentional and actionable under general negligence rules.
The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of contract; and (3)
interference of the third person is without legal justification or excuse.
Petitioner's Trendsetter Marketing asked DCCSI to execute lease contracts in
its favor, and as a result petitioner deprived respondent corporation of the
latter's property right. Clearly, and as correctly viewed by the appellate court,
the three elements of tort interference above-mentioned are present in the
instant case.

Authorities debate on whether interference may be justified where the

defendant acts for the sole purpose of furthering his own financial or
economic interest. One view is that, as a general rule, justification for
interfering with the business relations of another exists where the actor's
motive is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other. Added to this, some authorities believe
that it is not necessary that the interferer's interest outweigh that of the party
whose rights are invaded, and that an individual acts under an economic
interest that is substantial, not merely de minimis, such that wrongful and
malicious motives are negatived, for he acts in self-protection. Moreover
justification for protecting one's financial position should not be made to
depend on a comparison of his economic interest in the subject matter with
that of others. It is sufficient if the impetus of his conduct lies in a proper
business interest rather than in wrongful motives. Where there was no malice
in the interference of a contract, and the impulse behind one's conduct lies in a
proper business interest rather than in wrongful motives, a party cannot be a
malicious interferer. Where the alleged interferer is financially interested, and
such interest motivates his conduct, it cannot be said that he is an officious or
malicious intermeddler.

In the instant case, it is clear that petitioner So Ping Bun prevailed upon
DCCSI to lease the warehouse to his enterprise at the expense of respondent
corporation. Though petitioner took interest in the property of respondent
corporation and benefited from it, nothing on record imputes deliberate
wrongful motives or malice on him. Petitioner argues that damage is an
essential element of tort interference, and since the trial court and the
appellate court ruled that private respondents were not entitled to actual,
moral or exemplary damages, it follows that he ought to be absolved of any
liability, including attorney's fees.

While we do not encourage tort interferers seeking their economic interest to

intrude into existing contracts at the expense of others, however, we find that
the conduct herein complained of did not transcend the limits forbidding an
obligatory award for damages in the absence of any malice. The business
desire is there to make some gain to the detriment of the contracting parties.
Lack of malice, however, precludes damages. But it does not relieve petitioner
of the legal liability for entering into contracts and causing breach of existing
ones. The respondent appellate court correctly confirmed the permanent
injunction and nullification of the lease contracts between DCCSI and
Trendsetter Marketing, without awarding damages. The injunction saved the
respondents from further damage or injury caused by petitioner's interference.

Jose Lagon v. CA and Lapuz

G.R. No. 119107, 18 March 2005

FACTS:

Petitioner Jose Lagon purchased from the estate of Bai Tonina Sepi, through an intestate court, two
parcels of land located at Tacurong, Sultan Kudarat. A few months after the sale, private respondent
Menandro Lapuz filed a complaint for torts and damages against petitioner before the Regional Trial
Court (RTC) of Sultan Kudarat.

Private respondent claimed that he entered into a contract of lease with the late Bai Tonina Sepi
Mengelen Guiabar over three parcels of land (the property) in Sultan Kudarat, Maguindanao
beginning 1964. One of the provisions agreed upon was for private respondent to put up commercial
buildings which would, in turn, be leased to new tenants. The rentals to be paid by those tenants
would answer for the rent private respondent was obligated to pay Bai Tonina Sepi for the lease of
the land. The lease contract ended but since the construction of the commercial buildings had yet to
be completed, the lease contract was allegedly renewed.

When Bai Tonina Sepi died, private respondent started remitting his rent to the court-appointed
administrator of her estate. But when the administrator advised him to stop collecting rentals from
the tenants of the buildings he constructed, he discovered that petitioner, representing himself as the
new owner of the property, had been collecting rentals from the tenants. He thus filed a complaint
against the latter, accusing petitioner of inducing the heirs of Bai Tonina Sepi to sell the property to
him, thereby violating his leasehold rights over it.

In his answer to the complaint, petitioner denied that he induced the heirs of Bai Tonina to sell the
property to him, contending that the heirs were in dire need of money to pay off the obligations of the
deceased. He also denied interfering with private respondents leasehold rights as there was no
lease contract covering the property when he purchased it; that his personal investigation and
inquiry revealed no claims or encumbrances on the subject lots

ISSUE:

Whether or not the purchase by Lagon of the subject property, during the supposed existence of the
private respondent’s lease contract with the late Bai Tonina Sepi, constituted tortuous interference
for which Lagon should be held liable for damages.

RULING:

No, the interference of Lagon was with a legal justification (in furtherance of a personal financial
interest) and without bad faithThe elements of Tortuous Interference with contractual relation are: (1)
Existence of a valid contract; (2) Knowledge on the part of the third person of the existence of the
contract; (3) Interference of the third person without legal justification or excuse.

As regard to the first element, the existence of a valid contract must be duly established. In the given
case the Court ruled that the notarized copy of lease contract presented in court appeared to be an
incontestable proof that Bai Tonin Sepi and private respondent renewed their contract.  The second
element on the other hand, requires that there be knowledge on the part of the interferer that the
contract exists. In this case, Lagon had no knowledge of the lease contract as he even conducted
his own personal investigation and inquiry, and unearthed no suspicious circumstance that would
have made a cautious man probe deeper and watch out for any conflicting claim over the property;
that an examination of the entire property title bore no indication of the leasehold interest of private
respondent and that even the registry of property had no record of the same. As to the third element,
a party may be held liable only when there was no legal justification or excuse for his action or when
his conduct was stirred by a wrongful motive. To sustain a case for tortuous interference, the other
party must have acted with malice or must have been driven by purely impious reasons to injure the
other. In the case, even assuming that private respondent was able to prove the renewal of his lease
contract with Bai Tonina Sepi, the fact was that he was unable to prove malice or bad faith on the
part of petitioner in purchasing the property. Therefore, the claim of tortuous interference was never
established.

Professional Academic Plans, Inc. Francisco

Colayco and Benjamin Dino v. Crisostomo
G.R. No. 148599, 14 March 2005

FACTS:

Respondent is an employee of petitioner. It was initially agreed in a MOA that respondent was to
receive 10% commission on remittances of clients negotiated by her. Thereafter respondent
negotiated a scholarship program between AFSLAI and PAPI. Sometime later, a series of new
MOAs negotiated between AFSLAI and PAPI at the exclusion of the respondent resulted into
agreements that lowered and eventually removed respondent’s commissions. After exhausting
administrative remedies and termination from PAPI, respondent filed a complaint in court which was
ruled favorably by RTC and CA. Hence, petition.

ISSUE:

WON Crisostomo is entitled to the franchise commission under the new memorandum of
agreements under which she had no participation whatsoever in the negotiation and execution.

RULING:

Yes. She is entitled to the commissions.

SC ruled that abandonment of contract rights requires proof of actual intent to abandon. Once a
contract is entered into, no party can renounce it unilaterally or without the consent of the other. This
is the essence of the principle of mutuality of contracts entombed in Article 1308 of the Civil Code
which states that: “The contracts must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them”. To effectuate abandonment of a contract, mutual assent is always
required. The mere fact that one has made a poor bargain may not be a ground for setting aside the
agreement.

There is no evidence in the case that the respondent agreed to the cancellation of the original MOA
that entitled her to receive the commissions. The fact that subsequent MOAs were executed
between AFPSLAI and PAPI does not invalidate the original MOA contracted by respondent. Petition
is dismissed.
MANILA RAILROAD CO. VS. COMPANIA TRANSATLANTICA

38 Phil 875

FACTS:

      SS/Alicante, belonging to Compania Transatlantica de Barcelona was transporting two locomotive

boilers for the Manila Railroad Company.  The equipment of the ship for discharging the heavy cargo
was not strong enough to handle the boilers.  Compania Transatlantica contracted the services of
Atlantic gulf and Pacific Co., which had the best equipment to lift the boilers out of the ship’s hold. 
When Alicante arrived in Manila, Atlantic company sent out its floating crane under the charge of one
Leyden.  When the first boiler was being hoisted out of the ship’s hold, the boiler could not be brought
out because the sling was not properly placed and the head of the boiler was caught under the edge of
the hatch.  The weight on the crane was increased by a strain estimated at 15 tons with the result that
the cable of the sling broke and the boiler fell to the bottom of the ship’s hold.  The sling was again
adjusted and the boiler was again lifted but as it was being brought up the bolt at the end of the derrick
broke and the boiler fell again.  The boiler was so badly damaged that it had to be shipped back to
England to be rebuilt.  The damages suffered by Manila Railroad amounted to P23,343.29.  Manila
Railroad then filed an action against the Streamship Company to recover said damages.  The Steamship
Company caused Atlantic Company to be brought as co-defendant arguing that Atlantic Company as an
independent contractor, who had undertaken to discharge the boilers had become responsible for the
damage.

      The Court of First Instance decided in favor of Manila Railroad, the plaintiff, against Atlantic Company
and absolved the Steamship Company.  Manila Railroad appealed from the decision because the
Steamship Company was not held liable also.  Atlantic Company also appealed from the judgment
against it. 

ISSUES:

1.      Was the Steamship Company liable to Manila Railroad for delivering the boiler in a damaged
condition?

2.      Was Atlantic Company liable to the Steamship Company for the amount it may be required to pay
the plaintiff?

Was Atlantic Company directly liable to plaintiff as held by the trial court? 

RULING:
      There was a contractual relation between the Steamship Company and Manila Railroad.  There was
also a contractual relation between the Steamship Company and Atlantic.  But there was no contractual
relation between the Railroad Company and Atlantic Company.

      There was no question that the Steamship Company was liable to Manila Railroad as it had the
obligation to transport the boiler in a proper manner safe and securely under the circumstances
required by law and customs.  The Steamship Company cannot escape liability simply because it
employed a competent independent contractor to discharge the boiler.

      Atlantic Company claimed that it was not liable, because it had employed all the diligence of a good
father of a family and proper care in the selection of Leyden.  Said argument was not tenable, because
said defense was not applicable to negligence arising in the course of the performance of a contractual
obligation.  The same can be said with respect to the liability of Atlantic Company upon its contract with
the Steamship Company.  There was a distinction between negligence in the performance of a
contractual obligation (culpa contractual) and negligence considered as an independent source of
obligation (culpa aquiliana).  Atlantic Company wasis liable to the Steamship Company for the damage
brought upon the latter by the failure of Atlantic Company to use due care in discharging the boiler,
regardless of the fact that the damage was caused by the negligence of an employee who was qualified
for the work, duly chose with due care.

      Since there was no contract between the Railroad Company and Atlantic Company, Railroad
Company can had no right of action to recover damages from Atlantic Company for the wrongful act
which constituted the violation of the contract.  The rights of Manila Railroad can only be made effective
through the Steamship Company with whom the contract of affreightment was made.
DKC Holdings Corp. v. CA
G.R. No. 118248, 5 April 2000

FACTS:

DKC Holdings Corporation entered into a Contract of Lease with Option to Buy with Encarnacion
Bartolome, which option must be exercised within a period of two years counted from the signing of
the Contract. In turn, DKC undertook to pay P3,000.00 a month as consideration for the reservation
of its option. Within the two-year period, DKC shall serve formal written notice upon the lessor of its
desire to exercise its option.

When Encarnacion died, petitioner coursed its payment to private respondent Victor Bartolome,
being the sole heir of Encarnacion. Victor, however, refused to accept the payments. Subsequently,
petitioner served upon Victor, via registered mail, notice that it was exercising its option to lease the
property, tendering the amount of P15,000.00 as rent. Again, Victor refused to accept the tendered
rental fee and to surrender possession of the property to petitioner. On April 23, 1990, petitioner filed
a complaint for specific performance and damages against Victor and the Register of Deeds

ISSUE:

Whether or not the rights under a Contact of Lease with Option to Buy were transmissible.

RULING:

Article 1311 of the Civil Code states that the general rule, therefore, is that heirs are bound
by contracts entered into by their predecessors-in-interest except when the rights
and obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or
(3) provision of law. The Court held that there is neither contractual stipulation nor
legal provision making the rights and obligations under the lease contract intransmissible. More
importantly, the nature of the rights and obligations therein are transmissible.

In the case at bar, the subject matter of the contract is a lease, which is a property right. The death
of a party does not excuse nonperformance of a contract which involves a property right and the
rights and obligations thereunder pass to the personal representatives of the deceased. Similarly,
nonperformance is not excused by the death of the party when the other party has a property
interest in the subject matter of the contract.

Therefore, Victor is bound by the subject Contract of Lease with Option to Buy.
Florentino v. Encarnacion
G.R. No. L-27696, 30 September 1977

FACTS:

On May 22, 1964, the petitioners-appellants and the petitioner-appellee filed with CFI an application
for the registration under Act 496 of a parcel of agricultural land located at Cabugao, Ilocos Sur. The
application alleged among other things that the applicants are the common and pro-indiviso owners
in fee simple of the said land with the improvements existing thereon; that to the best of the
knowledge and belief; there is no mortgage, hen or encumbrance of any kind whatsoever affecting
said land, nor any other person having any estate or interest thereon, legal or equitable, remainder,
reservation at in expectancy; that said applicants had acquired the aforesaid land thru and by
inheritance from their predecessors in interest, their aunt, Doña Encarnacion Florentino, and Angel
Encarnacion acquire their respective shares of the land thru purchase from the original heirs, Jesus,
Caridad, Lourdes and Dolores, all surnamed Singson, on one hand and from Asuncion Florentino on
the other. After due notice and publication, the Court set the application for hearing. Only the
Director of Lands filed an opposition but was later withdrawn so an order of general default was
issued. Upon application of the applicants, the Clerk of Court was commissioned and authorized to
receive the evidence of the applicants and ordered to submit the same for the Court’s proper
resolution.

Exhibit O-1 embodied in the deed of extrajudicial partition (Exhibit O), which states that with respect
to the land situated in Barrio Lubong, Dacquel, Cabugao, Ilocos Sur, the fruits thereof shall serve to
defray the religious expenses, was the source of contention in this case (Spanish text). Florentino
wanted to include ExhibitO-1 on the title but the Encarnacion supposed and subsequently withdrawn
their application on their shares, which was opposed by the former.

The Court after hearing the motion for withdrawal and the opposition issued an order and for the
purpose of ascertaining and implifying that the products of the land made subject matter of this land
registration case had been used in answering for the payment of expenses for the religious functions
specified in the Deed of Extrajudicial Partition which was no registered in the office of the Register of
Deeds from time immemorial; and that the applicants knew of thisarrangement and the Deed of
Extrajudicial Partition of August 24,1947, was not signed by Angel Encarnacion or Salvador
Encarnacion, Jr.-CFI: The self-imposed arrangement in favor of the Church is a simple donation, but
is void since the done has not accepted the donation and Salvador Encarnacion, Jr. and Angel
Encarnacion had not made any oral or written grant at all so the court allowed the religious expenses
to be made and entered on the undivided shares, interests and participations of all the applicants in
this case, except that of Salvador Encarnacion, Sr., Salvador Encarnacion, Jr. and Angel
Encarnacion.”-the

petitioners-appellants filed their Reply to the Opposition reiterating their previous arguments, and
also attacking the jurisdiction of the registration court to pass upon the validity or invalidity of the
agreement Exhibit O-1, alleging that such is litigable only in an ordinary action and not proper in a
land registration proceeding.

The Motion for Reconsideration and of New Trial was denied for lack of merit, but the court modified
in highlighting that the donee Church has not showed its clear acceptance of the donation, and is the
real party of this case, not the petitioners-appellants.
ISSUE:

Whether or Not the court erred in concluding that the stipulation is just an arrangement stipulation.

RULING:

YES, the court erred in concluding that the stipulation is just an arrangement stipulation. It cannot be
revoked unilaterally.

The contract must bind both parties, based on the principles (1) that obligation wising from contracts
has the force of law between the contracting parties; and (2) that they must be mutuality between the
parties band on their essential equality, to which is repugnant to have one party bound by the
contract leaving the other free therefrom. The stipulation (Exhibit O-1) is part of an extrajudicial
partition (Exh. O) duly agreed and signed by the parties, hence the same must bind the contracting
parties thereto and its validity or compliance cannot be left to the will of one of them. The said
stipulation is a Stipulation pour autrui. A stipulation pour autrui is a stipulation in favor of a third
person conferring a clear and deliberate favor upon him, and which stipulation is merely a part of a
contract entered into by the parties, neither of whom acted as agent of the third person, and such
third person may demand its fulfillment provided that he communicates his acceptance to the obligor
before it is revoked.
Coquia v. Fieldmen’s Insurance Co.
G.R. No. L-23276, 29 November 1968

FACTS:

The Fieldmen’s Company (company) issued a common carrier accident insurance policy to Manila
Yellow Taxicab Co. Inc. (insured). In the policy it stipulated that accident arising from a motor vehicle
shall be insured with respect to the death or bodily injured driver, conductor and/or inspector riding in
the motor vehicle.

Carlito Coquia met an accident while driving resulting in his death. The insured asked the company
for the insurance of Carlito. The company refused to give insurance to the said insured, the
paaboutts of Carlito filed a complaint about a sum of money for the insurance of their dead child. The
company contends that parents had no contractual relation with the company, thus they are not the
proper parties in the said case.

ISSUE:

Whether or not the policy in question belong to such class of contracts pour autrui.

RULING:

Yes.Pursuant to these stipulations, the Company “will indemnify any authorized Driver who is driving
the Motor Vehicle” of the Insured and, in the event of death of said driver, the Company shall,
likewise, “indemnify his personal representatives.” In fact, the Company “may, at its option, make
indemnity payable directly to the claimants or heirs of claimants … it being the true intention of this
Policy to protect … the liabilities of the Insured towards the passengers of the Motor Vehicle and the
Public” — in other words, third parties.

Thus, the policy under consideration is typical of contracts pour autrui, this character being made
more manifest by the fact that the deceased driver paid fifty per cent (50%) of the corresponding
premiums, which were deducted from his weekly commissions. Under these conditions, it is clear
that the Coquias — who, admittedly, are the sole heirs of the deceased — have a direct cause of
action against the Company, and, since they could have maintained this action by themselves,
without the assistance of the Insured, it goes without saying that they could and did properly join the
latter in filing the complaint herein.
Constantino vs. Espiritu
Posted on March 13, 2009 by danabatnag

PASTOR B. CONSTANTINO vs.HERMINIA ESPIRITU

Issue: May those who are not parties to a contract be benefited by said contract?

Facts of the case: Pastor Constantino sold two parcels of land to Herminia Espiritu, on the condition that the land will
be held in trust for their already conceived but as yet unborn illegitimate son. Espiritu took two mortgages on the land
and then offered them for sale. Constantino asked the court to: one, issue a temporary restraining order to stop the
sale of the lands; and two: compel Espiritu to execute a deed of absolute sale to Pastor Constantino Jr., then two
years old.
Espiritu moved to dismiss the case on two grounds: Pastor Jr. was not a party to the suit; and the Statute on Frauds
(which basically says that some contracts, including those involving land, should be in writing; and signed by all
parties bound by the contracts).
Constantino argued that what was involved was an implied trust under Art. 1453. The trial court dismissed the
complaint. Constantino then filed a motion for an amended complaint, to have his son Pastor Jr. included in the suit.
The trial court dismissed the motion, and the case was appealed to the Supreme Court.

Ratio: The court ruled that the contract appears to be a contract pour autrui, although couched in the form of a deed
of absolute sale, and appellant’s action was, in effect, one for specific performance.
The court held that that the Statute of Frauds was not a strong defense as it was “clear upon the facts alleged in the
amended complaint that the contract between the parties had already been partially performed by the execution of
the deed of sale, the action brought below being only for the enforcement of another phase thereof, namely, the
execution by appellee of a deed of conveyance in favor of beneficiary thereunder.” Whether or not the properties
were sold to be held in trust for their child was a matter of fact that should be proved in court.
Decision: Case remanded to the lower court for further trial.
YOUNG VS CA

Facts: The Defendant Philippine Holding, Inc. is the former owner of a

piece of land located atSoler St., Sta. Cruz, Manila, and a two storey
building erected thereon, consisting of six units.The owner Philippine
Holding, Inc. secured an order from the City Engineer of Manila
todemolish the building. Antonio Young, then a tenant of said Unit 1352,
filed an action to annulthe City Engineer's demolition As an incident in said
case, the parties submitted a CompromiseAgreement to the Court.
Paragraph 3 of said agreement provides that plaintiff (Antonio
S.Young) and Rebecca Young and all persons claiming rights under
them bind themselves tovoluntarily and peacefully vacate the premises
which they were occupying as lessees which arethe subject of the
condemnation and demolition order and to surrender possession . A case
wasfi led to the RTC and Young contended that even assuming that
her supposed right of firstrefusal is a stipulation for the benefi t of a
third person, she did not inform the obligor of heracceptance as
required by the second paragraph of Article 1311 of the Civil Code.

Issue:Whether or not Young’s stipulation that gave her the right of refusal is a
stipulation pour autrui

Ruling: The stipulation that young gave may be a stipulation pour autrui
but it is unrebutted thatshe did not communicate her acceptance
whether expressly or impliedly. The requisites of astipulation pour autrui
or a stipulation in favor of a third person are the following: (1) there
mustbe a stipulation in favor of a third person (2) the stipulation must be a
part, not the whole of thecontract (3) the contracting parties must have
clearly and deliberately conferred a favor upon at h i r d p e r s o n , n o t a
m e r e i n c i d e n t a l b e n e fi t o r i n t e r e s t ( 4 ) t h e t h i r d p e r s o n m u s t
h a v e communicated his acceptance to the obligor before its revocation. (5)
neither of the contractingparties bears the legal representation or
authorization of the third party. The argument ispointless, considering
that the sale of subject property to some other person or entity constitutesin
effect a revocation of the grant of the right of first refusal to Rebecca C.
Young.
MARMONT RESORT HOTEL vs. GUIANG
168 SCRA 373

FACTS:
A Memorandum of Agreement was executed between Maris Trading and petitioner
Marmont Resort Hotel Enterprises, Inc. (“Marmont”).  Under the agreement, Maris Trading
undertook to drill for water and to provide all equipment necessary to install and complete a
water supply facility to service the Marmont Olongapo, for a stipulated fee of P40,000.00.
In fulfillment of its contract, Maris Trading drilled a well and installed a water pump on a
portion of a parcel of land then occupied by respondent spouses Federico and Aurora
Guiang.

Five months later, a Memorandum of Agreement was executed between Maris Trading and
Aurora Guiang, with Federico Guiang signing as witness. This agreement states that in
consideration of the sum of P1, 500.00 the Guiangs sell and cede all rights and claims over
the lot where the water source of Marmont is located unto and in favor of Maris Trading.

After some time, the water supply of the Marmont became inadequate which prompted
them to secure the services of another contractor. They sought permission from the Guiang
spouses to inspect the water pump which had been installed but it was not granted. 
Marmont filed a Complaint against the Guiang spouses for damages resulting from their
refusal. The claimed damages totaled P110, 000.

The Guiangs moved to dismiss the Complaint. They assailed the validity of the second
Memorandum of Agreement, alleging that the subject matter thereof involved conjugal
property alienated by Aurora Guiang without the marital consent of her husband, Federico
Guiang.

ISSUE:
Would the spouses be solidarily liable for the damages claimed by Marmont?

HELD:
It was established that The Guiangs have acted contrary to the principles of honesty, good
faith and fair dealing embodied in Articles 19 and 21 of the Civil Code when they refused
petitioner Marmont access to the water facility and to benefit from it which forced Marmont
to locate an alternative source of water which resulted to their lost revenues. Therefore, they
are liable for damages.
The Memorandum of Agreement entered into by Aurora Guiang was with full consent of
Federico and the proceeds thereof redounded to the benefit of the conjugal partnership.
Therefore, they are solidarily liable for the damages claimed.

Mandarin Villa, Inc. vs. CA and Clodualdo de Jesus

Mandarin Villa, Inc. vs. CA and Clodualdo de Jesus
G.R. No. 119850. 20 June 1996.

Ponente: Franciso, J.:

Facts: In the evening of 19 Oct 1989, private respondent de Jesus hosted a dinner for his friends at the
peririoner’s restaurant, the Mandarin Villa Seafoods Village in Mandaluyong City. After dinner, the waiter
handed to de Jesus the bill amounting to P2,658.50. De Jesus offered his BANKARD credit card to the
waiter for payment. Minutes later, the waiter returned and audibly informed that said credit card had
expired. De Jesus demonstrated that the card had yet to expire on Sept 1990, as embossed on its face. De
Jesus approached the cashier who again dishonored such card. De Jesus offered his BPI express credit
card instead and this was accepted, honored and verified. The trial court and CA held petitioner to be
negligent.

Issues: WON petitioner was negligent; If negligent, WON such negligence was the proximate cause of
private respondent’s damage.

Ruling: Petition dismissed. The test for determining the existence of negligence in a case may be stated as
follows: did the defendant in doing the alleged negligent act use the reasonable care and caution which an
ordinary prudent person would have used in the same situation? If not, then he is guilty of negligence. In
the case at bar, the Point of Sale Guidelines which outlined the steps that petitioner must follow under the
circumstances reveals that whenever the words CARD EXPIRED flashes on screen, petitioner should
check card’s expiry date as embossed in the card itself. If unexpired, petitioner should honor the card.
Clearly, it has not yet expired in 19 Oct 1989 when the same was dishonored by petitioner. Hence,
petitioner did not use the reasonable care and caution which an ordinary prudent person would have used
in the same situation and as such, petitioner is guilty of negligence.
The humiliation and embarrassment of private respondent was brought about by the fact of dishonor by
petitioner of private respondent’s valid BANKARD. Hence, petitioner’s negligence is the proximate cause
of private respondent’s damage.

SANCHEZ VS RIGOS

FACTS:

            Sanchez and Rigos executed an instrument entitled “Option to Purchase”. Rigos
rejected several tenders of payments made within the stipulated period. Sanchez filed an
action for specific performance with damages contending that Rigos agreed and
committed to sell the land and the plaintiff agreed and committed to buy it in the
option. Rigos rebutted that the contract between them was only a unilateral promise to
sell and unsupported by valuable consideration distinct from the price, and null and
void.

ISSUE:

           WON there is a perfected contract of sale between parties?

HELD:

            YES. Under the Civil Code, there is no valid contract without a cause or
consideration, the promisor is not bound by his promise and may withdraw it. However,
pending the notice of its withdrawal, his accepted promise is in the nature of an offer to
sell which if accepted results in a perfected contract of sale. In this case, the contract
between parties became a perfected contract of sale upon acceptance of Rigos of the
offer within the stipulated period even though he was only initially granted an option to
buy.
 MALBAROSA V. CA & S.E.A. DEVELOPMENT CORP.
G. R. No. 125761
April 30, 2003

FACTS
Petitioner Malbarosa was the president and general manager of Philtectic
Corporation, and an officer of other corporations belonging to the SEADC group
of companies.

The respondent assigned to the petitioner one of its vehicles described

as a 1982 model Mitsubishi Gallant Super Saloon. He was also issued
membership certificates in the Architectural Center, Inc.

Da Costa was the president of the Respondent and Commonwealth Insurance

Co., Inc., while Valero was the Vice-Chairman of the Board of Directors of the
respondent and Vice-Chairman of the Board of Directors of Philtectic
Corporation.

On January 8, 1990, the petitioner sent a letter to Valero tendering his

resignation, effective February 28, 1990 from all his positions in the SEADC
group of companies and reiterating therein his request for the payment of his
incentive compensation for 1989.

Da Costa met with the petitioner on two occasions & ventured that the
petitioner would be entitled to an incentive compensation in the amount of
around P395,000.

March 14, 1990 Respondent, through Valero, signed a letter-offer

addressed to the petitioner stating therein that petitioners resignation had
been accepted by the respondent, and that he was entitled to an incentive
compensation in the amount of P251,057.67, and proposing that the amount
be satisfied, thus:
The 1982 Mitsubishi Super saloon car assigned to you by the company shall be
transferred to you at a value of P220,000.00.
The membership share of our subsidiary, Tradestar International, Inc. in the
Architectural Center, Inc. will be transferred to you. 
 The respondent required that if the petitioner agreed to the offer, he
had to affix his conformity on the space provided therefor and the date
thereof on the right bottom portion of the letter.

MARCH 16, 1990 - Da Costa met with the petitioner and handed to him the
original copy of the March 14, 1990 Letter-offer. The petitioner was dismayed
when he read the letter. The petitioner refused to sign the letter-offer on
the space provided therefor. 

Despite the lapse of more than two weeks, the petitioner had not returned the
original copy with his conformity. Thus, the respondent decided to
withdraw the offer.

APRIL 4, 1990 - As authorized by respondent, Philtectic Corporation wrote the

petitioner withdrawing the Letter-offer of the respondent and demanding that
the petitioner return the car and his membership certificate in the Architectural
Center, Inc. within 24 hours from his receipt thereof.

APRIL 7, 1990 The petitioner answered that he cannot comply with said

demand as he already accepted the Letter-offer of the respondent
when he affixed on March 28, 1990 his signature on the original copy of
the letter-offer.

With the refusal of the petitioner to return the vehicle, the respondent
filed a complaint against the petitioner for recovery of personal
property with replevin with damages and attorneys fees,

PETITIONER’S DEFENSE
he had already agreed on March 28, 1990 to the March 14, 1990 Letter-offer of
the respondent and had notified the said respondent of his acceptance; hence,
he had the right to the possession of the car.

TRIAL COURT:
Petitioner to pay respondent lease rentals for the use of the motor
vehicle at P1000/day from May 8, 1990 up to the date of actual
delivery.

CA: affirmed but period of rentals payment shall start from the time
the judgment becomes final
-          the petitioner had not accepted the respondents March 14, 1990 Letter-offer
before the respondent withdrew said offer on April 4, 1990.
Petitioner appealed to SC.

ISSUES
1.  W/N there was a valid acceptance by the petitioner of the March 14, 1990
Letter-offer of the respondent? NO.
2. W/N there was an effective withdrawal by the respondent of said letter-
offer? YES

RULING
1. NO, THERE WAS NO VALID ACCEPTANCE BY PETITIONER OF THE LETTER-
OFFER.
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

ART. 1319. Consent is manifested by the meeting of the offer and the

acceptance upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. A qualified acceptance
constitutes a counter-offer.

The acceptance of an offer must be made known to the offeror, otherwise

the contract is not perfected. The offeror may withdraw its offer & revoke the same
before acceptance by the offeree.

If an offeror prescribes the exclusive manner in which acceptance of his

offer shall be indicated by the offeree, an acceptance of the offer in the
manner prescribed will bind the offeror.

An acceptance which is not made in the manner prescribed by the offeror

is not effective but constitutes a counter-offer which the offeror may
accept or reject.30 

The acceptance by the offeree of the offer AFTER knowledge of the

revocation or withdrawal of the offer is inefficacious.

In this case, the respondent made its offer through Valero. On March 16, 1990, Da
Costa handed over the original of the March 14, 1990 Letter-offer of the
respondent to the petitioner. The respondent required the petitioner to accept the
offer by affixing his signature on the space provided in said letter-offer and writing
the date of said acceptance.
However, on March 16, 1990, petitioner did not accept or reject the same for the
reason that he needed time to decide whether to reject or accept the same. 33 There
was no contract perfected between the petitioner and the respondent corporation. 34 

The petitioner claims that he had affixed his conformity to the letter-offer on March
28, 1990, BUT he failed to transmit the said copy to the respondent.

April 7, 1990 – petitioner notified respondent of his acceptance of the offer

BUT on April 4, 1990 - respondent had already notified petitioner that it
had withdrawn its offer

Indubitably, there was no contract perfected by the parties on the March

14, 1990 Letter-offer of the respondent.

The petitioner's plaint that he was not accorded by the respondent reasonable time
to accept or reject its offer does not persuade. It must be underscored that
there was no time frame fixed by the respondent for the petitioner to
accept or reject its offer. When the offeror has not fixed a period for the
offeree to accept the offer, and the offer is made to a person present, the
acceptance must be made immediately.

In this case, the respondent made its offer to the petitioner when Da Costa handed
over on March 16, 1990 to the petitioner its March 14, 1990 Letter-offer but that the
petitioner did not accept the offer. The respondent, thus, had the option to withdraw
or revoke the offer, which the respondent did on April 4, 1990.

Even if it is assumed that the petitioner was given a reasonable period to accept or
reject the offer of the respondent, the petitioner had more than two weeks which
was more than sufficient for the petitioner to accept the offer of the respondent.
2. YES, THERE WAS AN EFFECTIVE WITHDRAWAL BY THE RESPONDENT OF
SAID LETTER-OFFER.
Implicit in the authority given to Philtectic Corporation to demand for and
recover from the petitioner the subject car and to institute the appropriate action
against him to recover possession of the car is the authority to withdraw the
respondent's March 14, 1990 Letter-offer.

G.R. NO. 124242, January 21, 2005

SAN LORENZO DEVELOPMENT CORPORATION VS.
CA

FACTS:
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta. The latter made a downpayment of fifty thousand pesos
(P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same
date. Several other payments totaling two hundred thousand pesos (P200,000.00) were
made by Babasanta. He demanded the execution of a Final Deed of Sale in his favor so
he may effect full payment of the purchase price; however, the spouses declined to
push through with the sale.  They claimed that when he requested for a discount and
they refused, he rescinded the agreement. Thus, Babasanta filed a case for Specific
Performance.
On the other hand, San Lorenzo Development Corporation (SLDC) alleged that
on 3 May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had
been sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in
good faith and for value and therefore it had a better right over the property in litigation.
ISSUE:
Who between SLDC and Babasanta has a better right over the two parcels of
land?
RULING:
An analysis of the facts obtaining in this case, as well as the evidence presented
by the parties, irresistibly leads to the conclusion that the agreement between
Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty
thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of
farm lot. While there is no stipulation that the seller reserves the ownership of the
property until full payment of the price which is a distinguishing feature of a contract to
sell, the subsequent acts of the parties convince us that the Spouses Lu never intended
to transfer ownership to Babasanta except upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that
despite his repeated requests for the execution of the final deed of sale in his favor so
that he could effect full payment of the price, Pacita Lu allegedly refused to do so.   In
effect, Babasanta himself recognized that ownership of the property would not be
transferred to him until such time as he shall have effected full payment of the price.
Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected
contract to sell.
The perfected contract to sell imposed upon Babasanta the obligation to pay the
balance of the purchase price. There being an obligation to pay the price, Babasanta
should have made the proper tender of payment and consignation of the price in court
as required by law.  Glaringly absent from the records is any indication that Babasanta
even attempted to make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired obligatory force.
There was no double sale in this case because the contract in favor of
Babasanta was a mere contract to sell; hence, Art. 1544 is not applicable. There was
neither actual nor constructive delivery as his title is based on a mere receipt. Based on
this alone, the right of SLDC must be preferred.

MMDA VS JANCOM

https://www.academia.edu/38506250/MMDA_v_Jancom_Digest
Luis Aisain vs Benjamin Jalandoni

FACTS

The parties agreed upon the sale of the land  in question, they had in mind chiefly the
area and quality of the land, the subject of the contract, as will be seen from the letter of
Asiain dated May 6, 1920, purchase of land of Mr. Luis Asiain and his wife Maria
Cadenas, by B. Jalandoni, containing 25 hectares more or less of land bounded by
property of the purchaser, with its corresponding crop, estimated at 2,000 piculs, the
total value of which is P55,000.00. The price is to be paid by paying P30,000.00 at the
signing of the document, and P25,000.00 within one year with interest at the rate of
10%.” In accordance with the foregoing memorandum the deed of sale was executed in
the City of Iloilo, the parties stipulating among other things, the following:

“(1) That Luis Asiain does hereby promise and bind himself to sell to Benjamin
Jalandoni a parcel of land of the hacienda “Maria” of the aforesaid Luis Asiain, situated
in the municipality of La Carlota, Province of Occidental Negros, P.I.

“(2) That Benjamin Jalandoni does hereby promise and bind himself to purchase the
aforesaid parcel of land in the sum of P55,000 upon certain conditions specified in a
memorandum signed by the parties which is in the hands of Attorneys Padilla &
Treñas.”

Jalandoni then took possession of the land, milled the cane at La Carlota Central, from
which he realized 800 piculs and 23 cates of the centrifugal sugar. And after he had
secured from Asiain the certificate of title, he had a surveyor measure the land, which
was found to contain only 18 hectares, 54 centares, and 22 centares. Jalandoni had
paid P30,000 leaving an unpaid balance of P25,000 of the purchase price of P55,000
stipulated in the contract. Asiain sued to recover the balance from Jalandoni.

The competent court declared the deed of sale void, absolved the defendant from
paying P25,000 and ordered the parties to return what they had received under
the contract.Upon appeal to the Supreme Court, the judgment was affirmed on the
ground that both parties had acted by a mutual mistake.

ISSUE

Whether or not  the seller and buyer  misrepresented each other or committed an error?

HELD

1)The judgment was affirmed on the ground that both parties had acted by a mutual
mistake. 2) The vendor undertook to deliver to the vendee a parcel of land some 25
hectares in area and of such a quality as to be able to produce 2,000 piculs of
centrifugal sugar. The vendee, in turn, agreed to buy said parcel of land with the
understanding that it contained that area and was of the quality guaranteed by the
vendor. Inasmuch as the land had neither the area nor the quality the vendor had
assured the vendee it had, it is clear the latter was entitled to rescind the contract, upon
the strength of the authorities cited in the opinion of the court. We believe that Jalandoni
was entitled to rescind that contract, inasmuch as the vendor did not deliver a parcel of
land of the area and quality stipulated in the contract. 3) the judgment appealed from is
reversed, and it is held that the contract between the parties is valid and binding upon
them. Wherefore, the defendants are absolved from the complaint

ANDRES VS MANTRUST G.R. NO. 82670 SEPTEMBER 15, 1989

FACTS:

Andres, using the business name “Irene’s Wearing Apparel” was engaged in the manufacture of ladies
garments, children’s wear, men’s apparel and linens for local and foreign buyers. Among its foreign
buyers was Facts of the United States.

Sometime in August 1980, Facts instructed the First National State Bank (FNSB) of New Jersey to transfer
$10,000 to Irene’s Wearing Apparel via Philippine National Bank (PNB) Sta. Cruz, Manila branch. FNSB
instructed Manufacturers Hanover and Trust Corporation (Mantrust) to effect the transfer by charging
the amount to the account of FNSB with private respondent.

After Mantrust effected the transfer, the payment was not effected immediately because the payee
designated in the telex was only “Wearing Apparel.” Private respondent sent PNB another telex stating
that the payment was to be made to “Irene’s Wearing Apparel.”

On August 28, 1980, petitioner received the remittance of $10,000.

After learning about the delay, Facets informed FNSB about the situation. Facts, unaware that petitioner
had already received the remittance, informed private respondent and amended its instruction y asking
it to effect the payment to Philippine Commercial and Industrial Bank (PCIB) instead of PNB.

Private respondent, also unaware that petitioner had already received the remittance, instructed PCIB
to pay $10,000 to petitioner. Hence, petitioner received another $10,000 which was charged again to
the account of Facets with FNSB.

FNSB discovered that private respondent had made a duplication of remittance. Private respondent
asked petitioner to return the second remittance of $10,000 but the latter refused to do so contending
that the doctrine of solution indebiti does not apply because there was negligence on the part of the
respondents and that they were not unjustly enriched since Facets still has a balance of $49,324.

ISSUE: Whether or not the private respondent has the right to recover the second $10,000 remittance it
had delivered to petitioner

HELD: Yes. Art 2154 of the New Civil Code is applicable. For this article to apply, the following requisites
must concur: 1) that he who paid was not under obligation to do so; and 2) that payment was made by
reason of an essential mistake of fact.

There was a mistake, not negligence, in the second remittance. It was evident by the fact that both
remittances have the same reference invoice number.

Sps. Theis vs. CA et. al.

G.R. No. 126013. 12 Feb 1997
Petition to review the decision of the CA
Hermosisima, Jr., J.:

Facts: Private respondent Calsons Development Corporation is the owner of three (3) adjacent parcels of
land (parcel nos.1, 2 and 3). All three parcels of land are situated in Tagaytay City. Adjacent to parcel no.3
is a vacant lot denominated as parcel no. 4. In 1985, Private respondent constructed a two-srorey house
on parcel no. 3 and the two other lots remained idle.
In a survey conducted in 1985, parcel no. 3 was erroneously indicated to be covered by the TCT of parcel
no. 1, while the parcel no. 1 and parcel no. 2 were mistakenly surveyed to be located on parcel no. 4
instead. Unaware of the mistake private respondent sold said parcel no. 4 to petitioners.
In 1990, petitioners discovered that parcel no. 4 was owned by another person. They also discovered that
the lots actually sold to them were parcel nos. 2 and 3. To remedy the mistake, private respondent offered
parcel nos. 1 and 2 as these two were precisely the two vacant lots which private respondent owned and
intended to sell. Petitioners rejected the good faith offer. Private respondent made another offer, this time
the return of an amount double the price paid by petitioners. Petitioners still refused. Private respondent
was then compelled to file an action for annulment of deed of sale and reconveyance of the properties
subject thereof in the RTC which ruled on their favor and on appeal, the CA affirmed the same.

Issue: WON petitioners should be allowed to take parcel no. 3.

Ruling: Petition dismissed. CA decision affirmed.

The SC held that private respondent obviously committed an honest mistake in selling parcel no. 4. The
good faith of the private respondent is evident in the fact that when the mistake was discovered, it
immediately offered two other vacant lots to the petitioners or to reimburse them with twice the amount
paid. That petitioners refused either option left the private respondent with no other choice but to file an
action for the annulment of the deed of sale on the ground of mistake.
To allow the petitioners to take parcel no. 3 would be to countenance unjust enrichment. Considering that
petitioners intended at the outset to purchase a vacant lot, their refusal to accept the offer of the private
respondent to give them two (2) other vacant lots in exchange, as well as their insistence on parcel no. 3,
which is a house and lot, is manifestly unreasonable.

Dumasug v. Modelo
G.R. No. L-10462, 16 March 1916
FACTS:

Petitioner Andrea Dumasug alleged that respondent Felix Modelo persuaded her to sign a document
by falsely and maliciously making her believe that it contained an engagement on petitioner`s
obligation to pay a certain sum of money. Such obligation pertains to the advances and expenses
incurred by the respondent in protecting and aiding her in the proceeding of her case wherein the
petitioner was the plaintiff. Petitioner does not know how to write, hence, she only affixed her mark
as her signature believing in good faith that respondent herein was telling her the truth.

Three months after the execution of such document, the respondent took possession of a carabao
and of two parcels of land owned by the petitioner on the ground that the latter had conveyed such
properties to him by an Absolute Sale in consideration to the expenses he incurred in aiding the
petitioner on the proceedings of her case. Petitioner herein seeks for the recovery of the above
properties. 

ISSUE:

Whether or not the instrument of purchase and sale of two parcels of land and a plow carabao is null
and void.

RULING:

Yes.In the case at bar, it was inconceivable that respondent herein incurs such big amount as he
allegedly spent in the proceedings of the lawsuit involving petitioner. The evidence discloses that the
only great expense which Andrea Dumasug could have incurred was the sum that as fees she had
to pay the attorney Andres Jayme for filing a demurrer in the Court of First Instance. Said attorney
testified that he received from Andrea Dumasug only P80 or P90, the only large sum which the latter
had to expend.

The lower court held that the statements of Andrea Dumasug were well worthy of credence, and,
taking into consideration the merits of the case, reached the conclusion that the sole document
which plaintiff signed which she acknowledged she was owing to Felix Modelo, and not to the sale of
all her properties. The record shows plaintiff to have stated that she received an offer to sell her
carabao, but that she did not wish to sell the animal as she only rented it and it is her only means of
livelihood.

It is, then, perfectly evident that the document, by means of which defendant made himself the
owner of the properties in question is not the instrument of debt which Andrea Dumasug had signed,
and if it is the same one its contents were not duly and faithfully explained to plaintiff in the act of its
execution. In either case, the consent said to have been given by Andrea Dumasug in said
document is null and void, as it was given by mistake. This error invalidates the contract, because it
goes to the very substance of the thing which was the subject matter of said contract, for, had the
maker thereof truly understood the contents of said document, she would neither have accepted nor
authenticated it by her mark.

The consent given by plaintiff being null and void, the document is consequently also null, void, and
of no value or effect. Article 1303 of the Civil Code is therefore, applicable, which prescribes that:
“When the nullity of an obligation has been declared, the contracting parties shall restore to each
other the things which have been the object of the contract with their fruits, and the value with its
interest.”

For the foregoing reasons, whereby the errors assigned to the judgment appealed from are deemed
to have been refuted, petition granted.

KATIPUNAN VS KATIPUNAN

https://dokumen.tips/documents/katipunan-v-katipunan-digest.html
Martinez v. Hongkong and Shanghai Bank
G.R. No. L-5496, 19 February 1910

FACTS:

Plaintiff seeks to annul a contract on the ground that her consent was obtained under duress. Under
the contract, she agreed to convey several properties to Aldecoa & Co. and HSBC as a settlement of
their claims against her and her husband, who fled the country. It was established at the trial that
during the period of negotiation, representations were made to her by the defendants and concurred
in by her lawyers, that if she assented to the requirements of the defendants, the civil suit against
herself and her husband would be dismissed and the criminal charges against the latter withdrawn,
but if she refused, her husband must either spend the rest of his life abroad or be criminally
prosecuted.

ISSUE:

WON there was duress which would invalidate the contract.

RULING:

No. There is no duress that will invalidate the contract.

Article 1335 of the Civil Code in its last paragraph provides that: “A threat to enforce one’s claim
through competent authority, if the claim is just or legal does not vitiate consent”.

In order that this contract can be annulled it must be shown that the plaintiff never gave her consent
to the execution thereof. It is, however, necessary to distinguish between real duress and the motive
which is present when one gives his consent reluctantly. A contract is valid even though one of the
parties entered into it against his wishes and desires or even against his better judgment. Contracts
are also valid even though they are entered into by one of the parties without hope of advantage or
profit. A contract whereby reparation is made by one party for injuries which he has willfully inflicted
upon another is one which from its inherent nature is entered into reluctantly by the party making the
reparation. He is confronted with a situation in which he finds the necessity of making reparation or
of taking the consequences, civil or criminal, of his unlawful acts. He makes the contract of
reparation with extreme reluctance and only by the compelling force of the punishment threatened.
Nevertheless, such contract is binding and enforceable. Petition is dismissed.

LEE VS CA

https://www.scribd.com/document/447228149/12-Lee-vs-CA-201-SCRA-405
HILL vs. VELOSO 

FACTS :

On July 24, 1915 Maximina Veloso claimed that she was tricked by her son-in-law
Domingo Franco into signing a blank document, unknowingly binding her to a debt of
P6,319 to Michael & Co. She thought, according to her, she was made to sign to
acknowledge an obligation to pay for the guardianship of the minor children of
Potenciano Veloso (her brother). And that she learned of the true nature of the
document (a promissory note to Michael & Co.) only after Franco’s death. But, clearly
her signatures on the promissory note were obtained by means of fraud.

ISSUE:

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

HELD:

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

Franco was not one of the contracting parties who may have deceitfully induced the
other contracting party, Michael & Co.,to execute the contract. The one and the other of
the contracting parties, to whom the law refers, are the active and passive subjects of
the obligation, the party of the first part and the party of the second part who execute
the contract. The active subject and the party of the first part of the Promissory Note in
question was Michael & Co., and the passive subject and party of the second part were
Veloso and Franco.

Veloso and Franco, therefore, composed a single contracting party in contractual

relation with or against Franco, like any other person who might have induced Veloso
into signing the Promissory Note under the influence of deceit, would be but a third
person. Under the Civil Code, deceit by a third person does not in general annul
consent. This deceit may give rise to more or less extensive and serious responsibility
on the part of the third person (Franco) and a corresponding right of action for the
contracting party prejudiced (Veloso). Veloso will probably just have to file an action
against the estate of Franco.

Woodhouse v Halili
July 31, 1953, 93 Phil. 526

FACTS:

On November 29, 1947, plaintiff Woodhouse entered into a written agreement with defendant Halili
for a partnership for the bottling and distribution of Mission soft drinks, plaintiff to act as industrial
partner or manager, and the defendant as a capitalist. The plaintiff was to secure the Mission Soft
Drinks franchise for and in behalf of the proposed partnership and that the plaintiff was to receive 30
per cent of the net profits of the business.

Prior to the agreement, plaintiff had informed the Mission Dry Corporation that he had interested a
prominent financier who was willing to invest in the bottling and distribution of the said beverages,
and requested, in order that he may close the deal with him, that the right to bottle and distribute be
granted him for a limited time under the condition that it will finally be transferred to the corporation.
Pursuant to this request, plaintiff was given thirty days option on exclusive bottling and distribution
rights.

Plaintiff prayed for the execution of the contract of partnership; accounting of profits and share
thereof of 30 percent with damages. The Defendant on the other hand claims that the defendant’s
consent to the agreement, was secured by false representation of plaintiff that he was the owner, or
was about to become owner of an exclusive bottling franchise. Further, he contended that plaintiff
did not secure the franchise but was given to defendant himself. He also filed a counterclaim for
damages.

ISSUE:

WON false representation, if it existed, annuls the agreement to form the partnership

RULING:

No. Article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the causal fraud,
which may be ground for the annulment of a contract, and the incidental deceit, which only renders
the party who employs it liable for damages only. The Supreme Court has held that in order that
fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo
incidente) inducement to the making of the contract.

If ever the plaintiff was guilty of a false representation, this was not the causal consideration that led
plaintiff to enter into the partnership agreement. The main cause that induced defendant to enter into
the partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to
bottle and distribute for the defendant or for the partnership.

Geraldez, vs. CA & Kenstar Travel Corporation

G.R. No. 108253, February 23, 1994

FACTS:
Petitioner Geraldez filed an action for damages by reason of contractual breach against respondent
Kenstar Travel Corp. Petitioner booked the Volare 3 tour with Kenstar. The tour covered a 22-day
tour of Europe for $2,990.00 which she paid the total equivalent amount of P190,000.00 charged by
private respondent for her and her sister, Dolores. At the tour, petitioner claimed that what was
alleged in the brochure was not what they experienced. There was no European tour manager as
stated in the brochure, the hotels where they stayed in which were advertised as first class were not,
the UGC leather factory which was specifically included as a highlight of the tour was not visited and
The Filipino tour guide provided by Kenstar was a first timer thus inexperienced. The Quezon City
RTC rendered a decision ordering respondent Kenstar to pay moral, nominal, and exemplary
damages totalling P1,000,000 and P50,000 attorney’s fees. On appeal, respondent Court of Appeals
deleted the award for moral and exemplary damages and reduced the nominal damages and
attorney’s fees to P30,000 and P10,000 respectively.

ISSUE:

Whether or not Kenstar acted in bad faith or with gross negligence in discharging its obligations in
the contract?

RULING:

Yes. Kenstar acted in bad faith and with gross negligence in discharging its obligation. When they
authorized an inexperienced and a first timer to be a tour escort, private respondent manifested its
indifference to the convenience, satisfaction and peace of mind of its clients during the trip despite
its express commitment to provide such facilities under the Volare 3 Tour Program which had the
grandiose slogan “Let your heart sing”. This incompetence must necessarily be traced to the lack of
due diligence on the part of private respondent in the selection of its employees. It is true that among
the thirty-two destinations, which included twenty-three cities and special visits to nine tourist spots,
this was the only place that was not visited. Clearly, therefore, private respondent’s choice of
Zapanta as the tour guide is a manifest disregard of its specific assurances to the tour group,
resulting in agitation and anxiety on their part, and which deliberate omission is contrary to the
elementary rules of good faith and fair play. It is extremely doubtful if any group of Filipino tourists
would knowingly agree to be used in effect as guinea pigs in an employees’ training program of a
travel agency, to be conducted in unfamiliar European countries with their diverse cultures, lifestyles
and languages.

In either case, whether private respondent has committed dolo causante or dolo incidente by making
misrepresentations in its contracts with petitioner and other members of the tour group, which
deceptions became patent in the light of after-events when, contrary to its representations, it
employed an inexperienced tour guide, housed the tourist group in substandard hotels, and reneged
on its promise of a European tour manager and the visit to the leather factory, it is indubitably liable
for damages to petitioner. The effects of dolo causante are the nullity of the contract and the
indemnification of damages, 63 and dolo incidente also obliges the person employing it to pay
damages. Wherefore, ordering private respondent Kenstar Travel Corporation to pay petitioner Lydia
L. Geraldez the sums of P100,000.00 by way of moral damages, P50,000.00 as exemplary
damages, and P20,000.00 as and for attorney’s fees, with costs against private respondent.

Mariano S. Tuason – plaintiff – appellant

vs.

Crisanto Marquez – defendant – appellee

Facts: On March 5, 1921, Crisanto C. Marquez, owner of the electric light plant of
Lucena, Tayabas agreed to franchised with Tuason and to pay Marquez a total of
P14,400; P2,400 within the sixty days and remainder , P12,000 within a year. The 1st
installment was paid subsequent to the sixty-day period; 2nd installment has not been
paid. During March 20, 1921 to July 19, 1922, Consolidated Electric Light Plant, once in
possession by Tuason. The property was sold to Gregorio Marquez, brother of Crisanto
Marquez at P5,501.57. While on 1913 to 1914, a franchise for thirty-five years was
granted the Lucena Electric Company. The rights of this Company passed to Crisanto
Marquez at sheriff’s sale on September 10,1919. Marquez, became disgusted with the
business result on February 28, 1921, prior to the accomplishment of the contract, he
announced to the Public Utility Commissioner his intention to give up the franchise.
Tuason permitted to operate the company pursuant to a special license which was to
continue until they obtained a new franchised granted by Republic Utility Commissioner
with certain conditions amounting to the renovation of the entire plant. Tuason conceive
the idea of bringing active against Marques for rescission of the contract. The plaintiff
filed complain in CFI Manila against Crisanto Marquez for P37,400. The defendant
asked for a dismissal action and an allowance of P12,654.50 from plaintiff.

Issue: Whether or not the defendant is liable  for the damages due to honorable
disclosure of fact pertaining to the renovation of plant as a requisite after the franchise
has been granted.

Ruling: No, it should emphasized that the contract in making mention of the property,
the Electric Light Company merely renewed a previous inventory of the property. The
franchise, therefore, was not determining cause of purchase. Indeed the franchise was
then in force and either party could easily have ascertained its status by applying at the
office of the Public Utility Commissioner. The innocent non-disclosure of a fact does not
affect the formation of the contract or operate to discharge the parties from this
agreement.

RURAL BANK OF STA. MARIA, PANGASINAN vs. THE HONORABLE COURT

OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN R. ARCEÑO
G.R. No. 110672 September 14, 1999

Facts:
          A parcel of land is registered in the name of Manuel Behis, married to
Cristina Behis. Said land originally was part of a bigger tract of land owned by
Behis, father of Manuel Behis. And upon the latter's death, his children,
namely: Saro Behis, Marcelo Behis, Manuel Behis, Lucia Behis, Clara Behis
and Arana Behis, in an extrajudicial settlement with Simultaneous Sale of
Inheritance, agreed to sell the land to Manuel Behis, married to Cristina Behis
but which subsequently was explained as only an arrangement adopted by
them to facilitate transactions over the land in a Confirmation of Rights of Co-
Ownership over real Property, showing that the Behis brothers and sisters,
including Manuel Behis, are still co-owners thereof.
Manuel Behis mortgaged said land in favor of the Bank in a Real Estate
Mortgage as security for loans obtained, covered by six promissory notes and
trust receipts under the Supervised Credit Program and annotated at the back
of the title. The mortgage, the promissory notes and trust receipts bear the
signatures of both Manuel Behis and Cristina Behis. Unfortunately thereafter,
Manuel Behis was delinquent in paying his debts.
Manuel Behis sold the land to the plaintiffs in a Deed of Absolute Sale
with Assumption of Mortgage which bears the signature of his wife Cristina
Behis. Manuel Behis took it upon himself to secure the signature of his wife
and came back with it. On the same date, plaintiffs and Manuel Behis
simultaneously executed another Agreement whereby plaintiffs are indebted to
Manuel Behis for the sum of P2,400,000.00 payable in installments with
P10,000.00 paid upon signing and in case of default in the installments,
Manuel Behis shall have legal recourse to the portions of the land equivalent to
the unpaid balance of the amounts in installments.  Plaintiffs did not present
to the Register of Deeds said two contracts and ask that the title in the name of
Manuel Behis be cancelled and a new one issued in their name which normally
a buyer does. Neither did plaintiffs annotate at the back of the title the
aforesaid two contracts. Nor did they immediately go to the Bank and present
said two contracts. Thus, the title to the land remained in the name of Manuel
Behis.
The plaintiffs were unable to complete their full payment to Manuel
Behis of the sale of the land as it is nowhere near P2,400,000.00. Meantime,
the loan in the name of Manuel Behis with the Bank secured by the Real
Estate Mortgage on the land continued to accumulate being delinquent.

Issue:
          Whether or not the Memorandum is voidable on the ground of fraud

Ruling:
          The Supreme Court held that the kind of fraud that will vitiate a
contract refers to those insidious words or machinations resorted to by one of
the contracting parties to induce the other to enter into a contract which
without them he would not have agreed to.  Simply stated, the fraud must be
the determining cause of the contract, or must have caused the consent to be
given. It is believed that the non-disclosure to the bank of the purchase price of
the sale of the land between private respondents and Manuel Behis cannot be
the "fraud" contemplated by Article 1338 of the Civil Code.  From the sole
reason submitted by the petitioner bank that it was kept in the dark as to the
financial capacity of private respondents, we cannot see how the omission or
concealment of the real purchase price could have induced the bank into giving
its consent to the agreement; or that the bank would not have otherwise given
its consent had it known of the real purchase price.

Secondly, pursuant to Article 1339 of the Civil Code, silence or

concealment, by itself, does not constitute fraud, unless there is a special duty
to disclose certain facts, or unless according to good faith and the usages of
commerce the communication should be made. Verily, private respondents
Rayandayan and Arceño had no duty, and therefore did not act in bad faith, in
failing to disclose the real consideration of the sale between them and Manuel
Behis.

TRINIDAD vs IAC

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SONGCO VS SELLNER

Facts:
Both Defendant, George C. Sellner and the plaintiff, Lamberto
Songco owned a farm which was contiguous to each other’s
land. Both properties had the sugar cane ready to be cut. The
Defendant bought the plaintiff’s cane for P12,000 and
executed three promissory notes of P4,000 each. Two of these
notes were paid; and the third was was instituted to recover.
From a judgement rendered in favor of the plaintiff, the
defendant has appealed.

The defendant denied all the allegations of the complaint. He

said that the promissory note was obtained from him by
means of certain false and fraudulent representations therein
specified.

It is claimed that the plaintiff estimated that this cane would

produce 3,000 piculs of the sugar and that the defendant
bought the crop believing this estimate to be substantially
correct. As the crop turned out it produced 2,017 piculs, gross,
and after the toll for milling was deducted the net left to the
defendant was very much less. The court believed it is fairly
shown that the plaintiff knew at the time he made the
representation exaggerated the probable produce of his fields,
and it is impossible to believe that his estimate honestly
reflected his true opinion. He knew what these same fields had
been producing over a long period of years; and he knew that,
judging from the customary yield, the harvest of this year
should fall far below the amount stated.

Issue: 
Whether or not the plaintiff was guilty
of fraudulent representation of his cane.

Held:
No. Misinterpretation upon a mere matter of opinion is not an
actionable deceit, nor is it a sufficient ground for avoiding a
contract as fraudulent. The law allows considerable latitude to
seller’s statements, or dealer’s talk; and experience teaches
that it is exceedingly risky to accept it at its face value.

Assertions concerning the property which is the subject of a

contract of sale, or in regard to its qualities and
characteristics, are the usual and ordinary means used by
defendant to obtain a high price and are always understood as
affording to buyers no ground for omitting to make inquiries. A
man who relies upon such an affirmation made by a person
whose interest might so readily prompt him to exaggerate the
value of his property does so at his peril, and must take the
consequences of his own imprudence.

Mercado and Mercado v. Espiritu

G.R. No. L-11872, 1 December 1917

FACTS:

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

ISSUE:

Whether or not the deed of sale is valid, when the minors presented themselves of legal age, at the
time of the perfection of the contract.

RULING:

The court declared that the contract of sale was VALID, even if it were made and entered into by
minors, who pretended to be of legal age.

Whenever a party has, by its own declaration, act or omission, intentionally and deliberately led
another party to believe a particular thing to be true, and to act upon such belief, he cannot, in any
litigation arising out of such declaration, cannot be permitted to falsify it. Furthermore, the sale of real
estate made by a minor who pretend to be of legal age, when in fact he is not, is VALID, and he will
not be permitted to excuse himself from the fulfillment of the obligations contracted by him or to have
it annulled. The judgment that holds such sale to be valid and absolves the purchaser from the
complaint filed against him does not violate the laws relative to the sale of minor’s property, nor the
judicial rules established in consonance therewith.

In the given case, annulment of the sale cannot be invoked on the ground of minority, since at the
time of the perfection of the contract; Domingo and Josefa presented themselves to be of legal age.
Braganza v. Villa Abrille
G.R. No. L-12471, 13 April 1959

FACTS:

Rosario Braganza and her sons loaned from De Villa Abrille P70,000 in Japanese war notes and in
consideration thereof, promised in writing to pay him P10,000 + 2% per annum in legal currency of
the Philippines 2 years after the cessation of the war. Because they have not paid, Abrille sued them
in March 1949.

The Manila court of first instance and CA held the family solidarily liable to pay according to the
contract they signed. The family petitioned to review the decision of the CA whereby they were
ordered to solidarily pay De Villa Abrille P10,000 + 2% interest, praying for consideration of the
minority of the Braganza sons when they signed the contract.

They also averred that Guillermo and Rodolfo were minors when they signed the promissory note.

Court of Appeals found them liable pursuant to the following reasoning:

. . . . These two appellants did not make it appears in the promissory note that they were not yet of
legal age. If they were really to their creditor, they should have appraised him on their incapacity,
and if the former, in spite of the information relative to their age, parted with his money, then he
should have contended with the consequence of his act. But, that was not the case. Perhaps
defendants in their desire to acquire much-needed money, they readily and willingly signed the
promissory note, without disclosing the legal impediment with respect to Guillermo and Rodolfo.
When minor, like in the instant case, pretended to be of legal age, in fact, they were not, they will
not, later on, be permitted to excuse themselves from the fulfillment of the obligation contracted by
them or to have it annulled. (Mercado, et al. vs. Espiritu, 37 Phil., 215.)

ISSUE:

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

RULING:

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

The fraud of which an infant may be held liable to one who contracts with him in the belief that he is
of full age must be actual, not constructive, and mere failure of the infant to disclose his age is not
sufficient.

 However, the boys though not bound by the provisions of the contract, are still liable to pay the
actual amount they have profited from the loan. Art. 1340 states that even if the written contract is
unenforceable because of their non-age, they shall make restitution to the extent that they may have
profited by the money received.

Suntay v. CA
G.R. No. 114950, 19 December 1995
FACTS:

Federico Suntay, herein private respondent, was the registered owner of a parcel of land and a rice
mill. He applied as a miller-contractor of NARIC. His application was denied because he was tied up
with several unpaid loans. For purposes of circumvention, he thought of letting his nephew-layer,
herein petitioner, to make the application for him. Rafael prepared the deed of sale, wherein
Federico sold the parcel of land and the rice mill to Rafael. Three months later, the second deed of
sale was made, wherein Rafael sold back the properties in question to Federico for a consideration
of P20,000. A Certificate of Title in the name of Federico was canceled and a new was one was
issued in the name of Rafael. In spite of this, Federico was remained in possession of the property
and continued to exercise rights of absolute ownership over the property. Rafael, meanwhile, did not
make any attempt to take possession thereof at any time. Federico requested Rafael to deliver his
copy of the TCT so that Federico could have the counter-deed of sale in his favor registered in his
name. Rafael declined and furthered contended that the second deed of sale was a counterfeit.
Federico filed a complaint about reconveyance assailing the validity of the first deed of sale,
interjecting that he has been in continuous possession of the properties in question. While the trial
court favored the petitioner, the CA reversed the decision of the trial court by stating that the first
deed of sale is absolutely simulated and fictitious.

ISSUE:

WON the first Deed of Sale is simulated and therefore invalid.

RULING:

Yes. It can be adduced by the facts that the first deed of sale stipulating a transfer of property from
Federico to Rafael is absolutely simulated and fictitious. Rafael and Federico were relatives, whose
blood relation was the foundation of their professional and business relationship. Rafael admits that
he came into possession thereof in the course of rendering legal services to his uncle. Their close
relationship, as considered by the CA, is a badge of simulation. Rafael further attempted to claim
that the transfer was consideration for his attorney’s fees. The most protuberant index of simulation
is the complete absence of an attempt in any manner on the part of the late Rafael to assert his
rights of ownership over the land and rice mill in question. After the sale, he should have entered the
land and occupied the premises thereof. He did not even attempt to. If he stood as owner, he would
have collected rentals from Federico for the use and occupation of the land and its improvements.
All that the late Rafael had was a title in his name.
J.L.T. Agro, Inc. v. Balansag and Cadayday
G.R. No. 141882, 11 March 2005
FACTS:

Don Julian contracted two marriages. He had two children with the first wife Antonia and 4 children
on the second wife Milagros. The present controversy involves a parcel of land which was originally
registered in the name of Don Julian and Antonia. Don Julian married Milagros without partitioning
the properties in his first marriage. To avoid conflict, the parties entered into a Compromise
Agreement which embodied the partition of all the properties of Don Julian. The above parcel of land
was included to be the share of Milagros and her children. Milagros took possession of the said
property which was subsequently sold to respondents herein. Respondents, upon registering the
said land discovers that the title to the above land was on the name of Petitioner herein.

Don Julian after the execution of the Compromise Agreement executed a Deed of Assignment of
Assets with Assumption of Liabilities to petitioner which transfers the ownership of the subject land in
favor to the petitioner. Don Julian died intestate.

ISSUE:

Whether or not a future legitime can be determined, adjudicated and reserved prior to the death of
the testator.

RULING:

Yes. Well-entrenched is the rule that all things, even future ones, which are not outside the
commerce of man may be the object of a contract. The exception is that no contract may be entered
into with respect to future inheritance, and the exception to the exception is the partition inter vivos
referred to in Article 1080 which states that: “Should a person make a partition of his estate by an act
inter vivos, or by will, such partition shall be respected, insofar as it does not prejudice the legitime of
the compulsory heirs.”
Liguez v. CA
G.R. No. L-11240, 18 December 1957
FACTS:

Conchita Liguez filed a complaint against the widow and heirs of Salvador Lopez to recover a parcel
of 51.84 hectares of land in Davao. She averred to be its legal owner, pursuant to a deed of donation
executed in her favor by Salvador. At the time the deed was executed, Conchita was 16. She had
also been living with Salvador’s parents for barely a month. The deed of donation recites that the
donor Salvador, “for and in consideration of his love and affection” for Conchita, and “also for the
good and valuable services rendered to [Salvador] by [Conchita], does by these presents, voluntarily
give, grant and donate…”

The donation was made in view of Salvador’s desire to have sexual relations with Conchita.
Furthermore, Conchita’s parents would not allow Conchita to live with him unless he first donated the
subject land. The donated land originally belonged to the conjugal partnership of Salvador and his
wife, Maria Ngo. The deed of donation was inoperative, and null and void because: (a) Lopez had no
right to donate conjugal property to Conchita; and (b) the donation was tainted with illegal  causa or
consideration. 

ISSUE:

Whether or not the conveyance was predicated on illegal causa.

RULING:

Yes. Conchita Liguez entitled to so much of the donated property as may be found, upon proper
liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership or the
legitimes of Salvador’s forced heirs. Under the cited Art. 1274, liberality of the donor is
deemed causa only in contracts that are of “pure” beneficence, or contracts designed solely and
exclusively to procure the welfare of the beneficiary, without any intent of producing any satisfaction
for the donor.
Carantes v CA
76 SCRA 514

Facts: Mateo Carantes was the original owner of a certain parcel of land. When he died, he was survived
by his wife and six children. Subsequently, the parcel of land was subjected for expropriation, and was
later on indeed expropriated. A deed denominated as Assignment of Right of Inheritance was executed
by four of Mateo’s children assigning Maximo Carantes their rights to inheritance over the lot. Maximo
then sold the remaining lots to the government and also registered on Mar. 16, 1940 the deed of
Assignment of Right to Inheritance. The still remaining lot was issued in the name of Maximo. A complaint
was filed against Maximo alleging that the deed be annulled on the ground of fraud. The trial court
rendered a decision stating that plaintiff’s right of action has prescribed. The CA reversed the decision.

Issue: WON plaintiff’s right of action has prescribed.

Held: The present action, being one to annul the contract on the ground of fraud, its prescriptive period is
four years from the time of the discovery of the fraud.
The weight of authorities is to effect that the registration of an instrument in the Office of the Register of
Deeds constitutes constructive notice to the whole world, and therefore, discovery of the fraud is deemed
to have taken place at the time of the registration. In this case the deed of assignment was registered on
Mar. 16, 1940. The four year period within which the private respondents could have filed the present
action consequently commenced on Mar. 16, 1940; and since they filed it only on Sept. 4, 1958, it follows
that the same is barred by the statute of limitations.
Sps. Buenaventura v. CA
G.R. No. 126376, 20 November 2003

FACTS:

Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children
and the corresponding certificates of title issued in their names because of:

1. a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the
properties in litis;
2. b) Secondly, assuming that there was consideration in the sums reflected in the questioned
deeds, the properties are more than three-fold times more valuable than the measly sums
appearing therein;

3. c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors
and vendees); and

4. d) Fourthly, the purported sale of the properties in litiswas the result of a deliberate
conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of
their legitime.

Defendants, on the other hand, aver (1) that plaintiffs do not have a cause of action against them as
well as the requisite standing and interest to assail their titles over the properties in litis; (2) that the
sales were with sufficient considerations and made by defendants parents voluntarily, in good faith,
and with full knowledge of the consequences of their deeds of sale; and (3) that the certificates of
title were issued with sufficient factual and legal basis.

ISSUE:

Whether the Deeds of Sale are void for the gross inadequacy of price.

RULING:

No. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil
Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that
the price is equal to the exact value of the subject matter of sale. All the respondents believed that
they received the commutative value of what they gave.
Dauden-Hernaez v. De los Angeles
G.R. No. L-27010, 30 April 1969
FACTS:

Petitioner, an actress, filed a complaint against Hollywood Far East Productions to recover fees for
her services as leading actress in two motion pictures produced by the company. Respondent judge,
De los Angeles ordered the complaint dismissed grounded on the reason that the “claim of plaintiff
was not evidenced by any written document, either public or private”. That according to Article 1358
governing unenforceable contracts, writing was absolute and indispensable, because the amount
involved exceeds five hundred pesos.

ISSUE:

WON said contract must be in writing to be valid and enforceable.

RULING:

No. The aforementioned contract needs not to be in writing.

Article 1315 of the Civil Code provides that: “Contracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with good faith,
usage and law.”. Furthermore Article 1356 of the same book provides that: “Contracts shall be
obligatory in whatever form they may have been entered into, provided all the essential requisites for
their validity are present….” Exemptions to the general rule are solemn contracts (needs to be in
writing to be valid) and memorandums (governed by Article 1402(2) of the Statute of Frauds).

In the matter of formalities, the contractual system of our Civil Code still follows the upholding of  the
spirit and intent of the parties over formalities: hence, in general, contracts are valid and binding from
their perfection regardless of form whether they be oral or written. Petition is with merit and case
remanded to lower court for fee determination.
RESUENA VS CA

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Kasilag v. Rodriguez
G.R. No. 46623, 7 December 1939

FACTS:

This is an appeal taken by the defendant-petitioner (Kasilag) from the decision of the Court of
Appeals which modified that rendered by the court of First Instance of Bataan. The said court held:
that the contract is entirely null and void and without effect; that the plaintiffs-respondents
(Rodriguez, et.al.), then appellants, are the owners of the disputed land, with its improvements, in
common ownership with their brother Gavino Rodriguez, hence, they are entitled to the possession
thereof; that the defendant-petitioner should yield possession of the land in their favor, with all the
improvements thereon and free from any lien.

The parties entered into a contract of loan to which has an accompanying accessory contract of
mortgage. The executed accessory contract involved the improvements on a piece land, the land
having been acquired by means of homestead. Petitioner for his part accepted the contract of
mortgage.

Believing that there are no violations to the prohibitions in the alienation of lands Petitioner, acting in
good faith took possession of the land. To wit, the Petitioner has no knowledge that the enjoyment of
the fruits of the land is an element of the credit transaction of Antichresis.

ISSUE:

Whether the petitioner should be deemed a possessor in good faith?

RULING:

When the acquisition appears in a public document, the capacity of the parties has already passed
upon by competent authority, and even established by appeals taken from final judgments and
administrative remedies against the qualification of registrars, and the possibility of error is remote
under such circumstances; but unfortunately, private documents and even verbal agreements far
exceed public documents in number, while no one should be ignorant of the law, the truth is that
even we who are called upon to know and apply it fall into error not infrequently. However, a clear,
manifest, and truly unexcusable ignorance is one thing, to which undoubtedly refers article 2, and
another and different this is possible and excusable errors arising from complex legal principles and
from the interpretation of conflicting doctrines

Even ignorance of the law may be based upon error of fact, or better still, ignorance of a fact is
possible as to the capacity to transmit and as to the intervention of certain persons, compliance with
certain formalities and appreciation of certain acts, and error of law is possible in the interpretation of
doubtful doctrines.

Gross and inexcusable ignorance of law may not be the basis of good faith, but possible, excusable
ignorance may be such basis. It is a fact that the petitioner is not conversant with the laws because
he is not a lawyer. In accepting the mortgage of the improvements he proceeded on the well-
grounded belief that he was not violating the prohibition regarding the alienation of the land. In taking
possession thereof and in consenting to receive its fruits, he did not know, as clearly as a jurist does,
that the possession and enjoyment of the fruits are attributes of the contract of antichresis and that
the latter, as lien, was prohibited by section 116. These considerations again bring us to the
conclusion that, as to the petitioner, his ignorance of the provisions of section 116 is excusable and
may therefore, be the basis of good faith.We do not give much importance to the change of the tax
declaration, which consisted in making the petitioner appear as the owner of the land, because such
an act may only be considered as a sequel to the change of possession and enjoyment of the fruits
by the petitioner, to about which we have stated that the petitioner’s ignorance of the law is possible
and excusable. We, therefore, hold that the petitioner acted in good faith in taking possession of the
land and enjoying its fruits.

SANTI VS CA

FACTS:
Esperanza Jose, a registered owner of a parcel of land, leased a portion of her property
in Cavite to spouses Eugenio Vitan and Beatriz Francisco for a period of 20 years
automatically extended for another 20 years. Spouses, in turn, sold all their rights and
interest to Augusto Reyes where a new lease contract was entered with Jose. In the
interim, Jose sold all his rights to plaintiff Vicente Santi, with a rental of 20 years
extendable for another 20 years. After Reyes’ expiration of lease, plaintiff Santi wrote to
Reyes’ heirs demanding recover of possession. Defendants refused on the contention
that there was automatic 20 years extension, and tendered to plaintiff the payment
which the latter refused to accept. Plaintiff filed a complaint against Reyes which the
trial court ruled in his favor. CA reversed the lower court’s decision.

ISSUE:
Whether the contract of lease contained automatic extension of lease

HELD:
NO. The phrase, “automatically extended” did not appear and was not used in the lease
contract subsequently entered by Jose and Reyes since the lessor did not want to be
bound by the stipulation of automatic extension as provided in the previous contract. It
clearly shows that Jose did not intend to automatically extend the lease contract but to
ponder whether to do so. If the intention provided for an automatic extension, they could
have easily provided a 40 years contract instead to 20.
OIL AND NATURAL GAS COMMISSION VS CA

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GARCIA VS BISAYA

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QUIROS VS ARJONA

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