SUBJECT ELEMENTS

OCAMPO III. VS. PEOPLEG.R Nos. 156547-51. February 4, 200

FACTS : The Department of Budget and Management released the amountof Php 100

Million for the support of the local government unit of theprovince of Tarlac.

However, petitioner Ocampo, governor of Tarlac, loaned out more than P 56.6 million in

which he contracted with Lingkod Tarlac Foundation, Inc., thus, it was the subject of 25

criminal chargesagainst the petitioner. T h e S an d i gan b ayan co nv ic t ed t h e

p e t i t i o ne r o f t h e c r i me o f malversation of public funds. However, the petitioner

contended that theloan was private in character since it was a loan contracted with the

Taralc Foundation.

ISSUE :Whether or not the amount loaned out was private in nature.

RULING : Yes, the loan was private in nature because Art. 1953 of the NewCivil Code

provides that ―a person who receives a loan of money or anyother fungible thing

acquires the ownership thereof, and is bound to paythe creditor an equal amount of the same kind

and quality.‖ The fact that the petitioner-Governor contracted the loan, the publicfund changed

its nature to private character, thus it is not malversationwhich is the subject of this

case, instead it must be a simple collection of money suit against the petitioner in case of non

payment . Therefore, thepetitioner is acquitted for the crime of malversation.

SOURCES OF OBLIGATIONS

A . L A W

1 . L E U N G B E N V S . O ’ B R I E N , 3 8 P H I L 1 8 2

2 . P E L A Y O V S . L A U R O N , 1 2 P H I L 4 5 3

3 . N I K K O H O T E L V S . R E Y E S , 4 5 2 S C R A 5 3 2

4 .ST . MA RY ’S ACA D E MY V S. C A RPI T A NOS , FEB . 6 , 2 00 2

5 . RE GIN O VS . PAN GA SI N AN COLLE GE, N OV . 18 , 200 4

6 . COS MO E NTE RT AI N ME NT VS . LA VI LLE, AU G. 20 , 2 00 4

LEUNG BEN; plaintiff, VS. P. J. O’BRIEN, JAMES A. OSTRAND and GEO. R.

HARVEY, Judgesof First Instance of the City of Manila, defendants

April 6, 1918

FACTS: On December 12, 1917, an action was instituted in the Court of FirstInstance of

Manila by P.J. O‘Brien to recover of Leung Ben the sum of P15,000, alla l l eged to h av e

b een lo s t b y t h e p l a i n t i f f t o t h e d e f end an t i n a s e r i es o f gambling, banking,

and percentage games conducted during the two or threemonths prior to the institution

of the suit. The plaintiff asked for an attachmentagainst the property of the defendant, on the

ground that the latter was about todepart from the Philippines with intent to defraud his creditors.

This attachmentwas issued. The provision of law under which this attachment was

issuedrequires that there should be a cause of action arising upon contract, express orimplied.

The contention of the petitioner is that the statutory action to recover money lost at

gaming is not such an action as is contemplated in this provision,and he insists that the

original complaint shows on its face that the remedy of attachment is not available in aid

thereof; that the Court of First Instance actedin excess of its jurisdiction in granting the writ of

attachment; that the petitionerhas no plain, speedy, and adequate remedy by appeal or

otherwise; and thatconsequently the writ of certiorari supplies the appropriate remedy for this

relief.

ISSUE: Whether or not the statutory obligation to restore money won at gaming isan obligation arising

from contract, express or implied.

RULING: Yes.

In permitting the recovery money lost at play, Act No. 1757 has introduced

modifications in the application of Articles 1798, 1801, and 1305 of the Civil Code. The first

two of these articles relate to gambling contracts, while article1 3 0 5 t r e a t s o f t h e

n u l l i t y o f co n t r ac t s p ro ceed in g f ro m a v i c io us o r i l l i c i t consideration. Taking all

these provisions together, it must be apparent that theobligation to return money lost at

play has a decided affinity to contractualobligation; and the Court believes that it could,

without violence to the doctrinesof the civil law, be held that such obligations is an innominate

quasi-contract.It is however, unnecessary to place the decision on this ground. In

theopinion of the Court, the cause of action stated in the complaint in the court below

is based on a contract, express or implied, and is therefore of such naturethat the court had

authority to issue the writ of attachment. The application forthe writ of certiorari must therefore

be denied and the proceedings dismissed.LAW AS A SOURCE OF OBLIGATION

ARTURO PELAYO, plaintiff-appellantVS. MARCELO LAURON, defendant-appellee12 Phil

453 January 12, 1909FACTS: On November 23, 1906, Arturo Pelayo, a physician, filed a complaintagainst Marcelo

and Juana Abella. He alleged that on October 13, 1906 at night,Pelayo was called to the house of

the defendants to assist their daughter-in-lawwho was about to give birth to a child.

Unfortunately, the daughter-in-law diedas a consequence of said childbirth. Thus, the

defendant refuses to pay. Thed e f e n d a n t s a r g u e t h a t t h e i r d a u g h t e r - i n - l a w

l i v e d w i t h h e r h u s b a n d independently and in a separate house without any relation, that

her stay therewas accidental and due to fortuitous event.

ISSUE: W h e t h e r o r n o t t h e d e f e n d a n t s s h o u l d b e h e l d l i a b l e f o r t h e

f e e s demanded by the plaintiff upon rendering medical assistance to the defendants‘daughter-

in-law.

RULING: No. The Court held that the rendering of medical assistance is one of theo b l i g a t i o n s t o

w h i c h s p o u s e s a r e b o u n d b y m u t u a l s u p p o r t , e x p r e s s l y determined by

law and readily demanded. Therefore, there was no obligation onthe part of the in-laws but rather

on the part of the husband who is not a party. Thus, decision affirmed.LAW AS A SOURCE OF

OBLIGATION

ASI CORPORATION,

plaintiff-appellant

VS.EVANGELISTA,

defendant-appellee

February 14, 2008FACTS :P r i v a t e r e s p o n d e n t E v a n g e l i s t a c o n t r a c t e d P e t i t i o n e r

A S J Corporation for the incubation and hatching of eggs and by productsowned by

Evangelista Spouses. The contract includes the scheduledpayments of the service of ASJ

Corporation that the amount of installments h a l l b e p a i d a f t e r t h e d e l i v e r y o f

t h e c h i c k s . H o w e v e r , t h e A S J Corporation detained the chicks because

Evangelista Spouses failed topay the installment on time.

ISSUE :

Wh e th e r o r no t t h e d e t en t io n o f t h e a l l eged ch i ck s v a l i d an d recognized under

the law?

RULING :N o , becaus e ASJ Co r po r a t io n m us t g iv e d u e to t h e E v ange l i s t a Spouses in

paying the installment, thus, it must not delay the delivery of the chicks. Thus, under the

law, they are obliged to pay damages witheach other for the breach of the obligation.

Therefore, in a contract of service, each party must be in good faithi n t h e p e r f o r man ce o f

t h e i r ob l i ga t io n , t hu s w h en th e p e t i t i on e r h ad detained the hatched eggs of the

respondents spouses, it is an implicationof putting prejudice to the business of the

spouses due to the delay of paying installment to the petitioner.

LAW AS A SOURCE OF OBLIGATION

RAMAS,

plaintiff-appellant

VS.QUIAMCO,

defendant-appellee

December 6, 2006FACTS :Q u i a m c o h a s a m i c a b l y s e t t l e d w i t h D a v a l a n , G a b u t e r o a n d G en e r os o

f o r t h e c r im e o f r ob b e r y an d t h a t i n r e t u r n , t h e t h r ee had surrendered to

Quiamco a motorcycle with its registration. However, Atty.Ramas has sold to Gabutero the

motorcycle in installment but when thelatter did not able to pay the installment, Davalon

continued the paymentbut when he became insolvent, he said that the motorcycle was taken

byQ u i am co ‘s m en . H o w ev e r , a f t e r s eve r a l yea r s , t h e pe t i t i on e r

R am as together with policemen took the motorcycle without the respondent‘s permit

and shouted that the respondent Quiamco is a thief of motorcycle.Respondent then filed an

action for damages against petitioner allegingt h a t p e t i t i o ne r i s l i ab l e fo r

u n l aw fu l t ak in g o f t h e m ot o rc yc l e and utterance of a defamatory remark and

filing a baseless complaint. Also,p e t i t i on er s c l a im t h a t t h e y sh o u ld n o t b e

h e ld l i ab l e f o r p e t i t i o ne r ‘ sex e rc i s e o f i t s r i gh t a s s e l l e r -m o r t gagee t o

r e co ve r t he m o r t gaged motorcycle preliminary to the enforcement of its right to foreclose

on themortgage in case of default.

ISSUE :Whether or not the act of the petitioner is correct.

RULING

:No. The petitioner being a lawyer must know the legal procedurefor the recovery of

possession of the alleged mortgaged property in whichsaid procedure must be conducted through

judicial action. Furthermore,t h e p e t i t i on e r ac t ed i n m al i c e and in t en t t o c aus e

d am age to t he respondent when even without probable cause, he still instituted an

actagainst the law on mortgage.

LAW AS A SOURCE OF OBLIGATION

NIKKO HOTEL MANILA GARDEN AND RUBY LIMVS. ROBERTO REYES a.k.a.

“AMAY BISAYA”2005 Feb 28G.R. No. 154259

FACTS: In the evening of October 13, 1994, while drinking coffee at the lobby of Hotel

Nikko, respondent was invited by a friend, Dr. Filart to join her in a party incelebration of the

birthday of the hotel‘s manager. During the party and whenrespondent was lined -up

at the buffet table, he was stopped by Ruby Lim, theExecutive Secretary of the

hotel, and asked to leave the party. Shocked andembarrassed, he tried to explain

that he was invited by Dr. Filart, who wash e r s e l f a gu es t . N o t l on g a f t e r , a

M ak a t i p o l i c em a n ap p ro ached h i m an d escorted him out of her party.Ms. Lim

admitted having asked respondent to leave the party but notunder the ignominious

circumstances painted by Mr. Reyes, that she did the actpolitely and discreetly. Mindful of

the wish of the celebrant to keep the partyintimate and exclusive, she spoke to the

respondent herself when she saw himby the buffet table with no other guests in the

immediate vicinity. She askedhim to leave the party after he finished eating. After

she had turned to leave,the latter screamed and made a big scene.Dr. Filart testified that

she did not want the celebrant to think that she invited Mr. Reyes to the

party.Respondent filed an action for actual, moral and/or exemplary damagesand

attorney‘s fees. The lower court dismissed the complaint. On appeal, theCourt of

Appeals reversed the ruling of the trial court, consequently imposingupon Hotel

Nikko moral and exemplary damages and attorney‘s fees. On motionfor reconsideration, the

Court of Appeals affirmed its decision. Thus, this instantpetition for review.

ISSUES: Whether or not Ms. Ruby Lim is liable under Articles 19 and 21 of the CivilCo d e i n a sk in g

M r . R e yes to l e ave t h e p a r t y a s h e w as n o t i n v i t ed b y t h e celebrant thereof and

whether or not Hotel Nikko, as the employer of Ms. Lim, besolidarily liable with her.

RULING: The Court found more credible the lower court‘s findings of facts. Therewas no

proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and to ex po s e h im

t o r i d i cu l e and s ham e . Mr . R eyes ‘ v e r s io n o f t h e s to r y w as unsupported,

failing to present any witness to back his story. Ms. Lim, not having abused her right to

ask Mr. Reyes to leave the party to which he was notinvited, cannot be made liable for damages

under Articles 19 and 21 of the CivilCode. Necessarily, neither can her employer, Hotel

Nikko, be held liable as itsliability springs from that of its employees.When a right is

exercised in a manner which does not conform with thenorms enshrined in Article 19

and results in damage to another, a legal wrong isthereby committed for which the

wrongdoer must be responsible. Article 21states that any person who willfully causes loss

or injury to another in a mannerthat is contrary to morals, good customs or public policy

shall compensate thelatter for the damage.Without proof of any ill-motive on her part, Ms.

Lim‘s act cannot amount toabusive conduct. The maxim ―Volenti Non Fit Injuria‖ (self -

inflicted injury) was upheld bythe Court, that is, to which a person assents is not

esteemed in law as injury,t h a t co ns en t t o i n j u r y p r ec lu d es the r eco v e r y o f

d am ages b y o n e who ha s knowingly and voluntarily exposed himself to danger.LAW AS

A SOURCE OF OBLIGATION

ST. MARY’S ACADEMY, petitioner,VS. WILLIAM CARPITANOS and LUCIA S. CARPITANOS,

GUADA DANIEL, JAMES DANIEL II, JAMES DANIEL, SR., and VIVENCIO

VILLANUEVA,respondentsFebruary 6, 2002FACTS: From February 13 to 20, 1995, defendant-appellant St. Mary‘s Academy of Dipolog City

conducted an enrollment drive for the school year 1995-1996. As astudent of St. Mary‘s

Academy, Sherwin Carpitanos was part of the campaigninggroup. Accordingly, Sherwin, along

with other high school students were ridingin a Mitsubishi jeep owned by defendant

Vivencio Villanueva on their way toLarayan Elementary School, Larayan, Dapitan

City. The jeep was driven by James Daniel II then 15 years old and a student of the

same school. Allegedly,the latter drove the jeep in a reckless manner and as a result

the jeep turnedturtle. Sherwin Carpitanos died as a result of the injuries he sustained from

theaccident. The trial court ordered the defendants, St. Mary‘s Academy

principallyliable and the parents of James Daniel as subsidiarily liable for damages.

The Court of Appeals affirmed the decision of the trial court. The Court of Appeals held

petitioner St. Mary‘s Academy liable for the death of SherwinCarpitanos under

Articles 218 and 219 of the Family Code, pointing out thatpetitioner was negligent in

allowing a minor to drive and in not having a teacheraccompany the minor students in the jeep.

ISSUE: Whether or not the appellant St. Mary‘s Academy is principally liable for damages for

the death of Sherwin.

RULING: No. Under Article 219 of the Family Code, if the person under custody is aminor, those

exercising special parental authority are principally and solidarilyliable for damages

caused by the acts or omissions of the unemancipated minorwhile under their supervision,

instruction, or custody.However, for petitioner to be liable, there must be a finding that the act

oromission considered as negligent was the proximate cause of the injury causedbecause the

negligence must have a causal connection to the accident.Respondents Daniel spouses and

Villanueva admitted that the immediatecause of the accident was not the negligence of petitioner

or the reckless drivingof James Daniel II, but the detachment of the steering wheel guide of the

jeep.Hence, liability for the accident, whether caused by the negligence of theminor driver or

mechanical detachment of the steering wheel guide of the jeep,must be pinned on the

minor‘s parents primarily. The negligence of petitionerSt. Mary‘s Academy was

only a remote cause of the accident. Between theremote cause and the injury, there

intervened the negligence of the minor‘sparents or the detachment of the steering wheel

guide of the jeep. Consideringthat the negligence of the minor driver or the detachment of the

steering wheelguide of the jeep owned by respondent Villanueva was an event over

whichpetitioner St. Mary‘s Academy had no control, and which was the

proximatecause of the accident, petitioner may not be held liable for the death

resultingfrom such accident.

SOURCES OF OBLIGATIONSA . C O N T R A C T S 1 .TS PI , IN C . , VS .

TS PO C E MPL OYEE S UN IO N 54 5 S 2 15 2 . R E G I N O V S . C A ,

N O V E M B E R 1 8 , 1 9 9 2 3 . P S B A V S . C A , F E B . 4 ,

1 9 9 2 4 . C OS MO EN TE RT AI N ME NT V S. L A VI LLE , 20 A U GUST

2 0 04 5 . AY AL A C OR P. VS . ROS A D IA N A R EA LTY , 346 S C RA

6 6 36 . B R I C K T O W N D E V E L O P M E N T V S . A M O R

T I E R R A DEVELOPMENT, 239 SCRA 1267 . P I L I P I N A S H I N O V S . C A , 3 3 8

S C R A 3 5 5

TSPI, INCORPORATION VS. TSPIC EMPLOYEES UNIONG.R No. 163419. February 13,

2008FACTS : TSPI Corporation entered into a Collective Bargaining Agreement w i t h th e

co r po r a t i on Un io n f o r t h e i nc r eas e o f s a l a r y f o r t h e l a t t e r ‘ s members for the

year 2000 to 2002 starting from January 2000. thus, theincreased in salary was materialized

on January 1, 2000. However, onOctober 6, 2000, the Regional Tripartite Wage and

production Boardraised daily minimum wage from P 223.50 to P 250.00 starting November1,

2000. Conformably, the wages of the 17 probationary employees wereincreased to P250.00 and

became regular employees therefore receivinganother 10% increase in salary. In January 2001,

TSPIC implemented thenew wage rates as mandated by the CBA. As a result, the nine

employeeswho were senior to the 17 recently regularized employees, received lesswages. On

January 19, 2001, TSPIC‘s HRD notified the 24 employees whoare private respondents, that

due to an error in the automated payrollsystem, they were overpaid and the

overpayment would be deductedfrom their salaries starting February 2001. The

Union on the other hand,

a s s e r t ed th a t t h e re w as n o e r ro r and t he d ed u c t i on o f t h e a l l eged overpayment

constituted diminution of pay.

ISSUE :Whether the alleged overpayment constitutes diminution of pay asalleged by the Union.

RULING : Yes, because it is considered that Collective Bargaining Agreemententered into by unions and

their employers are binding upon the partiesand be acted in strict compliance therewith. Thus,

the CBA in this case isthe law between the employers and their employees. Therefore, there was

no overpayment when there was an increaseof salary for the members of the union simultaneous

with the increasingof minimum wage for workers in the National Capital Region. The

CBAshould be followed thus, the senior employees who were first promoted asregular

employees shall be entitled for the increase in their salaries and the same with lower

rank workers.

REGINO VS. PCSTG.R No. 156109. November 18, 2004FACTS :P e t i t i o n e r K r i s t i n e R egi no w as a p oo r s t ud en t en ro l l ed a t t h eP an gas in an

C o l l ege o f S c i ence an d T ech no lo g y. T h us , a fu nd r a i s i n g project pertaining

to a dance party was organized by PCST, requiring all its students to purchase two tickets

in consideration as a prerequisite forthe final exam.Regino, an underprivileged, failed to

purchase the tickets becauseof her status as well as that project was against her religious

belief, thus,she was not allowed to take the final examination by her two professors.

ISSUE :Was the refusal of the university to allow Regino to take the final examination valid?

RULING :No, the Supreme Court declared that the act of PCST was not valid,though, it can impose its

administrative policies, necessarily, the amounto f t i ck e t s o r p aym en t sh a l l b e

i n c lu d ed o r ex pr e s sed i n t h e s t ud en t handbooks given to every student before the start

of the regular classesof the semester. In this case, the fund raising project was not included inthe

activities to be undertaken by the university during the semester. Thepetitioner is entitled for

damages due to her traumatic experience on theacts of the university causing her to stop

studying sand later transfer toanother school.

CONTRACT AS A SOURCE OF OBLIGATION

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, ET AL. petitioners,VS.

COURT OF APPEALS, HON. REGINA ORDOÑEZ-BENITEZ, SEGUNDA

R.BAUTISTA, and ARSENIA D. BAUTISTA, respondents The accused Manuel Opulencia pleaded not guilty. On 2 February 1976,he filed a

motion to dismiss the information upon the grounds that the crimethere charged had

already prescribed and that the civil indemnity there soughtto be recovered was beyond

the jurisdiction of the Batangas City Court to awardwhich was dismissed by the

judge.Fo u r t een ( 14 ) d a ys l a t e r , o n 2 0 Ap r i l 19 76 , t h e A c t in g C i t y F i s ca l o f

Batangas City filed before the Court of First Instance of Batangas, Branch

II,another information against Manuel Opulencia, this time for theft of electric power

under Article 308 in relation to Article 309, paragraph (1), of the RevisedPenal Code. Before

he could be arraigned thereon, Manuel Opulencia filed aM o t i on t o Q uas h , d a t ed

5 M a y 1 9 76 , a l l eg in g th a t h e h ad b een p r ev i o us l y acquitted of the offense

charged in the second information and that the filingthereof was violative of his

constitutional right against double jeopardy. ByO r d e r d a t ed 16 A u gu s t 19 76 ,

t h e r es po nd en t J u dge g r an t ed t he accus ed ' s Motion to Quash and ordered the case

dismissed.

ISSUES: Whether or not Manuel Opulencia can be tried for violation of the RevisedPenal Code after

acquittal from the violation of an ordinance due to prescriptionwhich were based from the

same act and whether or not he may still be held liable civilly.

RULING: The Supreme Court held that the accused was placed in double jeopardy,hence, could not be

tried in the criminal case.H o w ev e r , t h e c i v i l l i ab i l i t y a s p ec t s o f t h i s c as e a r e

an o t h er m at t e r . Because no reservation of the right to file a separate civil action

was made bythe Batangas City electric light system, the civil action for recovery of

civill i ab i l i t y a r i s ing f r om t h e o f f ens e ch a r ged w as i mpl i ed l y i n s t i t u t ed

w i t h th e criminal action both before the City Court of Batangas City and the Court of

FirstInstance of Batangas. The extinction of criminal liability whether by prescription or by the

bar of double jeopardy does not carry with it the extinction of civil liability arising fromthe

offense charged.In the present case, accused Manuel Opulencia freely admitted during thepolice

investigation having stolen electric current through the installation and u s e o f

u n au th o r i z ed e l ec t r i c a l co nn ec t io ns o r d ev i ce s . Wh i l e t h e accus ed pleaded

not guilty before the City Court of Batangas City, he did not deny havingappropriated electric

power. However, there is no evidence in the record as tothe amount or value of the electric

power appropriated by Manuel Opulencia, thecriminal informations having been

dismissed both by the City Court and by theCourt of First Instance (from which

dismissals the Batangas City electric lightsystem could not have appealed) before

trial could begin. Accordingly, therelated civil action which has not been waived expressly

or impliedly, should ber em and ed t o t h e Cou r t o f F i r s t In s t an ce o f Ba tan gas C i t y

f o r r e cep t i on o f ev id en ce on th e am oun t o r v a lu e o f t h e e l e c t r i c p o wer

ap p ro p r i a t ed an d converted by Manuel Opulencia and rendition of judgment

conformably withsuch evidence.DELICT AS A SOURCE OF OBLIGATION

MANANTAN VS. COURT OF APPEALS350 SCRA 387 January 29, 2001FACTS: On June 1, 1983, the Provincial Fiscal of Isabela filed an informationcharging

petitioner Manantan with reckless imprudence resulting to homicide, a l l eged l y

co mmi t t ed o n o r abo u t t he 2 5

th

d a y o f S ep t em b er 19 8 2 , i n t he municipality of Santiago, Isabela. The said

accused being then the driver andperson-in-charge of an automobile bearing Plate

No. NGA-816 willfully andunlawfully drove and operated the same while along the Daang

Maharlika of thesaid municipality, in a negligent manner causing the automobile to sideswipe

apassenger jeepney, thereby causing the said automobile to turn turtle twice resulting

to the death Ruben Nicolas passenger of the said automobile.In its decision dated June 30,

1988, promulgated on August 4, 1988, thetrial court decided the criminal case in favor of

Manantan.Subsequently, the private respondent spouses Nicolas filed their notice of appeal on

the civil aspect of the trial court‘s judgment. The Nicolas spousesprayed that the

decision appealed from be modified and that the appellee beordered to pay

indemnity and damages. On its decision, the Court of Appealsdecided in favor of

the private respondents. In finding petitioner civil liabilit y,the court a quo noted that at

the time the accident occurred, Manantan was in astate of intoxication, due to his having

consume all in all a total amount of at least twelve bottles of beer between 9 a.m. to 11 p.m.

The petitioner moved for reconsideration but the appellate court deniedthe motion.

ISSUE: Whether or not the acquittal of the accused also extinguished his civil liability.

RULING: NO. Our law recognizes two kinds of acquittal, with different effects onthe civil

liability of the accused. First is an acquittal on the ground that theaccused is not the

author of the act or omission complained of as a felony. Thisinstance closes the door to civil

liability, for a person who has been found not tobe the perpetrator of any act or omission cannot

and can never be held liable forsuch act or omission. There being no

delict

, civil liability

ex delicto

is out of thequestion, and the civil action, if any, which will be instituted must be

based onground other than the

delict

complained of. The second instance is an acquittalbased on reasonable doubt on the guilt of the

accused. In this case, even if theguilt of the accused has not been satisfactorily

established, he is not exemptfrom civil liability which may be proved by preponderance of

evidence only.In the case at bar, the accused‘s acquittal is based on reasonable doubt.

The decision of the trial court did not state in clear and equivocal terms

thatpetitioner was not recklessly imprudent or negligent. Hence, impliedly, the trialcourt

acquitted him on reasonable doubt. Since civil liability is not extinguishedin criminal cases if

the accused acquittal is based on reasonable doubt, thedecision of the Court of Appeals

finding that the defendant is civilly liable for hisnegligent and reckless act of driving his

car which was the proximate cause of the vehicular accident, and sentenced him to

indemnify plaintiff-appellants inthe amount of P74,400.00 for the death of Ruben

Nicolas.DELICT AS A SOURCE OF OBLIGATION

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,VS. ROGELIO BAYOTAS Y CORDOVA,

accused-appellantG.R. No. 102007Sept. 2, 1994236 SCRA 239FACTS: Rogelio Bayotas was charged with rape and eventually convicted on June19, 1991. While the

appeal was pending, Bayotas died. The Supreme Courtd ismissed the criminal aspect

of the appeal; however, it required the Solicitor -G en e r a l t o com ment w i t h

r ega r d t o Ba yo t a s ‘ c i v i l l i ab i l i t y a r i s in g f r om h i s commission of the offense

charged.In his comment, the Solicitor-General expressed his view that the death of a ccu s ed -

ap p e l l an t d i d no t ex t i n gu i s h h i s c i v i l l i ab i l i t y a s a r es u l t o f h i s commission of

the offense charged. This comment was opposed by the counselof accused-appellant,

arguing that the death of the accused while judgment of the conviction is pend ing

appeal extinguishes both criminal and civil penalties,he cited in support and

invoked the ruling of the Court of Appeals in

People v.Castillo

, which was held that the civil obligation in a criminal case takes root in the criminal

responsibility and therefore civil liability is extinguished if accusedshould die before final

judgment is rendered.

ISSUE: Whether or not the death of the accused pending appeal of his convictionextinguishes his civil

liability.

RULING: Y e s , t h e d e a t h o f t h e a c c u s e d p e n d i n g a p p e a l o f h i s

c o n v i c t i o n extinguishes his civil liability because tire liability is based solely on the

criminalact committed. Corollarily, the claim for civil liability survives notwithstandingthe

death of the accused, if the same may also be predicted as one source of obligation

other than delict.Moreover, when a defendant dies before judgment becomes

executory,'there cannot be any determination by final judgment whether or not the felonyupon

which the civil action might arise exists,' for the simple reason that `thereis no party

defendant.' The Rules of Court state that a judgment in a criminalcase becomes final

'after the lapse of the period for perfecting an appeal orw h en t he s en t en ce h as

b ee n p ar t i a l l y o r t o t a l l y s a t i s f i ed o r s e r v ed , o r t h e defendant has expressly

waived in writing his right to appeal.'In addition, where the civil liability does not exist

independently of thec r im in a l r esp on s i b i l i t y , t h e ex t i n c t i on o f t he l a t t e r b y

d ea th , i p s o f ac t o extinguishes the former, provided, of course, that death supervenes before

final

judgment. As in this case, the right to institute a separate civil action is

notr e s e r v ed , t h e d ec i s io n to b e r end e red m us t , o f n ece ss i t y , co v er ' bo th

t h ecr imi n a l and t h e c iv i l a sp ec t s o f t he ca se . ' Th e accus ed d i ed b e fo r e

f i na l j u d gm ent w as r end e r ed , t h us , he i s abs o lv ed o f bo t h h i s c r im in a l an d

c i v i l liabilities based solely on delict or the crime committed.Appeal dismissed.

SOURCES OF OBLIGATIONSE . Q U A S I - D E L I C T S 1 . B A R R E D O

V S . G A R C I A , 7 3 P H I L 6 0 7 2 . D Y T E B A N V S . C H I N G , 5 4 3 S

5 6 0 3 . S A F E G U A R D S E C U R I T Y V S . T A N G C O , 5 1 1 S

6 7 4 . V I L L A N U E V A V S . D O M I N G O , 4 3 8 S 4 8 5 5 . C A L A L A S V S .

C A , 3 1 M A Y 2 0 0 0 6 . L U D O A N D L U Y M C O R P . V S . C A , F E B . 1 ,

2 0 0 1 7 . T H E R M O C H E M V S . N A V A L , O C T . 3 0 , 2 0 0 0 8 . P I C A R T

V S . S M I T H , 3 7 P H I L 8 1 3 FAUSTO BARREDO VS. SEVERINO GARCIA

and TIMOTEO ALMARIOG.R. No. 48006 July 08, 194273 PHIL 607FACTS: O n M a y 3 , 1 93 6 , t he r e w as a head -o n co l l i s io n b e t w een a t ax i o f t he Malate

Taxi driven by Fontanilla and a carretela guided by Dimapilis. Theca rretela was

overturned and a passenger, 16-year-old boy Garcia, sufferedinjuries from which

resulted to his death. A criminal action was filed againstFontanilla, and he was

convicted. The court in the criminal case granted thepetition to reserve the civil

action against Barredo, the proprietor of the Malate T ax i and th e em plo ye r o f

Fo n t an i l l a , m ak in g h im p r im ar i l y an d d i rec t l yr e s p o ns ib l e u nd e r cu lp a

aq u i l i an a . I t w as un d i sp u t ed t h a t Fo n tan i l l a ‘ s negligence was the cause of the

accident as he was driving on the wrong side of the road at high speed, and there was no

showing that Barredo exercised thediligence of a good father of a family.Bar r ed o ‘ s

t h eo r y o f d e f en s e i s t h a t Fo n t an i l l a ‘ s n eg l i gen ce b e i n g punishable by the

Revised Penal Code, that his liability as employer is onlysubsidiary liable but Fontanilla

was sued for civil liability, hence, Barredo claimsthat he can not be held liable.

ISSUE: Whether or not complainant‘s liability as employer of Fontanilla was onlysubsidiary and not as

primarily and directly responsible under Article 1903 of theCivil Code.

RULING: N o , th e Su pr eme Co u r t r u l ed t h a t comp l a in an t ‘ s l i ab i l i t y i s no t

o n l ysubsidiary but also primary liability. The Court affirmed the decision of the Courtof

Appeals which ruled that the liability sought to be imposed upon Barredo int h i s

a c t i on i s no t a c i v i l o b l i ga t i on a r i s in g f r om a fe lo n y, b u t an

o b l i ga t io n imposed in Article 1903 of the Civil Code by reason of his negligence in

theselection or supervision of his servant or employee.

QUASI-DELICT OR CULPA AQUILIANA

is a separate legal institution underthe Civil Code and is entirely distinct and independent

from a delict or crime aspunished under the Revised Penal Code (RPC). In this

jurisdiction, the samenegligent act causing damage may produce civil liability (subsidiary)

arising froma crime under Art. 103 of the RPC; or create an action for the quasi delict

orculpa aquiliana (primary) and the parties injured are free to choice which courseto take.In the

instant case, the negligent act of Fontanilla produced two liabilitiesof Barredo. First, a

subsidiary one because of the civil liability of Fontanilla arising from the latter‘s

criminal negligence; and second, Barredo‘s primary anddirect responsibility arising from his

presumed negligence as an employer in theselection of his employees or their supervision, under

Art. 1903 of the Civil Code. The parties instituted an action for damages under Art.

1903 of the CivilC o de . Ba r redo w as f oun d gu i l t y o f n egl i gen ce f o r

c a r e l es s l y em p lo yi n g Fontanilla, who had been caught several times for violation

of the AutomobileLa w and s peed i n g v i o l a t io n . T hu s , t he p e t i t i on i s d en i ed .

Ba r r ed o m us t indemnify plaintiffs under the provisions of Art. 1903 of the Civil Code.

QUASI-DELICT AS A SOURCE OF OBLIGATION

DY TEBAN VS. LIBERTY FORESTG.R No. 161803. February 4, 2008FACTS :A Prime Mover Trailer suffered a tire blow out during the night of itstravel at a national

highway. The trailer was owned by the respondentLiberty Forest. The driver allegedly

put earl warning devices but the onlyevidence being witnessed was a banana trunks and candles.

Since the carwas placed at the right wing of the road, thus it cause the swerving of

aNissan van owned by the petitioner when a passenger bus was coming inbetween the trailer.

The Nissan van owner claimed for damages againstthe respondent. The trial court

found that the proximate cause of thethree –way accident is the negligence and

carelessness of driver of therespondent . However reversed the decision of the trial court.

ISSUE :Whether there was negligence on the part of the respondent.

RULING : Yes. There was negligence on the part of the respondent when thelatter failed to put and used

an early warning device because it was foundout that there was no early warning device being

prescribed by law thatwas used by the driver in order to warn incoming vehicle.

Furthermore,the proximate cause of the accident was due to the position of the trailerwhere it

covered a cemented part of the road, thus confused and madetrick way for other

vehicles to pass by. Thus the respondent is declaredliable due to violation of road rules

and regulations.

QUASI-DELICT AS A SOURCE OF OBLIGATION

SAFEGUARD SECURITY VS. TANGCOG.R No. 165732. December 14, 2006FACTS : The victim Evangeline Tangco was depositor of Ecology Bank. Shewas also a

licensed-fire arm holder, thus during the incident, she wasentering the bank to

renew her time deposit and along with her was her firearm. Suddenly, the security guard

of the bank, upon knowing that thevictim carries a firearm, the security guard shot the

victim causing thelatter‘s instant death. The heirs of the victim filed a criminal case

againstsecurity guard and an action against Safeguard Security for failure to observe

diligence of a goof father implied upon the act of its agent.

ISSUE :Whether Safeguard Security can be held liable for the acts of its agent.

RULING : Yes. The law presumes that any injury committed either by fault oromission of an employee

reflects the negligence of the employer. Inquasi-delicts cases, in order to overcome this

presumption, the employermust prove that there was no negligence on his part in the supervision

of his employees.I t w as d ec l a r ed th a t i n t he s e l ec t i on o f emp lo yees an d

agen t s , em plo ye r s a r e r e q u i r ed t o ex ami n e t h em as t o t he i r

q u a l i f i c a t io ns , experience and service records. Thus, due diligence on the

supervisionand operation of employees includes the formulation of suitable rules

andregulations for the guidance of employees and the issuance of p roperinstructions

intended for the protection of the public and persons withwhom the employer has

relations through his employees. Thus, in thiscase, Safeguard Security committed

negligence in identifying thequalifications and ability of its agents.

QUASI-DELICT AS A SOURCE OF OBLIGATION

VILLANUEVA VS. DOMINGOG.R No. 144274. September 20, 2004FACTS :In 1991, a collision was made by a green Mitsubishi lancer owned byOcfemia against a silver

Mitsubishi lancer driven by Leandro Domingo andowned by petitioner Priscilla Domingo.

The incident caused the car of D o m i n go bu mp ed ano t h e r t w o p a r k ed v eh i c l es .

A ch ar ged w as f i l ed against Ocfemia and the owner Villanueva. Villanueva

claimed that hemust not be held liable for the incident because he is no longer the ownerof the

car, that it was already swapped to another car . however, the trialcourt ordered the petitioner

to pay the damages incurred by the silverMitsubishi lancer car.

ISSUE :Whether the owner Villanueva be held liable for the mishap.

RULING :Under the Motor Vehicle law, it was declared that the registered owner of any vehicle

is primary land directly liable for any injury it incurswhile it is being operated. Thus, even

the petitioner claimed that he wasno longer the present owner of the c ar, still the

registry was under hisname, thus it is presumed that he still possesses the car and

that thedamages caused by the car be charge against him being the registered owner.

The primary function of Motor vehicle registration is to identify theowner so that if any

accident happens, or that any damage or injury iscaused by the vehicle, responsibility

therefore can be fixed on a definiteindividual, the registered owner.

QUASI-DELICT AS A SOURCE OF OBLIGATION

CALALAS VS. COURT OF APPEALSG.R No. 122039. May 31, 2000FACTS :Eliza Sunga was a passenger of a jeepney owned and operated bythe petitioner

Calalas. Private respondent Sunga sat in the rear protion of the jeepney where the conductor

gave Sunga an extension seat. Whenthe jeep stopped, Sunga gave way to a passenger going

outside the jeep.H o w e v e r , a n I s u z u T r u c k d r i v e n b y V e r e n e a n d o w n e d

b y S a l v a , accidentally hit Sunga causing the latter to suffer physical injuries wherethe

attending physician ordered a three months of rest. Sunga filed an ac t io n fo r

d am ages aga i ns t t he p e t i t i o n e r fo r b r each o f con t rac t o f common carriage by

the petitioner.On the other hand, the petitioner Calalas filed an action against Salva,

being the owner of the truck. The lower court ruled in favor of therpetitioner, thus the truck

owner is liable for the damage to the jeep of thepetitioner.

ISSUE :Whether the petitionerr is liable.

RULING : Yes. The petitioner is liable for the injury suffered by Sunga. UnderArticle 1756 of the New

Civil Code, it provides that common carriers arepresumed to have been at fault or to

have acted negligently unless theyprove that they observed extraordinary diligence as

defined in Arts. 1733and 1755 of the Code. This provision necessarily shifts to the

commoncarrier the burden of proof.I n t h i s c a s e , t h e l a w p r e s u m e s t h a t a n y

i n j u r y s u f f e r e d b y a passenger of the jeep is deemed to be due to the negligence of the

driver. T h i s i s a c as e o n C u l pa C on t r ac tu a l wh e r e th e r e w as p r e -

ex i s t i n g obligations and that the fault is incidental to the performance of

theo b l i g a t i o n . T h u s , i t w a s c l e a r l y o b s e r v e d t h a t t h e p e t i t i o n e r

h a s negligence in the conduct of his duty when he allowed Sunga to seat in the rear

portion of the jeep which is prone to accident.

QUASI-DELICT AS A SOURCE OF OBLIGATION

LUDO AND LUYM CORPORATION, petitioner,VS. COURT OF APPEALS, GABISAN

SHIPPING LINES, INC.and/or ANSELMO OLASIMAN, respondents .

G.R. No. 125483February 1, 2001351 SCRA 35FACTS: Private respondent Anselmo Olasiman, as captain, was maneuvering the ship MV

Miguela owned by respondent Gabisan Shipping lines, at the pier ownedb y p e t i t i o ne r Lu d o

an d Lu ym C o r po r a t i on wh en i t r amm ed t h e p i l e c lu s t e r damaging it and

deforming the cable wires wound around it.In an action for recovery of damages filed by

Petitioner, the Regional TrialCourt ruled against respondents for incompetence and negligence.

In an appealt h e C ou r t o f Ap pea l s r ev er s ed t h e l o w er co u r t ‘ s d ec i s io n , s a yi n g

t h a t t h e petitioner‘s witness Naval was incompetent to testify on the negligence of

thecrew and that petitioner‘s evidence did not positively identify that MV

Miguelacaused the damage. Thus, petitioner filed this petition for review.

ISSUE: Whether or not the private respondents are responsible for the damage done to the pier

by the ship based on the doctrine of

RES IPSA LOQUITOR

.

RULING: The Supreme Court sustained the Regional Trial Court decision partly onthe ground

that the incompetence of eyewitness Naval was not an assignederror at the appellate

court. The doctrine of RES IPSA LOQUITOR says that when the thing that causesthe damage

is in the control and management of the respondent, and in theordinary course of

things the accident does not happen if those who have themanagement use proper care,

it affords reasonable evidence, in the absence of explanation, that the accident arose from

want of care. The principle applieshere. The MV Miguela was in the exclusive control of

respondent Olasiman, anda s id e f r om p e t i t i on e r ‘ s wi t n es s t e s t im on y t h a t t he

v ess e l r amm ed t h e p i l e cluster, respondent did not show persuasively o ther

possible causes of thedamage. Therefore, respondents were responsible for the

damage. Petition isgranted and the decision of the Regional Trial Court reinstated.QUASI-

DELICT AS A SOURCE OF OBLIGATION

THERMOCHEM INCORPORATED and JEROME O. CASTRO, petitioners,VS.

LEONORA NAVAL and THE COURT OF APPEALS, respondentsG.R. No. 1315412000 Oct

20FACTS: On May 10, 1992, at around 12:00 o'clock midnight, Eduardo Edem was driving a

"Luring Taxi" along Ortigas Avenue, near Rosario, Pasig, going towardsCainta. Prior to the

collision, the taxicab was parked along the right side of O r t i ga s A v enu e , no t f a r

f r om t h e R os a r i o Br i d ge , t o un lo ad a p a s s en ge r . Thereafter, the driver executed a

U-turn to traverse the same road, going to thedirection of EDSA. At this point, the Nissan

Pathfinder traveling along the sameroad going to the direction of Cainta collided with

the taxicab. The point of impact was so great that the taxicab was hit in the middle

portion and waspushed sideward, causing the driver to lose control of the vehi cle.

The taxicabw as th en d r agged in to th e nea r b y Q u es t i on T a i l o r in g Sh op ,

t hu s , c aus in g damage to the said tailoring shop, and its driver, Eduardo Eden,

sustainedinjuries as a result of the incident.Private respondent, as owner of the taxi, filed

a damage suit againstpetitioner, Thermochem Incorporated, as the owner of the Nissan

Pathfinder, andits driver, petitioner Jerome Castro.A f t e r t r i a l , t h e l ower cou r t

ad ju d ged pe t i t i o n er C as t r o n egl i gen t an d ordered petitioners, jointly and

severally, to pay private respondent actual,compensatory and exemplary damages plus

attorney's fees and costs of suit.On appeal, the Court of Appeals affirmed the judgment of the

court a quo.Hence, this petition for review on certiorari.

ISSUE:

Whether or not the petitioners are liable based on quasi-delict.

RULING: Yes. The Court held that the driver of the oncoming Nissan Pathfindervehicle was

liable and the driver of the U-turning taxicab was contributorilyliable.From petitioner

Castro's testimonial admissions, it is established that hewas driving at a speed faster than

50 kilometers per hour. But as he allegedlystepped on the brake, it locked causing

his Nissan Pathfinder to skid to the left and consequently hit the taxicab. The sudden

malfunction of the vehicle's brakesystem is the usual excuse of drivers involved in collisions

which are the result of speedy driving. Malfunction or loss of brake is not a fortuitous event. The

ownerand his driver are presumed to know about the conditions of the vehicle and

isduty bound to take care thereof with the diligence of a good father of the family.A

mechanically defective vehicle should avoid the streets.Moreover, the record shows that the

Nissan Pathfinder was on the wronglane when the collision occurred. This was a

disregard of traffic safety rules. The law considers what would be reckless, blameworthy or

negligent in a man of ordinary diligence and prudence and determines liability by that.As

mentioned earlier, the driver of the taxi is contributorily liable. U-turnsare not generally

advisable particularly on major streets. The driver of the taxiought to have known

that vehicles coming from the Rosario bridge are on adownhill slope. Obviously,

there was lack of foresight on his part, making him contributorily liable.C o n s i d e r i n g

t h e c o n t r i b u t o r y n e g l i g e n c e o f t h e d r i v e r o f p r i v a t e respondent's taxi, the

award of P47,850.00, for the repair of the taxi, should bereduced in half. All other awards for

damages are deleted for lack of merit.QUASI-DELICT AS A SOURCE OF OBLIGATION

PICART VS. SMITH37 PHIL 813FACTS: Plaintiff was riding on his pony across the bridge. Before he had gottenhalf -way

across, the defendant approached from the opposite direction in anautomobile. As

the defendant neared the bridge, he saw the plaintiff and blewhis horn to give

warning. The plaintiff heard the warning signal but instead of going to the let, he

pulled the pony closely up against the railing on the right side of the bridge. He averred

that he thought he did not have sufficient time toget over the other side. As the automobile

approached, the defendant guided ittoward the plaintiff, without diminution to speed, assuming

the horseman wouldm o v e t o t h e o t h er s id e . Wh en h e h ad go t t en q u i t e n ea r ,

t h e r e b e in g no possibility o the horse getting across to the other side, the

defendant quicklyturned his car sufficiently to the right to escape hitting the horse. However,

thehorse was still hit and died while the rider was thrown off violently.

ISSUE: Whether the defendant was negligent in maneuvering his car giving rise to a civil

obligation.

RULING: Yes. The Court held that the control of the situation has shifted to the defendant when

the incident occurred. At first, he has the right to assume thatthe horse and rider would pass

over to the other side but as he moved to thecenter, it was demonstrated that this would

not be done. It was then his duty tobring his car to an immediate stop or, seeing that there were

no other person onthe bridge, to take the other side and ass sufficiently far away from the horse

toavoid the danger of collision. Instead of doing this, the defendant ran straight onuntil he was

almost upon the horse. When the defendant exposed the horse andrider to this danger he was

negligent in the eye of the law.Conduct is said to be negligent when a prudent man in the

position of thetortfeasor would have foreseen that an effect harmful to another was

sufficientlyp r o b a b l e t o w a r r a n t h i s f o r e g o i n g t h e c o n d u c t o r g u a r d i n g

a g a i n s t i t s consequences. Applying this test to the conduct of the defendant, it is clear

thatnegligence is established. A prudent man, laced in the position o the defendant,would have

recognized that the course which he was pursuing was fraught withr i sk , an d w ou ld

t h e r e f o r e h av e fo r es een h ar m t o th e h o r s e an d r i d e r as a reasonable

consequence of that course. Under these circumstances the lawimposed on the

defendant the duty to guard against the threatened harm. The plaintiff on the other hand

was guilty of antecedent negligence inplanting himself on the wrong side o the

road. The negligent acts of the twoa r t i e s w e r e n o t co n t emp or an eou s , s i n ce t h e

n eg l i gen ce o f t h e de f en dan t succeeded the negligence of the plaintiff by an appreciable

interval. Under thesecircumstances, the law is that the person who has the last fair

chance to avoidthe impending harm and fails to do is chargeable wit the consequences,

withoutreference to the prior negligence of the other party.

In sum, though the plaintiff was guilty of negligence or being on the wrongside of the bridge, the

defendant was civilly liable as he had fair chance to avoidthe accident.

NATURE AND EFFECT OF OBLIGATIONS

POSITIVE PERSONAL OBLIGATIONS / TO DO1 . F R A N C I S C O V S . C A ,

4 0 1 S C R A 5 9 4 2 . T A N G U I L I N G V S . C A , 2 6 6 S C R A 7 8 SPOUSES

LORENZO G. FRANCISCO and LORENZA D. FRANCISCO,petitioners,VS.

HONORABLE COURT OF APPEALS, andBIENVENIDO C. MERCADO, respondentsApril 25,

2003401 SCRA 594FACTS: On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and Engineer

Bienvenido C. Mercado entered into a Contract of Development for thedevelopment into a

subdivision of several parcels of land in Pampanga.Respondent committed to complete the

construction within 27 months.R es po nd en t a l s o adv an ced P20 0 ,0 00 .0 0 fo r t h e

i n i t i a l ex p ens es o f t h e development work. In return, respondent would receive

50% of the total grosssales of the subdivision lots and other income of the

subdivision. Respondentalso enjoyed the exclusive and irrevocable authority to

manage, control andsupervise the sales of the lots within the subdivision.On 5 August

1986, respondent secured from the Human SettlementsRegulatory Commission

("HSRC") an extension of time to finish the subdivisiondevelopment until 30 July

1987. On 8 August 1986, petitioners instructedrespondent to stop selling

subdivision lots and collecting payments from lotbuyers.O n 20 Jan u a r y 1 9 8 7 ,

p e t i t i o ne r s g r an t ed r e s po nd en t an au tho r i t y t o resume the sale of subdivision lots

and the collection of payments subject to thefollowing conditions: (1) all collections shall be

deposited in a joint account withChina Banking Corporation, San Fernando, Pampanga

branch; (2) withdrawalsshall be limited to 50% of the total collections or to

respondent's share, whichcan only be used for development expenses, and any withdrawal

shall be subjectto the approval of petitioners; (3) only Franda Village Subdivision receipts,

dulycountersigned by petitioners, shall be used; (4) collections shall be subject to aweekly or

monthly audit; and (5) any violation of these conditions shall result inthe automatic cancellation

of the authority.Respondent filed an action to rescind the contract on the ground

thatconditional authority issued by petitioners violated the Contract.

Petitionersco u n t e r ed th a t r es po nd en t b reach ed t h e C on t rac t b y f a i l i n g to

f i n i s h th e subdivision within the 27 months agreed upon, and therefore respondent was

indelay. Petitioners also alleged that respondent sold one subdivision lot to

twodifferent buyers. The trial Court ruled that the petitioners breached the Contract

by: (1)hiring Rosales to do development work on the subdivision within the 27 -

monthp e r i od ex c l us i v e l y g r an t ed t o r esp o nd en t ; ( 2 ) i n t e r fe r in g w i th t he

l a t t e r ‘ s development work; and (3) stopping respondent from managing the sale of lotsand

collection of payments.B ecau se p e t i t i o ne r s w e r e t he f i r s t t o b reach th e C on t r ac t

an d ev en interfered with the development work, the trial court declared that

respondentdid not incur delay even if he completed only 28% of the development

work.Further, the HSRC extended the Contract up to July 1987. Since the

Contracth a d n o t e x p i r e d a t t h e t i m e r e s p o n d e n t f i l e d t h e a c t i o n f o r

r e s c i s s i o n , petitioners‘ defense that respondent did not finish the development

work ontime was without basis. The Court of Appeals affirmed the decision.

ISSUE: Whether or not the respondent incurred delay in not finishing the work inthe stipulated time.

RULING: The Supreme Court finds no merit in petitioner‘s claim that respondentincurred

delay in the performance of his obligation under the Contract. At that

of admitting patients into the hospital. The physician‘s performance is gen e r a l l y

ev a lu a t ed and i f s a i d ph ys i c i an f a l l s sh o r t o f t h e mi n im um standards he is

normally terminated. In the said case, the hospital has acontrol over its attending or visiting

physician.I n g e n e r a l , a h o s p i t a l i s n o t l i a b l e f o r t h e n e g l i g e n c e o f

a n independent contractor-physician. However, the hospital may be held l i ab l e i f

t h e ph ys i c i an i s t h e ―os t ens ib l e‖ agen t o f t h e h osp i t a l . Th i s exception is also

known as the ―doctrine of apparent authority‖. The doctrine of apparent authority involves two

factors to determinethe liability of an independent contractor-physician. First factor focuses

onthe hospital‘s manifestations and is sometimes described as an inquirywhether the

hospital acted in a manner which would lead a responsibleperson to conclude that

the individual who was alleged to be negligentwas an employee or agent of the

hospital. The second factor focuses onthe patient‘s reliance. It is sometimes

characterized as an inquiry onwhether the plaintiff acted in reliance upon the conduct of the

hospital orits agent, consistent with ordinary care and prudence.In this case, it has been

proven that the two factors were present. The hospital indeed made it appear that Dr.

Ampil was its employee whenthey advertise and displayed his name in the directory at the lobby

of thesaid hospital and that Natividad relied on such knowledge that Dr. Ampilwas indeed an

employee of the hospital.Wherefore PSI and Dr. Ampil are liable jointly and severally.

Malicious Prosecution1. DIAZ VS. DAVAO LIGHT, 4 APRIL 20072. YASONNA VS. DE

RAMOS, 440 S 154

DIAZ VS. DAVAO LIGHTGR No. 160959 April 2, 2007FACTS: Pl a in t i f f a s ks f o r dam ages f o r de f end an t ‘ s a l l eged ma l i c io us p ro s ecu t io n

o f a c r im in a l c as e o f t he f t o f e l e c t r i c i t y aga i n s t h i m, f o r plaintiff‘s filing of

a charge of violation of P.D. 401 as amended afterdismissal of the theft case, the filing of

a damage suit against him beforet h e RTC o f C ebu C i t y w h i ch was d i sm is s ed and

t h e f i l i n g o f ano t h er damage suit before the same Cebu RTC which is still

pending. Damagesare also being sought for defendant‘s removal of Electric Meter, but this isa

subject matter of a case pending before Branch 13 of this Court and therefore said

court retains jurisdiction over the said cause of action. The RTC held that while the City

Prosecutor, and later the Secretaryof Justice, concluded that there was no probable cause

for the crime of theft, this did not change the fact that plaintiff made an illegal connectionfor

electricity. A person‘s right to litigate should not be penalized by holding him liable

for damages.On October 1, 2003, the CA affirmed the decision of the RTC.

Itconcluded that the evidence on hand showed good faith on the part of DLPC in

filing the subject complaints. It pointed out that Diaz had been using the electrical

services of DLPC without its consent. As to the effectof the compromise agreement, the CA

ruled that it did not bar the filing of the criminal action. Thus, under the principle of damnum

absque injuria,t h e l eg i t im at e ex e rc i s e o f a p e r s on ‘s r i gh t , even i f i t c aus e s

l o s s t o another, does not automatically result in an actionable injury.Diaz, now petitioner,

comes before this Court in this petition for review on certiorari

ISSUES: 1. Whether or not the compromise agreement entered into betweenDLPC and Diaz barred the

former from instituting further actions; and2. Whether or not DLPC acted in bad faith in

instituting the criminalcases against Diaz

RULING: The petition is without merit. Petitioner insists that the compromisea g r e e m e n t a s w e l l

a s t h e d e c i s i o n o f t h e C A a l r e a d y s e t t l e d t h e controversies between them;

yet, DLPC instituted the theft case againstDiaz, and worse, instituted another action for

violation of P.D. 401, asamended by B.P. Blg. 876. Thus, the only conclusion that can be

inferred

from the acts of DLPC is that they were designed to harass, embarrass,prejudice, and

ruin him. He further avers that the compromise agreementcompletely erased litigious matters that

could necessarily arise Moreover,Diaz asserts that the evidence he presented is

sufficient to prove thedamages he suffered by reason of the malicious institution of the

criminalcases. The court does not agree. Article 2028 of the Civil Code defines

acompromise as a contract whereby the parties, by making reciprocalconcessions,

avoid litigation or put an end to one already commenced. The purpose of

compromise is to settle the claims of the parties and barall future disputes and

controversies. However, criminal liability is nota f f e c t e d b y c o m p r o m i s e f o r

i t i s a p u b l i c o f f e n s e w h i c h m u s t b e prosecuted and punished by the

Government on its own motion, thoughcomplete reparation should have been made of the

damages suffered bythe offended party. A criminal case is committed against the People, andthe

offended party may not waive or extinguish the criminal liability thatt h e l a w i m p o s e s

f o r t h e c o m m i s s i o n o f t h e o f f e n s e . M o r e o v e r , a compromise is not one

of the grounds prescribed by the Revised PenalCode for the extinction of criminal

liability. On the other hand, malicious prosecution has been defined as anaction for

damages brought by or against whom a criminal prosecution,civil suit or other legal

proceeding has been instituted maliciously andwithout probable cause, after the

termination of such prosecution, suit, orother proceeding in favor of the defendant

therein. It is an establishedrule that in order for malicious prosecution to prosper,

the followingrequisites must be proven by petitioner: (1) the fact of prosecution

andt h e f u r t h e r f a c t t h a t t h e d e f e n d a n t ( r e s p o n d e n t ) w a s h i m s e l f

t h e prosecutor, and that the action finally t erminated with an acquittal; (2)that in

bringing the action, the prosecutor acted without probable cause;and (3) that the prosecutor was

actuated or impelled by legal malice, thati s , b y i mp ro p e r o r s in i s t e r mot iv e . Th e

f o r ego i n g a re n ecess a r y t o preserve a person‘s right to litigate which may be

emasculated by theu n d u e f i l i n g o f m a l i c i o u s

p r o s e c u t i o n c a s e s . From the foregoing requirements, it can be

inferred that malice andwant of probable cause must both be clearly established to

justify anaw ar d o f dam ages b as ed on ma l i c io us p ro s ecu t ion . D LP C w as

n o t motivated by malicious intent or by a sinister design to unduly

harassp e t i t i o n e r , b u t o n l y b y a w e l l - fou n ded anx ie t y t o p ro t ec t i t s

r i gh t s . Respondent DLPC cannot therefore be faulted in availing of the remediesprovided for

by law.

Malicious Prosecution

YASOÑA VS. DE RAMOSGR No. 156339 October 6, 2004FACTS: Aurea Yasoña and her son, Saturnino, went to the house of Jovenciode Ramos to ask for

financial assistance in paying their loans to PhilippineNational Bank (PNB), otherwise their

residential house and lot would beforeclosed. Inasmuch as Aurea was his aunt,

Jovencio acceded to therequest. They agreed that, upon payment by Jovencio of the loan to

PNB,half of Yasoñas‘ subject property would be sold to him. Jovencio paidAurea‘s

bank loan. As agreed upon, Aurea executed a deed of absolutesale in favor of

Jovencio over half of the lot consisting of 123 squaremeters. Thereafter, the lot was

surveyed and separate titles were issuedby the Register of Deeds of Sta. Cruz, Laguna in the

names of Aurea and Jovencio T w en t y- t w o yea r s l a t e r , i n Au gu s t 1 99 3 , A u rea

f i l ed an es t a f acom pl a i n t aga i ns t b r o t h er s J ov enc io an d R od en c i o de

R am os o n th e g r o u n d t h a t s h e w a s d e c e i v e d b y t h e m w h e n s h e a s k e d

f o r t h e i r assistance in 1971 concerning her mortgaged property. In her complaint,A u rea

a l l eged t ha t R od enc i o as k ed h e r t o s i gn a b l ank p ap e r o n t h ep r e t ex t t h a t i t

w o u l d be u s ed i n t he r edemp t io n o f t h e mo r t gaged propertyOn February 21,

1994, Assistant Provincial Prosecutor Rodrigo B.Zayenis dismissed the criminal

complaint for estafa for lack of evidence.On account of this dismissal, Jovencio and Rodencio

filed a complaint fordamages on the ground of malicious prosecution. They alleged

that thefiling of the estafa complaint against them was done w ith malice and itcaused

irreparable injury to their reputation, as Aurea knew fully well thatshe had already sold half of

the property to Jovencio.

ISSUE: Whether or not the filing of the criminal complaint for estafa bypetitioners against

respondents constituted malicious prosecution?

RULING: To constitute ―malicious prosecution,‖ there must be proof that thep r o s ecu t i on w as

p r om pt ed b y a s i n i s t e r d e s i gn to v ex o r h umi l i a t e a person, and that it was

initiated deliberately by the defendant knowingthat his charges were false and groundless.

Concededly, the mere act of submitting a case to the authorities for prosecution does

not make oneliable for malicious prosecution.In this case, the records show that the sale

of the property wasevidenced by a deed of sa le duly notarized and registered with

the localRegister of Deeds. After the execution of the deed of sale, the propertywas

surveyed and divided into two portions. Separate titles were thenissued in the names

of Yasoña and Jovencio. Since 1973, Jovencio hadbeen paying the realty taxes of

the portion registered in his name. In1974, Aurea even requested Jovencio to use his

portion as bond for thetemporary release of her son who was charged with malicious

mischief.Also, when Aurea borrowed money from the Rural Bank of Lumban in1973

and the PNB in 1979, only her portion was mortgaged.All these pieces of evidence indicate

that Aurea had long acknowledged Jovencio‘s ownership of half of the property.

Furthermore, it was only in1 9 9 3 w h en p e t i t i o n e rs d ec i ded to f i l e t he es t a f a

co mpl a in t aga ins t respondents. If petitioners had honestly believed that they still owned

theen t i r e p ro p er t y, i t wo u ld n o t h ave t ak en th em 2 2 yea r s t o qu es t io n

Jovencio‘s ownership of half of the property.M al i c i ou s p ro s ecu t i on , b o th i n c r im in a l

a n d c iv i l c as e s , r equ i re s t h e elements of (1) malice and (2) absence of probable

cause.These twoelements are present in the present controversy. The complaint for estafawas

dismissed outright as the prosecutor did not find any probable causeagainst respondents. A

suit for malicious prosecution will prosper where legal prosecution is carried out without

probable cause.

ULPA CRIMINAL

PEOPLE VS. DE LOS SANTOSG.R. No. 131588March 27, 2001355 SCRA 415FACTS: As part of the Special Counter Insurgency Operation Unit Training held atCamp Damilag,

Manolo Fortich, Bukidnon, several members of the Philippine National Police were

undergoing an ―endurance run‖ on October 5, 1995 whichstarted at 2:20 am. The PNP trainees

were divided into three columns and werewearing black t-shirts, bl;ack short pants, and

green and black combat shoes. There were two rear guards assigned to each rear column.

Their duty was to jogb a ck w ard s f ac i n g th e o n co min g v eh i c l es an d g i v e hand

s i gn a l s fo r o t h e r vehicles. From Alae to Maitum Highway, Puerto, Cagayan de Oro City,

about 20vehicles passed them, all of which slowed down and took the left portion of theroad

when signaled to do so.While they were negotiating Maitum Highway, they saw an Isuzu Elf

truckcoming at high speed towards them. The vehicle lights were in the high beam.At a distance

of 100 meters, the rear security guards started waving their handsfor the vehicle to take the

other side of the road, but the vehicle just kept itsspeed, apparently ignoring their

signals and coming closer and closer to them. T h e r ea r gu a rd s t o l d t h e i r co -

t r a i n ees t o ― r e t r ac t ‖ . T h e gu a r ds j u mped i n different directions. They saw their

co-trainees being hit by the said vehicle,falling like dominoes one after the other.

Some were thrown, and others wereoverrun by the vehicle. The driver, Glenn de los Santos

did not reduce his speedeven after hitting the first and second columns.After arraignment and

trial, the court convicted accused-appellant guiltyof complex crime of multiple

murder, multiple frustrated murder and multipleattempted murder, with the use of motor

vehicle as the qualifying circumstance.

ISSUE: Whether or not the incident was a product of a malicious intent on the part of accused-

appellant

RULING: The Supreme Court held that the incident, tragic though it was in the lightof the number of

persons killed and seriously injured, was an accident than of am a l i c io us in t en t o n

G l en n ‘s p a r t . G l enn s ho w ed an i n ex cus ab l e l a ck o f precaution. Since the place of

the incident was foggy and dark, he should haveobserved due care in accordance with the

conduct of a reasonably prudent man,such as by slackening his speed, applying his brakes, or

turning to the left sideeven if it would mean entering the opposite lane.W her e f o r e , t h e

S up r em e Co u r t conv i c t ed Gl en n d e Lo s S an to s o f o n eco mp l ex c r im e o f

r e ck l e s s im pr u den ce r e su l t i n g in mu l t ip l e hom i c id e wi t h serious physical

injuries and less serious physical injuries and sentenced him tos u f f e r an i nd e t e rm in a t e

p en a l t y o f fo u r yea r s o f p r i s io n co r r ecc i on a l , a s minimum, to 10 years of prision

mayor, as maximum; and 10 counts of recklessimprudence resulting in slight physical injuries

and sentenced for each count, tothe penalty of 2 months of arresto mayor. The awards of

death indemnity foreach group of heirs of trainees are reduced to P50,000, and the awards in

favorof other victims are deleted.CONTRAVENTION OF THE TERMS

VICTORINO D. MAGAT,

petitioner,

VS. HON. LEO D. MEDIALDEA and SANTIAGO A. GUERRERO,

respondents

G.R. No. L-37120April 20, 1983FACTS: Sometime in September 1972, the defendant entered into a contract withthe U.S. Navy

Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each taxicab

to be provided with the necessary taximeter and a radiotransceiver for receiving and sending of

messages from mobile taxicab to fixedbase stations within the Naval Base at Subic Bay,

Philippines. Since hereinpetitioner is known of his good reputation as a

businessman, the defendant,through his agent, entered into a contract with the former. In said

contract, thedefendant must open a letter of credit in favor of the petitioner, since the

latterwould also engage a foreign company for such taximeter.Defendant and his agent have

repeatedly assured plaintiff herein of thedefendant's financial capabilities to pay for the

goods ordered by him and in facthe accomplished the necessary application for a letter of credit

with his banker,b u t h e s ub s eq u en t l y i n s t r uc t ed h i s b ank e r no t t o g iv e du e

co u rs e t o h i s ap p l i ca t i on fo r a l e t t e r o f c r ed i t an d t h a t f o r r e a so ns on l y

k n ow n to t h e defendant, he fails and refuses to open the necessary letter of credit

to coverpayment of the goods ordered by him. After some time, herein defendant failedto

comply with his obligation, and several demands were made by petitioner soas to reinforce such

contract, and even communicated if defendant would like tor e s c in d con t r ac t , bu t s a id

d e f end an t d i d no t r ep l y t o s u ch d em and s . Th e defendant even used as a defense that

the petitioner was delayed in deliveringthe taximeters when the former was apprehended by U.S.

Navy Exchange for notcomplying with their agreement. As a consequence, petitioner

filed a caseagainst the defendant but respondent judge dismissed such petition in a minuteorder

for lack of cause of action.

ISSUE: Whether or not petitioner has a cause of action against the defendant forthe latter‘s contravention

of the terms of contract.

RULING: Article 1170 of the Civil Code provides:―Those who in the performance of their obligation are

guilty of fraud, negligence,or delay, and those who in any manner contravene the tenor

thereof are liablefor damages.‖ T h e ph r as e " i n an y m ann e r con t r av en e th e

t eno r " o f t h e o b l i ga t i on includes any ilicit act or omission which impairs the strict and

faithful fulfillmentof the obligation and every kind of defective performance. The damages

whichthe obligor is liable for includes not only the value of the loss suffered by

theobligee [daño emergente] but also the profits which the latter failed to

obtain[lucro cesante]. If the obligor acted in good faith, he shall be liable for

thosedamages that are the natural and probable consequences of the breach of

theo b l i ga t i on an d wh i ch th e p a r t i e s h av e fo r es een o r co u ld hav e

r e a s on ab l y foreseen at the time the obligation was constituted; and in case of fraud,

badfaith, malice or wanton attitude, he shall be liable for all damages which may bereasonably

attributed to the non-performance of the obligation. The same is true with respect to moral

and exemplary damages. Theapplicable legal provisions on the matter, Articles

2220 and 2232 of the CivilC o de , a l l o w the aw ard o f su ch d am ages in

b r each es o f con t r ac t wh e r e t h e defendant acted in bad faith. To our mind, the complaint

sufficiently alleges badfaith on the part of the defendant. In fine, the Supreme Court

held that on the

b a s i s o f t h e f a c t s a l l eged i n t h e com pla i n t , t h e cou r t co u ld r en d er a v a l i d

judgment in accordance with the prayer thereof.

SPECIFIC PERFORMANCE: NECESSITY (Art. 1165, CC)1 . V D A . D E M I S T I C A V S .

N A G U I A T , 4 1 8 S C R A 7 3 2 . C O V S . C A , A U G . 1 7 , 1 9 9 9 VDA

DE MISTICA VS. NAGUAIT418 SCRA 73FACTS: Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of the parcel of land

which was leased to respondent Bernardinio Naguiat.Mistica entered into a contract to sell

with respondent over a portion of t h e a fo rem en t i on ed l o t co n t a i n i n g an a r ea o f

2 0 0 s qu a r e m et e r s . T h i s agreement was reduced to writing in a document.

Pursuant to said agreement,respondent gave a down payment of P2,000. He made another

partial paymentof P1,000 on February 8, 1980. He failed to make any paymen ts

thereafter.Mistica died sometime in October 1986.On December 4,1991, petitioner filed a

complaint for rescission alleging,among others that the failure and refusal of respondent

to pay the balance of the purchase price constitute a violation of the contract which

established her torescind the same. That respondent have been in possession of the

subjectmatter, should be ordered to vacate and surrender possession of the same.

ISSUE: Whether or not the Court of Appeals erred in the application of Article 1191 of the

Civil Code, as it ruled that there is no breach of obligation in spite of the lapse of their stipulated

period and the failure of the respondent to pay.

RULING: NO. The failure of respondent to pay the value of the purchase price within ten (10)

years from execution of the deed did not amount to a substantialbreach.In the agreement, it

was stipulated that payment could be made evenafter ten (10) years from execution

provided that the vendee paid 12% interest. The stipulation of the parties constitute the law

between them, thus court haven o a l t e r n a t i v e b u t t o en f o rce t h em a s ag r eed up on

an d w r i t t en . Th us , t h eSu p r em e C ou r t ru l ed th a t t h e Co ur t o f Ap pea l s d i d

n o t com mi t an e r r o r i n deciding this issue.SPECIFIC PERFORMANCE: NECESSITY

(Art. 1165, CC)

SPS. HENRY CO AND ELIZABETH CO AND MELODY CO, petitioners,VS. COURT

OF APPEALS AND MRS. ADORACION CUSTODIO, representedby her Attorney-in-

fact, TRINIDAD KALAGAYAN, respondentsAug 17, 1999G.R. No. 112330FACTS: On October 9, 1984, the spouses Co entered into a verbal contract withCustodio for

her purchase of the their house and lot worth $100,000.00. Onew eek t he r ea f t e r ,

an d sh o r t l y b e f o r e s h e l e f t fo r t h e Un i t ed S ta t es s he p a id amounts of $1,000.00

and P40,000.00 as earnest money, in order that the samemay be reserved for her purchase, said

earnest money to be deducted from thetotal purchase price. The purchase price of

$100,000.00 is payable in twopayments $40,000.00 on December 4, 1984 and the balance of

$60,000.00 on January 5, 1985. On January 25, 1985, although the period of payment

hadalready expired, she paid to the defendant Melody Co in the United States,

thesum of $30,000.00, as partial payment of the purchase price. Spouses

Co‘scounsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated March

15,1985, demanding that she pay the balance of $70,000.00 and not receiving anyresponse

thereto, said lawyer wrote another letter to plaintiff dated August 8,1986, informing

her that she has lost her ‗option to purchase‘ the propertysubject of this case and offered

to sell her another property.A t t y. E s t r e l l a O . La ys a , co u ns e l o f C us t od io , w ro te a

l e t t e r t o At t y. Leopoldo Cotaco informing him that Custodio ‗is now ready to pay the

remainingbalance to complete the sum of $100,000.00, the agreed amount as

sellingprice‘ and on October 24, 1986, plaintiff filed the instant complaint.‖ The trial court

ruled in favor of Custodio and ordered the spouses Co to refund the amount of

$30,000.00. Not satisfied with the decision, the spouses

Co appealed to the Court of Appeals, which affirmed the decision of the RTC. Hence,

this appeal.

ISSUE: Whether or not the Court of Appeals erred in ordering the Cos to return the $30,000.00

paid by Custodio pursuant to the ―option‖ granted to her.

RULING: An option is a contract granting a privilege to buy or sell within an agreedtime and at a

determined price. It is a separate and distinct contract from thatwhich the parties may enter into

upon the consummation of the option. It mustbe supported by consideration. However, the

March 15, 1985 letter sent by theCOS through their lawyer to Custodio reveals that the

parties entered into aperfected contract of sale and not an option contract.A contract of sale is

a consensual contract and is perfected at the momentthere is a meeting of the minds upon the

thing which is the object of the contractand upon the price. From that moment the parties

may reciprocally demandp e r f o r m an ce su b j ec t t o t h e p ro v i s ion s o f t h e l aw

go v e r n i n g th e f o rm o f contracts. The elements of a valid contract of sale under

Article 1458 of the CivilCode are (1) consent or meeting of the minds; (2)

determinate subject matter;and (3) price certain in money or its equivalent. As evidenced by

the March 15,1985 letter, all three elements of a contract of sale are present in the

transactionbetween the petitioners and respondent. Custodio‘s offer to purchase the

Beataproperty, subject of the sale at a price of $100,000.00 was accepted by the Cos.Even the

manner of payment of the price was set forth in the letter. Earnestmoney in the

amounts of US$1,000.00 and P40,000.00 was already received bythe Cos. Under Article

1482 of the Civil Code, earnest money given in a saletransaction is considered part

of the purchase price and proof of the perfectionof the sale.D e s p i t e t h e f a c t t h a t

C u s t o d i o ‘ s f a i l u r e t o p a y t h e a m o u n t s o f US$40,000.00 and US$60,000.00 on

or before December 4, 1984 and January 5,1985 respectively was a breach of her obligation

under Article 1191 of the CivilCode, the Cos did not sue for either specific performance

or rescission of theco n t rac t . T h e C os wer e o f t h e m i s t ak en b e l i e f t h a t

C us t od io h ad l os t he r ―option‖ over the Beata property when she failed to pay the

remaining balanceof $70,000.00 pursuant to their August 8, 1986 let ter. In the absence

of anexpress stipulation authorizing the sellers to extrajudicially rescind the contractof sale,

the Cos cannot unilaterally and extrajudicially rescind the contract of

sale.Accordingly, Custodio acted well within her rights when she attempted top a y t h e

r em ai n in g b a l ance o f $ 70 ,0 00 .0 0 to com pl e t e t h e s um o wed o f $100,000.00

as the contract was still subsisting at that time. When the Cosrefused to accept said

payment and to deliver the Beata property, Custodioimmediately sued for the

rescission of the contract of sale and prayed for thereturn of the $30,000.00 she had

initially paid.Under Article 1385 of the Civil Code, rescission creates the obligation

toreturn the things, which were the object of the contract, but such rescission canonly be

carried out when the one who demands rescission can return whateverhe may be

obliged to restore. This principle has been applied to rescission of reciprocal

obligations under Article 1191 of the Civil Code. The Court of Appealstherefore did not err

in ordering the Cos to return the amount of $30,000.00 toCustodio after ordering the

rescission of the contract of sale over the property.Since it has been shown that the

appellee who was not in default, waswilling to perform part of the contract while

the appellants were not, rescissiono f t h e co n t r ac t i s i n o r d e r . T h e po w er to

r e s c i nd o b l i ga t i on s i s im pl i ed in reciprocal ones, in case one of the obligors

should not comply with what isi n cu mb en t u po n h im , ( Ar t i c l e 1 19 1 , s am e

C od e ) . R es c i s s io n c r ea t es t h e obligation to return the things which were the

object of the contract, togetherwith their fruits, and the price with its interest x x x x (Article

1385, same Code).In the case at bar, the property involved has not been delivered to

theappellee. She has therefore nothing to return to the appellants. The pricereceived

by the appellants has to be returned to the appellee as aptly ruled bythe lower court,

for such is a consequence of rescission, which is to restore theparties in their former

situations.Petition denied. Decision affirmed.

RIGHT TO RESOLVE/RESCIND: REQUISITES1. UFC VS. CA, 33 S 1

2. UP VS. DELOS ANGELES, 35 S 1023. FRANCISCO VS. DEAC CONST. INC., 543 S 6444.

CANNU VS. GALANG, 459 S 805. VILLANUEVA VS. ESTATE OF GONZAGA, 498 S 2856.

PAGUYO VS. ASTORGA, 470 S 337. CASINO VS. CA, 470 S 578. CARRASCOSO VS. CA, 477 S

6669. GOLDENROD VS. CA, 299 S 141

UNIVERSAL FOOD CORPORATION VS. CAL-29155 February 22, 1971FACTS: T h e p e t i t i on e r con ten ds t h a t ( a ) un d e r t h e t e rm s o f t h e B i l l o f Assignment,

exh. A, the respondent Magdalo V. Francisco ceded andtransferred to the petitioner

not only the right to the use of the formulafor Mafran sauce but also the formula itself,

because this, allegedly, wasthe intention of the parties; (b) that on the basis of the entire evidence

onrecord and as found by the trial court, the petitioner did not dismiss the respondent

Francisco because he was, and still is, a member of the boardof directors, a stockholder, and

an officer of the petitioner corporation,and that as such, had actual knowledge of the

resumption of productionby the petitioner, but that despite such knowledge, he refused

to reportback for work notwithstanding the petitioner's call for him to do so; (c) t h a t

t h e p r iv a t e r esp on den t s a r e n o t en t i t l ed t o r es c in d t h e B i l l o f

A s s i g n m e n t ; a n d ( d ) t h a t t h e e v i d e n c e o n r e c o r d s h o w s t h a t

t h e respondent Francisco was the one not ready, willing and able to complywith his

obligations under the Bill of Assignment, in the sense that he notonly irregularly reported for

work but also failed to assign, transfer andconvey to the petitioner of the said deed of

conveyance.

ISSUE: Whether respondent Francisco ceded to the petitioner merely theuse of the formula for Mafran

sauce and not the formula itself.

RULING: The Court concluded that what was actually ceded and transferred wasonly the use

of the Mafran sauce formula. The fact that the trademark "Mafran" was duly registered

in the name of the petitioner pursuant to theBill of Assignment, standing by itself alone,

to borrow the petitioner'sl an gu age , i s n o t su f f i c i en t p ro o f t ha t t h e r esp on d en t

F r an c i s co was supposedly obligated to transfer and cede to the petitioner the

formulafor Mafran sauce and not merely its use. For the said respondent allowedt h e

p e t i t i o ne r t o r eg i s t e r t h e t r ad em ark fo r pu r po se s m e r e l y o f t he "marketing of

said project."

RIGHT TO RESOLVE/RESCIND: REQUISITES

UNIVERSITY OF THE PHILIPPINES VS. DELOS ANGELESL-28602 September 29,

1970FACTS: UP and ALUMCO entered into a logging agreement under which thelatter was granted exclusive

authority, for a period starting from the dateof the agreement to 31 December 1965, extendible

for a further period of five (5) years by mutual agreement, to cut, co llect and remove

timberfrom the Land Grant, in consideration of payment to UP of royalties, forestfees, etc.;

that ALUMCO cut and removed timber therefrom but, as of 8December 1964, it had

incurred an unpaid account of P219,362.94, which,despite repeated demands, it had failed to pay;

that after it had received

n o t i c e t h a t UP w ou l d r es c in d o r t e rmin a t e t h e lo gg i n g agr eem en t , ALUMCO

executed an instrument, entitled "Acknowledgment of Debt andProposed Manner of

Payments," dated 9 December 1964, which wasa p p r o v e d b y t h e p r e s i d e n t o f

U P . A L U M C O c o n t i n u e d i t s l o g g i n g operations, but again incurred an

unpaid account, for the period from 9December 1964 to 15 July 1965, in the amount of

P61,133.74, in additionto the indebtedness that it had previously acknowledged. That on 19

July 1965, petitioner UP informed respondent ALUMCOthat it had, as of that date,

considered as rescinded and of no further legal effect the logging agreement that they had

entered in 1960. That before the issuance of the aforesaid preliminary injunction UPhad taken

steps to have another concessionaire take over the loggingo p e r a t io n , and t h e

co n ces s io n w as awar d ed t o S t a . C l a r a Lu m b er Company, Inc.

ISSUE: W h e t h e r p e t i t i o n e r U . P . c a n t r e a t i t s c o n t r a c t w i t h

A L U M C O r e s c i n d e d , a n d m a y d i s r e g a r d t h e s a m e b e f o r e a n y

j u d i c i a l pronouncement to that effect.

RULING: Respondent ALUMCO contended, and the lower court, in issuing theinjunction order of 25

February 1966. apparently sustained it (althoughthe order expresses no specific findings

in this regard), that it is only aftera final court decree declaring the contract rescinded

for violation of itsterms that U.P. could disregard ALUMCO's rights under the

contract andtreat the agreement as breached and of no force or effect.UP and ALUMCO had

expressly stipulated in the "Acknowledgmentof Debt and Proposed Manner of Payments"

that, upon default by thed eb t o r A LU M CO, t h e c r ed i to r ( UP ) h a s " th e r i gh t

an d th e p ow er to consider the Logging Agreement dated 2 December 1960 as

rescindedwithout the necessity of any judicial suit." "There is nothing in the law thatprohibits

the parties from entering into agreement that violation of theterms of the contract

would cause cancellation thereof, even withoutco u r t i n t e rv en t i on . In o t h e r

w o r ds , i t i s no t a l wa ys n ece ss a r y f o r t h e injured party to resort to court for rescission

of the contract."In other words, the party who deems the contract violated

mayconsider it resolved or rescinded, and act accordingly, without previous co u r t

a c t i on , bu t i t p ro ceed s a t i t s o wn r i s k . Fo r i t i s o n l y t h e f i n a l judgment of

the corresponding court that will conclusively and finallysettle whether the action taken

was or was not correct in law. But the lawdefinitely does not require that the contracting

party who believes itself i n j u r e d m u s t f i r s t f i l e s u i t a n d w a i t f o r a

j u d g m e n t b e f o r e t a k i n g extrajudicial steps to protect its interest. Otherwise, the party

injured byt h e o t h er ' s b r each wi l l hav e to p as s i ve l y s i t and w a t ch i t s

d am ages accumulate during the pendency of the suit until the final judgment of

rescission is rendered when the law itself requires that he should exercisedue diligence to

minimize its own damages.

RIGHT TO RESOLVE/RESCIND: REQUISITES

FRANCISCO VS. DEAC CONSTRUCTION, INC.GR No. 171312 February 4, 2008FACTS: Spouses Francisco obtained the services of DEAC Construction, Inc.to construct a 3-storey

residential building with mezzanine and roof deckon their lot for a contract price of 3.5M. as

agreed upon, a downpaymentof 2M should be paid upon signing of the construct of

construction, andthe remaining balance of 1.5M was to be paid in two equal

installments. T o u nde r t ak e t he s a id p ro j ec t , DE AC en gaged th e s e rv i ce s o f

a su b - co n t r ac to r , Vi go r Co ns t r u c t i on an d D ev e lo pm en t C or p o r a t i on ,

b u t allegedly without the spouses‘ knowledge and consent.Even prior to the execution of

the contract, spouses Francisco hadp a i d t he do w np a ym ent . H ow ev e r , t he s a id

co ns t r u c t i on co mmen ced although DEAC had not yet obtained the necessary building

permit for thep r o p os ed con s t ru c t io n and th a t t h e con t r ac t o r d ev i a t ed f ro m

t h e approved plans.

EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS

VASQUEZ VS. COURT OF APPEALS138 SCRA 558FACTS: A vessel sailed from Manila to Cebu despite the knowledge by the captainand officers that a

typhoon was building up somewhere in Mindanao. When itpassed Tanguigui Island, the

weather suddenly changed and the vessel struck areef, sustained leaks and eventually sunk. The

ship sunk with the children of thepetitioners who sued for damages before the CFI of

Manila, which was granted.Respondents defense of

force majeure

t o ex t i n gu i s h i t s l i ab i l i t y w e r e no t entertained. On appeal, the judgment was reversed.

ISSUE: Whether or not the defense of

force majeure

is tenable.

RULING: NO. A fortuitous event is constituted by the following: 1) The event mustbe independent of

the human will; 2) the occurrence must render it impossiblefor the debtor to fulfill

the obligation in a normal manner; and 3) the obligormust be free of participation in

the aggravation of the injury suffered by theobligee or if it could be foreseen, it must have

been impossible to avoid. Theremust be an entire exclusion of human agency from the

cause of the injury orloss. Such is not the case at bar. The vessel still proceeded

even though thecaptain already knew that they were within the typhoon zone and

despite thefact that they were kept posted about the weather conditions. They failed

toexercise that extraordinary diligence required from them, explicitly mandated bythe law, for

the safety of the passengers.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS

YOBIDO VS. COURT OF APPEALS281 SCRA 01G.R. No. 113003Oct. 17, 1997FACTS: On April 26, 1988, spouses Tito and Leny Tumboy and their minor childrennamed Ardee and

Jasmin, boarded at Mangagoy , Surigao Del Sur, a Yobido Linerbus bound for Davao City.

Along Picop Road in Km. 17, Sta.Maria, Agusan delSur, the left front tire of the

bus exploded. The bus fell into a ravine aroundthree (3) feet from the road and struck a

tree. The incident resulted in the deathof 28-year-old Tito Tumboy and physical injuries to other

passengers. On Nov.21, 1988, a complaint for breach of contract of carriage, damages and

attorney‘sfees was filed by Leny and her children against Alberta Yobido, the owner of thebus,

and Cresencio Yobido, its driver, before the Regional Trial Court of DavaoCity.

When the defendants therein filed their answer to the complaint, theyraised the

affirmative defense of caso fortuito. They also filed a third -partyco mpl a in t

aga i ns t P h i l i p p i ne S ur e t y an d In s u r ance , In c . Th i s t h i r d -p a r t yd e f en d an t

f i l ed an ans w er wi th co mp ul s o r y co u n te r c l a im . At t h e p r e - t r i a l conference, the

parties agreed to a stipulation of facts.On August 29, 1991, the lower court rendered a

decision dismissing theaction for lack of merit. On the issue of whether or not the

tire blowout was acaso fortuito, it found that ―the falling of the bus to the cliff was

a result of noother outside factor than the tire bolw-out.‖ It held that the ruling in

the

LaMallorca and Pampanga Bus Co. v. De Jesus

that a tire blowout is a ―mechanicald e f e c t o f t h e c o n v e y a n c e o r a f a u l t i n i t s

e q u i p m e n t w h i c h w a s e a s i l y discoverable if the bus had been subjected to a more

thorough or rigid check-upbefore it took to the road that morning‖ is inapplicable to this case. It

reasonedout that in said case. It reasoned out that in said case, it was found that

theblowout was caused by the established fact that the inner tube of the left

fronttire ―was pressed between the inner circle of the left wheel and the rim

whichhad slipped out of the left wheel ―. In this case, however,‖ the cause of

theexplosion remains a mystery until at present.‖ As such, the court added, the tireblowout was

―a

caso fortuito

which is completely an extraordinary circumstanceindependent of the will‖ of the defendants

who should be relieved of ―whateverliability the plaintiffs may have suffered by reason

of the explosion pursuant toArticle 1174 of the Civil Code.‖

ISSUE: Whether or not the Trial Court erred in their findings that the tire blowoutwas a

caso fortuito

.

RULING: On August 23, 1193, the Court of Appeals rendered the decision reversingthe decision of the trial

court. Article 1755 provides that ―(a) common carrier isbound to carry the passenger safely

as far as human care and foresight canprovide, using the utmost diligence very cautious

persons, with a due regard for

all the circumstances‖. Accordingly, in culpa contractual, once a passenger diesor is injured,

the carrier is presumed to have been at fault or to have actednegligently. The

disputable presumption may only be overcome by evidencethat the carrier had observed

extraordinary diligences as prescribed by Articles1733, 1755 and 1756 of the Civil Code

or that the injury of the passenger wasdue to fortuitous event. Consequently, the court need

make an express findingo f f au l t o r n eg l i gence on t he p a r t o f t he ca r r i e r t o h o ld

i t r e s po ns i b l e f o r damages sought by the passenger. T h e d e c i s i o n o f t h e C o u r t

o f A p p e a l s w a s a f f i r m e d s u b j e c t t o t h e modification that petitioners shall,

in addition to the monetary awards therein,be liable for the award of exemplary damages

in the amount of P20,000.00.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS

ROBERTO JUNTILLA VS. CLEMENTE FONTANAR136 SCRA 625G.R. No. L-

45637FACTS: The plaintiff was a passenger of the public utility jeepney on the course of the trip from

Danao City to Cebu City. The jeepney was driven by defendantBerfol Camoro. It

was registered under the franchise of defendant ClementeFontanar but was actually

owned by defendant Fernando Banzon. When the jeepney reached Mandaue City, the

right rear tire exploded causing the vehicleto turn turtle. The plaintiff who was sitting at

the front seat was thrown out of the vehicle and momentarily lost consciousness. When he

came to his senses,he found that he had a lacerated wound on his right palm and injuries on his

leftarm, right thigh and on his back. Because of his shock and injuries, he went back

to Danao City but on the way, he discovered that his "Omega" wrist watchwas lost. Upon his

arrival in Danao City, he immediately entered the Danao CityHospital to attend to his injuries,

and also requested his father-in-law to proceedimmediately to the place of the accident

and look for the watch. In spite of theefforts of his father-in-law, the wrist watch could no

longer be found.

ISSUE:W hether or not the accident that happened was due to a fortuitous event,thereby, absolving the

respondents from any obligation.

RULING: NO. The accident was not due to a fortuitous event. There are specificacts of

negligence on the part of the respondents. The passenger jeepneyt u r n ed t u r t l e and

j um ped in to a d i t ch imm edi a t e l y a f t e r i t s r i gh t r e a r t i r e exploded. It was

running at a very high speed before the accident and wasoverloaded. The petitioner

stated that there were three (3) passengers in the front seat and fourteen (14) passengers in

the rear.While the tire that blew-up was still good because the grooves were

stillvisible, this does not make the explosion of the tire a fortuitous event.

Noevidence was presented to show that the accident was due to adverse

roadconditions or that precautions were taken by the jeepney driver to avert possibleaccidents.

The blowing-up of the tire, therefore, could have been caused by toomuch air pressure and

aggravated by the fact that the jeepney was overloadedand speeding at the time of the

accident. The accident was caused either through the negligence of the driver

orbecause of mechanical defects in the tire. Common carriers are obliged to supervise

their drivers and ensure that they follow rules and regulations such asnot to overload their

vehicles, not to exceed safe and legal speed limits, and toknow the correct measures to take when

a tire blows up. The source of a common carrier's legal liability is the contract of carriage,and

by entering into the said contract, it binds itself to carry the passengerss a f e l y a s

f a r a s h um an ca re an d f o r es i gh t c an p ro v i d e , u s in g th e u tm os t diligence of a

very cautious person, with a due regard for all the circumstances. The driver and the owner of the

vehicle are liable for damages.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS

THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC,VS. MGG MARINE

SERVICES, INC. and DOROTEO GAERLAN

2002 Mar 8G.R. No. 135645FACTS: On March 1, 1987, San Miguel Corporation insured several beer bottlecases with an

aggregate value of P5,836,222.80 with petitioner PhilippineAmerican General

Insurance Company. The cargo were loaded on board the M/VPeatheray Patrick-G to be

transported from Mandaue City to Bislig, Surigao delSur.A f t e r hav in g b een

c l ea r ed b y t h e Co as t Gu a rd S t a t io n i n C ebu th e previous day, the vessel left the

port of Mandaue City for Bislig, Surigao del Suron March 2, 1987. The weather was calm when

the vessel started its voyage. The following day, March 3, 1987, M/V Peatheray Patrick -

G listed andsubsequently sunk off Cawit Point, Cortes, Surigao del Sur. As a

consequencethereof, the cargo belonging to San Miguel Corporation was lost.

Subsequently,San Miguel Corporation claimed the amount of its loss from petitioner. The Court

of Appeals observed respondents from any liability because thecargo was lost due to a

fortuitous event; strong winds and huge waves caused the vessel to sink.

ISSUE: Whether the loss of the cargo was due to the occurrence of a naturaldisaster, and if

so, whether such natural disaster was the sole and proximatecause of the loss or

whether private respondents were partly to blame for failingto exercise due diligence to prevent

the loss of the cargo.

RULING: Common carriers, from the nature of their business and for reasons of public policy,

are mandated to observe extraordinary diligence in the vigilanceover the goods and for

the safety of the passengers transported by them. Owingto this high degree of diligence required

of them, common carriers, as a generalrule, are presumed to have been at fault or negligent if the

goods transported bythem are lost, destroyed or if the same deteriorated. The parties do not

dispute that on the day the M/V Peatheray Patrick -Gsunk, said vessel encountered strong

winds and huge waves ranging from six toten feet in height. The vessel listed at the port side and

eventually sunk at CawitPoint, Cortes, Surigao del Sur.In the case at bar, it was adequately

shown that before the M/V PeatherayPatrick-G left the port of Mandaue City, the

Captain confirmed with the CoastGuard that the weather condition would permit the

safe travel of the vessel toBislig, Surigao del Sur. Thus, he could not be expected to

have foreseen theunfavorable weather condition that awaited the vessel in Cortes, Surigao del

Sur.It was the presence of the strong winds and enormous waves which caused thevessel to list,

keel over, and consequently lose the cargo contained therein. Theappellate court likewise

found that there was no negligence on the part of thecrew of the M/V Peatheray

Patrick-G. Since the presence of strong winds andenormous waves at Cortes,

Surigao del Sur on March 3, 1987 was shown to be the proximate and only cause of the

sinking of the M/V Peatheray Patrick-G andthe loss of the cargo belonging to San Miguel

Corporation, private respondentscannot be held liable for the said loss.EFFECTS OF

FORTUITOUS EVENT UPON OBLIGATIONS

MINDEZ RESOURCES DEVELOPMENT VS. MORILLO379 SCRA 144March 12,

2002FACTS:

On February 1991 a verbal agreement was entered into between EphraimMorillo and Mindex

Resources Corporation fro the lease of the former‘s 6x6 10 -wheeler cargo truck for use

in Mindex‘s mining operations in Oriental Mindoro ata stipulated rental of P300.00 per hour for

a minimum of 8 hours a day or a totalof P2,400.00 daily. Mindex was paying its rentals until

April 10, 1991. On April11, unidentified persons burned the truck while it was parked

unattended at San Teodoro, Oriental Mindoro due to mechanical trouble. Upon learning the

burningi n c i den t , Mo r i l l o o f f e r ed to s e l l t h e t r u ck to M in d ex bu t t he l a t t e r

r e f us ed . Instead, it replaced the vehicle‘s burned tires and had it towed to a shop

forrepair and overhauling. On April 15, 1991, Morillo sent a letter to

Mindexproposing that he will entrust the said vehicle in the amount of P275,000.00 thatis its

cost price without charging for the encumbrance of P76,800.00.Mindex responded by a hand

written letter expressing their reservationson the above demands due to their tight

financial situation. However, he madecounter offers which state that they will pay the

rental of the 6x6 truck in theamount of P76,000.00, repair and overhaul the truck on their

own expenses andreturn it to Morillo on good running condition after repair. April 18,

Morilloreplied that he will relinquish to Mindex the damaged truck; that he is amenable

to receive the rental in the amount of P76, 000.00; and that Mindex will

payP50,000.00 monthly until the balance of P275,000.00 is fully paid. Except for hisacceptance

of the proffered P76,000.00 unpaid rentals. Morillo‘s stand has notbeen changed as he

merely lowered the first payment on the P275,000.00valuation of the truck from

P150,000.00 to P50,000.00. The parties had since remain intransigent and so on August, Morillo

pulledout the truck from the repair shop of Mindex and had it repair ed elsewhere

forw h i ch h e s pen t t h e am ou n t o f P 13 2 ,7 5 0 . 00 . Th e RT C fo u nd

p e t i t i o ne r responsible fro the destruction of loss of the leased 6x6 truck and

ordered it topay respondent P76,000.00 as balance of the unpaid rental for the 6x6

truckwith interest of 12%, P132,750.00 representing the cost of repair and overhaulof the

truck with interest of 12% until fully paid; and P20,000.00 as attorney‘s fees. The

appellate court sustained RTC‘s finding. The CA found petitioner wasn o t w i t ho u t f au l t fo r

t h e l o s s and d e s t ruc t i on o f t he t r uck an d th us l i ab l e therefore. However, it

modified the 12% interest on the P76,000.00 rentals andP132,750.00 repair cost to 6% per

annum form June 22, 1994 to the date of finality of the said decision. It affirmed the award

of attorney‘s fees.

ISSUE: Whether or not the CA is correct in finding the petitioner liable due to negligence and

cannot be exonerated due to the defense of fortuitous event.

RULING: YES. As stated by the Court of Appeals, ―the burning of the subject truckwas impossible to

foresee, but not impossible to avoid. Mindex could haveprevented the incident by

immediately towing the truck to a motor shop for repair.In this case, petitioner was found

negligent and thus liable for the loss ordestruction of the leased truck. Article 1174 of the

Civil Code states that, ―Noperson shall be responsible for a fortuitous event that could not be

foreseen or,though foreseen, was inevitable. In other words, there must be an exclusion of human

intervention form the cause of injury on loss.‖ In this case, the petitioneris contributory negligent

to the incident.Decision was denied. Deleting attorney‘s fees, modified the RTC and

CA‘sdecision.EFFECTS OF FORTUITOUS EVENT UPON OBLIGATIONS

NATIONAL POWER CORPORATIONVS. PHILIPP BROTHERS OCEANIC, INC.G.R.

No. 126204November 20, 2001369 SCRA 629FACTS: On May 14, 1987, the National Power Corporation (NAPOCOR) issued invitations to

bid for the supply and delivery of 120,000 metric tons of importedcoal for its Batangas Coal-

Fired Thermal Power Plant in Calaca, Batangas. TheP h i l i p p Bro th e rs O cean i c ,

In c . ( P H IBR O ) p r eq u a l i f i ed and was a l lo w ed to p a r t i c i p a t e a s on e o f t h e

b id d er s . Af t e r t h e p u b l i c b i dd in g w as con du c ted , PHIBRO‘s bid was accepted.

NAPOCOR‘s acceptance was conveyed in a letterdated July 8, 1987, which was received

by PHIBRO on July 15, 1987.On July 10, 1987, PHIBRO sent word to NAPOCOR that

industrial disputesmight soon plague Australia, the shipment‘s point of origin, which could

seriouslyhamper PHIBRO‘s ability to supply the needed coal unless a ―strike-free‖ clauseis

incorporated in the charter party or the contract of carriage. In order to hastenthe transfer of

coal, PHIBRO proposed to NAPOCOR that they equally share the burden of a ―strike-

free‖ clause. NAPOCOR refused. On August 6, 1987, PHIBROreceived from NAPOCOR a

confirmed and workable letter of credit. Instead of delivering the coal on or before

the thirtieth day after receipt of the Letter of Credit, as agreed upon by the parties

in the July contract, PHIBRO effected its first shipment only on November 17,

1987.Consequently, in October 1987, NAPOCOR once more advertised for

thedelivery of coal to its Calaca thermal plant. PHIBRO participated anew in

thissubsequent bidding but its application was denied for not meeting the

minimumrequirements. However, PHIBRO found that the real reason for the disapprovalwas its

purported failure to satisfy NAPOCOR‘s demand for damages due to thedelay in the delivery of

the first coal shipment. Thus, PHIBRO filed an action fordamages with application for injunction

against NAPOCOR with the Regional TrialCourt, Branch 57, Makati City. In its complaint,

PHIBRO alleged that NAPOCOR‘sact of disqualifying it in the October 1987 bidding and in all

subsequent biddingswas tainted with malice and bad faith. PHIBRO prayed for actual,

moral andexemplary damages and attorney‘s fees.

On the other hand NAPOCOR averred that the strikes in Australia could notbe invoked as reason

for the delay in the delivery of coal because PHIBRO itself admitted that as of July 28, 1987

those strikes had already ceased. Furthermore,NAPOCOR claimed that due to PHIBRO‘s failure

to deliver the coal on time, it wascompelled to purchase coal from ASEA at a higher price.

NAPOCOR claimed foractual damages in the amount of P12,436,185.73, representing the

increase inthe price of coal, and a claim of P500,000.00 as litigation expenses.O n J anu a r y

1 6 , 19 92 , t h e t r i a l co u r t r end e r ed a d ec i s io n in f avo r o f PHIBRO. Unsatisfied,

NAPOCOR elevated the case to the Court of Appeals whichaffirmed in toto the latter‘s decision.

Hence, this present petition.

ISSUE: Whether or not the lower court erred in holding that PHIBRO‘s delay in thedelivery of imported

coal was due to

force majeure.

RULING: It was disclosed from the records of the case that what prevented PHIBROf r om co mpl yi n g

w i t h i t s o b l i ga t i on u n de r t he J u l y 1 9 87 co n t r ac t w as t h e industrial disputes

which besieged Australia during that time. The Civil Codeprovides that no person shall

be responsible for those events which could not beforeseeen, or which, though foreseen, were

inevitable. This means that when anobligor is unable to fulfill his obligation because of

a fortuitous event or forcemajeure, he cannot be held liable for damages for non-

performance.In addition to the above legal precept, it is worthy to note that

PHIBROan d N AP OC OR ex p l i c i t l y ag r eed i n S ec t io n X V II o f t h e ―B id d in g

T er ms and Specifications that ―neither seller (PHIBRO) nor buyer (NAPOCOR) shall be

liablefor any delay in or failure of the performance of its obligations, other than

thepayment of money due, if any such delay or failure is due to ForceMajeure.‖ ―Strikes‖ then

are undoubtedly included in the force majeure clauseof the Bidding Terms and Specifications.

TRANSMISSIBILITY OF RIGHTS AND OBLIGATIONS1 . U N I O N B A N K V S .

S A N T I B A N E Z , 4 5 2 S 2 2 8 2 . S A N A G U S T I N V S . C A , 3 7 1 S C R A

3 4 8 3 . PR OJ EC T BU IL DE RS , IN C. VS . C A, 3 58 SC R A 6 2 6

UNION BANK OF THE PHILIPPINES versus EDMUND SANTIBAÑEZand

FLORENCE SANTIBAÑEZ ARIOLAG . R . N o . 1 4 9 9 2 6 2 0 0 5 F e b

2 3 FACTS: On May 31, 1980, the First Countryside Credit Corporation (FCCC)and Efraim M.

Santibañez entered into a loan agreement in the amount of P128,000.00. The amount was

intended for the payment of the purchaseprice of one unit Ford 6600 Agricultural All-Purpose

Diesel Tractor. In viewthereof, Efraim and his son, Edmund, executed a promissory note in

favorof the FCCC, the principal sum payable in five equal annual amortizationsof P43,745.96

due on May 31, 1981 and every May 31st thereafter up toMay 31, 1985.On December

13, 1980, the FCCC and Efraim entered into another loan agreement, this time in the

amount of P123,156.00. It was intendedto pay the balance of the purchase price of

another unit of Ford 6600Agricultural All -Purpose Diesel Tractor, with accessories,

and one unitHoward Rotamotor Model AR 60K. Again, Efraim a nd his son,

Edmund,executed a promissory note for the said amount in favor of the FCCC. Aside

from such promissory note, they also signed a Continuing GuarantyAgreement for the loan dated

December 13, 1980.Sometime in February 1981, Efraim died, leaving a holographic

will.Subsequently in March 1981, testate proceedings commenced before theR TC o f I l o i lo

C i t y. O n Ap r i l 9 , 19 8 1 , E dmu nd , a s one o f t h e h e i r s , w as appointed as the

special administrator of the estate of the decedent.During the pendency of the

testate proceedings, the surviving heirs,E d m un d and h i s s i s t e r F lo r en ce

S an t i bañ ez A r i o l a , ex ecu t ed a J o i n t Agreement dated July 22, 1981, wherein

they agreed to divide betweenthemselves and take possession of the three tractors; that is,

two tractorsfor Edmund and one tractor for Florence. Each of them was to assume the

indebtedness of their late father to FCCC, corresponding to the tractor respectively

taken by them.O n A u gu s t 2 0 , 1 98 1 , a D eed o f Ass i gnm en t wi t h As su mpt io n

o f Liabilities was executed by and between FCCC and Union Savings

andM o r t gage Ban k , w h er e in th e FCC C as t h e a s s i gno r , am on g

o th e rs , assigned all its assets and liabilities to Union Savings and Mortgage Bank.Demand

letters for the settlement of his account were sent by petitionerUnion Bank of the Philippines

(UBP) to Edmund, but the latter failed toh e ed t h e sam e an d r e fu s ed t o p ay.

T h us , on Feb ru a r y 5 , 1 98 8 , t h e petitioner filed a Complaint for sum of money against

the heirs of EfraimSantibañez, Edmund and Florence, before the RTC of Makati City.

ISSUE: 1. Whether in testate succession, there can be no valid partition among the heirs.2.

Whether or not the heirs‘ assumption of the indebtedness of thedeceased is binding.3. Whether

or not the petitioner can hold the heirs liable on theobligation of the deceased.

RULING: 1. In testate succession, there can be no valid partition among theheirs until after the will has

been probated. The law enjoins the probateof a will and the public requires it,

because unless a will is probated andnotice thereof given to the whole world, the right of a

person to dispose of his property by will may be rendered nugatory. It presupposes that

theproperties to be partitioned are the same properties embraced in the will. The court then

agrees with the appellate court that the provisionss t a t ed in t h e w i l l i s an a l l -

en com pass in g p r ov i s io n emb r ac i n g a l l t h e properties left by the decedent which

might have escaped his mind atthat time he was making his will, and other

properties he may acquirethereafter. This being so, any partition involving the said tractors

amongt h e h e i r s i s n o t v a l id . Th e j o in t ag r eem en t ex ecu ted b y E d mu nd

an d Florence, partitioning the tractors among themselves, is invalid, speciallys o s i nce a t t h e

t im e o f i t s ex ecu t ion , t h e r e w as a l r e ady a p en d i n g proceeding for the probate of

their late father‘s holographic will coveringthe said tractors. 2. The heirs‘ assumption of the

indebtedness is not binding. Theassumption of liability was conditioned upon the

happening of an event,that is, that each heir shall takepossession and use of their respective

share under the agreement. It wasmade dependent on the validity of the partition, and

that they were toassume the indebtedness corresponding to the chattel that they

wereeach to receive. The partition being invalid, the heirs in effect did notreceive

any such tractor. It follows then that the assumption of liabilitycannot be given any

force and effect.3. Florence S. Ariola could not be held accountable for any liabilityi n cu r r ed

b y h e r l a t e f a t he r . T h e do cum ent a r y ev id en ce p r e sen t ed , particularly the

promissory notes and the continuing guaranty agreement,were executed and signed only by the

late Efraim Santibañez and his sonEdmund. As the petitioner failed to file its money claim with

the probatecourt, at most, it may only go after Edmund as co-maker of the decedentunder the

said promissory notes and continuing guaranty, of course,subject to any defenses

Edmund may have as against the petitioner.H o w ev e r , t h e cou r t h ad n o t

a cq u i r ed j u r i s d i c t io n o ve r t he p e r so n o f Edmund. Also, the petitioner had not

sufficiently shown that it is thesuccessor -in-interest of the Union Savings and

Mortgage Bank to whichthe FCCC assigned its assets and liabilities.

TRANSMISSIBILITY OF RIGHTS AND OBLIGATIONS

SAN AGUSTIN VS. COURT OF APPEALS371 S 348FACTS: On February 11, 1974, the Government Service Insurance System (GSIS)sold to Macaria Vda de

Caiquep, a parcel or residential land located in Pasig City,part of the GSIS Low Cost Housing

Project evidenced by a Deed of Absolute Sale.On February 19, 1974, the Register of

Deeds of Rizal issued in the nameof Caiquep, Transfer Certificate of Title. The next day,

Caiquep sold the subjectl o t t o p r i v a t e r es pon d en t M ax imo M enez . So m et im e i n

1 9 79 , fo r b e i n g suspected as a subversive, military men ransacked Menez's‘ house in Rizal.

Hesurrendered to the authorities and was detained for two years. When released,another order

for his arrest was issued so he hid in Mindanao for another fouryears or until March

1984. In December 1990, he discovered that the subject TCT was missing. He consulted

a lawyer but the latter did not act immediatelyon the matter. Upon consulting a new counsel, an

Affidavit of Loss was filed withthe Register of Deeds and a certified copy of TCT was issued.

Private respondentalso declared the property for tax purposes and obtained a

certification thereof from the Assessor‘s office. His search for the registered owner to

different partsof the country failed prompting the former to file a petition for the

issuance of owner‘s duplicate copy to replace the lost one.During the hearing, only Menez

and counsel were present because theRegister of Deeds and the Provincial Prosecutor were

not notified. The trial courtgranted his petition after Menez presented his evidence

ex parte

. San Agustinclaimed this was the first time he became aware of the case of his aunt Ma.

Vdade Caiquep and the present occupant of the property. He filed A Motion

toReopen Reconstitution Proceedings but RTC denied said motion. Petitioner moved

for motion for reconsideration but was again denied.

ISSUE: Whether or not petitioner is bound by the contract entered into by his predecessor-in-

interest.

RULING: Yes, petitioner is bound by contracts entered into by his predecessor‘s-in-interest. Heirs are

bound by contracts entered into by their predecessors-in-interest. In this case, the GSIS

has not filed any action for the annulment of Deedof Absolute Sale of the lot the latter sold to

Caiquep, nor the forfeiture of the lotin question.In the Court‘s view, the contract of sale remains

valid between the parties,unless and until annulled in the proper suit filed by the

rightful party, the GSIS.For now, the said contract of sale is binding upon the heirs

of Macaria Vda deCaiquep., including petitioner who alleges to be one of her heirs, in line

with therule that heirs are bound by contracts entered into by their predecessors -in-

interest. TRANSMISSIBILITY OF RIGHTS AND OBLIGATIONS

PROJECT BUILDERS, INC., GALICANO A. CALAPATIA, JR., and

LEANDROENRIQUEZ, petitioners, vs. THE COURT OF APPEALS and

INDUSTRIALFINANCE CORPORATION, respondents2001 Jun 19358 SCRA 626FACTS: O n A u g u s t 2 1 , 1 9 7 5 , p l a i n t i f f a n d d e f e n d a n t P B I e n t e r e d i n t o

a n agr eem en t w he r eb y i t w as ag r eed t ha t p l a in t i f f wo u ld p r o v i de a

m ax im um amount of P2,000,000.00 against which said defendant would discount

andassign to plaintiff on a ‗with recourse non -collection basis‘ its (PBI‘s)

accountsreceivable under the contracts to sell specified in said agreement.

Eventually,the same parties entered into an agreement whereby it was agree d that

PBI‘scredit line with plaintiff be increased to P5,000,000.00. It was stipulated that thec r e d i t

l i n e o f P 5 , 0 0 0 , 0 0 0 . 0 0 g r a n t e d i n c l u d e s t h e a m o u n t

a l r e a d y assigned/discounted.Against the above-mentioned ‗credit line,‘ defendant

PBIdiscounted with plaintiff on different dates accounts receivables with

differentmaturity dates from different condominium-unit buyers. The total amount

of receivables discounted by defendant PBI is P7,986,815.38 and consists of twentyaccounts. Of

such receivables amounting to P7,986,815.38 plaintiff released todefendant PBI the amount of

P4,549,132.72 and the difference of P3,437,682.66represents the discounting fee or finance fee.

To secure compliance with the terms and conditions of the agreementdefendants

executed a Deed of Real Estate Mortgage in favor of plaintiff. Whendefendants

allegedly defaulted in the payment of the subject account, plaintiff foreclosed the

mortgage and plaintiff was the highest bidder in the amount of P3,500,000.00. The

foreclosed property was redeemed a year later but afterap p l i c a t io n o f t h e

r ed em pt i on p a ym en t , p l a i n t i f f c l a im s th a t t h e r e i s s t i l l a deficiency in the

amount of P1,323,053.08.A collection suit was then filed by IFC against PBI.

However, PBI deniedliability alleging that IFC has no case or right of action because the

obligation isfully paid out of the proceeds of foreclosure sale of its property. Further,

it

alleged that a proper accounting of the transaction between the parties will showthat it is the IFC

who is liable to PBI. The trial court dismissed the complaint but the Court of Appeals reversedit.

It ordered PBI to pay IFC the deficiency in the amount of P1,237,802.48 andthe monetary

interests.

ISSUE: Whether or not said Republic Act No. 5980 should govern the transactionbetween petitioners

and private respondent which in reality was bilateral, nottrilateral, and respondent

financing company was not really subrogated in theplace of the supposed seller or

assignor.

RULING: The assignment of the contracts to sell falls within the purview of the Act. The term credit has

been defined to - "(c) x x x mean any loan, mortgage, deedof trust, advance, or discount;

any conditional sales contract, any contract tosell, or sale or contract of sale of property

or service, either for present or futured e l i v e r y, u n de r w h i ch , p a r t o r a l l o f t h e p r i c e

i s p ayab l e su bs eq uen t t o t h e making of such sale or contract; any rental -purchase

contract; any option,demand, lien, pledge, or other claim against, or for the delive ry

of, property ormoney, any purchase, or other acquisition of or any credit upon the security

of,any obligation or claim arising out of the foregoing; and any transaction or seriesof

transactions having a similar purpose or effect.‖A n as s i gnm ent o f c r ed i t i s an ac t o f

t r an s f e r r i n g , e i t h e r o ne r ou s l y o r gratuitously, the right of an assignor to an assignee

who would then be capableof proceeding against the debtor for enforcement or

satisfaction of the credit. The transfer of rights takes place upon perfection of the contract,

and ownershipof the right, including all appurtenant accessory rights, is thereupon acquired

bythe assignee. The assignment binds the debtor only upon acquiring knowledgeof the

assignment but he is entitled, even then, to raise against the assignee thesame defenses he

could set up against the assignor. Where the assignment ison account of pure

liberality on the part of the assignor, the rules on donationwould likewise be

pertinent; where valuable consideration is involved, theassignment partakes of the

nature of a contract of sale or purchase.U p o n an a s s i gnm ent o f a con t rac t t o s e l l ,

t h e as s i gn ee i s e f f ec t i v e l y subrogated in place of the assignor and in a position

to enforce the contract tosell to the same extent as the assignor could.A n i ns i s t ence o f

p e t i t i o ne r s t h a t t h e su b j ec t t r an s ac t i on sh ou ld b e considered a simple loan since

private respondent did not communicate with thedebtors, condominium unit buyers, to collect

payment from them, is untenable.In an assignment of credit, the consent of the debtor is

not essential for itsperfection, his knowledge thereof or lack of it affecting only the

efficaciousnessor inefficaciousness of any payment he might make. The assignment, it might be

pointed out, was "with recourse," and defaulti n t h e p a ym en t o f i n s t a l lm en t s h ad b een

d u l y e s t ab l i s h ed wh en p e t i t i o n e r co rp or a t i on fo r ec lo s ed on t h e m o r t gaged

p a r ce l s o f l and . The r e so r t t o foreclosure of the mortgaged properties did not

preclude private respondentfrom collecting interest from the assigned Contr acts To

Sell from the time of foreclosure to the redemption of the foreclosed property. The

imposition of interest was a mere enforcement or exercise of the right to the ownership of

thec r ed i t o r r e ce iv ab l es w h i ch t h e p a r t i e s s t i pu l a t ed in t he 19 76

f i nan c i n gagreement. Thus -"f. That the Assignor shall comply with all the terms

andconditions specified on the said Contracts to Sell, executed by the assignor andits individual

purchaser or customers, and assigned/discounted to Assignee.‖O n e o f t he p ro v i s io ns in

t h e con t r ac t s t o s e l l , su b j ec t m at t e r o f t h e assignment agreement, related to the

imposition of interest in the event of default by the debtor in the payment of installments,

to wit: "All payments shallbe made on or before their respective due dates withou t

necessity of demandtherefor, and failure to make such payments on time shall entitle the

Developerto charge interest at the rate of one percent (1%) per month without prejudice tot h e

o th e r r em ed i es av a i l ab l e t o t h e Dev e l op e r . ‖ As o wn e r o f t h e

acco un t receivables, private respondent was impressed with the entitlement over

suchinterest payment.REQUISITES OF CONDITIONAL OBLIGATIONS (Art. 1179, CC)

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,VS. COURT OF APPEALS, Sps.

NORMY D. CARPIO and CARMEN ORQUISA;Sps. ROLANDO D. CARPIO and RAFAELA

VILLANUEVA; Sps. ELISEO D.CARPIO and ANUNCIACION del ROSARIO; LUZ C.

REYES, MARIO C.REYES, JULIET REYES-RUBIN, respondents1996 September 20G.R.

No. 118180262 SCRA 245

FACTS: Private respondents were the original owner of a parcel of agriculturalland covered by

a TCT, with an area of 113,695 square meters, more or less. On30 May 1977, Private

respondents mortgaged said land to petitioner. Whenprivate respondents defaulted

on their obligation, petitioner foreclosed themortgage on the land and emerged as

sole bidder in the ensuing auction sale.Consequently, a TCT was eventually issued in

petitioner's name. On 6 April 1984petitioner and private respondents entered into a Deed

of Conditional Salew h e r e i n p e t i t i o n e r ag r eed t o r e co n v e y t h e fo r ec l os ed

p r op e r t y t o p r i v a t e respondents. T h e D eed p ro v i d ed , am on g o t h er s , t h a t : ― th e

V E N DE ES o f f e r ed t o repu r ch as e and t he V EN D OR agr eed t o s e l l t h e

ab ov e - des c r ib ed p ro p e r t y, subject to the terms and stipulations as hereinafter

stipulated, for the sum of SEVENTY THREE THOUSAND SEVEN HUNDRED ONLY

(P73,700.00), with a downpayment of P8,900.00 and the balance of P64,800 shall be

payable in six (6)years on equal quarterly amortization plan at 18% interest per annum. The

firstquarterly amortization of P4,470.36 shall be payable three months from the dateof the

execution of the documents and all subsequent amortization shall be dueand payable every

quarter thereafter. . .that, upon completion of the paymentherein stipulated and agreed,

the Vendor agrees to deliver to the Vendee/s(,) hisheirs, administrators and assigns(,) a

good and sufficient deed of conveyanceco v e r i n g t h e p r op e r t y , s ub j ec t ma t t e r

o f t h i s d eed o f co nd i t i on a l s a l e , i n accordance with the provision of law.‖On 6 April

1990, upon completing the payment of the full repurchaseprice, private respondents

demanded from petitioner the execution of a Deed of Conveyance in their favor. Petitioner then

informed private respondents that thep r e s t a t io n to ex ecu t e and d e l i v e r a d eed o f

co nv e yan ce in t he i r f a vo r h ad b e c o m e l e g a l l y i m p o s s i b l e i n v i e w

o f S e c . 6 o f R e p . A c t 6 6 5 7 ( t h e Comprehensive Agrarian Reform Law or

CARL) approved 10 June 1988, and Sec.1 of E.O. 407 issued 10 June 1990.Aggrieved, private

respondents filed a complaint for specific performancew i t h d am ages aga i n s t p e t i t i o n e r

b e f o re t h e R TC . The t r i a l cou r t r en d ered judgment ordering defendant to

execute and deliver unto plaintiffs a deed of final sale of there land subject of their deed

of conditional sale.Dissatisfied, petitioner appealed to the CA, still insisting that its obligationto

execute a Deed of Sale in favor of private respondents had become a

legalimpossibility and that the non-impairment clause of the Constitution must yieldt o t he

d em an ds o f po l i c e p o w er . T he C A r end e r ed j ud gm ent d i s m is s in g petitioner's

appeal.

ISSUE: Whether or not the petitioner‘s prestation to execute and deliver a deed of conveyance in

favor of private respondents had become legally impossible inview of Sec. 6 of Rep.

Act 6657 (the Comprehensive Agrarian Reform Law orCARL) approved 10 June 1988,

and Sec. 1 of E.O. 407 issued 10 June 1990.

RULING: If the obligation depends upon a suspensive condition, the demandabilityas well as the

acquisition or effectivity of the rights arising from the obligation issuspended pending the

happening or fulfillment of the fact or event whichconstitutes the condition. Once

the event which constitutes the condition isfulfilled resulting in the effectivity of

the obligation, its effects retroact to themoment when the essential elements w hich

gave birth to the obligation havetaken place. Applying this precept to the case, the full

payment by the appelleeo n A p r i l 6 , 19 90 r e t r ac t s t o t h e t im e th e co n t r ac t o f

co nd i t i on a l s a l e w as executed on April 6, 1984. From that time, all elements of

the contract of salewere present. Consequently, the contract of sale was perfected.

As such, thesaid sale does not come under the coverage of R.A. 6657.Despite the mandate

of Sec. 1, R.A. 6657, appellant continued to accept the payments made by the appellant

until it was fully paid on April 6, 1990. Allthat the appellant has to do then is to execute

the final deed of sale in favor of the appellee. Obligations arising from contracts

have the force of law betweenthe contracting parties and should be complied with in good

faith.E . O . 40 7 can ne i t h e r a f f ec t app e l l an t ' s ob l i ga t io n und e r t h e d eed o f

conditional sale. Under the said law, appellant is required to transfer to the Republic

of the Philippines "all lands foreclosed" effective June 10, 1990. Underthe facts obtaining,

the subject property has ceased to belong to the mass of f o r ec lo sed p r op e r t y

f a i l i n g wi t h i n t h e reach o f s a i d l aw. Th e p r op e r t y h a s a l r ead y b een s o ld t o

h e r e i n app e l l e es even b e f o r e t he s a id E . O. h a s b een enacted. On this same

reason, the Court held that they need not delve on theapplicability of DBP Circular No.

11. The Court ruled in favor of private respondents. In conditional obligations,the acquisition of

rights, as well as the extinguishment or loss of those alreadyacquired, shall depend upon the

happening of the event which constitutes theco n d i t i o n . Th e d eed o f co nd i t i on a l

s a l e b e tw een p e t i t i o n e r and p r i v a t e respondents was executed on 6 April 1984. Private

respondents had religiously

paid the agreed installments on the property until they completed payment on 6April 1990.

Petitioner, in fact, allowed private respondents to fulfill the conditionof effecting full

payment, and invoked Section 6 of Rep. Act 6657 only afterprivate respondents,

having fully paid the repurchase price, demanded theexecution of a Deed of Sale in their

favor. T h e C ou r t ru l ed t h a t t h e t r i a l cou r t an d CA h av e co r r ec t l y r u l ed

t h a t neither Sec. 6 of Rep. Act 6657 nor Sec. 1 of E.O. 407 was intended to impair

theo b l i ga t io n o f co n t r ac t p e t i t i on e r h ad mu ch ea r l i e r con c lu d ed wi t h

p r iv a t e respondents. Petitioner cannot invoke the last paragraph of Sec. 6 of Rep.

Act6657 to set aside its obligations already existing prior to its enactment. In

thefirst place, said last paragraph clearly deals with "any sale, lease, managementcontract or

transfer or possession of private lands executed by the original landowner." The

original owner in this case is not the petitioner but the privaterespondents. Petitioner

acquired the land through foreclosure proceedings butagreed thereafter to reconvey

it to private respondents, albeit conditionally.Sec. 6 of Rep. Act 6657 in its entirety deals

with retention limits allowed by lawto small landowners. Since the property here

involved is more or less ten (10)hectares, it is then within the jurisdiction of the Department

of Agrarian Reform(DAR) to determine whether or not the property can be subjected

to agrarianreform. But this necessitates an entirely differently proceeding.While DBP

committed egregious error in interpreting Sec. 6 of RA 6657,the same is not

equivalent to gross and evident bad faith when it refused to execute the deed of sale in

favor of private respondents. The petition was DENIED, and the decision of the CA was

AFFIRMED withthe MODIFICATION that attorney's fees and nominal damages awarded to

privaterespondent were DELETED.

SUSPENSIVE CONDITIONS – MEANING1 . G O N Z A L E S V S . H E I R S , 3 1 4

S C R A 5 8 5 2 . I N S U L A R L I F E V S . Y O U N G , 3 7 3 S C R A

6 2 6 3 . D I R E C T F O U N D E R S V S . L A V I N A , 3 7 3 S C R A 6 4 5 FELIX L.

GONZALES, petitioner,VS. THE HEIRS OF THOMAS and PAULA CRUZ, herein

represented byELENA C. TALENS, respondentsG.R. No. 13178419 September 1999314 SCRA

585FACTS: On December 1, 1983, Paula Cruz together with the plaintiffs heirs of Thomas and

Paula Cruz, entered into a Contract of Lease/Purchase with thedefendant, Felix L.

Gonzales, the sole proprietor and manager of Felgon Farms,of a half-portion of a 'parcel of

land containing an area of 12 hectares, more orless, and an accretion of 2 hectares,

more or less, situated in Rodriguez Town,P r o v i nce o f R iz a l . Th e co n t r ac t o f

Leas e / P ur ch as e con t a i ns t h e fo l lo wi n g provisions:'1.......The terms of this

Contract is for a period of one year upon thesigning thereof. After the period of this

Contract, the LESSEE shall purchase theproperty on the agreeable price of One Million

Pesos (P1,000,000.00) payablewithin Two (2) Years period with an interest of 12%

per annum subject to thedevalued amount of the Philippine Peso, according to the

following schedule of payment: Upon the execution of the Deed of Sale 50% - and

thereafter 25%every six (6) months thereafter, payable within the first ten (10) days

of thebeginning of each period of six (6) months.'2.......The LESSEE shall pay by way of annual

rental an amount equivalentto Two Thousand Five Hundred (P2,500.00) Pesos per hectare, upon

the signingof this contract on Dec. 1, 1983.'9.......The LESSORS hereby commit

themselves and shall undertake too b t a in a s ep a r a t e and d i s t i nc t T .C . T . ov e r

t h e h e r e in l e as ed po r t io n to t h e LESSEE within a reasonable period of time

which shall not in any case exceedf o u r (4 ) yea r s , a f t e r w h i ch a n ew C on t r ac t

s h a l l b e ex ecu t ed by t h e h e r e in p a r t i e s w h i c h s h a l l b e t h e s a m e i n a l l

r e s p e c t s w i t h t h i s C o n t r a c t o f Lease/Purchase insofar as the terms and conditions

are concerned. The defendant Gonzales paid the P2,500.00 per hectare or

P15,000.00annual rental on the half -portion of the property in accordance with the

secondprovision of the Contract of Lease/Purchase and thereafter took possession of

the property, installing thereon the defendant Jesus Sambrano as his caretaker. The defendant

Gonzales did not, however, exercise his option to purchase theproperty immediately

after the expiration of the one-year lease on November 30,1984. He remained in possession

of the property without paying the purchaseprice provided for in the Contract of

Lease/Purchase and without paying anyfurther rentals thereon.

A le t t e r w as s en t by o n e o f t h e p l a i n t i f f s -h e i r s R i ca r do Cr uz to

t h ed e f en d an t Go nza l es i n fo rmi n g h im o f t h e l e s so rs ' d ec i s io n to re s c i nd

t h eC o n t r a c t o f L e a s e / P u r c h a s e d u e t o a b r e a c h t h e r e o f c o m m i t t e d

b y t h e defendant. The letter also served as a demand on the defendant to vacate

thepremises within 10 days from receipt of said letter. The defendant Gonzales refused to

vacate the property and continuedpossession thereof. The property subject of the

Contract of Lease/Purchase is currently thesubject of an Extra-Judicial Partition. Title to

the property remains in the name of the plaintiffs' predecessors-in-interest, Bernardina Calixto

and Severo Cruz.Alleging breach of the provisions of the Contract of Lease/Purchase,

theplaintiffs filed a complaint for recovery of possession of the property - subject of the

contract with damages, both moral and compensatory and attorney's fees and litigation

expenses.

ISSUE: Whether or not the trial court gravely erred in holding that plaintiffs -appellants

could not validly rescind and terminate the lease/purchase contractand thereafter to

take possession of the land in question and eject therefromdefendants-appellees.

RULING: Alleging that petitioner has not purchased the property after the lapse of one year,

respondents seek to rescind the Contract and to recover the property.Petitioner, on the other

hand, argues that he could not be compelled to purchasethe property, because respondents

have not complied with paragraph nine,which obligates them to obtain a separate and

distinct title in their names. Hecontends that paragraph nine was a condition precedent to the

purchase of theproperty.Bo t h t h e t r i a l cou r t and t h e C ou r t o f Ap p ea l s (C A )

i n t e rp r e t ed t h i s provision to mean that the respondents had obliged themselves to obtain a

TCTin the name of petitioner-lessee. The trial court held that this obligation was

acondition precedent to petitioner's purchase of the property. Since respondentshad not

performed their obligation, they could not compel petitioner to buy theparcel of

land. The CA took the opposite view, holding that the property shouldbe purchased

first before respondents may be obliged to obtain a TCT in thename of petitioner-

lessee-buyer.As earlier noted, petitioner disagrees with the interpretation of the

twocourts and maintains that respondents were obligated to procure a TCT in

theirnames before he could be obliged to purchase the property in question.Basic is the rule in

the interpretation of contracts that if some stipulationtherein should admit of several meanings, it

shall be understood as bearing thatimport most adequate to render it effectual. Considering the

antecedents of theownership of the disputed lot, it appears that petitioner's interpretation

rendersclause nine most effectual. The record shows that at the time the contract was

executed, the land inquestion was still registered in the name of Bernardina Calixto and

Severo Cruz,respondents' predecessors-in-interest. There is no showing whether

respondentswere the only heirs of Severo Cruz or whether the other half of the land

in thename of Bernardina Calixto was adjudicated to them by any means. In fact, theyad m i t

t h a t ex t r a j ud i c i a l p r o ceed in gs w e r e s t i l l on go i n g . H ence , w h en t h e Contract

of Lease/Purchase was executed, there was no assurance that the r e s po nd en t s w er e

i nd eed t h e ow n e rs o f t he s p ec i f i c po r t i on o f t h e l o t t h a t petitioner wanted to

buy, and if so, in what concept and to what extent. T hu s , t h e c l e a r i n t en t o f t h e n in th

p a r ag r aph was f o r r e s po nd en t s t o obtain a separate and distinct TCT in their names.

This was necessary to enablethem to show their ownership of the stipulated portion of

the land and theirconcomitant right to dispose of it. Absent any title in their names, they could

nothave sold the disputed parcel of land.SUSPENSIVE CONDITIONS: MEANING

INSULAR LIFE ASSURANCE COMPANY, LTD., INSULAR SAVINGS BANK and

JACINTO D. JIMENEZVS. ROBERT YOUNG, GABRIEL LA'O II, ARTHUR TAN,

LOPE JUBAN, JR.,MARIA LOURDES ONGPIN, ANTONIO ONGPIN, ELSIE DIZON,

YOLANDABAYER, CECILIA VIRAY, MANUEL VIRAY and JOSE VITO

BORROMEO2002 Jan 16G.R. No. 140964FACTS: I n D e c e m b e r , 1 9 8 7 , r e s p o n d e n t R o b e r t Y o u n g , t o g e t h e r w i t h

h i s associates and co-respondents, acquired by purchase Home Bankers Savings and

Trust Co., now petitioner Insular Savings Bank ("the Bank," for brevity), from

RULING: Petitioner‘s offer to pay is clearly not the payment contemplated in thecontract.

While he might have tendered payment through a check, this is notconsidered

payment until the check is encashed. Besides, a mere tender of payment is not

sufficient. Consignation is essential to extinguish petitioner's obligation to pay the

purchase price. The Supreme Court also affirmed the decision of the Court of

Appealswhere the respondents have the right to rescind the contract on the ground thatthere is

failure on the part of the petitioners to pay the balance within ten daysupon the

conveyance of the Court of the Title of Land to respondents. Thus,private

respondents are under no obligation, and may not be compelled, to convey title to

petitioner and receive the full purchase price.OBLIGATIONS TO PAY MONEY

SPOUSES TIBAJIA v. COURT OF APPEALS and EDEN TANG. R. No. 100290, June 4,

1993FACTS: A suit of collection of sum of money was filed by Eden Tan againstthe spouses. A

writ of attachment was issued, the Deputy Sheriff filed a return stating that a deposit

made by Tibajia in the amount of P442,750 inanother case, had been garnished by him. RTC

ruled in favor of Eden Tanand ordered the spouses to pay her an amount in excess of

P3,000,000.C o u r t o f A p p ea l s m od i f i ed th e d ec i s i on b y r ed uc i n g th e am ou n t

f o r damages. Tibajia Spouses delivered to Sheriff Bolima the total money judgment of

P398483.70. Tan refused to accept the payment and insistedthat the garnished funds be

withdrawn to satisfy the judgment obligation.

ISSUE: Whether or not payment by means of check is considered paymentin legal tender

RULING: The ruling applies the statutory provisions which lay down the rulethat a check is not legal

tender and that a creditor may validly refusepayment by check, whether it be a manager‘s

check, cashier‘s or personalcheck. The decision of the court of Appeals is affirmed.

OBLIGATIONS TO PAY MONEY

DEVELOPMENT BANK OF THE PHILIPPINES v. COURT OFAPEEALSG.R.No.

138703,June 30, 2006FACTS: In March 1968, DBP granted to private respondents an industrialloan in the amount

of P2,500,000 – P500,000 n cash and P2,000,000 inDBP Progress Bank. It was

evidenced by a promissory note and securedby a mortgage executed by respondents

over their present and futurep r o p e r t i e s . An o t h er l o an w as g r an t ed b y D BP i n

t h e fo r o f a 5 - yea r revolving guarantee to P1,700,000. In 1975, the outstanding accounts

wthD B P w a s r e s t r u c t u r e d i n v i e w o f f a i l u r e t o p a y .

A m o u n t i n g t o P4,655,992.35 were consolidated into a single account. On the

otherhand, all accrued interest and charges due amounting to P3,074,672.21were

denominated as ― Notes Taken for Interests‖ and evidenced by aseparate promissory

note. For failure to comply with its obligation, DBPinitiated foreclosure proceedings

upon its computation that respondent‘sloans were arrears by P62,954,473.68.

Respondents contended that theco l l ec t io n w as u ncon s c i on ab le i f n o t u n l awf u l

o r u su r i ou s . R TC , a s affirmed by the CA, ruled in favor of the respondents.

ISSUE: Whether the prestation to collect by the DBP is unconscionable orusurious

RULING: It cannot be determined whether DBP in fact applied an interest ratehigher than what is

prescribed under the law. Assuming it did exceed 12%in addition to the other penalties

stipulated in the note, this should bestricken out for being usurious. The petition is

partly granted. Decision of the court of Appeals isreversed and set aside. The case

is remanded o the trial court for thedetermination of the total amount of the respondent‘s

obligation based onthe promissory notes, according to the interest rate agreed upon by

theparties on the interest rate of 12% per annum, whichever is lower.

INSTRUMENTS/EVIDENCES OF CREDIT

METROBANK v. CABLZOG . R . N o . 1 5 4 4 6 9 D e c e m b e r 6 ,

2 0 0 6 FACTS: R e s p o n d e n t C a b i l z o w a s o n e o f t h e M e t r o b a n k ‘ s c l i e n t

w h o maintained a current account. On November 12, 199, Cabilzo issued

aMetrobank check payable to cash in the amount of P1,000 and was paidto a certain

Mr. Marquez. The check was oresented to Westmont Bank orpayment and in turn indorsed to

etrobank for appropriate clearing. It wasdiscovered that the amount withdrawn wa

P91,000, thus, the check wasa l t e r ed . C ab i l z o r e - c r ed i t t h e am ou n t o f P9 1 , 00 0

t o h i s a cco un t b u t Metrobank refused to comply despite demands. RTC ordered

Metrobankt o p ay t h e su m o f P 90 ,0 00 to C ab i l z o . Co u r t o f A p p ea l s a f f i r med

t h e decision with modification.

ISSUE: Wh e th e r ho ld i n g Me t ro b an k , a s d r aw ee b an k , l i ab l e f o r t h e alternations on

the subject check bearing the authentic signature of thedrawer thereof

RULING: T h e d e g r e e o f d i l i g e n c e i n t h e e x e r c i s e o f h i s t a s k s a n d

t h e performance of his duties have been faithfully complied with by Cabilzo. Iti s ob v i ou s

t h a t M et ro b an k w as r em is s i n t h e d u t y an d v i o l a t ed t h a t fiduciary relationship

with its clients as it appeared that there are materialalterations on the check that are visble

to the naked eye but the bankfailed to detect such.P e t i t i o n i s d en ied . Co ur t o f

A p p ea l s d ec i s i on i s a f f i rm ed wi thm od i f i c a t i on t h a t ex em pl a r y d am ages i n

t h e am ou n t o f P5 0 ,0 0 0 be awarded.

OBLIGATIONS TO PAY MONEY: EFFECTS OF INFLATION1. ALMEDA VS. BATHALA

MKTNG., 542 S 4702. PCI VS. NG SHEUNG NGOR, 541 S 223

EUFEMIA and ROMEL ALMEDA v. BATHALA MARKETINGG.R.No. 150806, January 28,

2008FACTS: In May 1997, Bathala Marketng, renewed its Contract of Leasewith Ponciano Almeda.

Under the contract, Ponciano agreed to lease aporton of Almeda Compound for a

monthly rental of P1,107,348.69 forfour years. On January 26, 1998, petitioner

informed respondent that itsmonthly rental be increased by 73% pursuant to the condition

No. 7 of thecontract and Article 1250. Respondent refused the demand and

insistedthat there was no extraordinary inflation to war rant such

application.Respondent refused to pay the VAT and adjusted rentals as demanded bythe

petitioners but continually paid the stipulated amount. RTC ruled infavor of the respondent

and declared that plaintiff is not liable for thepayment of VAT and the adjustment rental,

there being no extraordinaryinflation or devaluation. CA affirmed the decision deleting

the amountsrepresenting 10% VAT and rental adjustment.

ISSUE: Wh e th e r t h e amo un t o f r en t a l s du e th e p e t i t i on e rs s ho u ld b e adjusted by reason

of extraordinary inflation or devaluation

RULING: Petitioners are stopped from shifting to respondent the burden of paying the VAT.

6th Condition states that respondent can only be held liable for new taxes imposed after

the effectivity of the contract of lease,after 1977, VAT cannot be considered a ―new tax‖. Neither

can petitionerslegitimately demand rental adjustment because of extraordinary inflationo r

d ev a l ua t i on . Ab s en t an o f f i c i a l p r on oun cement o r d ec l a r a t io n b y competent

authorities of its existence, its effects are not to be applied.Petition is denied. CA decision is

affirmed.

OBLIGATIONS TO PAY MONEY: EFFECTS OF INFLATION

EQUITABLE PCI BANK, YU and APASv. NG SHEUNG NGORG.R.NO. 171545,

December 19, 2007FACTS: On October 7, 2001, respondents Ngor and Go filed an actionfor amendment and/or

reformation of documents and contracts againstEquitable and its employees. They

claimed that they were induced by thebank to avail of its peso and dollar credit facilities by

offering low interestsso they accepted and signed Equitable‘s proposal. They alleged that

theywere unaware that the documents contained escalation clauses grantingEquitable authority to

increase interest without their consent. These wererebutted by the bank. RTC ordered the

use of the 1996 dollar exchangerate in computing respondent‘s dollar-denominated loans.

CA granted theBank‘s application for injunction but the properties were sold to

publicauction.

ISSUE: Whether or not there was an extraordinary deflation

RULING: Ex t r ao r d i n ar y i n f l a t i o n ex i s t s w h en the r e i s an un us u a l decrease in the

purchasing power of currency and such decrease couldn o t b e r eas on ab l y

f o r es een o r w as b eyo n d th e co n t em pl a t io n o f t h e parties at the time of the

obligation. Deflation is an inverse situation.Despite the devaluation of the peso, BSP

never declared asituation of extraordinary inflation. Respondents should pay their

dollardenominated loans at the exchange rate fixed by the BSP on the date of maturity.Decision

of lower courts are reversed and set aside.

INTEGRITY OF PRESTATION / SUBSTANTIAL PAYMENT

SIMPLICIO PALANCAVS. ULYSSIS GUIDES joined by her husband LORENZO

GUIDESFebruary 28, 2005452 SCRA 461FACTS:

On August 23, 1983, Simplicio Palanca executed a Contract to Sell a parcel of land on

installment with a certain Josefa Jopson for P11, 250.00. Jopsonpaid the petitioner in the

amount of P1, 650 as her down payment, leaving abalance of P9, 600.00. Sometime

in December 1983, Jopson assigned andtransferred all her rights and interests over

the property in question in favor of the respondent Ulyssis Guides.In the deed of

transfer, respondent undertook to assume the balance of J o ps on ‘s a cco un t an d to

p a y t h e s am e in a cco r d an ce wi th t he t e r m s an d co nd i t i on s o f t he

C on t r ac t t o S e l l .

After reimbursing Jopson P1,650.00,respondent acquired possession of the lot and

paid petitioner the stipulatedamortizations which were in turn acknowledged by

petitioner through receiptsissued in the name of respondent. Believing that she had fully paid

the purchaseprice of the lot, respondent verified the status of the lot with the Register

of Deeds, only to find out that title thereto was not in the name of the petitioner asi t w as

co v e red b y T r an s f e r Ce r t i f i c a t e o f T i t l e N o . 1 05 74 2 i s s u ed on 2 6 September

1978 in the name of a certain Carissa T. de Leon. Respondent wentto petitioner‘s office to secure

the title to the lot, but petitioner informed her thatshe could not as she still had unpaid accounts.

Thereafter, respondent, through

a lawyer, sent a letter to petitioner demanding compliance with his obligationand the

release of the title in her name.A s p e t i t i o n er d i d no t heed h e r dem and s ,

r e s po nd en t , j o in ed b y h e r husband, filed a

Complaint

for specific performance with damages. Petitionersought the dismissal of the

complaint on the ground of respondent‘s allegedfailure to comply with the

mandatory requirement of Presidential Decree (P.D.)No. 1508. Respondent alleged that

she paid petitioner P14,880.00, which notonly fully settled her obligation to him, but in

fact overpaid it by P3,620.00. Inaddition, she claimed that petitioner charged her

devaluation charges and illegalinterest. At the pre-trial in 1989, both parties admitted that Jopson

assigned herrights over the property in favor of respondent and respondent paid

petitionerthe subsequent monthly amortizations on installments. Petitioner

likewiseacknowledged the payments made by respondent as stated in the statement of

accounts initiated by its manager, Oscar Rivera. On November 1996, the trialcourt

rendered its decision ordering the petitioner to execute in favor of therespondent a

Deed of Sale. The petitioner appealed to the Court of Appeals; however, it affirmed the

decision of the lower court.

ISSUE: Whether or not the petitioner has a right to claim for unpaid charges as stipulated in

the contract from the private respondent.

RULING: T h e Su pr eme C ou r t h e l d t h a t p r i ma r i l y p r ev en t i n g p e t i t i on e r f r om recovering

the amounts claimed from respondent is the effective waiver of thesecharges. Assuming that said

charges are due, petitioner waived the same whenhe accepted respondent‘s payments

without qualification, without any specificdemand for the individual charges he now seeks

to recover. The same goes truefor the alleged forfeiture of the down payment made by

Jopson. From its ownStatements of Accounts and Payments Made, petitioner credited to

respondent‘saccount the P1,650.00 down payment paid by Jopson at the commencement of the

contract. There is no indication that he informed respondent of the allegedforfeiture, much

more demanded the payment again of the amount previouslyp a i d b y J o ps on . A r t .

1 2 35 o f t h e C i v i l Co d e w hi ch p r ov i d es t h a t ―Wh en t h e obligee accepts the

performance, knowing its incompleteness or irregularity, andwithout expressing any protest

or objection, the obligation is deemed fullyc o m p l i ed wi t h , ‖ i s i n p o i n t . T hu s ,

w h en p e t i t i o n er a ccep t ed r e sp on d en t ‘ s installment payments despite the alleged

charges incurred by the latter, andwithout any showing that he protested the

irregularity of such payment, nordemanded the payment of the alleged charges,

respondent‘s liability, if any forsaid charges, is deemed fully satisfied. The petition is denied.

WHO MAY DEMAND PAYMENT1 . P C I B V S . C A , 4 8 1 S 1 2 7 2 . L A G O N

V S . H O O V E N C O M A L C O , 3 4 9 S C R A 3 6 3 3 . B P I V S . C A , 2 3 2

S C R A 3 0 2

PCIBv. COURT OF APPEALSG . R . N O . 1 2 1 9 8 9 J a n u a r y 3 1 ,

2 0 0 6 FACTS: PC IB an d M BC w ere jo i n t b id de r s i n a f o r ec lo su r e s a l e he l d o f assorted

mining machinery and equipment previously mortgaged to themb y P h i l i p p i n e I r o n

M in es . A t l as ag r eed t o pu r chas e som e o f t h es e p r o p e r t i e s a n d t h e s a l e

w a s e v i d e n c e d b y a D e e d o f S a l e w i t h a downpayment of P12,000,000 and the

balance of P18,000,000 payable in6 monthly installments. In compliance with the

contract, Atlas issuedHongKong and shanghai Bank check amounting to

P12,000,000. Atlaspaid to NAMAWU the amount of P4,298,307.77 in compliance with the

writof garnishment issued against Atlas to satisfy the judgment in favor of

N A M AWU . At l a s a l l eged t h a t t h e r e was o v e rp aym en t , h en ce t he

s u i t against PCIB to obtain reimbursement. PCIB contended that Atlas still owed

P908,398.75 because NAAWU had been partially paid in the amountof P601,260.00. RTC

ruled against Atlas to pay P908,398.75 to PCIB. CAreversed the decision.

ISSUE: Whether atlas had complied with its obligation to PCIB

RULING: W h i l e t h e o r i g i n a l a m o u n t s o u g h t t o b e g a r n i s h e d

w a s P4,298,307,77, the partial payment of P601,260 naturally reduced it

toP3,697,047.77 Atlas overpaid NAMAWU, thus the remedy if Atlas would beto proceed

against NAAWU nut not against PCIB in relation to article 1236of the Civil Code The petition is

partly granted.CA decision is reversed and set asideand in lieu thereof Atlas is ordered to

pay PCIB the sum of P146,058.96,with the legal interest commencing from the time

of first demand onAugust 22, 1985.

WHO MAY DEMAND PAYMENT,CREDITOR‘S RIGHT OF PAYMENT (Art. 1240, CC)

JOSE V. LAGON, petitioner,vs. HOOVEN COMALCO INDUSTRIES, INC., respondent

G.R. No. 135657 January 17, 2001

349 SCRA 363FACTS: Petitioner Jose V. Lagon is a businessman and owner of a commercialbuilding in

Tacurong, Sultan Kudarat. Respondent HOOVEN on the other is adomestic

corporation known to be the biggest manufacturer and installer of aluminum

materials in the country with branch office at E. Quirino Avenue, Davao

City.S o m e t i m e i n A p r i l 1 9 8 1 L a g o n a n d H O O V E N e n t e r e d i n t o t w o

( 2 ) contracts, both denominated Proposal, whereby for a total consideration of P104,870.00

HOOVEN agreed to sell and install various aluminum materials in Lagon‘sco mm erc i a l

b u i ld i n g i n T acu ron g , S u l t an Ku d a ra t . U po n ex ecu t i o n o f t h e contracts, Lagon

paid HOOVEN P48,000.00 in advance.Lagon, in his answer, denied liability and averred

that HOOVEN was theparty guilty of breach of contract by failing to deliver and

install some of thematerials specified in the proposals; that as a consequence he was

compelled top r o cur e th e u nd e l iv e r ed m ate r i a l s f rom o th e r so u r ces ; t ha t a s

r ega r d s t h e materials duly delivered and installed by HOOVEN, they were fully

paid. Hecounterclaimed for actual, moral, exemplary, temperate and nominal damages,as well

as for attorney‘s fees and expenses of litigation.

ISSUE: Wh e th e r o r no t a l l t h e m a t e r i a l s s p ec i f i ed i n t h e con t r ac t s h ad

b een delivered and installed by respondent in petitioner‘s commercial building in

Tacurong, Sultan Kudarat.

RULING: Firstly, the quantity of materials and the amounts sated in the deliveryreceipts do

not tally with those in the invoices covering them, notwithstandingthat, according

to HOOVEN OIC Alberto Villanueva, the invoices were basedmerely on the delivery

receipts.Secondly, the total value of the materials as reflected in all the invoices isP117, 329.00

while under the delivery receipts it is only P112, 870.50, or adifference of

P4,458.00Even more strange is the fact that HOOVEN instituted the present action for

collection of sum of money against Lagon only on 24 February 1987, or morethan five (5)

years after the supposed completion of the project. Indeed, it is contrary to common

experience that a creditor would take its own sweet time inco l l e c t in g i t s c r ed i t , m o r e so

i n t h i s c as e wh en th e am ou n t i n v o l v ed i s n o t miniscule but substantial.All the

delivery receipts did not appear to have been signed by petitioneror his duly authorized

representative acknowledging receipt of the materialslisted therein. A closer

examination of the receipts clearly showed that thedeliveries were made to a certain

Jose Rubin, claimed to be petitioner‘s driver,Armando Lagon, and a certain

bookkeeper. Unfortunately for HOOVEN, theidentities of these persons were never been

established, and there is no way of d e t e r min ing n o w wh e th e r t h e y w e r e in deed

au th or i z ed r ep re s en t a t iv e s o f petitioner.WHEREFORE, the assailed Decision of the

Court of Appeals dated 28 April1997 is MODIFIED. Petitioner Jose V. Lagon is ordered to pay

respondent HoovenC o ma l co In d u s t r i es , In c . , P6 , 37 7 . 66 r ep r es en t i n g t h e va lu e

o f t he un pa id materials admittedly delivered to him. On the other hand, respondent is

orderedto pay petitioner P50,000.00 as moral damages, P30,000.00 as attorney‘s feesand

P46,554.50 as actual damages and litigation expenses.

WHO MAY DEMAND PAYMENT,CREDITOR‘S RIGHT OF PAYMENT (Art. 1240, CC)

BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS232 SCRA302G.R. NO.

104612MAY 10, 1994FACTS: Private respondents Eastern Plywood Corporation and Benigno Lim as officer of the

corporation, had an

“ AND/OR‖ joint account with Commercial Banka n d T ru s t Co (C BTC) , t he

p r ed ecess o r - in - i n t e r e s t o f p e t i t i on e r Ban k o f t h e Philippine Islands. Lim withdraw

funds from such account and used it to open a joint checking account (an ―AND‖ account) with

Mariano Velasco. When Velascodied in 1977, said joint checking account had

P662,522.87. By virtue of anIndemnity Undertaking executed by Lim and as President and

General Managero f E as t e r n wi th d rew o n e h a l f o f t h i s am ou n t an d d ep os i t ed i t

t o on e o f t h e accounts of Eastern with CBTC.Eastern obtained a loan of P73,000.00 from

CBTC which was not secured.However, Eastern and CBTC executed a Holdout

Agreement providing that the loan was secured by the ―Holdout of the C/A No. 2310-001-

42‖ referring to the joint checking account of Velasco and Lim.Meanwhile, a judicial

settlement of the estate of Velasco ordered thewithdrawal of the balance of the account of

Velasco and Lim.Asserting that the Holdout Agreement provides for the security of the

loano b t a in ed b y E as t e rn an d th a t i t i s t h e d u t y o f C BTC t o d eb i t t h e

a cco un t o f respondents to set off the amount of P73,000 covered by the

promissory note,BPI filed the instant petition for recovery. Private respondents Eastern and

Lim,however, assert that the amount deposited in the joint a ccount of Velasco

andLim came from Eastern and therefore rightfully belong to Eastern and/or

Lim.Since the Holdout Agreement covers the loan of P73,000, then petitioner

canonly hold that amount against the joint checking account and must return the rest.

ISSUE: Whether BPI can demand the payment of the loan despite the existence of the Holdout

Agreement and whether BPI is still liable to the private respondentson the account subject of the

withdrawal by the heirs of Velasco.

RULING: Y es , fo r b o th i s s ues . R eg a rd in g t h e f i r s t , t he Ho l do u t A gr eem en t conferred on

CBTC the power, not the duty, to set off the loan from the accounts u b j ec t o f t h e

A gr eem en t . Wh en BP I d em and ed p aym ent o f t h e lo an f ro m Eastern, it exercised

its right to collect payment based on the promissory note,and disregarded its option under the

Holdout Agreement. Therefore, its demandwas in the correct order.Regarding the second

issue, BPI was the debtor and Eastern was thecreditor with respect to the joint checking

account. Therefore, BPI was obligedto return the amount of the said account only to the

creditor. When it allowedthe withdrawal of the balance of the account by the heirs of

Velasco, it made thep a ym ent t o t he wr on g p a r t y. T h e l aw p r ov id e s t h a t

p a ym en t m ad e b y t h e debtor to the wrong party does not extinguish its obligation

to the creditor whois without fault or negligence. Therefore, BPI was still liable to the true

creditor,Eastern.PAYMENT – WHO MUST PAY: DEBTOR

AUDION ELECTRIC CO., INC.,VS. NATIONAL LABOR RELATIONS COMMISSION and

NICOLAS MADOLID1999 Jun 17G.R. No. 106648FACTS: From the position paper and affidavit corroborated by oral testimony, it ap p ea r s

t h a t com pl a i n an t was emp lo yed b y r e sp o nd en t Au d i on E lec t r i c Company on

June 30, 1976 as fabricator and continuously rendered serviceassig ned in different

offices or projects as helper electrician, stockman andtimekeeper. He has rendered

thirteen (13) years of continuous, loyal anddedicated service with a clean record. On

August 3, complainant was surprisedto receive a letter informing him that he will be considered

terminated after theturnover of materials, including respondents‘ tools and equipments

not laterthan August 15, 1989.Complainant claims that he was dismissed without

justifiable cause anddue process and that his dismissal was done in bad faith which

renders thedismissal illegal. For this reason, he claims that he is entitled to reinstatementwith

full backwages. He also claims that he is entitled to moral and exemplaryd am ages . H e

i n c lu d es p a ym en t o f h i s ov e r t i me p a y, p ro j ec t a l l o w an c e ,

m in i mum w age in c rea s e ad j us t m en t , p ro p or t io n a t e 13 th mo n t h p ay

an d attorney‘s fees.

ISSUES: Whether or not the respondent NLRC committed grave abuse of discretionamounting to lack or

excess of jurisdiction when it ruled that private respondentwas a regular employee and not a

project employee;Whether or not petitioner was denied due process when all the

moneyclaims of private respondent, i.e. overtime pay, project allowances,

salarydifferential, proportionate 13th month pay, moral and exemplary damage s

aswell as attorney‘s fees, were granted.

RULING: Respondent‘s assigning complainant to its various projects did not

makecomplainant a project worker. As found by the Labor Arbiter, ‗it appears

thatcomplainant was employed by respondent as fabricator and or projects as helperelectrician,

stockman and timekeeper.‘ Simply put, complainant was a regular non-project

worker.P r i v a t e r e s p o n d e n t ‘ s e m p l o y m e n t s t a t u s w a s e s t a b l i s h e d b y

t h e Certification of Employment dated April 10, 1989 issued by petitioner

whichcertified that private respondent is a bonafide employee of the petitioner from

June 30, 1976 up to the time the certification was issued on April 10, 1989. Thesame

certificate of employment showed that private respondent‘s exposure to t h e i r

f i e l d o f o p e r a t i o n w a s a s f a b r i c a t o r ,

h e l p e r / e l e c t r i c i a n , stockman/timekeeper. This proves that private

respondent was regularly andcontinuously employed by petitioner in various job

assignments from 1976 to1989, for a total of 13 years. The alleged gap in

employment service cited bypetitioner does not defeat private respondent‘s regular status as

he was rehiredfor many more projects without interruption and performed functions which

arevital, necessary and indispensable to the usual business of petitioner.P e t i t i on e r f a i l ed to

p r e s en t s u ch emp loym en t co n t r ac t f o r a sp ec i f i c project signed by private

respondent that would show that his employment withthe petitioner was for the duration of a

particular project.Moreover, notwithstanding petitioner‘s claim in its reply that in

takinginterest in the welfare of its workers, petitioner would strive to provide them withmore

continuous work by successively employing its workers, in this case, p r i v a t e

r e s po nd en t , p e t i t i on e r f a i l ed t o p r e s en t an y r ep o r t o f t e rm in a t io n . Petitioner

should have submitted or filed as many reports of termination as therewere construction projects

actually finished, considering that private respondenth ad b een h i r ed s in ce 1 97 6 . T h e

f a i l u re o f p e t i t i on er t o s ubm i t r epo r t s o f termination supports the claim of

private respondent that he was indeed aregular employee. The Court finds no grave abuse

of discretion committed by NLRC in findingthat private respondent was not a project

employee.Private respondent clearly specified in his affidavit the specific dates

inwhich he was not paid overtime pay, that is, from the period March 16, 1989 toApril 3, 1989

amounting to P765.63, project allowance from April 16, 1989 to July31, 1989 in the total

amount of P255.00, wage adjustment for the period fromA u g u s t 1 , 1 9 8 9 t o

A u g u s t 1 4 , 1 9 8 9 i n t h e a m o u n t o f P 2 5 6 . 5 0 a n d t h e proportionate 13th

month pay for the period covering January to May 1988,November -December 1988,

and from January to August 1989. This sameaffidavit was confirmed by private

respondent in one of the scheduled hearingswhere he moved that he be allowed to present his

evidence ex-parte for failureof petitioner or any of his representative to appear thereat. On the

other hand,petitioner submitted its unverified Comment to private respondent‘s

complaintstating that he had already satisfied the unpaid wages and 13th month

payclaimed by private respondent, but this was not considered by the Labor Arbiterfor being

unverified.Petitioner failed to rebut the claims of private respondent. It failed

tos h ow p r oo f b y m ean s o f p ayr o l l o r o th e r ev i d en ce to d i sp r ov e t he c l a i m

o f private respondent. Petitioner was given the opportunity to cross -examineprivate

respondent yet petitioner forfeited such chance when it did not attend the hearing, and

failed to rebut the claims of private respondent.However, the award of moral and exemplary

damages must be deleted forbeing devoid of legal basis. Moral and exemplary damages are

recoverable onlywhere the dismissal of an employee was attended by bad faith or

fraud, orconstituted an act oppressive to labor, or was done in a manner contrary

tomorals, good customs or public policy. The person claiming moral damagesmust

prove the existence of bad faith by clear and convincing evidence for thelaw always

presumes good faith. It is not enough that one mere ly sufferedsleepless nights, mental

anguish, serious anxiety as the result of the actuationsof the other party. Invariably, such action

must be shown to have been willfullydone in bad faith or with ill -motive, and bad faith

or ill motive under the lawcan n o t b e p r e su m ed b u t mu s t b e es t ab l i s hed w i th

c l e a r and co nv i n c i ng evidence. Private respondent predicated his claim for such damages

on his own

allegations of sleepless nights and mental anguish, without establishing bad faith,

fraud or ill motive as legal basis therefor.Private respondent not being entitled to award

of moral damages, anaward of exemplary damages is likewise baseless. Where the

award of moraland exemplary damages is eliminated, so must the award for attorney‘s fees

bedeleted. Private respondent has not shown that he is entitled thereto pursuantto Art. 2208 of

the Civil Code.WHEREFORE, the challenged resolutions of the respondent NLRC

areh e r eb y A FF IR M E D wi t h t h e MO D IF IC A T IO N t h a t t h e aw a rd s o f m o r a l

an d exemplary damages and attorney‘s fees are DELETED.WHERE PAYMENT MUST BE

MADE

LORENZO SHIPPING VS. BJ MARTHEL443 S 163

November 19, 2004FACTS: Petitioner Lorenzo Shipping is engaged in coastwiseshipping and owns the cargo

M/V Dadiangas Express. BJ Marthel isen ga ged in t r ad i n g , m ark e t in g an

d s e l l i n g v ar io us ind us t r i a l co mmo di t i es . Lo r en zo Sh ip p ing o r d e red f o r t h e

s econ d t im e cylinder lines from the respondent stating the term of payment tobe

25% upon delivery, the balance payable in 5 bi -monthly equalinstallments, no again

stating the date of the cylinder‘s delivery. Itwas allegedly paid through post dated checks

but the same wasdishonored due to insufficiency of funds. Despite due demands

bythe respondent, petitioner falied contending that time was of the essence in the

delivery of the cylinders and that there was a delaysince the respondent committed said

items ― within two monthsa f t e r r e ce ip t o f f i r o r de r ‖ . R TC he l d r es po nd en t s

b o un d t o t h e quotation with respect to the term of payment, which was reversedb y t h e

C ou r t o f ap pea l s o rd e r i n g ap p e l l e e t o p a y a p p e l l an t P9 54 ,0 0 0 p lu s i n t e r es t .

T h e r e w as n o d e l ay s i n ce t h e r e was no demand.

ISSUE: Whether or not respondent incurred delay in performing itsobligation under the contract

of sale

RULING: By accepting the cylinders when they were delivered to thewarehouse, petitioner

waived the claimed delay in the delivery of said items. Supreme Court geld that

time was not of the essence. T h e r e h av i n g b een n o f a i lu r e on th e p a r t o f t h e

r e s po nd en t t o p er f o rm i t s ob l i ga t io ns , t h e p o w er t o r es c i nd th e co n t r ac t

i s unavailing to the petitioner.Petition is denied. Court of appeals decision is affirmed.

SPECIAL FORMS OF PAYMENT:A. DACION EN PAGO / DATION IN

PAYMENT1 .EST A NISL AO VS. E AST -W EST BA N KI N G C O R P. , 5 44 S

3 6 9 2 . A Q U I N T E Y V S . T I B O N G , 5 1 1 S 4 1 4 3 . V D A . D E J A Y M E

V S . C A , 3 9 0 S C R A 3 8 0 4 . C A L T E X V S . I A C , N O V . 1 3 , 1 9 9 2

SPOUSES RAFAEL ESTANISLAO v. EASTWEST BANKINGCORPORATIONG.R. No.

178537,February 11, 2008FACTS: K au sap i n sh a l l h ave th e u su f ru c t u ar y r i gh t s ov e r t h e p a rce l o f l an d

h e r e i n described during her lifetime or widowhood.‖O n F e b r u a r y 2 8 , 1 9 7 9 ,

E n r i q u e D . H e m e d e s s o l d t h e p r o p e r t y t o Dominium Realty and Construction

Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit

affirming the conveyance of the subjectproperty in favor of Enrique D. Hemedes as

embodied in the ―Kasunduan‖ datedMay 27, 1971, and at the same time denying the

conveyance made to MaximaHemedes.On August 27, 1981, Dominium and Enrique D.

Hemedes filed a complaintwith the Court of First Instance of Binan, Laguna for the

annulment of TCT No.41985 issued in favor of R & b Insurance and/or the reconveyance to

Dominiumof the subject property. Specifically, the complaint alleged that Dominium wasthe

absolute owner of the subject property by virtue of the February 28, 1979deed of

sale executed by Enrique D. Hemedes, who in turn obtained ownershipof the land

from Justa Kausapin, as evidenced by the ―Kasunduan‖ dated May27, 1971. The

Plaintiffs asserted that Justa Kausapin never transferred the landto Maxima Hemedes and

that Enrique D. Hemedes had no knowledge of theregistration proceedings initiated by

Maxima Hemedes.After considering the merits of the case, the trial court rendered judgmenton

February 22, 1989 in favor of plaintiffs Dominium and Enrique D. Hemedes.Both R

& B Insurance and Maxima Hemedes appealed from the trial court‘sdecision. On

September 11, 1992 the Court of Appeals affirmed the assaileddecision in toto and on

December 29, 1992, it denied R & Insurance‘s motion forr e co ns i d e r a t io n . Th us ,

M ax im a Hem ed es an d R & B In s u r an ce f i l ed th e i r r e sp ec t i v e p e t i t i o ns f o r

r ev i ew w i th t h i s Co u r t o n No v em ber 3 , 1 99 2 an d February 22, 1993, respectively.

ISSUE: Which of the two conveyances by Justa Kausapin, the first in favor of Maxima

Hemedes and the second in favor of Enrique D. Hemedes, effectivel ytransferred

ownership over the subject land?

RULING: Public respondent‘s finding that the ―Deed of Conveyance of UnregisteredReal Property By

Reversion‖ executed by Justa Kausapin in favor of MaximaHemedes is spurious is

not supported by the factual findings in this case. It isgrounded upon the mere denial of

the same by Justa Kausapin.A party to a contract cannot just evade compliance with his

contractualobligations by the simple expedient of denying the execution of such

contract.If, after a perfect and binding contract has been executed between the parties, itoccurs

to one of them to allege some defect therein as a reason for annulling it,the alleged defect must

be conclusively proven, since the validity and fulfillmentof contracts cannot be left to the will of

one of the contracting parties.In upholding the deed of conveyance in favor of Maxima

Hemedes, theCourt must concomitantly rule that Enrique D. Hemedes and his

transferee,Dominium, did not acquire any rights over the subject property. Justa Kausapin

sought to transfer to her stepson exactly what she hadearlier transferred to Maxima

Hemedes – he ownership of the subject propertypursuant to the first condition stipulated

in the deed of donation executed by herhusband. Thus, the donation in favor of Enrique D.

Hemedes is null and void forthe purported object thereof did not exist at the time of the

transfer, havingalready been transferred to his sister.S imi l a r l y, t h e sa l e o f t h e

s ub j ec t p ro pe r t y b y E nr iq u e D. Hem edes t o Dominium is also a nullity for the

latter cannot acquire more rights than itspredecessor -in-interest and is definitely not

an innocent purchaser for valuesince Enrique D. Hemedes did not present any

certificate of title upon which it relied. The Court upheld petitioner R & B Insurance‘s

assertion of ownership overt h e p r op e r t y i n d i sp u t e , a s ev i d en ced b y T C T N o .

4 1 98 5 , su b j ec t t o t h e usufructuary rights of Justa Kausapin, which encumbrance

has been properlyannotated upon the said certificate of title.

RIGHTS OF FIRST REFUSAL1.VILLEGAS VS. CA2.EQUATORIAL REALTY

VS. CARMELO3 . PU P V S . C A 4.LITONJUA VS. L &R

JOSELITO VILLEGAS and DOMINGA VILLEGAS

vs.

COURT OFAPPEALS G.R. No. 129977. February 1, 2001

FACTS: Before September 6, 1973, Lot B-3-A, with an area of 4 hectareswas registered

under TCT No. 68641 in the names of Ciriaco D. Andresand Henson Caigas. This

land was also declared for real estate taxationunder Tax Declaration No. C2 -4442.

On September 6, 1973, Andres andCaigas, with the consent of their respective spouses,

Anita Barrientos andConsolacion Tobias, sold the land to Fortune Tobacco

Corporation forP60,000.00. Simultaneously, they executed a joint affidavit declaring

thatt h e y h a d n o t e n a n t s o n s a i d l o t . O n t h e s a m e d a t e , t h e s a l e

w a s registered in the Office of the Register of Deeds of Isabela. TCT No. 68641was cancelled

and TCT No. T-68737 was issued in Fortune‘s name. OnAugust 6, 1976, Andres and

Caigas executed a Deed of Reconveyance of the same lot in favor of Filomena Domingo, the

mother of Joselito Villegas,d e f end an t i n t h e ca s e b e fo r e t h e t r i a l co ur t . A l t ho u gh

n o t i t l e w as mentioned in this deed, Domingo succeeded in registering this documentin the

Office of the Register of Deeds on August 6, 1976, causing thelatter to issue TCT

No. T-91864 in her name. It appears in this title that t h e sam e was a t r ans f e r

f r om T CT No . T - 686 4 1 . O n Ap r i l 13 , 19 8 1 , Domingo declared the lot for real

estate taxation under Tax DeclarationNo. 10-5633. On December 4, 1976, the Office of the

Register of Deeds of Isabela was burned together with all titles in the office. On December

17,1976, the original of TCT No. T-91864 was administratively reconstitutedby the Register

of Deeds. On June 2, 1979, a Deed of Absolute Sale of aportion of 20,000 square

meters of Lot B-3-A was executed by FilomenaD o mi n go in f av o r o f V i l l egas

f o r a co ns id e r a t i on o f P 1 , 00 0 . 00 . T h i sd o cu m ent was r eg i s t e r ed o n J u n e 3 ,

1 9 81 and as a r es u l t T CT N o . T - 131807 was issued by the Register of Deeds to

Villegas. On the samedate, the technical description of Lot B-3-A-2 was registered and TCT

No. T-131808 was issued in the name of Domingo. On January 22, 1991, thisd o c u m e n t

w a s r e g i s t e r e d a n d T C T N o . 1 5 4 9 6 2 w a s i s s u e d t o t h e defendant, Joselito

Villegas.On April 10, 1991, the trial court upon a petition filed by Fortune ordered the

reconstitution of the original of TCT No. T-68737. After trial onthe merits, the trial court

rendered its assailed decision in favor of Fortune T o bacco , d ec l a r i n g i t t o b e en t i t l ed

t o t h e p ro p er t y. P e t i t i o n e rs t h us appealed this decision to the Court of Appeals,

which affirmed the trialcourt‘s decision.

ISSUES: Whether or not the Court of Appeals was correct in affirming the trial court‘s decision.

RULING: Even if Fortune had validly acquired the subject property, it would s t i l l b e b a r r ed

f r om as s e r t i n g t i t l e b ecau se o f l a ch es . T he f a i l u re o r neglect, for an unreasonable

length of time to do that which by exercisingdue diligence could or should have been done

earlier constitutes laches. Iti s n egl i gen ce o r om iss io n to a s s e r t a r i gh t wi t h in a

r e a s on ab l e t im e , warranting a presumption that the party entitled to assert it has

eitherabandoned it or declined to assert it. While it is by express provision of law

that no title to registered land in derogation of that of the registeredo w n e r sh a l l b e

a cq u i r ed b y p r e s c r ip t i on o r adv e rs e p os s es s io n , i t i s likewise an enshrined

rule that even a registered owner may be barredfrom recovering possession of property by

virtue of laches.H en ce , p e t i t i on w as GR AN T E D and th e D ec i s io n o f t h e C ou r t

o f Appeals was REVERSED.

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO &BAUERMANN, INC

vs. MAYFAIR THEATER, INC G.R. No. 106063 1996 Nov 21 264 SCRA 483

FACTS: C a r m e l o o w n e d a p a r c e l o f l a n d , t o g e t h e r w i t h t w o 2 -

s t o r e y buildings constructed thereon. On June 1, 1967 Carmelo entered into

aco n t r ac t o f l e as e w i t h M ayf a i r f o r t he l a t t e r ‘ s l e as e o f a p o r t io n o f

Carmelo‘s property. Two years later, on March 31, 1969, Mayfair enteredinto a second

contract of lease with Carmelo for the lease of anotherportion of Carmelo‘s property.

Both contracts of lease provide identically worded paragraph 8,which reads:‗That if

the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-

days exclusive option to purchase the same.In the event, however, that the leased premises is

sold to someoneother than the LESSEE, the LESSOR is bound and obligated, as it herebybinds

and obligates itself, to stipulate in the Deed of Sale thereof that thepurchaser shall recognize this

lease and be bound by all the terms andconditions thereof.M r . H enr y P as ca l o f C a rm el o

i n fo rm ed Mr . H en ry Y an g , P re s i d en t o f Mayfair, through a telephone conversation

that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr.

Yang that acertain Jose Araneta was offering to buy the whole property for US Dollars1,200,000,

and Mr. Pascal asked Mr. Yang if the latter was willing to buythe property for Six to Seven

Million Pesos.Under your company‘s two lease contracts with our client, it is

uniformlyprovided:‗ 8 . T h a t i f t h e LE SS OR s ho u ld d e s i r e t o s e l l t h e l e as ed

p r em is e s t h e LESSEE shall be given 30-days exclusive option to purchase the same. Inthe

event, however, that the leased premises is sold to someone other than the LESSEE, the

LESSOR is bound and obligated, as it here binds andobligates itself, to stipulate in the Deed of

Sale thereof that the purchasershall recognize this lease and be bound by all the terms

and conditionshereof.Carmelo did not reply to this letter.On September 18, 1974, Mayfair sent

another letter to Carmelopurporting to express interest in acquiring not only the leased

premisesbut ‗the entire building and other improvements if the price is reasonable.However, both

Carmelo and Equatorial questioned the authenticity of thesecond letter.Four years later, on July

30, 1978, Carmelo sold its entire C.M. RectoAvenue land and building, which included the

leased premises housingthe ‗Maxim‘ and ‗Miramar‘ theatres, to Equatorial by virtue of a Deed of

Absolute Sale, for the total sum of P11,300,000.00.In September 1978, Mayfair instituted

the action a quo for specificp e r f o rm an ce an d ann u lm en t o f t h e s a l e o f t h e

l e as ed p r emi se s t o Equatorial. It dismissed the complaint with costs against the plaintiff.

TheCourt of Appeals reversed the decision of the trial court.

RULING: Whether or not the decision of the Court of Appeals‘ decision wascorrect.

RULING: T h e Co u r t ag r ee s wi th t h e Co u r t o f A pp ea l s t h a t t h e a fo r ec i t ed co n t r ac tu a l

s t i p u l a t io n p ro v id es fo r a r i gh t o f f i r s t r e f us a l i n f av o r o f Mayfair. It is not an

option clause or an option contract. It is a contract of a right of first refusal.As early as 1916,

in the case of Beaumont vs. Prieto, unequivocalw as ou r ch a rac t e r i z a t i on o f an

o p t io n co n t r ac t a s o n e n ecess a r i l yi n vo lv in g t h e cho i ce gr an t ed to an o th e r

f o r a d i s t i n c t an d sep a r a t e consideration as to whether or not to purchase a

determinate thing at apredetermined fixed price.Further, what Carmelo and Mayfair agreed

to, by executing the twolease contracts, was that Mayfair will have the right of first refusal in

theevent Carmelo sells the leased premises. It is undisputed that Carmelo didrecognize this right

of Mayfair, for it informed the latter of its intention tos e l l t h e s a i d p r o p e r t y i n

1 9 7 4 . T h e r e w a s a n e x c h a n g e o f l e t t e r s evidencing the offer and counter-

offers made by both parties. Carmelo,however, did not pursue the exerc ise to its

logical end. While it initiallyrecognized Mayfair‘s right of first refusal, Carmelo

violated such rightwhen without affording its negotiations with Mayfair the full

process to

r i p e n t o a t l e a s t a n i n t e r f a c e o f a d e f i n i t e o f f e r a n d a

p o s s i b l e corresponding acceptance within the ―30 -day exclusive option‖

timegranted Mayfair, Carmelo abandoned negotiations, kept a low profile forsome time, and

then sold, without prior notice to Mayfair, the entire ClaroM. Recto property to Equatorial.Since

Equatorial is a buyer in bad faith, this finding renders the saleto it of the property in

question rescissible. We agree with respondentAppellate Court that the records bear

out the fact that Equatorial wasaware of the lease contracts because its lawyers had,

prior to the sale,studied the said contracts. As such, Equatorial cannot tenably claim to bea

purchaser in good faith, and, therefore, rescission lies.Hence, the petition was denied.

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

vs

. COURT OFAPPEALS and FIRESTONE CERAMICS, INC. G.R. No. 143513. November 14, 2001

NATIONAL DEVELOPMENT CORPORATION

vs.

FIRESTONE CERAMICS INC G.R. No. 143590. November 14, 2001

FACTS:

In the early sixties, petitioner National Development Corporation (NDC), had in its

disposal a ten-hectare property located along Pureza St.,Sta. Mesa, Manila. The estate was

popularly known as the NDC compoundand covered by Transfer Certificates of Title

Nos. 92885, 110301 and145470. Private respondent Firestone Ceramics Inc. manifested its

desireto lease a portion of the property for its ceramic manufacturing business.NDC and

FIRESTONE entered into a contract of lease denominated asContract No. C -30-65

covering a portion of the property measured at2.90118 hectares for use as a

manufacturing plant for a term of ten years,renewable for another ten years under the same terms

and conditions. Inconsequence of the agreement, FIRESTONE constructed on the

leasedpremises several warehouses and other improvements needed for the fabrication

of ceramic products. Three and a half years later, FIRESTONEentered into a second

contract of lease with NDC over the latter's four-unit pre-fabricated reparation steel

warehouse stored in Daliao, Davao.FIRESTONE agreed to ship the warehouse to Manila

for eventual assemblywithin the NDC compound. The second contract, denominated as

ContractNo. C-26-68, was for similar use as a ceramic manufacturing plant andwas

agreed expressly to be "co-extensive with the lease of LESSEE withLESSOR on the

2.60 hectare-lot. The parties signed a similar contractconcerning a six-unit pre-

fabricated steel warehouse which, as agreedu p on b y t h e p a r t i e s , wo u l d ex p i r e

o n 2 D ecem b er 1 978 . P r io r t o t h eex p i ra t i on o f t he a fo r emen t io n ed

co n t r ac t , F IR E ST ON E wr o t e N DC requesting for an extension of their lease agreement.

Consequently, theBoard of Directors of NDC adopted the Resolution extending the term of the

lease, subject to several conditions among which was that in the event NDC "with the

approval of higher authorities, decide to dispose ands e l l t h es e p r op e r t i e s i n c l ud i n g t h e

l o t , p r io r i t y s h o u ld b e g i v en to t h e LESSEE". In pursuance of the resolution,

the parties entered into a newagreement for a ten-year lease of the property, renewable for

another tenyears, expressly granting FIRESTONE the first option to purchase

theleased premises in the event that it decided "to dispose and sell these properties

including the lot‖. The parties' lessor-lessee relationship went smoothly until

early1988 when FIRESTONE, cognizant of the impending expiration of theirlease

agreement with NDC, informed the latter through several letters and telephone calls that

it was renewing its lease over the property. Whileits letter of 17 March 1988 was answered by

Antonio A. Henson, GeneralManager of NDC, who promised immediate action on the matter,

the resto f i t s c o m m u n i c a t i o n s r e m a i n e d u n a c k n o w l e d g e d .

F I R E S T O N E ' s predicament worsened when rumors of NDC's supposed plans to disposeof

the subject property in favor of petitioner Polytechnic University of thePhilippines came to its

knowledge. Forthwith, FIRESTONE served noticeon NDC conveying its desire to purchase the

property in the exercise of itscontractual right of first refusal. Apprehensive that its

interest in thep r o p e r ty w o u l d be d i s r egar d ed , F IR E ST O NE i ns t i t u t ed an

ac t i on fo r specific performance to compel NDC to sell the leased property in

itsf av o r . Fo l lo wi n g t h e d en i a l o f i t s p e t i t i on , F IR E S TO N E am en ded i t s

complaint to include PUP and Executive Secretary Catalino Macaraeg, Jr.,as party-

defendants, and sought the annulment of

Memorandum Order No. 214

.After trial, judgment was rendered declaring the contracts of leaseex ecu t ed b e t ween

F IR E ST O NE an d ND C cov e r i n g t h e 2 .6 0 -h ec t a r e property and the warehouses

constructed thereon valid and existing until2 June 1999. The Court of Appeals affirmed the

decision of the trial courtordering the sale of the property in favor of FIRESTONE.

ISSUE: Whether or not the Court of Appeals decided a question of substance in a way definitely not in

accord with law or jurisprudence.

RULING: The courts

a quo

did not hypothesize, much less conjure, the sale of the disputed property by NDC in favor

of petitioner PUP. Aside from thefact that the intention of NDC and PUP to enter into a

contract of sale wasclearly expressed in the

Memorandum Order No. 214

, a close perusal of t h e c i r c u m s t a n c e s o f t h i s c a s e s t r e n g t h e n s t h e

t h e o r y t h a t t h e conveyance of the property from NDC to PUP was one of absolute sale,

fora valuable consideration, and not a mere paper transfer as argued b ypetitioners.A

contract of sale, as defined in the Civil Code, is a contract whereone of the parties obligates

himself to transfer the ownership of and todeliver a determinate thing to the other or

others who shall pay thereforea sum certain in money or its equivalent. It is therefore a general

requisitefor the existence of a valid and enforceable contract of sale that it be mutually

obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a

determinate thing and the promise of the vendee toreceive and pay for the property so

delivered and transferred. The CivilCode provision is, in effect, a "catch-all" provision which

effectively bringswithin its grasp a whole gamut of transfers whereby ownership of a thingis

ceded for a consideration.Contrary to what petitioners PUP and NDC propose, there is

not just oneparty involved in the questioned transaction. Petitioners NDC and

PUPhave their respective charters and therefore each possesses a separate and distinct

individual personality.Hence, the petition was denied.

SPS. LITONJUA vs

.

L & R CORPORATION G.R. No. 130722. December 9, 1999320 SCRA 405

FACTS: This stems from loans obtained by the spouses Litonjua from L&R Corporation in the

aggregate sum of P400,000.00; P200,000.00 of whichwas obtained on August 6, 1974 and the

remaining P200,000.00 obtainedon March 27, 1978. The loans were secured by a mortgage

constituted bythe spouses upon their two parcels of land and the improvements thereon The

mortgage was duly registered with the Register of Deeds.Spouses Litonjua sold to

Philippine White House Auto Supply, Inc.(PWHAS) the parcels of land they had

previously mortgaged to L & RCorporation for the sum of P430,000.00. Meanwhile,

with the spousesLitonjua having defaulted in the payment of their loans, L & R

Corporationinitiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon

City. The mortgaged properties were sold at public auction to L &R Corporation as the only

bidder for the amount of P221,624.58. The Deputy Sheriff informed L & R Corporation

of the payment byPWHAS of the full redemption price and advised it that it can

claim thepayment upon surrender of its owner‘s duplicate certificates of title. Thespouses

Litonjua presented for registration the Certificate of Redemptioni s s u ed in t h e i r f av o r t o

t h e R eg i s t e r o f Deed s o f Qu ez on C i t y. T h e Certificate also informed L & R

Corporation of the fact of redemption anddirected the latter to surrender the owner‘s duplicate

certificates of titlewithin five days.On April 22, 1981, L & R Corporation wrote a letter

to the Sheriff, copyf u r n i s hed to t he R eg i s t e r o f D eeds , s t a t i n g : (1 ) t h a t t h e

s a l e o f t he mortgaged properties to PWHAS was without its consent, in contraventionof

paragraphs 8 and 9 of their Deed of Real Estate Mortgage; and (2) thatit was not the spouses

Litonjua, but PWHAS, who was seeking to redeemthe foreclosed properties, when under Articles

1236 and 1237 of the NewCivil Code, the latter had no legal personality or capacity to

redeem thesame.

O n t he o th e r h a n d , t h e sp ou se s Li t o n jua a sk ed t h e R eg i s t e r o f Deeds to

annotate their Certificate of Redemption as an adverse claim onthe titles of the subject

properties on account of the refusal of L & RCorporation to surrender the owner‘s

duplicate copies of the titles to thesubject properties. With the refusal of the Register of Deeds to

annotatetheir Certificate of Redemption, the Litonjua spouses filed a Petition on July

17, 1981 against L & R Corporation for the surrender of the owner‘sduplicate of

Transfer Certificates of Title No. 197232 and 197233 before the then CFI.While the

said case was pending, L & R Corporation executed anAffidavit of Consolidation of

Ownership. The Register of Deeds cancelled Transfer Certificates of Title No. 197232

and 197233 and in lieu thereof,issued Transfer Certificates of Title No. 280054 and 28055

in favor of L &R Corporation, free of any lien or encumbrance. A complaint for Quietingof

Title, Annulment of Title and Damages with preliminary injunction wasfiled by the spouses

Litonjua and PWHAS against herein respondentsbefore the then CFI.

ISSUE: Whether or not the Court of Appeals erred in its decision.

RULING: In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted

to L & R Corporation over the subject properties sincethe Deed of Real Estate Mortgage

containing such a provision was dulyregistered with the Register of Deeds. As such,

PWHAS is presumed tohave been notified thereof by registration, which equates to notice to

thewhole world. Thus, the Decision appealed from was AFFIRMED with thefollowing

MODIFICATIONS.

MUTUALITY OF CONTRACT JOSEFA VS. ZHANDONG TRADING CORPORATION417

SCRA 269G.R. NO. 150903DECEMBER 8, 2003FACTS: Respondent Zhandong delivered to petitioner Josefa, who was introducedto it as a client by

Mr. Tan, the total volume of 313 crates of boards valued atP 4 , 55 8 ,1 00 .0 0

p a yab l e wi t h i n 60 d a ys f r om d e l iv e r y. In s t ead o f p ayi n gr e s po nd en t ,

h o w ev e r , p e t i t i on e r r em i t t ed h i s p a ym en t s t o T an w ho in t u rn de l i ve r ed

v a r i ou s ch eck s t o re s po nd en t , wh o accep t ed th em up on T an ‘ s assurance that

said checks came from petitioner. When a number of the checksbounced, Tan issued his own

checks and those of his mother, but Tan laterstopped payments. Respondent demanded

payment from Tan and petitioner butwas ignored; hence he filed the instant complaint.I n h i s

a n s w e r p e t i t i o n e r a v e r r e d t h a t h e h a d a l r e a d y p a i d a l l h i s obligations to

respondent through Tan. Furthermore, he claimed he is not privyt o t h e ag r eem en t s

b e tw een T an an d r es po nd en t , and h en ce , i n c as e h i s payments were not remitted

to respondent, then it was not his (petitioner) faultand that respondent should bear the

consequences.

ISSUE: W h e t h e r o r n o t p e t i t i o n e r i s l i a b l e f o r p a y m e n t o f t h e b o a r d s

t o respondent when he did not negotiate the transaction with it, rather through Tanas

intermediary.

RULING: No. The transaction was negotiated between Tan and petitioner who onlyreceived the goods

delivered by respondent. Petitioner was not privy to thearrangement between Tan

and respondent. Petitioner has fully paid for thegoods to Tan with whom he had arranged

the transaction.C o n t r ac t s t ak e e f f ec t on l y b e tw een t h e p a r t i e s , t h e i r

s u ccess o rs i n interest, heirs, and assigns. When there is no privity of contract, there is

likewiseno obligation or liability and thus, no cause of action arises. Petitioner, being notprivy to

the transaction between Tan and respondent, should not be made liablefor the failure of Tan to

deliver the payment to respondent. Therefore, respondent should recover the payment from Tan.

PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION1 . P C I V S . N G

S H E U N G N G O R 2 . D I O V S . S T . F E R D I N A N D

M E M O R I A L 3 . P I L T E L V S . T E C S O N 4 . P A L V S . C A , 2 5 5

S C R A 4 8 5 . E R M I T A N O V S . C A , 3 0 6 S C R A 2 1 8

PCI VS NG SHUENG NGOR A.M. No. P-05-1973. March 18, 2005

FACTS: Complainant EPCIB is the defendant in Civil Case No. CEB-26983before the Regional

Trial Court (RTC), Branch 16, Cebu City, entitled, ―NgSheung Ngor, doing business under the

name and style ‗Ken Marketing,‘Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs.

Equitable PCIBan k , Ai mee Yu and Ben Ap as , De f end an t s ‖ fo r An nu l m en t

an d / o r Reformation of Documents and Contracts.Respondents Antonio A. Bellones and

Generoso B. Regalado are thesheriffs in Branches 9 and 16, respectively, of the RTC of Cebu

City.For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at

Citibank, N.A., and Hongkong and Shanghai Bank Corporation(HSBC), allegedly in

violation of Section 9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of

authority was filed by Atty. PaulinoL. Yusi against Sheriffs Antonio A. Bellones and

Generoso B. Regalado. There was an offer of other real property by petitioner.

ISSUE: Did respondents violate the Rules of Court?

RULING: By serving notices of garnishment on Citibank, N.A., HSBC and PNB,Sheriff Regalado violated

EPCIB‘s right to choose which property may belevied upon to be sold at auction for the

satisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, it

exercised itsoption because it cannot immediately pay the full amount stated in

thewrit of execution and all lawful fees in cash, certified bank check or anyother

mode of payment acceptable to the judgment obligee.In t h e cas e a t ba r , E PC IB can n o t

i mm ed ia t e l y p a y b y w a y o f Manager‘s Check so it exercised its option to choose and

offered its realproperties. With the exercise of the option, Sheriff Regalado should havec e a s e d

s e r v i n g n o t i c e s o f g a r n i s h m e n t a n d d i s c o n t i n u e d t h e i r implementation.

This is not true in the instant case. Sheriff Regalado wasadamant in his posture even if real

properties have been offered whichwere sufficient to satisfy the judgment debt.

PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION

TERESITA DIO vs. ST. FERDINAND MEMORIALPARK, INC.G.R. No. 169578

November 30, 2006509 SCRA 453FACTS: On December 11, 1973, Teresita Dio agreed to buy, on installmentbasis, a memorial lot from the

St. Ferdinand Memorial Park, Inc. (SFMPI) inLu cen a C i t y. T h e pu rch as e w as

ev id enced b y a P r e - N eed P u r ch as e Agreement. She obliged herself to abide by all such

rules and regulationsgoverning the SFMPI dated May 25, 1972. SFMPI issued a Deed

of Saleand Certificate of Perpetual. The ownership of Dio over the property wasm ad e

s ub j ec t t o t h e ru l e s and r egu l a t i on s o f S FMP I, a s w e l l a s t h e government,

including all amendments, additions and modifications thatm ay l a t e r b e ado p t ed .

A cco rd in g t o t h e Ru l es ( Ru l e 6 9 ) Maus o l eum building and memorials should be

constructed by the Park Personnel. LotOwners cannot contract other contractors for the

construction of the saidbuildings and memorial, however, the lot owner is free to give their

owndesign for the mausoleum to be constructed, as long as it is in accordancew i t h t h e p a r k

s t an da r ds . Th e co ns t ru c t i on s h a l l b e un d e r t h e c los e supervision of the Park

Superintendent. The mortal remains of Dio‘s husband, father and daughter

werei n t e r r ed i n t h e l o t a t h e r o w n ex p en s e , wi t ho u t t h e k no w led ge

an d intervention of SFMPI..

In October 1986, Dio informed SFMPI, through its president andcontrolling

stockholder, Mildred F. Tantoco, that she was planning to builda mausoleum on her lot and

sought the approval thereof. Dio showed to Tantoco the plans and project specifications

accomplished by her privatec o n t r a c t o r a t a n e s t i m a t e d c o s t o f P 6 0 , 0 0 0 . 0 0 .

T h e p l a n s a n d specifications were approved, but Tantoco insisted that the

mausoleumbe built by it or its agents at a minimum cost of P100,000.00 as providedin Rule

69 of the Rules and Regulations the SFMPI issued on May 25,1972. The total amount

excluded certain specific designs in the approvedplan which if included would cost Dio

much more. Dio, through counsel,demanded that she be allowed to construct the

mausoleum within 10days, otherwise, she would be impelled to file the necessary

action/sagainst SFMPI and Tantoco. Dio filed a Complaint fo r Injunction

withDamages against SFMPI and Tantoco before the RTC. She averred thatshe was

not aware of Rule 69 of the SFMPI Rules and Regulations; theam ou n t o f

P 10 0 , 00 0 . 00 as cons t ru c t i on co s t o f t he m aus o l eum w as unconscionable and

oppressive. She prayed that, after trial, judgment berendered in her favor, granting a final

injunction perpetually restrainingd e f en d an t s f ro m enf o r c in g th e i nv a l id Ru l e

6 9 o f S FMP I‘ s ―Ru l e s fo r M emo r i a l Wo r k in t h e M aus o l eu m o f t h e P a r k ‖

o r f r om re f us i n g o r preventing the construction of any improvement upon her property in

thepark. The court issued a cease and desist order against defendants. T h e t r i a l cou r t

r en d er ed ju d gm ent i n f av o r o f d e f end an t s . On appeal, the CA affirmed the decision

of the trial court.

ISSUE: Whether or not petitioner had knowledge of Rule 69 of SFMPI Rulesand Regulations for

memorial works in the mausoleum areas of the parkw h en t h e P r e - N eed P ur ch as e

A gr eem en t and th e D eed o f S a l e w as executed and whether the said rule is valid and

binding upon petitioner.

RULING: Plaintiff‘s allegation that she was not aware of the said Rules and Regulations lacks

credence. Admittedly, in her Complaint and during thetrial, plaintiff testified that she informed

the defendants of her intention toconstruct a mausoleum. Even counsel for the plaintiff,

who is the son of t h e p l a in t i f f , i n f o rm ed t h e C ou r t d u r i n g the t r i a l i n t h i s

c a s e th a t he r mot h e r , t h e p l a i n t i f f h e re in , i n f o r m ed th e d e fen d an t s o f h e r

p l an to construct and erect a mausoleum.

This act of the plaintiff clearly showsthat she was fully aware of the said rules and

regulations

otherwise sheshould not consult, inform and seek permission from the defendants of

her intention to build a mausoleum if she is not barred by the rules and r egu l a t io ns

t o do t he s ame . W hen s h e s i gn ed t h e co n t r ac t w i th t h e defendants, she was

estopped to question and attack the legality of saidcontract later on.Fu r t h e r , a con t r ac t o f

ad h es i o n , w h er e in o n e p a r t y i m po s es a readymade form of contract on the other, is not

strictly against the law. Acontract of adhesion is as binding as ordinary contracts, the reason

beingthat the party who adheres to the contract is free to reject it entirely.Contrary

to petitioner‘s contention, not every contract of adhesion is an invalid agreement. Thus,

the petition was denied.

PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION

PILIPINO TELEPHONE CORPORATION

vs.

DELFINO TECSONG.R. No. 156966. May 7, 2004FACTS: On various dates in 1996, Delfino C. Tecson applied for 6 cellular p h o ne

s ub s c r ip t io ns wi t h p e t i t i o ne r P i l i p in o T e l ep ho n e C o rp or a t io n (PILTEL), a

company engaged in the telecommunications business, whichap p l i c a t i on s w e r e each

ap p ro v ed an d co v e red , r e sp ec t i v e l y, by s ix mobiline service agreements. On 05

April 2001, respondent filed with theRegional Trial Court a complaint agains t petitioner

for a ―Sum of Moneyand Damages.‖ Petitioner moved for the dismissal of the complaint on

theground of improper venue, citing a common provision in the mobiline service

agreements to the effect that - ―Venue of all suits arising from thisA gr eem en t o r an y o t h er

s u i t d i re c t l y o r i nd i r ec t l y a r i s i n g f r om th e relationship between PILTEL and

subscriber shall be in the proper courtsof Makati, Metro Manila. Subscriber hereby

expressly waives any othervenues.‖ The Regional Trial Court of Iligan City, Lanao

del Norte, denied

petitioner‘s motion to dismiss and required it to file an answer within 15days from receipt

thereof.Petitioner filed a petition for

certiorari

before the Court of Appeals. T h e C ou r t o f Ap p ea l s s aw n o m er i t i n t h e p e t i t i o n

an d a f f i rm ed t h e assailed orders of the trial court.

ISSUE: Whether or not the Court of Appeals erred in affirming the orders of the trial court.

RULING: The contract herein involved is a contract of adhesion. But such anagreement is not

per se

inefficacious. The rule instead is that, should there be ambiguities in a contract of

adhesion, such ambiguities are to beconstrued against the party that prepared it. If, however, the

stipulationsare not obscure, but are clear and leave no doubt on the intention of theparties, the

literal meaning of its stipulations must be held controlling. Acontract of adhesion is just as

binding as ordinary contracts. It is true thatt h i s C ou r t h a s , o n o cca s i on , s t ru ck do wn

s u ch co n t r ac t s a s be i n g assailable when the weaker party is left with no choice by

the dominantbargaining party and is thus completely deprived of an opportunity

tob a r ga i n e f f ec t i ve ly . N ev e r th e l e s s , con t rac t s o f adh es io n a r e n o t prohibited

even as the courts remain careful in scrutinizing the factualcircumstances underlying

each case to determine the respective claims of co n t en d in g p a r t i e s on th e i r e f f i c ac y.

In t h e cas e a t b a r , r e s po nd en t secured 6 subscription contracts for cellular

phones on various dates. Itwould be difficult to assume that, during each of those times,

respondenth a d n o s u f f i c i e n t o p p o r t u n i t y t o r e a d a n d g o o v e r t h e t e r m s

a n d conditions embodied in the agreements. Respondent continued, in fact, toacqu i r e i n t h e

p u rs u i t o f h i s bu s i ne s s su bs eq u en t su bs c r i p t i on s and remained a subscriber of

petitioner for quite sometime.Hence, the petition was granted by the Court and the

decision of the Court of Appeals is reversed and set aside. The Civil Case

pendingbefore the Regional Trial Court of Iligan City, Branch 4, was

DISMISSEDwithout prejudice to the filing of an appropriate complaint by respondentagainst

petitioner with the court of proper venue.

PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESIONPHILIPPINE AIRLINES

VS. COURT OF APPEALSG.R. No. 119706March 14, 1996255 SCRA 48FACTS: On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine

Airlines, one (1) unit microwave oven under PAL Air Waybill No. 0-79-1013008-3, with a

gross weight of 33 kilograms from San Francisco, U.S.A. toManila, Philippines. Upon

arrival, however, of said article in Manila, Philippines,p l a i n t i f f d i s cove r ed th a t i t s

f r o n t g l a s s do o r w as b r ok en and th e d am age r end e r ed i t u ns e r v i ceab l e .

D em an ds b o t h o r a l an d w r i t t en w e r e mad e b yp l a in t i f f aga i ns t t h e

d e f end an t f o r t h e re im bu r s em en t o f t he v a l ue o f t hed am aged mi c ro w av e

o v en , and t r an sp o r t a t i on ch a r ges p a i d b y p l a i n t i f f t o defendant company. But

these demands fell on deaf ears. This is because,according to petitioner, was filed out of

time under paragraph 12, a (1) of the AirW a yb i l l wh i ch p ro v id e s : " ( a ) t h e p e r so n

en t i t l ed to d e l iv e r y mu s t m ak e a complaint to the carrier in writing in case: (1)

of visible damage to the goods,immediately after discovery of the damage and at the latest

within 14 days fromthe receipt of the goods.On September 25, 1990, Gilda C. Mejia filed an

action for damages againstthe petitioner in the lower court. The latter rendered a

decision rendering PALliable to pay, actual, moral and exemplary damages as well

as attorney‘s fees.On appeal, the Court of Appeals similarly ruled in favor of private

respondent byaffirming in full the trial court's judgment, with costs against petitioner.

ISSUE: Whether or not the respondent court erred in affirming the conclusions of the trial court that

since the air waybill is a contract of adhesion, its provisionsshould be strictly construed

against herein petitioner.

RULING: The Supreme Court affirmed the appealed decision. The trial court relied on the ruling in the

case of Fieldmen's Insurance Co.,Inc. vs. Vda. De Songco, et al. in finding that the

provisions of the air waybill

should be strictly construed against petitioner. More particularly, the court belowstated its

findings thus:― In t h i s c a s e , i t i s s e r io us l y d ou b t ed w h e t h er p l a i n t i f f h ad r ead

t h e p r in t ed conditions at the back of the Air Waybill, or even if she had, if she was

given achance to negotiate on the conditions for loading her microwave oven.

Insteadshe was advised by defendant's employee at San Francisco, U.S.A., that there isno need

to declare the value of her oven since it is not brand new. Further,plaintiff testified that

she immediately submitted a formal claim for P30,000.00with defendant. But their claim was

referred from one employee to another thentold to come back the next day, and the next

day, until she was referred to ace r t a i n At ty . P aco . Wh en th ey go t t i r ed and

f r u s t r a t ed o f comi ng w i t ho u t a settlement of their claim in sight, they consulted

a lawyer who demanded fromdefendant on August 13, 1990‖.Respondent appellate court

approved said findings of the trial court in thismanner: ―We cannot agree with defendant-

appellant's above contention. Underour jurisprudence, the Air Waybill is a contract of

adhesion considering that allthe provisions thereof are prepared and drafted only by

the carrier. The onlyparticipation left of the other party is to affix his signature thereto. In the

earlierca s e o f A n ge le s v . Ca l as anz , t h e S up r em e Co u r t r u l ed t h a t t h e t e rms

o f a contract of adhesion must be interpreted against the party who drafted the same.‖

PRINCIPLE OF EQUALITY / CONTRACTS OF ADHESION

ERMITAÑO VS. COURT OF APPEALS306 SCRA 218FACTS: Petitioner Luis Ermitaño applied for a credit card from private respondentBPI Express Card

Corp. (BECC) on October 8, 1986 with his wife, Manuelita, as extension card holder.

The spouses were given credit limit of P10, 000.00. Theyoften exceeded this credit limit without

protest from BCC.On August 9, 1989, Manuelita‘s bag was snatched from her as she

wasshopping at the greenbelt mall in Makati, Metro Manila. Among the items insidethe bag was

her BECC credit card. That same night she informed, by telephone,BECC of the loss. The call

was received by BECC offices through a certain GinaBan zo n . T h i s w as fo l lo w ed b y a

l e t t e r d a t ed A u gus t 3 0 , 1 98 9 . Sh e a l s o surrendered Luis‘ credit card and requested for

replacement cards. In her letter,Manuelita stated that she ―shall not be responsible for

any and all chargesincurred [through the use of the lost card] After August 29,

1989.However, when Luis received his monthly billing st atement from BECCdated

September 20,1989, the charges included amounts for purchases were made, one

amounting to P2,350.05 and the other, P607.50. Manuelita received abilling statement dated

October 20,1989 which required her to immediately paythe total amount of P3,197.70

covering the same (unauthorized) purchases.Manuelita wrote again BECC disclaiming

responsibility for those charges, whichwere made after she had served BECC with notice of loss

of her card.H o w ev e r , BE CC , i n a l e t t e r da t ed J u l y 1 3 , 19 90 , p o in t ed to Lu i s

t h e following stipulation in their contract:In his reply dated July 18, 1990, Luis stressed that the

contract BECC wasreferring to was a contract of adhesion and warned that if BECC

insisted oncharging him and his wife for the unauthorized purchases, they will sue

BECCcontinued to bill the spouses for said purchases. The trial court only opined that the only

purpose for the suspension of thespouses‘ credit privileges was to compel them to pay

for the unauthorizedpurchases. The trial court ruled that the latter portion of the

condition in theparties‘ contract, which states the liability for purchases made after a card is

lostor stolen shall be for the account of the cardholder until after notice of the lost ortheft has

been given to BECC and after the latter has informed its membere s t ab l i s hm en t s ,

i s vo id f o r b e in g co n t r a r y t o pu b l i c po l i cy an d f o r b e in g dependent upon the

sole will of the debtor.

ISSUE: Whether or not the Court of Appeals gravely erred in relying on the case of Serra v.

Court of appeals, 229 SCRA 60, because unlike that case, petitionershave no chance at all to

contest the stipulations appearing in the credit cardap p l i c a t i on th a t w as d r a f t ed

en t i r e l y b y p r i v a t e r e s po nd en t , t hu s , a c l ea r contract of adhesion.

RULING: At the outset, we note that the contract between the parties in this case isindeed a contract of

adhesion, so-called because its terms are prepared by onlyo n e p a r t y w h i l e t h e o th e r

p a r t y m e r e l y a f f ix es h i s s i gn a tu r e s i gn i f yi n g h i s adhesion thereto. Such

contracts are not void in themselves. They are asbinding as ordinary contracts. Parties

who enter in to such contracts are free toreject the stipulations entirely.

In t h i s c as e , t h e c a r d ho ld e r , M anu e l i t a , h a s comp l i ed wi th wh a t w as required

of her under the contract with BECC, She immediately notified BECC of loss of her card on

the same day it was lost and, the following day, she sent awritten notice of the loss to

BECC.C l ea r l y, w h a t h ap p en ed i n t h i s ca s e w as th a t BECC f a i l ed t o

n o t i f ypromptly the establishment in which the unauthorized purchases were

madewith the use of Manuelita‘s lost card. Thus, Manuelita was being liable for thosepurchases,

even if there is no showing that Manuelita herself had signed for saidpurchases, and after notice

by her concerning her card‘s loss was already givento BECC.

NON-BINDING TO THIRD PARTIES1.UNIWIDE VS. TITAN-IKEDA2.HEIRS OF

SALASVS. LAPERAL3 . ME D RA NO V S. C A4 .T A N VS. GULL AS

UNIWIDE SALES REALTY AND RESOURCES CORPORATION,vs. TITAN-IKEDA

CONSTRUCTIONAND DEVELOPMENTCORPORATIONG.R. No. 126619 December

20, 2006511 SCRA 335FACTS: PR OJ EC T 1 .

T h e f i r s t ag r eem en t w as a w r i t t en ―Con s t r uc t io nC on t r ac t ‖ en t e r ed in to b y

T i t an an d U ni wid e s om et im e in M ay 1 9 9 1 whereby Titan undertook to

construct Uniwide‘s Warehouse Club andAdministration Building in Libis, Quezon City

for a fee of P120,936,591.50,p a yab l e i n mo n th l y p r o gr e s s b i l l i ngs t o b e ce r t i f i ed

t o b y U n i wi d e ‘s representative. The parties stipulated that the building shall be completednot

later than 30 November 1991. As found by the CIAC, the building waseventually finished on 15

February 1992 and turned over to Uniwide.

PROJECT 2.

Sometime in July 1992, Titan and Uniwide entered into t h e s econ d ag r eem en t

w h e r eb y t h e f o rm er ag r eed to co ns t r u c t an additional floor and to renovate the

latter‘s warehouse located at theEDSA Central Market Area in Mandaluyong City.

There was no writtencontract executed between the parties for this project. Construction

wasallegedly to be on the basis of drawings and specifications provided

byUniwide‘s structural engineers. The parties proceeded on the basis of acost

estimate of P21,301,075.77 inclusive of Titan‘s 20% mark -up. Titanco n ced ed i n

i t s com pl a i n t t o h av in g r ece i ved P1 5 ,0 0 0 , 00 0 . 00 o f t h i s amount. This project

was completed in the latter part of October 1992 andturned over to Uniwide.

PROJECT 3.

The parties executed the third agreement in May 1992.In a written ―Construction

Contract,‖ Titan undertook to construct theUniwide Sales Department Store Building in

Kalookan City for the price of P 1 1 8 , 00 0 , 00 0 .0 0 p ayab l e i n p r o gre s s b i l l i n gs t o b e

ce r t i f i ed t o b yU n i w i d e‘ s r ep r e s en t a t ive . I t w as s t i pu l a t ed th a t t h e p r o j ec t

s h a l l b e completed not later than 28 February 1993. The project was completed and

turned over to Uniwide in June 1993.U ni wid e a s s e r t ed in i t s p e t i t i on t ha t : ( a ) i t

o v e rp a i d T i t an f o r unauthorized additional works in Project 1 and Project 3; (b) it is not

liableto pay the Value-Added Tax for Project 1; (c) it is entitled to

liquidateddamages for the delay incurred in constructing Project 1 and Project

3;an d ( d ) i t sh ou ld n o t h av e been f ou nd l i ab l e f o r d e f i c i en c i es i n

t h e defectively constructed Project 2. The decision:

On Project 1 – Libis : Uniwide is absolved of any liability for theclaims made by [Titan] on this Project.

Project 2 – Edsa Central : Uniwide is absolved of any liability forVAT payment on this project, the same being for

the account of Titan. Onthe other hand, Titan is absolved of any liability on the

counterclaim fordefective construction of this project. Uniwide is held liable for the

unpaidbalance in the amount of P6,301,075.77 which is ordered to be paid to the Titan with 12%

interest per annum commencing from 19 December 1992until the date of payment.

On Project 3 – Kalookan : Uniwide is held liable for the unpaidbalance in the amount of P5,158,364.63

which is ordered to be paid to Titan with 12% interest per annum commencing from 08

September 1993until the date of payment. Uniwide is held liable to pay in full the VAT ont h i s

p r o j ec t , i n su ch amo u n t a s m a y b e com pu ted b y t h e Bu r eau o f Internal

Revenue to be paid directly thereto. The BIR is hereby notified t ha t U n i wi d e S a l e s

R ea l t y an d R es ou r ce s C or po r a t io n h as a s su med responsibility and is held

liable for VAT payment on this project. Thisaccordingly exempts Claimant Titan-Ikeda

Construction and DevelopmentCorporation from this obligation.

ISSUE: Whether or not the decision rendered is correct.

RULING: The petition is DENIED and the Decision of the Court of Appeals wasAFFIRMED.

NON-BINDING TO THIRD PARTIES

HEIRS OF AUGUSTO L. SALAS, JR.

vs.

LAPERAL REALTY CORPORATIONG.R. NO. 135362. December 13, 1999FACTS: Salas, Jr. was the registered owner of a vast tract of land in LipaCity, Batangas

spanning 1,484,354 square meters. On May 15, 1987, heentered into an Owner-

Contractor Agreement with respondent LaperalR e a l t y C o r p o r a t i o n t o r e n d e r

a n d p r o v i d e c o m p l e t e ( h o r i z o n t a l ) co ns t ru c t i on s e r v i ces o n h i s l and .

O n S ep temb e r 23 , 1 9 88 , S a l a s , J r . executed a Special Power of Attorney in

favor of respondent LaperalRealty to exercise general control, supervision and

management of thesale of his land, for cash or on installment basis. On June 10, 1989, Salas,

Jr. left his home in the morning for a business trip to Nueva Ecija. Henever

returned.On August 6, 1996, Teresita Diaz Salas filed with theRegional Trial Court a

verified petition for the declaration of presumptivedeath of her husband, Salas, Jr., who had then

been missing for more thanseven (7) years. It was granted on December 12, 1996.Meantime,

respondent Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions

thereof to respondents Rockway RealEstate Corporation and South Ridge Village, Inc. on

February 22, 1990; torespondent spouses Abrajano and Lava and Oscar Dacillo on

June 27,1991; and to respondents Eduardo Vacuna, Florante de la Cruz and JesusVicente

Capalan on June 4, 1996.On February 3, 1998, petitioners as heirs of Salas, Jr. filed in

theR eg i o n a l T r i a l Co u r t a C om pl a in t fo r d ec l a r a t io n o f nu l l i t y o f

s a l e , reconveyance, cancellation of contract, accounting and damages againstherein respondents.

Laperal Realty filed a Motion to Dismiss

on the groundthat petitioners failed to submit their grievance to arbitration as requiredunder

Article VI of the Agreement. Spouses Abrajano and Lava andrespondent Dacillo filed a

Joint Answer with Counterclaim and Crossclaimpraying for dismissal of petitioners‘ Complaint

for the same reason. The trial court issued an Order dismissing petitioners‘ Complaint fornon-

compliance with the arbitration clause.

ISSUE: Whether or not the trial court erred in dismissing the complaint.

RULING: A submission to arbitration is a contract. As such, the Agreement, containing the

stipulation on arbitration, binds the parties thereto, as wellas their assigns and heirs.

But only they. Petitioners, as heirs of Salas, Jr.,and respondent Laperal Realty are

certainly bound by the Agreement. If respondent Laperal Realty, had assigned its rights

under the Agreementt o a t h i r d p a r t y, m ak in g th e fo rm er , t he a s s i gn or , and t he

l a t t e r , t h e assignee, such assignee would also be bound by the arbitration provisions in ce

a s s i gnm ent i n vo lv es s u ch t r an s f e r o f r i gh t s a s t o v es t i n t h e assignee the

power to enforce them to the same extent as the assignorcould have enforced them

against the debtor

or in this case, against the

h e i r s o f t h e o r i g in a l p a r t y t o t h e A gr eem en t . Ho w ev e r ,

r e s po nd en t s Rockway Real Estate Corporation, South Ridge Village, Inc.,

MaharamiDevelopment Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo,Eduardo

Vacuna, Florante de la Cruz and Jesus Vicente Capellan are

not assignees of the rights of respondent Laperal Realty under the Agreementto develop Salas, Jr.‘s

land and sell the same. They are, rather, buyers of t h e l and t h a t r es pon d en t Lap e r a l

R ea l t y w as g iv en th e au th or i t y t o develop and sell under the Agreement. As

such, they are

not ―assigns‖contemplated in Art. 1311 of the New Civil Code which provides

that―contracts take effect only between the parties, their assigns and heirs‖.Laperal Realty, as

a contracting party to the Agreement, has theright to compel petitioners to first arbitrate

before seeking judicial relief.However, to split the proceedings into arbitration for respondent

LaperalRealty and trial for the respondent lot buyers, or to hold trial in abeyancepending

arbitration between petitioners and respondent Laperal Realty,would in effect result

in multiplicity of suits, duplicitous procedure andu n n eces s a r y d e l a y. O n th e

o th e r h an d , i t wo u ld be i n t h e in t e r es t o f justice if the trial court hears the complaint

against all herein respondentsan d ad j ud i ca t e s p e t i t i on e rs ‘ r i gh t s a s aga i ns t t h e i r s

i n a s i n g l e an d complete proceeding.Hence, the trial court‘s decision was nullified

and set aside. Saidcourt was ordered to proceed with the hearing.

NON-BINDING TO THIRD PARTIES

BIENVENIDO R. MEDRANO and IBAAN RURAL BANK

vs

. CA, PACITAG. BORBON, JOSEFINA E. ANTONIO and ESTELA A. FLORG.R. No.

150678. February 18, 2005FACTS: Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank,a bank owned by the

Medrano family. In 1986, Mr. Medrano asked Mrs.Estela Flor, a cousin-in-law, to look

for a buyer of a foreclosed asset of thebank,

a 17 - h ec t a r e m an go p l an t a t i on p r i c ed a t P2 ,2 00 ,0 00 .0 0 . Mr . D o m i n a d o r

L e e , a b u s i n e s s m a n f r o m M a k a t i C i t y , w a s a c l i e n t o f respondent Mrs.

Pacita G. Borbon, a licensed real estate broker. Borbonrelayed to her business associates and

friends that she had a ready buyerfor a mango orchard. Flor then advised her that her cousin-in-

law owned am an go p l an t a t i on w hi ch w as u p fo r s a l e . S h e t o l d F lo r t o co n fe r

w i t h Medrano and to give them a written authority to negotiate the sale of theproperty. Thus,

Medrano issued the Letter of Authority in favor of PacitaG. Borbon and Josefina E. Antonio.A

D e e d o f S a l e w a s e v e n t u a l l y e x e c u t e d b e t w e e n t h e b a n k , r ep r e s en t ed

b y i t s P r es id en t / G en e r a l M an age r T e res a M . G anz on (a s Vendor) and KGB

Farms, Inc., represented by Dominador Lee (as Vendee),for the purchase price of

P1,200,000.00. Since the sale of the propertywas consummated, the respondents

asked from the petitioners theircommission, or 5% of the purchase price. The petitioners

refused to payand offered a measly sum of P5,000.00 each. Hence, the

respondentswere constrained to file an action against herein petitioners. The trial court

rendered a Decision in favor of the respondents. It f o u n d th a t t he l e t t e r o f

au th or i t y w as v a l id and b in d in g a s aga i ns t Medrano and the Ibaan Rural bank.

Medrano signed the said letter for andin behalf of the bank, and as owner of the property,

promising to pay therespondents a 5% commission for their efforts in looking for a purchaserof

the property. He is, therefore, estopped from denying liability on the basis of the letter

of authority he issued in favor of the respondents. Thetrial court further stated that the sale of the

property could not have beenp o s s i b l e w i t h o u t t h e r e p r e s e n t a t i o n a n d

i n t e r v e n t i o n o f t h e respondents. As such, they are entitled to the broker‘s commission

of 5%of the selling price of P1,200,000.00 as evidenced by the deed of sale. Onappeal, the CA

affirmed the trial court‘s decision.

ISSUE: Whether or not the Court of Appeals erred in affirming the trial court‘s decision.

RULING: There can be no other conclusion than the respondents are indeedthe procuring cause of the sale.

If not for the respondents, Lee would noth a v e k n o w n a b o u t t h e m a n g o

p l a n t a t i o n b e i n g s o l d b y t h e petitioners. The sale was consummated. The

bank had profited from suchtransaction. It would certainly be iniquitous if the respondents would

not

be rewarded their commission pursuant to the letter of authority. Hence,the Court of Appeal‘s

decision is affirmed.

NON-BINDING TO THIRD PARTIES

MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAÑA,

vs.

EDUARDO R. GULLAS and NORMA S. GULLASG.R. No. 143978. December 3, 2002FACTS: Spouses Eduardo R. Gullas and Norma S. Gullas, were the registeredo w ne r s o f a p a r ce l o f

l and m eas ur in g 10 4 , 1 14 sq . m . , wi th Tr an s f e r Certificate of Title No. 31465. On

June 29, 1992, they executed a specialpower of attorney authorizing petitioners Manuel

B. Tan, a licensed reale s t a t e b ro ke r , and h i s a s s o c i a t e s G r egg M . T ecs on an d

A l ex and e rS a l d añ a , t o n ego t i a t e fo r t h e s a l e o f t h e l an d a t P 55 0 . 00

per squaremeter, at a commission of 3% of the gross price. The power of

attorneywas non-exclusive and effective for one month from June 29, 1992. On thesame date,

petitioner Tan contacted Engineer Ledesma, constructionmanager of the Sisters of

Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interested in

acquiring a property.O n 1 , 1 99 2 , p e t i t i on e r T an v i s i t ed t h e p rop e r t y w i th

E n g in ee r Ledesma. Thereafter, the two men accompanied Sisters Michaela Kim andAzucena

Gaviola, representing the Sisters of Mary, who had seen and i n sp ec t ed th e l an d ,

f o un d th e s am e su i t ab l e fo r t h e i r p u rpo s e and expressed their desire to buy it.

However, they requested that the sellingprice be reduced to P530.00 per square meter

instead of P550.00

persquare meter. Private respondent Eduardo Gullas referred the prospectivebuyers to his wife.I t

w as th e f i r s t t i m e th a t t h e bu ye r s c ame to k no w th a t p r i va t e r es po nd en t

E d ua r do Gul l a s w as t h e ow n e r o f t h e p r op e r t y. P r i va t e r es po nd en t s ag r eed

t o s e l l t h e p r op e r t y t o t he S i s t e r s o f Mar y, an d subsequently executed a

special power of attorney in favor of EufemiaCañete, giving her the special

authority to sell, transfer and convey theland at a fixed price of P200.00 per square meter.

Attorney-in-fact Cañeteexecuted a deed of sale in favor of the Sisters of Mary for the

price of P20,822,800.00, or at the rate of P200.00 per square meter. The

buyerssubsequently paid the corresponding taxes. Thereafter, the Register of D eed s

o f i s su ed TC T No . 7 5 98 1 i n t h e n am e o f t he S i s t e r s o f Mar y o f Banneaux,

Inc.Earlier, on July 3, 1992, petitioners went to see private respondentEduardo Gullas to claim

their commission, but the latter told them that heand his wife have already agreed to sell

the property to the Sisters of Mary. Private respondents refused to pay the broker‘s

fee and allegedthat another group of agents was responsible for the sale of land to

theSisters of Mary.petitioners filed a complaint

against the defendants for recovery of their broker‘s fee in the sum of P1,655,412.60,

a s we l l a s mo r a l and exemplary damages and attorney‘s fees. They alleged that they were

theefficient procuring cause in bringing about the sale of the property to theSisters of Mary,

but that their efforts in consummating the sale werefrustrated by the private

respondents who, in evident bad faith, maliceand in order to evade payment of

broker‘s fee, dealt directly with thebuyer whom petitioners introduced to them. They

further pointed out thatthe deed of sale was undervalued obviously to evade payment of

theco r r ec t amo un t o f c ap i t a l ga ins t ax , d o cu m ent a r y s t amps an d

o th e r internal revenue taxes.I n t h e i r a n s w e r , p r i v a t e r e s p o n d e n t s c o u n t e r e d

t h a t , c o n t r a r y t o petitioners‘ claim, they were not the efficient procuring cause in

bringingabout the consummation of the sale because another broker, Roberto P acan a ,

i n t ro du ced t h e p ro pe r t y t o t h e S i s t e r s o f M ar y ah ead o f t h ep e t i t i o n e rs .

P r i v a t e r es po nd en t s m ai n t a i n ed t ha t wh en p e t i t i o n e rs introduced the buyers to

private respondent Eduardo Gullas, the formerwere already decided in buying the

property through Pacana, who hadbeen paid his commission. Private respondent

Eduardo Gullas admittedthat petitioners were in his office on July 3, 1992, but only

to ask for thereimbursement of their cellular phone expenses.

After trial, the lower court rendered judgment in favor of petitioners.Eduardo and Norma

Gullas were ordered to pay jointly and severallyplaintiffs Manuel Tan, Gregg

Tecson and Alexander Saldaña the sum of P 62 4 , 68 4 . 00 as b rok e r ‘ s f e e wi t h

l ega l i n t e r es t a t t h e r a t e o f 6 % p e r annum from the date of filing of the complaint; and

the sum of P50,000.00as attorney‘s fees and costs of litigation. T h e Co ur t o f A pp ea l s

r ev e rs ed and s e t a s i d e t h e lo w er co u r t ‘ s decision and rendered another judgment

dismissing the complaint.

ISSUE: W h e t h e r o r n o t t h e C o u r t o f A p p e a l s e r r e d i n d i s m i s s i n g

t h e complaint.

RULING: It is readily apparent that private respondents are trying to evadepayment of the

commission which rightfully belongs to petitioners asbrokers with respect to the sale.

There was no dispute as to the role thatpetitioners played in the transaction. At the very least,

petitioners set thesale in motion. They were not able to participate in its consummation

onlybecause they were prevented from doing so by the acts of the

privater e s p o n den t s . In t h e cas e o f

A l f r e d H a h n v . C o u r t o f A p p e a l s a n d Bayerische Motoren Werke

Aktiengesellschaft (BMW)

the SC ruled that,―An

agent

receives a commission upon the successful conclusion of asale. On the other hand, a

broker

earns his pay merely by bringing thebuyer and the seller together, even if no sale is

eventually made.‖ Clearly,therefore, petitioners, as brokers, should be entitled to the

commissionwhether or not the sale of the property subject matter of the contract wasconcluded

through their efforts.

ENFORCEABILITY

JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADOG.R. No. 167812 December 19,

2006FACTS: In the local elections of 1995, respondent vied for the gubernatorialpost in Pampanga. Upon

respondent‘s request, petitioner, owner of JMGPublishing House, a printing shop, submitted to

respondent draft samplesand price quotation of campaign materials.B y p e t i t i o n e r ‘ s

c l a i m , r e s p o n d e n t ‘ s w i f e h a d t o l d h i m t h a t respondent already approved his

price quotation and that he could startprinting the campaign materials, hence, he did print

campaign materials.Given the urgency and limited time to do the job order, petitioner availedof

the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press,

owned by his daughter Jennifer Gozun and mother EpifaniaMacalino Gozun,

respectively.P e t i t i on e r d e l i v e r ed th e campa i gn m at e r i a l s t o

r e s po nd en t ‘ s headquarters.O n M arch 31 , 19 9 5 , r e sp on d en t ‘ s s i s t e r - i n - l aw,

Li l i an S o r i an o obtained from petitioner ―cash advance‖ of P253,000 allegedly for

theallowances of poll watchers who were attending a seminar and for otherrelated expenses.

Lilian acknowledged on petitioner‘s 1995 diary receiptof the amount.Petitioner later sent

respondent a Statement of Account in the totalamount of P2,177,906 itemized as follows:

P640,310 for JMG PublishingHouse; P837,696 for Metro Angeles Printing;

P446,900 for St. JosephPrinting Press; and P253,000, the ―cash advance‖ obtained

by Lilian.Respondent‘s wife partially paid P1,000,000 to petitioner who issued

areceipt therefor. Despite repeated demands and respondent‘s promise topay, respondent failed

to settle the balance of his account to petitioner.Petitioner thus filed with the RTC a complaint

against respondent toc o l l e c t t h e r e m a i n i n g a m o u n t o f P 1 , 1 7 7 , 9 0 6 p l u s

― i n f l a t i o n a r y adjustment‖ and attorney‘s fees. The trial court rendered judgment

infavor of the petitioner. The CA however, reversed the trial court‘s decisionand dismissed the

complaint for lack of cause of action.

ISSUE: Whether or not the Court of Appeals erred in reversing the trialcourts‘ decision.

RULING: Petitioner is the real party in interest in this case. The trial court‘sfindings on the

matter were affirmed by the appellate court. It erred,however, in not declaring

petitioner as a real party in interest insofar as recovery of the cost of campaign materials

made by petitioner‘s motherand sister are concerned, upon the wrong notion that they

should havebeen, but were not, impleaded as plaintiffs.

RELATIVITY: PRIVITY: EXCEPTIONS (Art. 1311, CC) JOSEPH CHAN, WILSON

CHAN and LILY CHAN VS. BONIFACIO S.MACEDA,·JR2003 Apr 30G.R. No. 142591402

SCRA 352FACTS: On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained aP 7 . 3 m i l l i on l o an

f r om t h e D ev e l op men t Bank o f t h e Ph i l i p p in e s fo r t he construction of his

New Gran Hotel Project in Tacloban City. Thereafter, onSeptember 29, 1976,

respondent entered into a building construction contractwith Moreman Builders Co.,

Inc. They agreed that the construction would befinished not later than December 22,

1977. Respondent purchased variousconstruction materials and equipment in

Manila. Moreman, in turn, depositedthem in the warehouse of Wilson and Lily Chan,

herein petitioners. The depositwas free of charge. Unfortunately, Moreman failed to finish the

construction of the hotel at the stipulated time. Hence, on February 1, 1978, respondent

filedwith the then CFI an action for rescission and damages against Moreman.

OnN o v emb er 28 , 197 8 , t h e C FI r en d e r ed i t s D ec i s i on r e s c in d i n g t he

co n t r ac t between Moreman and respondent and awarding to the latter P445,000.00

asactual, moral and liquidated damages; P20,000.00 representing the increase inthe

construction materials; and P35,000.00 as attorney‘s fees. Moremaninterposed an

appeal to the Court of Appeals but the same was dismissed onM a r ch 7 , 19 89 fo r

b e in g d i l a t o r y. H e e l eva t ed th e cas e to t h i s C ou r t v i a a petition for review on

certiorari. In a Decision dated February 21, 1990, theCourt denied the petition. On April

23, 1990 an Entry of Judgment was issued.M eanw h i l e , d u r in g th e pen d en c y o f t h e

ca s e , r es po nd en t o rd e r ed petitioners to return to him the construction materials

and equipment whichMoreman deposited in their warehouse. Petitioners, however,

told them thatMoreman withdrew those construction materials in 1977. Hence, on

December1 1 , 1 98 5 , r e s po nd en t f i l ed wi th t h e R TC an ac t ion fo r d am ages

w i t h an application for a writ of preliminary attachment against petitioners.

ISSUE: Whether or not respondent have the right to demand the release of the said materials

and equipment or claim for damages.

RULING: At the outset, the case should have been dismissed outright by the trial co u r t

b ecaus e o f p a t en t p r o cedu r a l i n f i r mi t i e s . Ev en wi th ou t s uch

s e r i ou s procedural flaw, the case should also be dismissed for utter lack of merit. UnderArticle

1311 of the Civil Code, contracts are binding upon the parties (and theirassigns and heirs) who

execute them. When there is no privity of contract, thereis likewise no obligation or

liability to speak about and thus no cause of actionarises. Specifically, in an action

against the depositary, the burden is on theplaintiff to prove the bailment or deposit

and the performance of conditionsprecedent to the right of action. A depositary is obliged to

return the thing to thedepositor, or to his heirs or successors, or to the person who may

have beendesignated in the contract.In the present case, the record is bereft of any contract of

deposit, oral orwritten, between petitioners and respondent. If at all, it was only

betweenpetitioners and Moreman. And granting arguendo that there was indeed

acontract of deposit between petitioners and Moreman, it is still incumbent uponr e s po nd en t

t o p ro v e i t s ex i s t ence and th a t i t w as ex ecu t ed i n h i s f av or . However,

respondent miserably failed to do so. The only pieces of evidence r e s p on d en t

p r e s en t ed t o p ro v e t h e con t r ac t o f d epo s i t w er e t he d e l ive r y receipts.

Significantly, they are unsigned and not duly received or authenticatedb y e i t h e r Mo r em an ,

p e t i t i o ne r s o r r es pon d en t o r an y o f t h e i r au t ho r i z ed representatives. Hence,

those delivery receipts have no probative value at all.While our laws grant a person the

remedial right to prosecute or institute a civila c t io n aga i ns t an o th e r f o r t h e

en f o rcemen t o r p ro t ec t io n o f a r i gh t , o r t he prevention or redress of a wrong,

every cause of action ex-contractu must bef o u nd ed u po n a co n t r ac t , o r a l o r

w r i t t en , ex pr e s s o r i mpl i ed . M o r eo v er ,

respondent also failed to prove that there were construction materials andequipment

in petitioners‘ warehouse at the time he made a demand for theirreturn. Considering

that respondent failed to prove (1) the existence of anycontract of deposit between

him and petitioners, nor between the latter andM o r em an i n h i s f av o r , and (2 )

t h a t t h e r e w e r e cons t ru c t i on m at e r i a l s i n petitioners‘ warehouse at the time of

respondent‘s demand to return the same,w e h o ld th a t p e t i t i o ne r s h av e n o

co r r es po nd in g ob l iga t io n o r l i ab i l i t y t o respondent with respect to those construction

materials.

STIPULATION

pour autrui

TIMOTEO BALUYOT, JAIME BENITO, BENIGNO EUGENIO,

ROLANDOGONZALES, FORTUNATO FULGENCIO and CRUZ-NA-LIGAS

HOMESITEASSOCIATION, INC., petitioners,VS. THE HONORABLE COURT OF

APPEALS, THE QUEZON CITY GOVERNMENT and UNIVERSITY OF THE

PHILIPPINES, respondents1999 Jul 22FACTS: Petitioners are residents of Barangay Cruz-na-Ligas. Diliman, Quezon City. The Cruz-na-Ligas

Homesite Association, Inc. is a non-stock corporation of whichpetitioners and other residents of

Barangay Cruz-na-Ligas are members.P e t i t i o n er s f i l ed a com pl a i n t fo r sp ec i f i c

p e r f o r man ce and d am ages aga ins t p r iv a t e r e sp on d en t Un ive r s i t y o f t h e

P h i l i pp in e s be f o re t h e R TC o f Quezon City. The complaint was later on amended to

include private respondentQuezon City government as defendant. As amended, the complaint

alleged:that plaintiffs and their ascendants are owners since memory can nolonger

recall of that parcel of riceland known Sitio Libis, Barrio Cruz -na-Ligas,Quezon

City (now Diliman, Quezon City), while the members of the plaintiff Association and

their ascendants have possessed since time immemorial openly,adversely, continuously and also

in the concept of an owner, the rest of the areaembraced by and within the Barrio Cruz-na-Ligas,

Diliman, Quezon City;that since October 1972, the claims of the plaintiffs and/or

members of plaintiff Association have been the subject of quasi -judicial

proceedings andad m in i s t r a t i v e in v es t i ga t io ns in t he d i f f e r en t b ran ch es o f

t h e go v er nm en t penultimately resulting in the issuance of that Indorsement dated

May 7, 1975by the Bureau of Lands, and ultimately, in the issuance of the

Indorsement of February 12, 1985, by the office of the President of the Rep. of the

Philippinesconfirming the rights of the bonafide residents of Barrio Cruz-na-Ligas

to theparcel of land they have been possessing or occupying;that defendant UP, pursuant to

the said Indorsement from the Office of the President of the Rep. of the Philippines,

issued that Reply Indorsementwherein it approved the donation of about 9.2 hectares of the

site, directly to theresidents of Brgy. Krus Na Ligas. After several negotiations with the

residents,the area was increased to 15.8 hectares (158,379 square meters);that, however,

defendant UP backed-out from the arrangement to donatedirectly to the plaintiff

Association for the benefit of the qualified residents andhigh -handedly resumed to

negotiate the donation thru the defendant QuezonCity Government under the terms

disadvantageous or contrary to the right s of the bonafide residents of the Barrio; that

plaintiff Association forthwith amendedits petition and prayed for a writ of preliminary

injunction to restrain defendantUP from donating the area to the defendant Quezon City

Government which wasgranted;that in the hearing of the Motion for Reconsideration

filed by defendantUP, plaintiff Association finally agreed to the lifting of the said Order

granting theinjunction after defendant UP made an assurance in their said Motion that

thedonation to the defendant Quezon City Government will be for the benefit of theresidents of

Cruz-Na-Ligas;that, however, defendant UP took exception to the aforesaid Order liftingthe

Order of Injunction and insisted on the dismissal of the case;t h a t p l a in t i f f m an i f es t ed i t s

w i l l i n gn ess t o t h e d i s mis s a l o f t h e cas e , p r o v i d e d , t h a t t h e a r e a t o b e

d o n a t e d t h r u t h e d e f e n d a n t Q u e z o n C i t y go v e r n m en t b e s ub d i v id ed

i n t o l o t s t o b e g i ven t o t h e qu a l i f i ed re s id en t s together with the certificate of titles,

without cost;that defendant UP failed to deliver the certificate of title covering

theproperty to be donated thus the defendant Quezon City Government was notable

to register the ownership so that the defendant Quezon City Government can

l ega l l y an d f u l l y co mp l y w i th t h e i r ob l i ga t i ons u nd e r t he s a id deed o f

donation;that upon expiration of the period of eighteen (18) months, for allegednon-

compliance of the defendant Quezon City Government with terms andconditions

quoted in par. 16 hereof, defendant UP thru its President, Mr. Jose A b u ev a ,

u n i l a t e r a l l y , c ap r i c i ou s l y, w h im s i ca l l y and u n l aw fu l l y i s su ed th a t

Administrative Order No. 21 declaring the deed of donation revoked and the donated

property be reverted to defendant UP. The petitioners, then, prayed that a writ of

preliminary injunction or at least a temporary restraining order be issued, ordering defendant

UP to observes t a tus qu o ; t he r ea f t e r , a f t e r du e n o t i c e and h ea r in g , a w r i t o f

p r e l imi n a r y injunction be issued; (a) to restrain defendant UP or to their representative

fromejecting the plaintiffs from and demolishing their improvements on the ricelandor

farmland situated at Sitio Libis; (b) to order defendant UP to refrain fromexecuting

another deed of donation in favor another person or entity and infavor of non -

bonafide residents of Barrio Cruz-na-Ligas different from the Deedof Donation, and

after trial on the merits, judgment be rendered:declaring theDeed of Donation as valid

and subsisting and ordering the defendant UP to abideby the terms and conditions thereof. The

Court of Appeals reversed the decision of the trial court.

ISSUE: Whether or not defendant UP could execute another deed of donation in favor of third

person.

RULING: The Court found all the elements of a cause of action contained in theamended

complaint of petitioners. While, admit tedly, petitioners were notparties to the deed

of donation, they anchor their right to seek its enforcementupon their allegation that

they are intended beneficiaries of the donation to theQ u ez on C i t y go v e r n men t . A r t .

1 3 11 , s econ d p ar ag r ap h , o f t h e C i v i l C o d e provides:

If a contract should contain some stipulation in favor of a third person, he may

demand its fulfillment provided he communicated his acceptance to the obligor before its

revocation. A mere incidental benefit or interest of a person is not sufficient. The

contracting parties must have clearly and deliberately conferred a favor upon a third person.

Under this provision of the Civil Code, the following requisites must be present in

order to have a stipulation pour autrui:(1) there must be a stipulationin 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 conferreda favor upon a third person, not a mere incidental

benefit or interest; (4) thethird person must have communicated his acceptance to

the obligor before itsr e v o c a t i o n ; a n d ( 5 ) n e i t h e r o f t h e c o n t r a c t i n g

p a r t i e s b e a r s t h e l e g a l representation or authorization of the third party. The allegations

in the following paragraphs of the amended complaint aresufficient to bring petitioners‘ action

within the purview of the second paragraphof Art. 1311 on stipulations pour autrui:1.

Paragraph 17, that the deed of donation contains a stipulation that the Quezon City

government, as donee, is required to transfer to qualified residentsof Cruz-na-Ligas, by way of

donations, the lots occupied by them;2. The same paragraph, that this stipulation is part of

conditions and obligationsimposed by UP, as donor, upon the Quezon City government, as

donee;3. Paragraphs 15 and 16, that the intent of the parties to the deed of

donationw as to co n fe r a f avo r u po n p e t i t i o n e rs b y t r an s f e r r i n g to t h e l a t t e r

t h e l o t s occupied by them;4. Paragraph 19, that conferences were held between the parties to

convince UPto surrender the certificates of title to the city government, implying that

thedonation had been accepted by petitioners by demanding fulfillment thereof andthat private

respondents were aware of such acceptance; and5. All the allegations considered together

from which it can be fairly inferredthat neither of private respondents acted in

representation of the other; each of the private respondents had its own obligations, in

view of conferring a favorupon petitioners. T h e am en d ed co mpl a i n t f u r th e r

a l l ege s t h a t r es po nd en t U P has an obligation to transfer the subject parcel of

land to the city government so that the latter can in turn comply with its obligations to make

improvements on theland and thereafter transfer the same to petitioners but that, in

breach of thisobligation, UP failed to deliver the title to the land to the city

government andthen revoked the deed of donation after the latter failed to fulfill its

obligationswithin the time allowed in the contract. For the purpose of determining

thesufficiency of petitioners‘ cause of action, these allegations of the

amendedcomplaint must be deemed to be hypothetically true. So assuming the truth

of the allegations, we hold that petitioners have a cause of action against UP.I t i s h a rd l y

n ecess a r y t o s t a t e t h a t ou r con c lus io n t h a t p e t i t i on e rs ‘ complaint states a cause

of action against respondents is in no wise a ruling on

the merits. That is for the trial court to determine in light of respondent

UP‘sd e f e n s e t h a t t h e d o n a t i o n t o t h e Q u e z o n C i t y g o v e r n m e n t ,

u p o n w h i c h petitioners rely, has been validly revoked. Respondents contend, however,

thatthe trial court has already found that the donation (on which petitioners base their

action) has already been revoked. This contention has no merit. The trial court‘s ruling

on this point wasm ad e in co nn ec t i on wi th pe t i t i o ne r s ‘ ap p l i c a t i on fo r a wr i t

o f p r e l imi n ar y injunction to stop respondent UP from ejecting petitioners. The trial court

deniedi n ju n c t i on o n t h e g r o un d t h a t t h e d on a t i on h ad a l r ead y b een rev ok ed

an d therefore petitioners had no clear legal right to be protected. It is evident

thatthe trial court‘s ruling on this question was only tentative, without prejudice

tothe final resolution of the question after the presentation by the parties of theirevidence. The

decision of the Court of Appeals is reversed and the case is remandedto the RTC of Quezon City

for trial on the merits.

CONTRACTS CREATING REAL RIGHTS

SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCOvs.SPOUSES RENATO

CUYCO and FILIPINA CUYCOG.R. No. 168736 April 19, 2006FACTS: Petitioners obtained a loan in the amount of P1,500,000.00 fromrespondents payable

within one year at 18% interest

per annum

, an d s e c u r e d b y a R e a l E s t a t e M o r t g a g e o v e r a p a r c e l o f l a n d

w i t h improvements thereon situated in Cubao, Quezon City covered by a

TCT.S ubs equ en t l y, p e t i t i o ne r s ob t a in ed ad d i t i o n a l l o ans f r o m t h e respondents

in the aggregate amount of P1,250,000.00, broken down asfollows: (1) P150,000.00 on May

30, 1992; (2) P150,000.00 on July 1,1992; (3) P500,000.00 on September 5, 1992; (4)

P200,000.00 on October29, 1992; and (5) P250,000.00 on January 13, 1993.Petitioners made

payments amounting to P291,700.00, but failed tosettle their outstanding loan obligations.

Respondents filed a complaint

forforeclosure of mortgage with the RTC. They alleged that petitioners‘ loanswere secured by

the real estate mortgage; that as of August 31, 1997,their indebtedness amounted to

P6,967,241.14, inclusive of the 18% interest compounded monthly; and that petitioners‘

refusal to settle thesame entitles the respondents to foreclose the real estate

mortgage.P e t i t i o n e r s f i l e d a m o t i o n t o d i s m i s s o n t h e g r o u n d t h a t

t h e complaint states no cause of action which was denied by the RTC for lackof merit.

Petitioners admitted their loan obligations but argued that onlyt h e o r i g ina l l o an o f

P 1 , 50 0 , 00 0 . 00 w as s ecu red b y t h e r ea l e s t a t e mortgage at 18%

per annum

and that there was no agreement that thesame will be compounded monthly. T h e RT C

r en d er ed ju d gm ent i n f av o r o f t h e r es po n den t s and ordered the petitioners to

pay to the Court or to the respondents theamounts of P6,332,019.84, plus interest

until fully paid, P25,000.00 asattorney‘s fees, and costs of suit, within a period of

120 days from theen t r y o f j u d gm ent , and i n c a se o f d e f au l t o f su ch p aym en t

an d up on proper motion, the property shall be ordered sold at public auction

tosatisfy the judgment. The CA partially granted the petition and modified the RTC

decisioninsofar as the amount of the loan obligations secured by the real

estatemortgage. It held that by express intention of the parties, the real estatemortgage

secured the original P1,500,000.00 loan and the subsequent l o an s o f P1 50 ,0 00 .0 0

an d P5 00 ,0 00 .0 0 ob t a in ed on J u l y 1 , 1 9 92 and September 5, 1992,

respectively. As regards the loans obtained on May3 1 , 1 99 2 , Oc t ob e r 2 9 , 1 99 2

an d J an u ar y 1 3 , 199 3 in t he am ou n t s o f P150,000.00, P200,000.00 and

P250,000.00, respectively, the appellatetribunal held that the parties never intended

the same to be secured bythe real estate mortgage.Hence, this petition.

ISSUE: Whether or not petitioners must pay respondents legal interest of 12% per annum on

the stipulated interest of 18% per annum, computedfrom the filing of the complaint until

fully paid.

RULING: A p p l yi n g th e r u l es i n t h e com put a t io n o f i n t e re s t , t h e p r inc i p a l am ou n t o f

l o an s su b j ec t o f t he r e a l e s t a t e m o r t gage m us t e a r n th e stipulated interest of 18%

per annum,

which

interest, as long as unpaid,also earns legal interest of 12%

per annum

, computed from the date of the filing of the complaint on September 10, 1997 until

finality of theCourt‘s Decision. Such interest is not due to stipulation but due to

themandate of the law as embodied in Article 2212 of the Civil Code. From such date

of finality, the total amount due shall earn interest of 12%

per annum

until satisfiedCertainly, the computed interest from the filing of the complaint onSeptember 10,

1997 would no longer be true upon the finality of thisC o u r t ‘ s dec i s io n . In

acco rd an ce wi t h the r u l es l a i d do w n in

EasternShipping Lines, Inc. v. Court of Appeals

, t h e S C de r iv ed t he f o l l o win g formula for the RTCs guidance: TOTAL AMOUNT

DUE = [principal + interest + interest on interest] -partial payments madeInterest = principal x

18 %

per annum

x no. of years from due dateuntil finality of judgmentIn t e r e s t o n i n t e re s t = In t e r es t

co mp ut ed as o f t h e f i l i n g o f t h e complaint (September 10, 1997) x 12% x no. of

years until finality of judgment Total amount due as of the date of finality of judgment will

earn aninterest of 12% per annum until fully paid.H en ce , t h e SC a f f i rm ed t h e CA

d ec i s i on wi t h m od i f i c a t i on s . I t ordered petitioners to pay the respondents (1) the

total amount due, ascomputed by the RTC in accordance with the formula specified above,

(2)the legal interest of 12%

per annum

on the total amount due from suchf i n a l i t y u n t i l f u l l y p a id , ( 3 ) t h e r e as o nab l e

am ou n t o f P 25 ,0 00 .0 0 a s attorney‘s fees, and (4) the costs of suit, within a period of not

less than90 days nor more than 120 days from the entry of judgment, and in caseof default of

such payment the property shall be sold at public auction tosatisfy the judgment.

TORTIOUS INTERFERENCE1 . S O V S . C A , S E P T . 2 1 ,

1 9 9 9 2 . T A Y A G V S . C A , 2 5 M A R C H 2 0 0 4 SO PING BUN VS. COURT

OF APPEALS314 SCRA 751FACTS:

In 1963, Tek Hua Trading Co., through its managing partner, So Pek Giok,entered into lease

agreements with lessor Dee C. Chuan and Sons Inc (DCCSI).Subjects of four (4) lease

contracts were premises located at Nos. 930, 930- Int.,924-B and 924-C, Soler Street, Binondo,

Manila. Tek Hua used the areas to storeits textiles. The contracts each had a one year term. They

provided that shouldthe lessee continue to occupy the premises after the term, the lease shall be

ona month to month basis.When the contracts expired, the parties did not renew the

contracts, but Tek Hua continued to occupy the premises in 1976 Tek Hua Trading Corp.

wasdissolved. Later, the original members of Tek Hua Trading Co., including ManuelC.Tiong,

formed Tek Hua Enterprising Corp., herein respondent corporation.So Pek Giok, managing

partner of Tek Hua Trading, died in 1986. So PekGiok‘s grandson, petitioner So Ping Bun,

occupied the warehouse for his owntextile business, Trendsetter Marketing.O n A u gus t

1 , 1 98 9 , l e s so r DCCS I s en t l e t t e r s add r e s s ed t o T ek H u a enterprises, informing

the latter of the 25% increase in rent effective September1, 1989. The rent increase was

later on reduced to 20% effective January 1,1990, upon other lessees‘ demand.

Again on December 1, 1990, the lessorimplemented a 30% rent increase. Enclosed

in these letters were new leasecontracts for signing. DCCSI warned that failure of the lessee

to accomplish theco n t rac t s s h a l l b e d eem ed as l a ck o f i n t e r e s t o n th e l e s see ‘ s

p a r t , and agreement to the termination of the lese. Private respondents did not

answerany of these letters. Still, the lease contracts were not rescinded.On March 1, 1991,

private respondent Tiong sent a letter to petitionerasking Mr. So Ping Bun to vacate the

premise because he used a warehouse.Petitioner refused to vacate. On March 4, 1992,

petitioner requestedformal contracts of lease with DCCSI in favor Trendsetter Marketing. So

Ping Bunc l a i m ed th a t a f t e r t h e d ea t h o f h i s g r an d f a th e r , S o P ek G io k , h e

h ad b een occupying the premises for his textile business and religiously paid rent. DCCSI

acceded to petitioner‘s request. The lease contracts in favor of Trendsetter wereexecuted.

ISSUE: Whether the appellate court erred in affirming the trial court‘s decision finding So

Ping Bun guilty of tortuous interference of contact.

RULING: In the instant case, it is clear that petitioner So Ping Bun prevailed uponDCCSI to

lease the warehouse to his enterprise at the expense of respondentcorporation.

Though petitioner took interest in the property of respondent corporation and benefited

from it, nothing on record imputes deliberate wrongfulmotives or malice on him.A duty which

the law of torts is concerned with is respect for the propertyof others, and cause of action

ex delicto

may be predicated upon an unlawfulinterference by one person of the enjoyment by the

other of his private property. This may pertain to a situation where a third person

induces a party to renegeon or violate his undertaking under a contract. In the case before us,

petitioner‘s Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, andas a

result petitioner deprived respondent corporation of the latter‘s propertyr i gh t .

C l ea r l y, an d a s co r r ec t l y v i ewed b y t h e app e l l a t e cou r t , t h e t h r ee elements of

tort interference above mentioned are present in the instant case.Authorities debate on

whether interference may be justified where thedefendant 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 thebusiness relations of another exist where the actor‘s motive is

to benefit himself.Such justification does not exist where his sole motive is to cause

harm to theother. Added to this, some authorities believe that it is not necessary

that theinterferer‘s interest outweigh that o f the party whose rights are invaded,

andthat an individual acts under an economic interest that is substantial, not merelyI

de minimis

for he acts in self protection. Moreover, justification for protectingones financial position

should not be made to depend on a comparison of hiseconomic interest in the subject

matter with that of others. It is sufficient if theimpetus of his conduct lies in a proper business

interest rather than in wrongfulmotives.As early as

Gilchrist vs. Cuddy

we held that where there was no malice inthe interference of a contract, and the impulse

behind one‘s conduct lies in aproper business interest rather than in wrongful

motives, a party cannot be amalicious interferer. Where the alleged interferer is

financially interested andsuch interest motivates his conduct it cannot be said that

he is an officious ormalicious intermeddler.

TORTIOUS INTERFERENCETAYAG VS. COURT OF APPEALS219 SCRA 481FACTS: Petitioners are the heirs of Juan Galicia, Sr. who are seeking to rescind thedeed of conveyance

executed by Galicia, Sr. together with Celerina Labuguin, infavor of Albrigido Leyva,

respondent involving the undivided one-half portion of apiece of land situated at Poblacion,

Guimba, Nueva Ecija. They contend thatrespondent is in breach of the con ditions of

the deed. Contained in the deedwere stipulations regarding the payment and settlement of

the purchase price of the land. The respondent however did not strictly comply this with. Despite

theposterior payments however, petitioners accepted them. Respondent, on

theco n t en t i on th a t h e fu l f i l l ed h i s o b l i ga t i on t o pa y f i l ed th i s c a s e fo r

s p ec i f i c performance by the petitioners. The court of origin which tried the suit for specific

performance on accountof the herein petitioner‘s reluctance to abide by the covenant,

ruled in favor of the vendee while respondent court practically agreed with the trial court

exceptas to the amount to be paid to petitioners and the refund to private respondentare

concerned.

ISSUE: The issue is whether or not petitioners‘ prayer for the rescission of thedeed can

prosper.

RULING: The Supreme Court affirmed the decision of the lower courts. The suggestion of petitioners that

the covenant must be cancelled in thelight of private respondent‘s so-called breach

seems to overlook petitioners‘demeanor who, instead of immediately filing the case

precisely to rescind theinstrument because of non-compliance, allowed private

respondent to effectnumerous payments posterior to the grace periods provided in

the contract. This apathy of pet itioners, who even permitted private respondent to

take the

initiative in filing the suit for specific performance against them, is akin to waiverof

abandonment of the right to rescind.STAGES IN THE EXECUTION OF A CONTRACT –

CONSUMMATION/TERMINATION

METROPOLITAN MANILA DEVELOPMENT AUTHORITY,

petitioner,

VS. JANCOM ENVIRONMENTAL CORPORATION and JANCOMINTERNATIONAL

DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA,

respondents

January 30, 2002G.R. No. 147465FACTS: The Philippine Government under the Ramos Administration, and throughthe Metro Manila

Development Authority (MMDA) Chairman, and the CabinetOfficer for Regional

Development-National Capital Region (CORD-NCR), enteredinto a contract with herein

respondent JANCOM, on waste-to-energy projects forthe waste disposal sites in San

Mateo, Rizal and Carmona, Cavite under thebuild-operate-transfer (BOT)

scheme.However, before President Ramos could have signed the said contract, there

was a change in the Administration and EXECOM. Said change caused thepassage of the law,

the Clean Air Act, prohibiting the incineration of garbage andthus, against the contents of said

contract. The Philippine Government, throughthe MMDA Chairman, declared said

contract inexistent for several reasons.Herein respondent filed a suit against petitioner. The

Regional Trial Court ruledin favor of the respondent. Instead of filing an appeal to the decision,

petitionerfiled a writ of certiorari on the Court of Appeals, which the latter granted.

TheRegional Trial Court declared its decision final and executory, for which

thepetitioner appealed to the CA, which the CA denied such appeal and

affirmingRTC‘s decision.

ISSUE: Whether or not a valid contract is existing between herein petitioner andrespondent.

RULING: Under Article 1305 of the C ivil Code, ―a contract is a meeting of mindsbetween two

persons whereby one binds himself, with respect to the other, to give something or to

render some service.‖ A contract undergoes three distincts t a g e s - p r e p a r a t i o n o r

n e g o t i a t i o n , i t s p e r f e c t i o n , a n d f i n a l l y , i t s consummation. Negotiation

begins from the time the prospective contractingp a r t i e s m an i fes t t h e i r i n t e r e s t

i n t h e con t r ac t an d en ds a t t h e mo m ent o f agreement of the parties. The

perfection or birth of the contract takes placewhen the parties agree upon the

essential elements of the contract. The laststage is the consummation of the contract

wherein the parties fulfill or performt h e t e r m s ag r eed up on in t h e co n t r ac t ,

cu lmi n a t i n g i n t h e ex t in gu i s hm en t thereof. Article 1315 of the Civil Code, provides

that a contract is perfected bymere consent. Consent, on the other hand, is manifested by the

meeting of theoffer and the acceptance upon the thing and the cause which are to

constitutethe contract. In the case at bar, the signing and execution of the contract by

theparties clearly show that, as between the parties, there was a concurrence of offer

and acceptance with respect to the material details of the contract, therebygiving rise to the

perfection of the contract. The execution and signing of thecontract is not disputed

by the parties. As the Court of Appeals aptly held:Contrary to petitioners‘

insistence that there was no perfected contract, themeeting of the offer and acceptance

upon the thing and the cause, which are toconstitute the contract (Arts. 1315 and 1319,

New Civil Code), is borne out bythe records.Admittedly, when petitioners accepted private

respondents‘ bid proposal(offer), there was, in effect, a meeting of the minds upon the

object (wastemanagement project) and the cause (BOT scheme). Hence, the perfection of

thecontract. In

City of Cebu vs. Heirs of Candido Rubi

, the Supreme Court held that―the effect of an unqualified acceptance of the offer or

proposal of the bidder isto perfect a contract, upon notice of the award to the bidder.In fact,

in asserting that there is no valid and binding contract between the parties, MMDA can

only allege that there was no valid notice of award; thatthe contract does not bear the signature of

the President of the Philippines; andthat the conditions precedent specified in the contract were

not complied with.In asserting that the notice of award to JANCOM is not a proper

notice of award, MMDA points to the Implementing Rules and Regulations of Republic

ActNo. 6957, otherwise known as the BOT Law, which require that i) prior to

thenotice of award, an Investment Coordinating Committee clearance must first beobtained; and

ii) the notice of award indicate the time within which the awardeeshall submit the prescribed

performance security, proof of commitment of equitycontributions and indications of financing

resources.

A d m i t t e d l y , t h e n o t i c e o f a w a r d h a s n o t c o m p l i e d w i t h

t h e s e requirements. However, the defect was cured by the subsequent execution of

t h e con t r ac t en t e r ed i n t o an d s i gn ed by au t h o r i z ed r ep re sen t a t i v es o f

t h e parties; hence, it may not be gainsaid that there is a perfected contract existingbetween the

parties giving to them certain rights and obligations (conditionsprecedents) in

accordance with the terms and conditions thereof. We borrowthe words of the Court of

Appeals:Petitioners belabor the point that there was no valid notice of award as toconstitute

acceptance of private respondent‘s offer. They maintain that formerMMDA Chairman Oreta‘s

letter to JANCOM EC dated February 27, 1997 cannot beco n s id e r ed as a v a l id n o t i c e

o f aw a r d as i t do es n o t comp l y w i t h t he r u l es implementing Rep. Act No. 6957, as

amended. The argument is untenable.

ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE1 .R OC KL AN D VS. MI D -

PA S I G L AN D DEV ELO PME NT 2 . M A N I L A M E T A L V S .

P N B 3 . M O N T E C I L L O V S . R E Y N E S , 3 8 5 S C R A 2 4 4 4 . S O L E R

V S . C A , 3 5 8 S C R A 5 7 5 . P A L A T T A O V S . C A , M A Y 7 ,

2 0 0 2 6 . A B S - C B N V S . C A , J A N . 2 1 , 1 9 9 9

ROCKLAND CONSTRUCTION COMPANY, INC vs. MID-PASIG

LANDDEVELOPMENT CORPORATIONG.R. No. 164587, February 04, 2008 Rockland Construction Company, Inc. in a letter dated March 1,2000, offered to lease

from Mid-Pasig Land Development Corporation thelatter‘s 3.1-hectare property in Pasig

City. This property is covered by Transfer Certificate of Title Nos. 469702 and 337158

under the control of the Presidential Commission on Good Government. Upon

instruction of Mid-Pasig to address the offer to the PCGG, Rockland wrote the PCGG onApril

15, 2000. The letter, addressed to PCGG Chairman Magdangal Elma,included Rockland‘

proposed terms and conditions for the lease. Thisletter was also received by Mid -

Pasig on April 18, 2000, but Mid-Pasigmade no response.A ga i n , i n an o t h er l e t t e r

d a t ed J un e 8 , 2 00 0 ad d r es s ed to t h e Chairman of Mid-Pasig, Mr. Ronaldo Salonga,

Rockland sent a MetropolitanBank and Trust Company Check No. 2930050168 for P1 million as

a signof its good faith and readiness to enter into the lease agreement under t h e

ce r t a i n t e rm s and co n d i t i on s s t i pu la t ed i n t h e l e t t e r . M id - P as i g received this

letter on July 28, 2000.In a subsequent follow-up letter

dated February 2, 2001, Rocklandthen said that it presumed that Mid-Pasig had accepted its

offer becausethe P1 million check it issued had been credited to Mid-Pasig‘s account

onDecember 5, 2000.M i d -P as i g , h ow ev er , d en i ed i t a ccep ted R o ck l and ‘ s o f f e r

an d claimed that no check was attached to the said letter. It also vehementlyd en i ed

r ece iv in g t h e P 1 mi l l i o n ch eck , m u ch l e s s d ep os i t i n g i t i n i t s account.In its

letter dated February 6, 2001, Mid-Pasig replied to Rocklandthat it was only upon

receipt of the latter‘s February 2 letter that theformer came to know where the

check came from and what it was for.N ev e r t he l es s , i t c a t egor i ca l l y i n fo r med

R o ck l and t ha t i t cou ld n o t entertain the latter‘s lease application. Mid-Pasig reiterated its

refusal of Rockland‘s offer in a letter dated February 13, 2001.Rockland then filed an action

for specific performance. Rocklandsought to compel Mid-Pasig to execute in Rockland‘s

favor, a contract of lease over a 3.1-hectare portion of Mid-Pasig‘s property in Pasig City. The

RTC‘s decision:1.the plaintiff and the defendant have duly agreed upon a valid

andenforceable lease agreement of subject portions of defendant‘s p r o p e r t i e s

co mp r i s in g an a r ea o f 5 ,0 00 s qu a r e m et e r s , 11 ,0 00 sq u a re m et e r s an d

1 5 ,0 00 sq u a r e m e te r s , o r a t o t a l o f 31 ,0 0 0 square meters;2.the principal terms

and conditions of the aforesaid lease agreementare as stated in plaintiff‘s June 8, 2000

letter;3.defendant to execute a written lease contract in favor of the plaintiff containing the

principal terms and conditions mentioned in thenext-preceding paragraph, within sixty

(60) days from finality of this j ud gm en t , an d l i k ew is e o rd e r i n g t he p l a i n t i f f t o

p a y r en t t o t h e defendant as specified in said terms and conditions;4 . d e f e n d a n t t o

k e e p a n d m a i n t a i n t h e p l a i n t i f f i n t h e p e a c e f u l possession and

enjoyment of the leased premises during the termof said contract;

5.defendant to pay plaintiff attorney‘s fees in the sum of One Million Pesos

(P1,000,000.00), plus P2,000.00 for every appearance madeby counsel in court;6 . T h e

t e m p o r a r y r e s t r a i n i n g o r d e r d a t e d A p r i l 2 , 2 0 0 1 i s

m a d e PERMANENT;7.Dismissed defendant‘s counterclaim. The Court of Appeals

reversed the trial court‘s decision.

ISSUES: 1.Was there a perfected contract of lease?2.Had estoppel in pais set in?

RULING: 1 . A c l o s e r e v i e w o f t h e e v e n t s i n t h i s c a s e , i n t h e l i g h t o f

t h e parties‘ evidence, shows that there was no perfected contract of leasebetween

the parties. Mid-Pasig was not aware that Rockland depositedthe P1 million check

in its account. It only learned of Rockland‘s checkwhen it received Rockland‘s

February 2, 2001 letter. Mid-Pasig, uponinvestigation, also learned that the check was

deposited at the PhilippineNational Bank San Juan Branch, instead of PNB Ortigas Branch

where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland

onFebruary 6, 2001 rejecting the offer, and proposed that Rockland applythe P1

million to its other existing lease instead. These circumstances clearly show that there

was no concurrence of Rockland‘s offer and Mid-Pasig‘s acceptance.

2.

M id -P as i g i s a l so no t i n e s t op p e l

i n p a i s

. Th e d oc t r in e o f estoppel is based on the grounds of public policy, fair dealing, good

faithand justice, and its purpose is to forbid one to speak against his own act,representations, or

commitments to the injury of one to whom they weredirected and who reasonably relied

thereon. Since estoppel is based onequity and justice, it is essential that before a person can

be barred fromasserting a fact contrary to his act or conduct, it must be shown that suchact or

conduct has been intended and would unjustly cause harm to thosewho are misled if the principle

were not applied against him.Hence, the petition was denied.

ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, VS.

JANCOMENVIRONMENTAL CORPORATIONG.R. No. 147465 January 30, 2002FACTS: The Philippine Government under the Ramos Administration, and through the Metro

Manila Development Authority (MMDA) Chairman, andthe Cabinet Officer for Regional

Development-National Capital Region(CORD-NCR), entered into a contract with

respondent JANCOM, on waste-to-energy projects for the waste disposal sites in San

Mateo, Rizal andCarmona, Cavite under the build-operate-transfer (BOT) scheme.

However, before President Ramos could have signed the said contract, there was a

change in the Administration and EXECOM. Said change caused thepassage of the law, the

Clean Air Act, prohibiting the incineration of garbage andthus, against the contents of said

contract. The Philippine Government, throughthe MMDA Chairman, declared said

contract inexistent for several reasons.Herein respondent filed a suit against

petitioner. The Regional Trial Court ruledin favor of the respondent. Instead of filing an

appeal to the decision, petitionerfiled a writ of certiorari on the Court of Appeals, which

the latter granted. TheRegional Trial Court declared its decision final and

executory, for which thepetitioner appealed to the CA, which the CA denied such

appeal and affirmingRTC‘s decision.

ISSUE: Whether or not a valid contract is existing between herein petitionerand respondent.

RULING: Under Article 1305 of the Civil Code, ―a contract is a meeting of minds between

two persons whereby one binds himself, with respect to

t h e o th e r , t o g i v e so m eth in g o r t o r end e r s om e s e r v i ce . ‖ A

co n t r ac t undergoes three distinct stages- preparation or negotiation, its perfection,and finally,

its consummation. Negotiation begins from the time theprospective contracting parties

manifest their interest in the contract andends at the moment of agreement of the parties. The

perfection or birthof the contract takes place when the parties agree upon the

essentialelements of the contract. The last stage is the consummation of thecontract

wherein the parties fulfi ll or perform the terms agreed upon inthe contract, culminating

in the extinguishment thereof. Article 1315 of the Civil Code, provides that a contract is

perfected by mere consent.Consent, on the other hand, is manifested by the meeting of the

offer andthe acceptance upon the thing and the cause which are to constitute thecontract. In the

case at bar, the signing and execution of the contract byt h e p a r t i e s c l ea r l y s h o w th a t , a s

b e tw een t h e p a r t i e s , t h e r e was a concurrence of offer and acceptance with respect to the

material detailsof the contract, thereby giving rise to the perfection of the contract.

Theexecution and signing of the contract is not disputed by the parties. Asthe Court

of Appeals aptly held: Contrary to petitioners‘ insistence that there was no perfected

contract, the meeting of the offer and acceptanceupon the thing and the cause, which are to

constitute the contract (Arts.1315 and 1319, New Civil Code), is borne out by the

records.Admittedly, when petitioners accepted private respondent s‘ bidproposal

(offer), there was, in effect, a meeting of the minds upon theobject (waste management

project) and the cause (BOT scheme). Hence,the perfection of the contract. In

City of Cebu vs. Heirs of Candido Rubi

,the Supreme Court held that ―the effect of an unqualified acceptance of the offer or

proposal of the bidder is to perfect a contract, upon notice of the award to the bidder.In f a c t ,

i n a s s e r t i n g t ha t t he r e i s no v a l id an d b in d i n g con t rac t between the parties,

MMDA can only allege that there was no valid noticeof award; that the contract does not bear

the signature of the President of t h e Ph i l i pp i ne s ; an d th a t t h e cond i t i on s p reced en t

s p ec i f i ed i n t h e contract were not complied with.In asserting that the notice of award

to JANCOM is not a propernotice of award, MMDA points to the Implementing Rules and

Regulationsof Republic Act No. 6957, otherwise known as the BOT Law, which requiret h a t

i ) p r i o r t o t h e n o t i c e o f a w a r d , a n I n v e s t m e n t

C o o r d i n a t i n g Committee clearance must first be obtained; and ii) the notice of

awardindicate the time within which the awardee shall submit the

prescribedperformance security, proof of commitment of equity contributions

andindications of financing resources.A d mi t t ed l y, t he n o t i c e o f awa r d h a s no t

co mpl i ed w i th t h ese r eq u i r em en t s . How ev e r , t he de f ec t was cu r ed b y t h e

s ub s eq u en t e x e c u t i o n o f t h e c o n t r a c t e n t e r e d i n t o a n d s i g n e d b y

a u t h o r i z e d representatives of the parties; hence, it may not be gainsaid that there isa

perfected contract existing between the parties giving to them certainrights and obligations

(conditions precedents) in accordance with thet e r m s and con d i t i on s t h e r eo f . W e

b o r ro w th e w o rds o f t h e Co u r t o f Appeals:Petitioners belabor the point that there was

no valid notice of awardas to constitute acceptance of private respondent‘s offer. They

maintainthat former MMDA Chairman Oreta‘s letter to JANCOM EC dated February27, 1997

cannot be considered as a valid notice of award as it does not comply with the rules

implementing Rep. Act No. 6957, as amended. Theargument is untenable.

ELEMENTS OF CONSENT: OFFER AND ACCEPTANCEMONTECILLO VS. REYNES385

SCRA 244FACTS: Respondents Ignacia Reynes and spouses Abucay filed on June 20, 1984 acomplaint for

Declaration of Nullity and Quieting of Title against petitioner RicoMontecillo. Reynes

asserted that she is the owner of a lot situated in Mabolo,Cebu City. In 1981 Reynes

sold 185 square meters of the Mabolo Lot to theAbucay Spouses who built a residential

house on the lot they bought.

Reynes alleged further that on March 1, 1984, she signed a Deed of Saleof the Mabolo Lot in

favor of Montecillo. Reynes, being illiterate signed byaffixing her thumb - mark on

the document. Montecillo promised to pay theagreed P47,000.00 purchase price

within one month from the signing of theDeed of Sale.Reynes further alleged that

Montecillo failed to pay the purchase priceafter the lapse of the one -month period,

prompting Reynes to demand fromMontecillo the return of the Deed of Sale. Since

Montecillo refused to return theDeed of Sale, Reynes executed a document unilaterally

revoking the sale andgave a copy of the document to Montecillo.Subsequently, on May 23,

1984 Reynes signed a Deed of Sale transferringto the Abucay Spouses the entire Mabolo

Lot, at the same time confirming theprevious sale in 1981 of a 185 square meter portion of

the lot.R eyn es an d t he A bu cay S p o us es a l l eged t ha t on J une 18 , 19 84

t h eyreceived information that the Register of Deeds of Cebu City issued Certificate of Title No.

90805 in the name of Montecillo for the Mabolo Lot.Reynes and the Abucay Spouses

argued that ―for lack for consideration there (was) no meeting of the minds) between

Reynes and Montecillo. Thus, thetrial court should declare null and void ab initio

Monticello‘s Deed of sale, andorder the cancellation of certificates of title No. 90805 in the

name of Montecillo.In his Answer, Montecillo a bank executive with a BS Commerce

degree,claimed he was a buyer in good faith and had actually paid the

P47,000.00consideration stated on his Deed of Sale. Montecillo however admitted

he stillowned Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00for the

release of the chattel mortgage which he argued constituted a lien on theMabolo Lot. He

further alleged that he paid for the real property tax as well asthe capital gains tax on

the sale of the Mabolo Lot.In their reply, Reynes and the Abucay Spouses contended that

Montecillodid not have authority to discharge the chattel mortgage especially after

Reynesr ev o k ed Mo ntec i l l o ‘ s Deed o f S a l e an d gav e th e mor t gagee a co p y o f

t h ed o cum ent o f r evo ca t io n . R eyn es and t h e Ab u cay S p ous e s c l a im ed

t h a t Montecillo secured the release of the chattel mortgage through machination.

They further asserted that Montecillo took advantage of the real property taxespaid by the

Abucay Spouses and surreptitiously caused the transfer of the title tothe Mabolo Lot in his

name.During pre-trial Montecillo claimed that the consideration for the sale of t h e

M a b o l o L o t w a s t h e a m o u n t h e p a i d t o C e b u I c e d a n d C o l d

S t o r a g e Corporation for the mortgage debt. Of Bienvenido Jayag. Montecillo argued thatthe

release of the mortgage was necessary since the mortgage constituted a lienon the Mabolo

Lot.Reynes, however stated that she had nothing to do with Jayag‘s mortgagedebt except that the

house mortgaged by Jayag stood on a portion of the MaboloLo t . R eyn es f u r th e r s t a t ed

t h a t t h e p a ym en t by M o n t ec i l l o t o r e l e a s e th e mortgage on Jayag‘s house is a matter

between Montecillo and J a yag . T h e mo r t gage on t h e ho us e b e i ng a ch a t t e l

m o r t gage cou l d no t b e interpreted in any way as an encumbrance on the Mabolo

Lot. Reynes furtherc l a im ed th a t t h e m o r tgage d eb t h ad lo n g p r e s c r ib ed s in ce

t h e P 47 ,0 00 .0 0 mortgage debt was due for payment on January 30,1967.

ISSUE: Whether or not there was a valid consent in the case at bar to have a validcontract.

RULING: One of the three essential requisites of a valid contract is consent of the parties on the

object and cause of the contract. In a contract of sale, the paritiesmust agree not only on the

p[rice, but also on the manner of payment of theprice. An agreement on the price

but a disagreement on the manner of itspayment will not result in consent, thus

preventing the existence of a validcontract for a lack of consent. This lack of

consent is separate and distinct forlack of consideration where the contract states

that the price has been paidwhen in fact it has never been paid.Reynes expected Montecillo

to pay him directly the P47, 000.00 purchaseprice within one month after the signing of the Deed

of Sale. On the other hand,Montecillo thought that his agreement with Reynes required him to

pay the P47,000.00-purchase price to Cebu Ice Storage to settle Jayag‘s mortgage

debt.Montecillo also acknowledged a balance of P10, 000.00 in favor of

Reynesalthough this amount is not stated in Montecillo‘s Deed of Sale. Thus, there wasno

consent or meeting of the minds, between Reynes and Montecillo on the manner of

payment. This prevented the existence of a valid contract because of lack of consent.In summary,

Montecillo‘s Deed of Sale is null and void

ab initio

not only forlack of consideration, but also for lack of consent. The cancellation of

TCT No.

90805 in the name of Montecillo is in order as there was no valid contract transferring

ownership of the Mabolo Lot from Reynes to Montecillo.

ELEMENTS OF CONSENT: OFFER AND ACCEPTANCE JASMIN SOLER, petitioner,VS.

COURT OF APPEALS, COMMERCIAL BANK OF MANILA, andNIDA LOPEZ,

respondentsMay 2, 2001G.R. No. 123892FACTS: Petitioner is a professional interior designer. In November 1986, her friendR os a r i o P a rd o

a s k ed h e r t o t a l k t o N id a Lo p ez , wh o w as m an age r o f t h e COMBANK Ermita

Branch for they were planning to renovate the branch offices.E v en p r i o r t o No vemb er

1 9 86 , pe t i t i o ne r and Ni da Lo p ez k n ew each o th e r because of Rosario Pardo,

the latter‘s sister. During their meeting, petitionerwas hesitant to accept the job

because of her many out of town commitments, and also considering that Ms. Lopez was

asking that the designs be submitted byDecember 1986, which was such a short notice.

Ms. Lopez insisted, however,because she really wanted petitioner to do the design for

renovation. Petitioneracceded to the request. Ms. Lopez assured her that she would be

compensatedfor her services. Petitioner even told Ms. Lopez that her professional fee

wasP10,000.00, to which Ms. Lopez acceded.During the November 1986 meeting

between petitioner and Ms. Lopez,there were discussions as to what was to be renovated.

Ms. Lopez again assuredp e t i t i o ne r t ha t t h e b ank wo u ld p a y h e r f e e s . A f t e r a

f ew d a ys , p e t i t i o n er requested for the blueprint of the building so that the proper

design, plans andspecifications could be given to Ms. Lopez in time for the board

meeting inDecember 1986. Petitioner then asked her draftsman Jackie Barcelon to

go tothe jobsite to make the proper measurements using the blue print.

Petitioneralso did her research on the designs and individual drawings of what the

bankw an t ed . P e t i t i on e r h i r ed En g i nee r O r t an ez to m ak e t he e l e c t r i c a l

l a yo u t , architects Frison Cruz and De Mesa to do the drafting. For the services renderedby

these individuals, petitioner paid their professional fees. Petitioner also contacted the

suppliers of the wallpaper and the sash makers for their quotation.So come December 1986,

the lay out and the design were submitted to Ms.Lopez. She even told petitioner that she

liked the designs.Subsequently, petitioner repeatedly demanded payment for her

servicesbut Ms. Lopez just ignored the demands. In February 1987, by chance petitioneran d

M s . Lo p ez s aw each o th e r i n a con ce r t a t t h e Cu l tu r a l C en t e r o f

t h e Philippines. Petitioner inquired about the payment for her services, Ms.

Lopezcurtly replied that she was not entitled to it because her designs did not conformt o t h e

b ank ‘ s po l i cy o f h av in g a s t and a rd de s i gn , and th a t t h e r e w as n o agreement

between her and the bank.P e t i t i on e r , t h r ou gh h e r l aw ye r s , w ho w r o t e M s .

Lo p ez , d em an d i n g payment for her professional fees in the amount of P10,000.00 which Ms.

Lopezignored. The lawyers wrote Ms. Lopez once again demanding the return of

theblueprint copies petitioner submitted which Ms. Lopez refused to return.

Thepetitioner then filed at the trial court a complaint against COMBANK and

Ms.Lopez for collection of professional fees and damages.In i t s ans w er , C OM BA N K

s t a t ed t ha t t h e r e was n o con t r ac t b e tween COMBANK and petitioner; that Ms.

Lopez merely invited petitioner to participatein a bid for the renovation of the

COMBANK Ermita Branch; that any proposalwas still subject to the approval of the

COMBANK‘s head office. The trial court rendered judgment in favor of plaintiff. On

appeal, theCourt of Appeals reversed the decision. Hence, this petition.

ISSUE: Whether or not the Court of Appeals erred in ruling that there was nocontract

between petitioner and respondents, in the absence of the element of consent.

RULING: A contract is a meeting of the minds between two persons whereby one binds himself

to give something or to render some service to bind himself to givesomething to render some

service to another for consideration. There is nocontract unless the follo wing

requisites concur: 1. Consent of the contractingparties; 2. Object certain which is

the subject matter of the contract; and 3.Cause of the obligation which is established.In

the case at bar, there was a perfected oral contract. When Ms. Lopez and petitioner met

in November 1986, and discussed the details of the work, thefirst stage of the contract

commenced. When they agreed to the payment of theP10,000.00 as professional fees of

petitioner and that she should give thedesigns before the December 1986 board meeting of

the bank, the second stageof the contract proceeded, and when finally petitioner gave

the designs to Ms.

Lo p ez , t h e con t rac t w as co ns umm at ed . P e t i t i o n er b e l i ev ed t h a t on ce

s h es ub mi t t ed th e de s i gns sh e wo u ld be p a i d he r p r o f e s s io n a l f e e s . M s .

Lo p ez assured petitioner that she would be paid.It is familiar doctrine that if a

corporation knowingly permits one of itsofficers, or any other agent, to act within

the scope of an apparent authority, itholds him out to the public as possessing the power to

do those acts; and thus,t h e co r po r a t i on wi l l , a s aga i ns t an yo n e w ho h a s i n go od

f a i t h d ea l t w i th i t through such agent, be estopped from denying the agent‘s authority.

A ls o , p e t i t i on e r m ay b e p a id o n t h e b as i s o f qu an t um m eru i t . " I t i s essential

for the proper operation of the principle that there is an acceptance of t h e b en e f i t s b y o n e

s ou gh t t o b e ch a r ged fo r t h e s e rv i ce s ren d e red un d e r circumstances as

reasonably to notify him that the lawyer performing the taskw as ex p ec t i n g t o be

p a id com p en s a t i on t h e r e f o r . T he d o c t r i n e o f qu an tum meruit is a device to

prevent undue enrichment based on the equitable postulatethat it is unjust for a person to retain

benefit without paying for it." The designs petitioner submitted to Ms. Lopez were not

returned. Ms.Lo p ez , an o f f i c e r o f t h e b an k a s b r an ch m anage r us ed s u ch

d e s i gn s fo r presentation to the board of the bank. Thus, the designs were in fact

useful toMs. Lopez for she did not appear to the board without any designs at the time of the

deadline set by the board.Decision reversed and set aside. Decision of the trial court affirmed.

ELEMENTS OF CONSENT: OFFER AND ACCEPTANCEPALATTAO VS. COURT OF

APPEALS381 SCRA 681MAY 7, 2002FACTS: Petitioner Yolanda Palattao interred into a lease contract whereby sheleased to

private respondent a house and a 490-square-meter lot located in101 Caimito Road,

Caloocan City, covered by Transfer Certificate of Title No.247536 and registered in

the name of petitioner. The duration of the leasecontract was for three years,

commencing from January 1, 1991, to December31, 1993, renewable at the option of the

parties. The agreed monthly rental wasP7,500.00 for the first year; P 8,000.00 for the second

year: and P8,500.l00 forthe third year. The contract gave respondent lessee the first option to

purchasethe leased property.During the last year of the contract, the parties began negotiations

for thesale of the leased premises to private respondent. In a letter dated April 2,

1993,petitioner offered to sell to private respondents 413.28 square m eters of

thel e a s e d l o t a t P 7 , 8 0 0 . 0 0 p e r s q u a r e m e t e r , o r f o r t h e t o t a l

a m o u n t o f P3 ,2 23 ,5 4 8 . 00 . p r iv a t e r e sp o nd en t s r ep l i ed on Ap r i l 15 , 19 93

w h e r e i n he informed petitioner that he ―shall definitely exercise his option to buy‖

theleased property. Private respondent, however, manifested his desire to buy thewhole 490-

square meters inquired from petitioner the reason why only 413.28square meters of

the leased lot were being offered for sale. In a letter dated November 6, 1993, petitioner

made a final offer to sell the lot at P 7,500.00 persquare meter with a down payment of

50% upon the signing of the contract of conditional sale, the balance payable in one

year with a monthly lease/interestpayment P 14,000.00 which must be paid on or before the

fifth day every monththat the balance is still outstanding. On November 7, 1993, private

respondentsaccepted petitioners offer and reiterated his request for respondent

acceptedpetitioner‘s offers and reiterated his request for clarification as to the size of thelot for

sale. Petitioner acknowledged private respondent‘s acceptance of the offer in his letter

dated November 10, 1993.Petitioner gave private respondent on or before November

24, 1993,w i t h i n w hich t o p ay t h e 5 0 % d o wn p aym en t i n c as h o r man age r ‘ s

ch eck . Petitioner stressed that failure to pay the downpayment on the stipulated periodwill

enable petitioner to freely sell her property to others. Petitioner likewise notified

private respondent, that she is no longer renewing the lease agreementupon its expiration on

December 31, 1993.P r iv a t e r es po nd en t d i d n o t a ccep t t h e t e rm s p ro pos ed b y

p e t i t i o ne r . Neither were there any documents of sale nor payment by private respondent of the

required downpayment. Private respondent wrote a letter to petitioner onNovember

29, 1993 manifesting his intention to exercise his option to renew t h e i r l e a s e

co n t r ac t f o r ano t h er t h r ee yea r s , s t a r t i n g J an u a r y 1 , 19 94 to December 31,

1996. This was rejected by petitioner, reiterating that she was nolonger renewing the lease.

Petitioner demanded that private respondent vacatethe premises, but the latter refused.Hence,

private respondent filed with the Regional Trial Court of Caloocan,Branch 127, a case for

specified performance, docketed as Civil Case No, 16287,s eek i n g to com p el p e t i t i on e r

t o s e l l t o h im th e l e a s ed p r op e r t y. P r iv a t e respondent further prayed for the

issuance of a writ preliminary injunction to

prevent petitioner from filing an ejectment case upon the expiration of the leasecontract on

December 31, 1993.During the proceedings in the specific performance case, the

partiesa g r eed to m ain t a in t h e

status quo

. A f t e r t h ey f a i l ed t o r e ach an ami cab le settlement, petitioner filed the instant

ejectment case before the Metropolitan Trial Court of Caloocan City, Branch 53. In

his answer, private respondentalleged that he refused to vacate the leased premises

because there was aperfected contract of sale of the leased property between him

and petitioner.Private respondent argued that he did not abandon his option to buy the

leasedp r o p e r t y an d th a t h i s p r op os a l t o r en ew th e l e as e w as b u t an

a l t e r n a t i v e proposal to the sale. He further contended that the filing of the

ejectment caseviolated their agreement to maintain the

status quo.

ISSUE: Whether or not there was a valid consent in the case at bar.

RULING: There was no valid consent in the case at bar.

C on t r ac t s t h a t a r e co ns ens u a l i n n a t u re , l i k e a co n t r ac t o f s a l e , a r e perfected

upon mere meeting of the minds. Once there is concurrence betweenthe offer and the

acceptance upon the subject matter, consideration, and ternsof payment, a contract

is produced. The offer must be certain. To convert theoffer into a contract, the

acceptance must be absolute and must not qualify theterms of the offer; it must be plain,

unequivocal, unconditional, and withoutvariance of any sort from the proposal. A

qualified acceptance, or one thatinvolves a new proposal, constitutes a counter -offer

and is a rejection of theoriginal offer. Consequently, when something is desired which is not

exactly isproposed in the offer, such acceptance is not sufficient to generate

consentbecause any modification or variation from the terms of the offer annuals

theoffer.In t h e cas e a t b a r , wh i l e i t i s t ru e t h a t p r iv a t e r es po n den t

i n fo rm ed petitioner that he is accepting the latter‘s offer to sell the leased property,

itappears that they did not reach an agreement as to the extent of the lot subjectof the proposed

sale.Letters reveal that private respondent did not give his consent to buy only413.28 square

meters of the leased lot, as he desired to purchase the whole 490square-meter- leased

premises which, however, was not what was exactlyp r o p o s ed i n p e t i t i o ne r ‘ s

o f f e r . C l ea r l y, t h e re f o r e , p r i v a t e r e spo n den t ‘ s acceptance of petitioner‘s offer

was not absolute, and will consequently notgenerate consent that would perfect a contract.

ELEMENTS OF CONSENT: OFFER AND ACCEPTANCEABS-CBN BROADCASTING

CORPORATIONVS. HONORABLE COURT OF APPEALS, REPUBLIC

BROADCASTING CORP.,VIVA PRODUCTIONS, INC., and VICENTE DEL

ROSARIOG.R. No. 128690 January 21, 1999301 SCRA 573FACTS: In 1 9 9 0 , A BS -C BN and V IV A ex ecu t ed a F i lm Ex h ib i t i on

A gr eem en t whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva films.

Viva,through defendant Del Rosario, offered ABS-CBN, through its vice-

presidentCharo Santos-Concio, a list of three (3) film packages (36 title) from which ABS-CBN

may exercise its right of first refusal under the afore-said agreement. ABS-CBN, however

through Mrs. Concio, "can tick off only ten (10) titles" (from the list) "we can

purchase" and therefore did not accept said list. The titles ticked off by Mrs. Concio are not

the subject of the case at bar except the film "MagingSino Ka Man."On February 27,

1992, defendant Del Rosario approached ABS-CBN‘s Ms.Concio, with a list consisting of

52 original movie titles (i.e., not yet aired ontelevision) including the 14 titles subject of

the present case, as well as 104 re-runs (previously aired on television) from which

ABS-CBN may choose another52 titles, as a total of 156 titles, proposing to sell to ABS-

CBN airing rights overt h i s p ack age o f 5 2 o r i g i na l s an d 52 r e - ru ns fo r

P 60 ,0 00 ,0 00 .0 0 o f w h ich P30,000,000.00 will be in cash and P30,000,000.00 worth of

television spots.On April 2, 1992, defendant Del Rosario and ABS-CBN‘s general

manager,Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discussthe

package proposal of VIVA. Mr. Lopez testified that he and Mr. Del Rosario allegedly

agreed that ABS-CBN was granted exclusive film rights to fourteen (14)f i l ms f o r a t o t a l

co ns id e r a t i on o f P36 m i l l i on ; t h a t h e a l l eged l y p u t t h i s agreement as to the

price and number of films in a "napkin" and signed it andgave it to Mr. Del Rosario.

On the other hand, Del Rosario denied having madeany agreement with Lopez regarding

the 14 Viva films; denied the existence of a

napkin in which Lopez wrote something; and insisted that what he and

Lopezdiscussed at the lunch meeting was Viva‘s film package offer of 104 films

(52originals and 52 re-runs) for a total price of P60 million.On April 06, 1992, Del Rosario and

Mr. Graciano Gozon of RBS Senior vice-president for Finance discussed the terms and

conditions of Viva‘s offer to sellthe 104 films, after the rejection of the same

package by ABS-CBN. On thefollowing day, Del Rosario received a draft contract

from Ms. Concio whichcontains a counter-proposal of ABS-CBN on the offer made by VIVA

including theright of first refusal to 1992 Viva Films. However, the proposal was

rejected bythe Board of Directors of VIVA and such was relayed to Ms. Concio.On April 29,

1992, after the rejection of ABS-CBN and following severalnegotiations and meetings

defendant Del Rosario and Viva‘s President TeresitaCruz, in consideration of P60 million,

signed a letter of agreement dated April 24,1992, granting RBS the exclusive right to air 104

Viva-produced and/or acquiredfilms including the fourteen (14) films subject of the present

case.On 27 May 1992, ABS-CBN filed before the RTC a complaint for

specificperformance with a prayer for a writ of preliminary injunction and/or

temporaryrestraining order against private respondents Republic Broadcasting

System( n o w G M A N e t w o r k I n c . ) O n 2 8 M a y 1 9 9 2 , t h e R T C i s s u e d a

t e m p o r a r y restraining order. The RTC then rendered decision in favor of RBS and against

ABS-CBN. Onappeal, the same decision was affirmed. Hence, this decision.

ISSUE: Whether or not there exists a perfected contract between ABS -CBN andVIVA.

RULING: A contract is a meeting of minds between two persons whereby one bindshimself to give

something or render some service to another [Ar t. 1305, CivilCode.] for a

consideration. There is no contract unless the following requisites concur:(1)consent of

the contracting parties;(2)object certain which is the subject of the contract; and(3)cause of the

obligation, which is established. [Art. 1318, Civil Code.]A contract undergoes three stages:( a )

p r ep ar a t io n , co n cep t i on , o r gen er a t ion , w h i ch i s t h e p e r io d o f negotiation and

bargaining rending at the moment of agreement of the parties;(b) perfection or birth of the

contract, which is the moment when theparties come to agree on the terms of the contract;

and(c) consummation or death, which is the fulfillment or performance of the terms agreed upon

in the contract.Contracts that are consensual in nature are perfected upon mere meetingof the

minds. Once there is concurrence between the offer and the acceptanceupon the

subject matter, consideration, and terms of payment a contract isproduced. The

offer must be certain. To convert the offer into a contract, the acceptance must be

absolute and must not qualify the terms of the offer; it mustbe plain, unequivocal,

unconditional, and without variance of any sort from thep r o p os a l . A q ua l i f i ed

accep t an ce , o r on e t h a t i n vo lv es a n ew p ro po s a l , constitutes a counter-offer and is

a rejection of the original offer. Consequently,when something is desired which is not

exactly what is proposed in the offer,such acceptance is not sufficient to generate consent

because any modificationor variation from the terms of the offer annuls the offer.In the present

case, when Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the Tamarind

Grill on 2 April 1992 to discuss the package of films, saidpackage of 104 VIVA films

was VIVA‘s offer to ABS-CBN to enter into a new FilmExhibition Agreement. But ABS-CBN,

sent through Ms. Concio, counter-proposalin the form a draft contract proposing exhibition of 53

films for a consideration of P35 million. This counter-proposal could be nothing less than the

counter-offerof Mr. Lopez during his conference with Del Rosario at Tamarind Grill

Restaurant.Clearly, there was no acceptance of VIVA‘s offer, for it was met by a

counter-offer which substantially varied the terms of the offer.Furthermore, ABS-CBN

made no acceptance of VIVA‘s offer hence, theyunderwent period of bargaining. ABS-

CBN then formalized its counter-proposalsor counter-offer in a draft contract. VIVA through its

Board of Directors, rejecteds u ch cou n t e r - o f fe r . E v en i f i t b e conced ed a r gu en do

t h a t D e l R os a r io h ad accepted the counter-offer, the acceptance did not bind

VIVA, as there was noproof whatsoever that Del Rosario had the specific authority to do

so.WHEREFORE, the instant petition is GRANTED.

REQUISITES OF OFFER AS DISTINGUISHED FROM OPTION

LOURDES ONG LIMSON VS. COURT of APPEALS, et alG. R. No. 135929April 20, 2001357

SCRA 209FACTS: In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-deVera, through their

agent Marcosa Sanchez, offered to sell to petitioner LourdesOng Limson a parcel of land

situated in Barrio San Dionisio, Paranaque, MetroManila. The respondent spouses were

the owners of the subject property.On July 31, 1978, she agreed to but the property at

the price of P34. 00per square meter and gave P20, 000.00 as ―earnest money‖. The

respondentspouses signed a receipt thereafter and gave her a 10 -day option period

topurchase the property. Respondent spouses informed petitioner that the subjectproperty was

mortgaged to Emilio Ramos and Isidro Ramos. Petitioner was askedto pay the balance of the

purchase price to enable the respondent spouses tosettle their obligation with the

Ramoses. Petitioner agreed to meet respondentspouses and the Ramoses on August 5,

1978, to consummate the transaction;however, the respondent spouses and the

Ramoses did not appear, same withtheir second meeting.On August 23, 1978, petitioner

allegedly gave respondent spouses threechecks for the settlement the back taxes of

property. On September 5, 1978,the agent of the respondent spouses informed

petitioner that the property wast h e s u b j e c t o f a n e g o t i a t i o n f o r t h e s a l e

t o r e s p o n d e n t S u n v a r R e a l t y Development Corporation.Petitioner alleged that it was

only on September 15, 1978, that TCT No. S-72946 covering the property was issued to

respondent spouses. On the sameday, petitioner filed and Affidavit of Adverse Claim with

the Office of the Registryof Deeds of Makati, Metro Manila. The Deed of Sale between

respondent spousesand respondent Sunvar was executed on September 15, 1978 and

TCT No. S-72377 was issued in favor of Sunvar on September 26, 1978 with the

AdverseClaim of petitioner annotated thereon.Respondent spouses and Sunvar filed their

Answers and Answers to Cross-Claim, respectively. On appeal, the Court of Appeals

completely reversed thedecision of the trial court and ordered the Register of Deeds of

Makati City to liftt h e Ad v e rs e C l a im an d o r d e r ed p e t i t i on e r t o p ay r e s p o nd en t

S un v ar an d respondent spouses exemplary and nominal damages and attorney‘s

fees.Hence, this petition.

ISSUE: Wh e th e r o r no t t h e ag r eem en t b e t w een p e t i t i on e r and r e spo n den t spouses was

a mere option or a contract to sell.

RULING: The Supreme Court held that the agreement between the parties was acontract of

option and not a contract to sell. An option is continuing offer or contract by which the

owner stipulates with another that the latter shall have theright to buy the property at a

fixed price within a time certain, or under, or incompliance with, certain terms and

conditions, or which gives the owner of thep r o p er t y t h e r i gh t t o s e l l o r d em an d a

s a l e . I t i s a l so s ome t i m es ca l l ed an ―unaccepted offer‖. An option is not of itself a

purchase, but merely secures theprivilege to buy. It is not a sale of property but a sale of the right

to purchase. Itsdistinguishing characteristic is that it imposes no binding obligation

on theperson holding the option, aside from the consideration for the offer.Hence, the

assailed decision is affirmed, with the modification that theaward of nominal and

exemplary damages as well as attorney‘s fees is deleted. The petition is denied.

VICES OF CONSENT1.CATALAN VS. BASA2 . DO MIN GO VS .

C A 3.MENDOZONA VS. OZAMIZ4 . L I M V S . C A 5 .R U I Z VS . C A6 . DEL A

C R U Z VS. C A 7.RURAL BANK OF STA. MARIA VS. CA

CATALAN vs. BASA JULY 31, 2007FACTS: On October 20, 1948, FELICIANO CATALAN Feliciano was dischargedf r o m ac t i v e

m i l i t a r y s e r v i ce . Th e Boa r d o f Med i ca l Of f i c e r s o f t he Department of Veteran

Affairs found that he was unfit to render militarys e r v i c e d u e t o h i s ―

s ch i zo p hr en i c r e ac t i on , c a t a to n i c t yp e , w h i ch i n c a p a c i t a t e s h i m

b e c a u s e o f f l a t t e n i n g o f m o o d a n d a f f e c t , p r eo ccu p a t i on wi t h

w o r r i es , wi th d raw al , and s p ar s e and po in t l es s speech.

‖On September 28, 1949, Feliciano married Corazon Cerezo.On June 16, 1951, a document was

executed, titled ―Absolute Deedof Donation,‖ wherein Feliciano allegedly donated to his sister

MERCEDESCATALAN one-half of the real property described,

viz

:A parcel of land located at Barangay Basing, Binmaley, Pangasinan.Bounded on the North

by heirs of Felipe Basa; on the South by BarrioR o ad ; O n t h e E as t b y h e i r s o f

S egu nd o C a t a l an ; an d o n t h e W es t b y Roman Basa. Containing an area of Eight

Hundred One (801) squaremeters, more or less. The donation was registered with

the Register of Deeds.On December 11, 1953, People‘s Bank and Trust Company

filed aSpecial Proceedings before the Court of First Instance to declare Felicianoincompetent.

On December 22, 1953, the trial court issued its Order forAdjudication of

Incompetency for Appointing Guardian for the Estate andFixing Allowance of Feliciano. The

following day, the trial court appointedPeople‘s Bank and Trust Company as Feliciano‘s

guardian. People‘s Bankand Trust Company has been subsequently renamed, and is

presentlyknown as the Bank of the Philippine Islands (BPI).On November 22, 1978, Feliciano

and Corazon Cerezo donated Lots1 and 3 of their property, registered under Original

Certificate of Title(OCT) No. 18920, to their son Eulogio Catalan.Mercedes sold the

property in issue in favor of her children Deliaan d J es us Bas a . T h e D eed o f

A b so l u t e S a l e w as r eg i s t e r ed wi t h t h eR eg i s t e r o f D eeds an d a T ax

D ec l a r a t io n w as i s su ed in t h e n ame o f respondents.Feliciano and Corazon Cerezo

donated Lot 2 of the aforementionedproperty registered under OCT No. 18920 to their

children Alex Catalan,Librada Catalan and Zenaida Catalan. On February 14, 1983,

Felicianoand Corazon Cerezo donated Lot 4 (Plan Psu-215956) of the same OCTNo.

18920 to Eulogio and Florida Catalan.BPI, acting as Feliciano‘s guardian, filed a case

for Declaration of Nullity of Documents, Recovery of Possession and Ownership, as well

asdamages against the herein respondents. BPI alleged that the Deed of Absolute

Donation to Mercedes was void

ab initio

, as Feliciano neverdonated the property to Mercedes. In addition, BPI averred that

even if Feliciano had truly intended to give the property to her, the donation w o u l d

s t i l l be v o i d , a s h e w as n o t o f so un d mi nd an d w as t he r e fo r e incapable of

giving valid consent. Thus, it claimed that if the Deed of Absolute Donation was

void

ab initio

, the subsequent Deed of AbsoluteSale to Delia and Jesus Basa should likewise be

nullified, for MercedesCatalan had no right to sell the property to anyone. BPI

raised doubtsabout the authenticity of the deed of sale, saying that its registration longafter

the death of Mercedes Catalan indicated fraud. Thus, BPI sought remuneration for

incurred damages and litigation expenses.On August 14, 1997, Feliciano passed away. The

original complaintwas amended to substitute his heirs in lieu of BPI as complainants in

CivilCase No. 17666. T h e t r i a l c o u r t f o u n d t h a t t h e e v i d e n c e p r e s e n t e d

b y t h e complainants was insufficient to overcome the presumption that Felicianowas sane and

competent at the time he executed the deed of donation infavor of Mercedes Catalan. Thus, the

court declared,

the presumption of sanity or competency not having been duly impugned, the presumption of

due execution of the donation in question must be upheld.

The Court of Appeals upheld the trial court‘s decision.

ISSUE: Whether said decision of the lower courts is correct.

RULING: Petitioners questioned Feliciano‘s capacity at the time he donatedthe property, yet did

not see fit to question his mental competence whenhe entered into a contract of marriage

with Corazon Cerezo or when heexecuted deeds of donation of his other properties

in their favor. Thepresumption that Feliciano remained competent to execute

contracts,despite his illness, is bolstered by the existence of these other contracts.Competency

and freedom from undue influence, shown to have existed in

the other acts done or contracts executed, are presumed to continue untilthe contrary is

shown.Needless to state, since the donation was valid, Mercedes had the right to sell

the property to whomever she chose. Not a shred of evidencehas been presented to prove the

claim that Mercedes‘ sale of the propertyto her children was tainted with fraud or

falsehood. It is of little bearingthat the Deed of Sale was registered only after the

death of Mercedes.What is material is that the sale of the property to Delia and

Jesus Basawas legal and binding at the time of its execution. Thus, the proper ty

inquestion belongs to Delia and Jesus Basa.petitioners raised the issue of prescription and

laches for the firsttime on appeal before this Court. It is sufficient for this Court to note

thateven if the present appeal had prospered, the Deed of Donation was still avoidable, not a

void, contract. As such, it remained binding as it was notannulled in a proper action in court

within four years.

IN VIEW WHEREOF , there being no merit in the arguments of thepetitioners, the petition is DENIED. The CA

decision was affirmed in toto.

VICES OF CONSENT

DOMINGO V. COURT OF APPEALS G.R. No. 127540. October 17, 2001

FACTS: Paulina Rigonan owned three parcels of land including the house and warehouse on

one parcel. She allegedly sold them to private respondents,t h e sp ou s es Fe l ip e and

C on cep c io n R i gon an , w ho c l a im t o b e h e r relatives. In 1966, petitioners who

claim to be her closest survivingrelatives, allegedly took possession of the properties by

means of stealth,force and intimidation, and refused to vacate the same. According

todefendants, the alleged deed of absolute sale was void for being spuriousas well as lacking

consideration. They said that Paulina Rigonan did notsell her properties to anyone. As her

nearest surviving kin within the fifthdegree of consanguinity, they inherited the three lots and the

permanentimprovements thereon when Paulina died. They said they had been

inpossession of the contested properties for more than 10 years.

ISSUE: 1 . ) W h eth e r o r no t t h e con s id e r a t i on in D eed o f S a l e c an b e u s ed t o impugn

the validity of the Contract of Sale.2.) Whether or not the alleged Deed of Sale executed by

Paulina Rigonanin favor of the private respondents is valid.

RULING: 1.) Consideration is the why of a contract, the essential reason whichmoves the

contracting parties to enter into the contract. The Court hadseen no apparent and

compelling reason for her to sell the subject 9parcels of land with a house and

warehouse at a meager price of P850only. On record, there is unrebutted testimony that

Paulina as landownerw a s f i n a n c i a l l y w e l l o f f . S h e l o a n e d m o n e y t o

s e v e r a l p e o p l e . Undisputably, the P850.00 consideration for the nine (9) parcels

of landincluding the house and bodega is grossly and shockingly inadequate, andthe sale is null

and void ab initio.2.) The Curt ruled in the negative. Private respondents presented

only acarbon copy of this deed. When the Register of Deeds was subpoenaed toproduce the

deed, no original typewritten deed but only a carbon copywas presented to the trial

court. None of the witnesses directly testifiedto prove positively and convincingly

Paulina‘s execution of the originaldeed of sale. The carbon copy did not bear her

signature, but only heralleged thumbprint. Juan Franco testified during the direct

examinationthat he was an instrumental witness to the deed. However, when cross-examined

and shown a copy of the subject deed, he retracted and said that said deed of sale was

not the document he signed as witness.

VICES OF CONSENT

MENDOZANA, ET AL. V. OZAMIZ ET AL. G.R. No. 143370, February 6, 2002

FACTS: Petitioner spouses Mario J. Mendezona and Teresita M. Mendezona,petitioner spouses Luis

J. Mendezona and Maricar L. Mendezona, andpetitioner Teresita Adad Vda. de

Mendezona own a parcel of land eachwith almost similar areas of 3,462 square

meters, 3,466 square metersand 3,468 square meters. The petitioners ultimately traced their

titles of o wn e r sh i p ove r t h e i r r e sp ec t i v e p r op e r t i e s f r om a no t a r i z ed D eed o f

Absolute Sale executed in their favor by Carmen Ozamiz. The petitionersinitiated the suit to

remove a cloud on their said respective titles causedby the inscription thereon. The

respondents opposed the petitioners‘claim of ownership of the said parcels of land

alleging that the titles i s s u ed in t h e pe t i t i o n e rs ‘ n am es a r e de f ec t i ve an d

i l l ega l , and t h e ownership of the said property was acquired in bad faith and

withoutvalue inasmuch as the consideration for the sale is grossly inadequate and

unconscionable. Respondents further alleged that at the time of thes a l e a s a l l eged ,

C a rm en Oz amiz w as a l r e ad y a i l i n g and no t i n fu l l possession of her mental

faculties; and that her properties having beenplaced in administration, she was in effect

incapacitated to contract withpetitioners. They argue that the Deed of Absolute sale is a

simulatedcontract.

ISSUE: Whether or not the Deed of Absolute Sale in the case at bar was simulated.

RULING: The Court ruled that the Deed in the case at bar is not a simulatedcontract.

Simulation is defined as ―the declaration of a fictitious will,deliberately made by

agreement of the parties, in order to produce, for the purposes of deception, the

appearances of a juridical act which doesnot exist or is different from what that which

was really executed.‖ Therequisites of simulation are:(a) an outward declaration of will

different from the will of the parties; (b)the false appearance must have been intended by

mutual agreement;and (c) the purpose is to deceive third persons.None of these were clearly

shown to exist in the case at bar. The Deed of Absolute Sale is a notarized document duly

acknowledged before a notarypublic. As such, it has in its favor the presumption of

regularity, and itcarries the evidentiary weight conferred upon it with respect to its

dueex ecu t i on . I t i s ad mis s i b l e i n ev i d en ce wi t ho u t f u r th e r p ro o f o f

i t s authenticity and is entitled to full faith and credit upon its face. The burden fell

upon the respondents to prove their allegations attacking thevalidity and due execution of the

said Deed of Absolute Sale. Respondentsfailed to discharge that burden; hence, the

presumption in favor of thesaid deed stands.

VICES OF CONSENTLIM VS. COURT OF APPEALS229 SCRA 616FACTS: The case involves the partition of the properties of the deceased spouses Tan Quico and Josefa

Oraa. The former died on May 11, 1932 and the latter onAugust 6, 1932. Both died intestate.

They left some ninety six hectares of landlocated in the municipality of Guinobatan and

Camalig, Albay. The late spouseswere survived by four children; Cresencia, Lorenzo,

Hermogenes and Elias. Eliasdied on May 2, 1935, without issue. Cresencia died on December

20, 1967. Shewas survived by her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose

Jovita, Anacoreta, Antonietta, Ruben, Benjamin and Rogelio. They are the petitioners

in the case at bench. The sad spectacle of the heirs squabbling overthe properties of their

deceased parents was again replayed in the case atbench. The protagonists were the

widower and children of Cresencia on oneside, and Lorenzo and Hermogenes on the other

side. The late Cresencia and Lorenzo had contrasting educational background.Cresencia only

reached the second grade of elementary school. She could notread or write in

English. On the other hand, Lorenzo is a lawyer and a CPA.Heirs of Cresencia

alleged that since the demise of the spouses Tan Quico and J o s e fa O r aa , t h e

s ub j ec t p ro pe r t i e s h ad b een adm in i s t e r ed b y r e s po nd en t

Lorenzo. They claimed that before her death, Cresencia had demanded their partition

from Lorenzo. After Cresencia‘s death, they likewise clamored for theirpartition. Their effort

proved fruitless.Respondents Lorenzo and Hermogenes‘ adamant stance against partitionis

based on various contentions. Principally, they urge: 1) that the propertieshad

already been partitioned, albeit, orally; and 2) during her lifetime, the

lateC r e s en c i a h ad so ld an d con ve yed a l l he r i n t e re s t s i n sa i d p r o pe r t i e s

t o respondent Lorenzo. They cited as evidence the ―Deed of Confirmation of Extra Judicial

Settlement of the Estate of Tan Quico and Josefa Oraa‖ and a receipt of payment.

ISSUE: Whether or not there is error in the signing of the Deed.

RULING:

In t h e pe t i t i o n a t ben ch , t he q u es t io n ed D eed i s w r i t t en in En g l i sh ,

a language not understood by the late Cresencia an illiterate. It was prepared bythe respondent

Lorenzo, a lawyer and CPA. Respondent Lorenzo did not causethe notarization of the Deed.

Considering these circumstances, the burden wason private respondents to prove that the

content of the Deed was explained tot h e i l l i t e r a t e C r es enc i a be f o r e sh e s i gn ed

i t . In t h i s r ega r d , t h e ev i d en ce adduced by the respondents failed to discharge their

burden. The conclusion drawn by the Honorable of Appeals that there was no u n d u e

i n f lu en ce ex e r t ed on C r es en c i a O . Tan b y h e r ( Law ye r - C PA )

b r o t he r Lorenzo O. Tan based on facts stated in the questioned judgment is

clearlyincorrect. As it is contrary to the provision of Art. 1337, Civil Code. The respondent

court, reversing the trial court, held that the evidencefailed to establish that it was

signed by the late Cresencia as a result of fraud,mistake or undue influence. The Court

upheld this ruling erroneous.In calibrating the credibility of the witnesses on this issue,

we take ourmandate from Article 1332 of the Civil Code which provides: ―When

one of theparties is unable to read, or if the contract is in a language not understood

byhim, and mistake or fraud is alleged, the person enforcing the contract must show

that the terms thereof have been fully explained to the former.‖ T h i s su bs t an t i v e l aw

cam e in to b e i n g d ue to t h e f i n d i n g o f t h e C od e Commission that there is still a

fairly large number of illiterates in this country,and documents are usually drawn up in

English or Spanish. It is also in accordwith our state policy of promoting social justice. It

also supplements Article 24 of the Civil Code which calls on court to be vigilant in the protection

of the rights of those who are disadvantaged in life. In the petition at bench, the

questionedDeed is written in English, a language not understood by the late

Cresencia anilliterate.

VICES OF CONSENT:RUIZ VS. COURT OF APPEALS401 SCRA 410G.R. NO.

146942APRIL 22, 2003FACTS: Petitioner Corazon Ruiz is engaged in the business of buying and selling j ew e l r y.

S h e ob t a i n ed l o ans f r om p r iv a t e r e sp on d en t C on su e lo T or r e s o n different

occasions and in different amounts. Prior to their maturity, the loanswere consolidated

under 1 promissory note dated March 22, 1995. T h e co ns o l i d a t ed l o an o f P7 50 ,

0 0 0 . 00 w as s ecu red b y a r e a l e s t a t e mortgage on a lot in Quezon City, covered by

Transfer of Certificate of Title No.RT-96686, and registered in the name of petitioner. The

mortgage was signed bypetitioner for herself and as attorney-in-fact of her husband

Rogelio. It wasex ecu t ed on 2 0 M ar ch 199 5 , o r 2 d a ys b e fo re t h e ex ecu t io n

o f t he s ub j ec t promissory note. Thereafter, petitioner obtained 3 more loans from

private respondent,under the following promissory notes: 1) promissory note dated 21 April

1995, int he am ou n t o f P 10 0 , 00 0 . 00 ; 2 ) p r o mis so r y n o t e d a t ed 2 3 M ay ! 9 9 5

i n t h e amount of P100,000.00, and 3) promissory note dated 21 December 1995, in theamount

of P100,000.00. These combined loans of P300,000.00 were secured byP571,000.00 worth of

jewelry pledged by petitioner to private respondent.From April 1995 to March 1996, petitioner

paid the stipulated 3% monthlyinterest on the P750,000.00 loan, amounting to

P270,000. After March 1996,p e t i t i on e r was u n ab le t o m ak e in t e r e s t p aym en t s

a s s h e h ad d i f f i cu l t i e s collecting from her clients in her jewelry business.Because of

petitioner‘s failure to pay the principal loan of P750,000.00, aswell as the interest payment

for April 1996, private respondent demandedpayment not only of the P750,000.00

loan but also of the P300,000.00 loan.

Wh en p e t i t i o n e r f a i l ed t o p ay, p r iv a t e r e s po nd en t so u gh t t h e

ex t r a ju d i c i a l foreclosure of the aforementioned real estate mortgage.

ISSUE: Whether or not there is undue influence in the signing of the promissorynote, which

determines if foreclosure proceedings could proceed.

RULING: The promissory note in question did not contain any fine prin t provisionwhich could

have escaped the attention of the petitioner. Petitioner had all thetime to go over and study

the stipulations embodied in the promissory note.Aside from the March 22, 1995

promissory note for P750,000.00, three otherpromissory notes of different dates and

amounts were executed by petitioner infavor of private respondent. These promissory notes

contain similar terms andconditions, with a little variance in the terms of interests and

surcharges. Thefact that petitioner and private respondent had entered into not only

one butseveral loan transactions shows that petitioner was not in any way compelled toaccept

the terms allegedly imposed by private respondent. Moreover, petitioner,in her complaint dated

October 7, 1996 filed with the trial court, never claimedt h a t s h e w as fo r ced t o s i gn th e

s ub j ec t no te . T he r e f o r e , t h e f o r ec l os u re proceedings may now proceed.

VICES OF CONSENTEPIFANIA DELA CRUZ, substituted by LAUREANA V.

ALBERTOVS. SPS. EDUARDO C. SISON and EUFEMIA S. SISONG.R. No.

163770February 17, 2005FACTS: Initially, the complainant in this case was Epifania S. Dela Cruz (Epifania),but she died on

November 1, 1996, while the case was pending in the Court of Appeals. Upon her

demise, she was substituted by her niece, Laureana V.Alberto.Epifania claimed that

sometime in 1992, she discovered that her rice landin Salomague Sur, Bugallon, Pangasinan, has

been transferred and registered inthe name of her nephew, Eduardo C. Sison, without her

knowledge and consent,purportedly on the strength of a Deed of Sale she executed on

November 24,1989.Epifania thus filed a complaint before the Regional Trial Court of

Lingayen,Pangasinan, to declare the deed of sale null and void. She alleged that

Eduardot r i cked h e r i n to s i gn in g th e D eed o f S a l e , b y i n s e r t i n g t he d eed

am on g t h e documents she signed pertaining to the transfer of her residential land,

houseand camarin, in favor of Demetrio, her foster child and the brother of

Eduardo.Respondents, spouses Eduardo and Eufemia Sison (Spouses Sison), deniedthat they

employed fraud or trickery in the execution of the Deed of Sale. Theyclaimed that they

purchased the property from Epifania for P20,000.00. Theyaverred that Epifania

could not have been deceived into signing the Deed of Absolute Sale because it was

duly notarized before Notary Public Maximo V.Cuesta, Jr.; and they have complied

with all requisites for its registration, asevidenced by the Investigation Report by

the Department of Agrarian Reform(DAR), Affidavit of Seller/Transferor, Affidavit of

Buyer/Transferee, Certificationissued by the Provincial Agrarian Reform Officer (PARO), Letter

for the Secretaryof Agrarian Reform, Certificate Authorizing Payment of Capital

Gains Tax, andthe payment of the registration fees. Some of these documents even

bore thesignature of Epifania, proof that she agreed to the transfer of the property.

ISSUES: Whether the deed of absolute sale is valid.Whether fraud attended the execution of a contract.

RULING:

On the issue of whether fraud attended the execution of a contract isfactual in nature.

Normally, this Court is bound by the appellate court‘s findings,unless they are contrary to those

of the trial court, in which case we may wadeinto the factual dispute to settle it with

finality. After a careful perusal of therecords, we sustain the Court of Appeals‘

ruling that the Deed of Absolute Saledated November 24, 1989 is valid.

There being no evidence adduced to support her bare allegations, thus, Epifania failed

to satisfactorily establish her inability to read and understand theEnglish language.Although

Epifania was 79 years old at the time of the execution of theassailed contract, her age

did not impair her mental faculties as to prevent herfrom properly and intelligently

protecting her rights. Even at 83 years, sheex h i b i t ed m en t a l a s t u t en ess w h en

s h e t e s t i f i ed in co ur t . I t i s , t h e r e fo r e , inconceivable for her to sign the assailed

documents without ascertaining theircontents, especially if, as she alleges, she did not direct

Eduardo to prepare thesame.A comparison of the deed of sale in favor of Demetrio and the deed

of salein favor Eduardo, draws out the conclusion that there was no trickery employed.O n e can

r ead i l y s ee th a t t h e f i r s t d eed o f s a l e i s i n a l l s i gn i f i c an t r e s p ec t s different

from the second deed of sale. A casual perusal, even by someone asold as Epifania,

would enable one to easily spot the differences. Epifania couldnot have failed to miss

them.Indeed, if the intention was to deceive, both deeds of sale should havebeen

mirror images as to mislead Epifania into thinking that she was signingwhat appeared

to be the same document.In addition, the questioned deed of sale was duly notarized. It is a

settledrule that one who denies the due execution of a deed where one‘s

signatureappears has the burden of proving that, contrary to the recital in the jurat,

onenever appeared before the notary public and acknowledged the deed to be

avoluntary act. Epifania never claimed her signatures as forgeries. In fact, Epifania

never questioned the deed of sale in favor of Demetrio, accepting it as avalid and binding

document. It is only with respect to the deed of sale in favor of Eduardo that she denies

knowledge of affixing her signature. Unfortunately, forboth parties, the notary public, Atty.

Maximo V. Cuesta, Jr. before whom theyappeared, died prior to the filing of the case.

KINDS OF FRAUD HOW COMMITTEDRURAL BANK OF ST. MARIA, PANGASINAN VS.

COURT OF APPEALS314 SCRA 255FACTS: Manuel Behis mortgaged a land in favor of RBS, Pangasinan, in a Real E s t a t e

M o r t gage d a t ed O ct ob e r 2 3 , 1 97 8 as a s ecu r i t y f o r l o an s o b t a i n ed amounting

to P156,270.00. Unfortunately thereafter, Manuel, being a delinquenti n pa yi n g h i s d eb t s ,

s o l d th e l an d . A nd s o a Deed o f Ab so lu t e S a l e wi t h Assumption of Mortgage

was executed between him as vendor/assignor andRayandayan and Arceño as

vendees/assignees for the sum of P250,000.00. Onthe same day, Rayandayan and Arceño,

together with Manual Behis executedanother Agreement embodying the

consideration of the sale of the land in thesum of P2.4 million. The land, however,

remained in the name of Behis becausethe former did not present to the Register of Deeds the

contracts.Meanwhile, the loan, still in the name of Behis, accumulated an

accountamounting to P316,368.13 in a Statement of Account sent to Behis on May, 30,1985.

Thereafter, Rayandaran and Arceño presented the Deed of Absolute Saleto the bank

and negotiated with the principal stockholder of the bank, Engr. E. Natividad, in

Manila for the assumption of the indebtedness of Manuel Behis andt h e s u b s e q u e n t

r e l e a s e o f t h e m o r t g a g e o n t h e p r o p e r t y b y t h e b a n k . Rayandaran and

Arceño did not show to the bank the agreement with ManuelBehis providing for the

real consideration of P2.4 million. Subsequently, thebank consented to the substitution

of plaintiffs as mortgage debtors in place of Manuel Behis in a Memorandum of Agreement

between private respondents andthe bank with restricted and liberalized terms for the

payment of the mortgagedebt including the initial payment of P143,782.22. The bank

discontinued to comply with the Memorandum of Agreementdue to the appearance of

Christina Behis, Manuel‘s wife and a co-signatory in themortgaged land, who claimed that her

signature was forged. For this reason, thebank considered the MA as void.On January 7, 1986,

plaintiffs demanded in a letter that the bank complywith its obligation under the

Memorandum of Agreement to which the latterdenied. Petitioner bank argued that the

Memorandum of Agreement is voidableon the ground that its consent to enter said

agreement was vitiated by fraudb ecau s e p r i v a t e r es po nd en t s w i t hh e l d f r om

p e t i t i o ne r b ank th e m at e r i a l information that the real consideration for the sale with

assumption of mortgageof the property by Manuel Behis to Rayandayan and Arceño is

P2,400,000.00,and not P250,000.00 as represented to petitioner bank. According to

petitionerbank, had it known for the real consideration for the sale, i.e. P2.4 million,

itwould not have consented into entering the Memorandum of Agreement

withRayandayan and Arceño as it was put in the dark as to the real capacity and

financial standing of private respondents to assume the mortgage from

ManuelBeh i s . P e t i t i o n e r b an k po i n t ed o u t t ha t i t w ou l d no t h av e a s s en t ed

t o t h e agreement, as it could not expect the private respondents to pay the bank

theapproximately P343,000.00 mortgage debt when private respondents have to pay

at the same time P2,400,000.00 to Manuel Behis on the sale of the land.

ISSUE: Whether or not there existed a fraud in the case at bar.

RULING: NO. The kind of fraud that will vitiate a contract refers to those insidiouswords or machinations

resorted to by one of the contracting parties to induce tothe other to enter into a contract which

without them he would not have agreedto. Simply stated, the fraud must be determining cause of

the contract, or musthave caused the consent to be given. It is believed that the non -

disclosure tot h e b a n k o f t h e p u r c h a s e p r i c e o f t h e s a l e o f t h e l a n d

b e t w e e n p r i v a t e respondents and Manuel Behis cannot be the ―fraud‖

contemplated by Article1338 of the Civil Code. From the sole reason submitted by the

petitioner bankthat 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

couldhave induced the bank into giving its consent to the agreement; or that the bankwould not

have otherwise given its consent had it known of the real purchaseprice.Pursuant to

Art. 1339 of the Code, silence or concealment, by itself, doesnot constitute fraud unless

there is a special duty to disclose certain facts. Inthe case at bar, private respondents had

no duty to do such.

ESSENTIAL REQUISITES OF CONTRACT: LICIT OBJECTCHAVEZ VS. PUBLIC

ESTATES AUTHORITY 415 SCRA 403SYNOPSIS: This case involves a government contract conveyed to a private entity (Amari), where

157.84 hectares of reclaimed public lands along Roxas Boulevard were sold at a negotiated

price of P 1,200/ square meter. Reports place themarket price of land in that are a at

a high of P 90, 000/ square meter. Thedifference is a mammoth P 140.16 B from the

purchase price of the actual sale,equivalent to the Judiciary‘s budget for 17 years and

three times the Marcos‘ Swiss deposits forfeited in favor of the government as decided by the

SupremeCourt. At the end, the contract was voided for Amari, the private entity, was

proven to have inveigled the Public Estates Authority to sell the reclaimed landswithout public

bidding, in violation of the Government Code.

FACTS: T w o S en a t e Com mi t t e e s , t he S en a t e B lu e R i bb on C ommi t t e e and Committee

on Accountability of Public Officers, conducted extensive publichearings to determine

the actual market value of the public lands; and found outthat the sale of such was grossly

undervalued based on official documentssubmitted by the proper government agencies

during the investigations. It wasf o u nd o u t t ha t t h e Pu b l i c E s t a t e s A u th or i t y

( P EA ) , un de r t he Jo in t V en t u r e Agreement (JVA), sold to Amari Coastal Bay

Development Corporation 157.84hectares of reclaimed public lands totaling to P

1.89 B or P 1,200 per squaremeter. However during the investigation process, the

BIR pitted the value at P7,800 per square meter, while the Municipal Assessor of

Parañaque at P 6,000per square meter and by the Commission on Audit (COA) at P21,333 per

squaremeter. Based on the official appraisal of the COA, the actual loss on the part of the

government is a gargantuan value of P 31.78 B. However, PEA justified

thep u r ch as e p r i c e ba s ed f ro m t h e v a r iou s app r a i s a l s o f p r iv a t e r e a l

e s t a t e corporations, amounting from P 500 – 1,000 per square meter. Further, it

wasalso found out that there were various offers from different private entities

tobuy the reclaimed public land at a rate higher than the offer of Amari, but

still,PEA finalized the JVA with Amari. During the process of investigation, Amari didnot

hide the fact that they agreed to pay huge commissions and bonuses to various persons

for professional efforts and services in successfully negotiatingand securing for Amari the JVA.

The amount constituting the commissions andbonuses totaled to a huge P 1.76 B; an

indicia

of great bribery.

ISSUE: Whether or not the sale between PEA and Amari is unconstitutional.

RULING: YES, it is unconstitutional for what was sold or alienated ar e lands of thepublic

domain. Further, the

Ponce doctrine

, t o w h i ch t he r es po n den t s eek s refuge and sanctuary, does not fall squarely in the

case.First, the subject of the sale was a submerged land; i.e., 78% of the totala r ea s o ld b y

P EA t o Am ar i i s s t i l l s u bm er ged l and . S ubm er ged l an ds , l i k e f o r e s h o r e

l a n d s , i s o f t h e p u b l i c d o m a i n a n d c a n n o t b e a l i e n a t e d .

A s unequivocally stated in Article XII, Section 2 of the Constitution, all lands of the

public domain, waters, minerals, coals, petroleum, forces which are

potentialenergies, fisheries, forests or timber, wildlife, flora and fauna, and other

naturalresources, with the exception of agricultural lands, are inalienable.

Submergedlands fall within the scope of such provision.Second, in the

Ponce case

, the ―irrevocable option‖ to purchase portionsof the foreshore lands shall be enforceable

only upon reclamation, not prior toreclamation. In the case at bar, even without actual

reclamation, the submergedlands were immediately transferred and sold to Amari. Third, the

Ponce doctrine

has been superseded by the provisions of theGovernment Auditing Code, which has

been bolstered by the provisions of theLocal Government Code, which states that

any sale of the public land must bemade only thru a public bidding. There b eing no

public bidding in the subjectsale of land; the amended JVA is a negotiated contract in patent

violation of suchlaw.Fourth, the

Ponce doctrine

which involved the validity to reclaim foreshorelands based on RA 1899 (authorizing

municipalities and chartered cities toreclaim foreshore lands) is not applicable in

the instant case because what is involved in the case at bar are submerged lands.F i f th , i n

t h e

Ponce case

, t h e C i t y o f C eb u w as s an c t io n ed t o re c l a i m foreshore lands under RA 1899 for it is

a

qualified end user government agency

;therefore, can sell patrimonial property to private parties. But PEA is

not

an endu s e r agen c y w i t h r es p ec t t o r e c l a im ed l an ds un d e r t h e am en d ed J V A

f o r reclaimed lands are public and therefore are inalienable.Finally, the

Ponce case

was decided under the 1935 Constitution (1965-66), which allowed private corporations to

acquire alienable lands of the publicdomain. The case at bar falls within the ambit of the

1987 Constitution whichprohibits corporations from acquiring alienable lands of the public

domain.Ergo, the submerged lands, being inalienable and outside the commerce of

man, could not be the subject of the commercial transactions specified in theAmended JVA.

Hence, the contract between Amari and the PEA is void.

REQUISITE OF CONTRACT – DETERMINATE OBJECTMELLIZA VS. CITY OF

ILOILO

23 SCRA 477

FACTS: Juliana Melliza during her lifetime owned three parcels of residential landin Iloilo City. On 1932,

she donated to the then Municipality of Iloilo a certain lotto serve as site for the municipal

hall. The donation was however revoked byt h e p a r t i e s f o r t h e r e a s o n t h a t

a r e a w a s f o u n d i n a d e q u a t e t o m e e t t h e requirements of the development

plan. Subsequently the said lot was divided into several divisions.Sometime in 1938,

Juliana Melliza sold her remaining interest on the saidlot to Remedios San Villanueva.

Remedios in turn transferred the rights to saidportion of land to Pio Sian Melliza.

The transfer Certificate of title in Melliza‘sn am e bea r s on ann o t a t io n s t a t i n g

t h a t a p o r t i on o f s a i d l o t b e lo n gs t o t he Municipality of Iloilo.Later the City of Iloilo,

which succeeds to the Municipality of Iloilo, donatedthe city hall sit to the University of

the Philippines, Iloilo Branch. On 1952, theUniversity of the Philippines enclosed the site

donated with a wire fence.Pio Sian Melliza then filed action in the Court of First

Instance of Iloiloagainst Iloilo City and the University of the Philippines for recovery of the

parcelof land or of its value specifically LOT 1214-B.Petitioner contends that LOT 1214-B was

not included in those lots whichwere sold by Juliana Melliza to the then municipality of Iloilo

and to say he wouldrender the Deed of Sale invalid because the law requires as an essential

elementof sale, determinate object.

ISSUE: Whether or not IF Lot 1214 – B is included in the Deed of Sale, it wouldr e n d e r

t h e c o n t r a c t i n v a l i d b e c a u s e t h e o b j e c t w o u l d a l l e g e d l y n o t

b e determinate as required by law.

RULING: NO. The requirement of the law specifically Article 1460 of the Civil Code,that the sale must

have for its object a determinate thing, is fulfilled as long as,at the time the contract is

entered into, the object of the sale is cable of beingdeterminate without the

necessity of a new or further agreement between theparties.

The specific mention of some of the lots plus the statement that the lotsobject of the

sale are the ones needed for city hall site sufficient provides abasis, as of the time, of

the execution of the contract, for rendering determinatesaid lots without the need of a new further

agreement of the parties.

ABSENCE OF CAUSE VS. FAILURE/INADEQUACY OF CAUSEASKAY, plaintiff-

appellant, VS. FERNANDO A. COSALAN, defendant-appellee1924 September 1546 PHIL

179FACTS: The plaintiff in this case is Askay, an illiterate Igorrote between 70 and 80years of age,

residing in the municipal district of Tublay, Province of Benguet, who at various times

has been the owner of mining property. The defendant isFernando A. Cosalan, the nephew by

marriage of Askay, and municipal presidentof Tublay, who likewise has been interested

along with his uncle in miningenterprisesAbout 1907, Askay obtained title to the Pet

Kel Mineral Claim located in Tublay, Benguet. On November 23, 1914, if we are to accept

defendant's Exhibit1, Askay sold this claim to Cosalan. Nine years later, in 1923,

Askay institutedaction in the Court of First Instance of Benguet to have the sale of

the Pet KelMineral Claim declared null, to secure possession of the mineral claim,

and toobtain damages from the defendant in the amount of P10,500. Following

thepresentation of various pleadings including the answer of the defendant,

andfollowing trial before Judge of First Instance Harvey, judgment was

rendereddismissing the complaint and absolving the defendant from the same, with

costsaga i n s t t h e p l a in t i f f . O n b e i n g in fo r med o f t h e ju d gmen t o f t h e t r i a l

co u r t , plaintiff attacked it on two grounds: The first, jurisdictional, and the

second,formal. Both motions were denied and an appeal was perfected.

ISSUE: Wh e th e r o r no t t h e p l a in t i f f h as e s t ab l i sh ed h i s c au se o f a c t i on b y

a preponderance of the evidence.

RULING: P l a i n t i f f c o n t e n d s t h a t t h e s a l e o f t h e P e t K e l M i n e r a l C l a i m

w a s accomplished through fraud and deceit on the part of the defendant. Plaintiff

may be right but in our judgment he has failed to establish his claim. Fraud mustbe both

alleged and proved. One fact exists in plaintiffs favor, and this is theage and

ignorance of the plaintiff who could be easily by the defendant, a manof greater

intelligence. Another fact is the inadequacy of the consideration forthe transfer

which, according to the conveyance, consisted of P1 and othervaluable

consideration, and which, according to the oral testimony, in realityconsisted of

P107 in cash, a bill-fold, one sheet, one cow, and two carabaos.Gross inadequacy

naturally suggest fraud is some evidence thereof, so that itmay be sufficient to show it

when taken in connection with other circumstances,such as ignorance or the fact that one of the

parties has an advantage over theo t h e r . Bu t t he f a c t t ha t t h e b a r ga i n w as a h a r d

o n e , co up led w i th m er e inadequacy of price when both parties are in a position to

form an independent j ud gm en t con ce rn ing t h e t r ans ac t i on , i s n o t a su f f i c i en t

g r o u nd fo r t h e cancellation of a contract.A ga i n s t t he p l a in t i f f and i n f avo r o f t h e

d e f end an t , t he C our t h ad t h e document itself executed in the presence of

witnesses and before a notarypublic and filed with the mining recorder. The notary public,

Nicanor Sison, andone of the attesting witnesses, Apolonio Ramos, testified to the effect that in

thepresence of the plaintiff and the defendant and of the notary public and

thesubscribing witnesses, the deed of sale was interpreted to the plaintiff and thatthereupon he

placed his thumb mark on the document. Two finger print experts,Dr. Charles S. Banks and A.

Simkus, have declared in depositions that the thumbmark on exhibit is that of Askay. No less

than four other witnesses testified thatat various times Askay had admitted to them that

he had sold the Pet Kel Mineto Fernando A. Cosalan.Having in mind of these

circumstances, how can the plaintiff expect thecourts to nullify the deed of sale on

mere suspicion? Having waited nine yearsfrom the date when the deed was executed, nine

years from the time FernandoA. Cosalan started developing the mine, nine years from the time

Askay himself had been deprived of the possession of the mine, and nine years permitting of

at h i r d p a r t y t o ob t a i n a co n t r ac t o f l e as e f r om Co s a l an , ho w can th e

co u r t overlook plaintiff's silent acquiescence in the legal rights of the defendant? Onthe facts of

record, the trial judge could have done nothing less than dismiss theaction. T he C ou r t

co n c l ud es , t h e r e fo re , t h a t t h e com pl a in t w as p r op e r l y dismissed. As a result,

judgment is affirmed

CAUSE: TRUE/REAL: SIMULATION OF CONTRACTS

HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE VS. LIM446

SCRA 57FACTS: The spouses Aurelio and Esperanza Balite were the owners of a parcel of l an d a t

C a t a rm an , N o r t he rn S am ar . Wh en A ure l i o d i ed i n t e s t a t e , h i s w i fe Esperanza

and their children inherited the subject property and became co -owners thereof. In the

meantime, Esperanza became ill and was in dire need of money fro her hospital expenses. She,

through her daughter, Cristeta, offered tos e l l t o R od r i go Li m, h e r un d i v i ded sh a r e

f o r t h e p r i c e o f P1 ,0 0 0 , 00 0 . 00 . Esperaza and Rodrigo agreed that under the Deed

of Absolute Sale, it will bemade to appear that the purchase price of the property

would be P150,000.00a l t h o u g h t h e a c t u a l p r i c e a g r e e d u p o n b y t h e m

f o r t h e p r o p e r t y w a s P1,000,000.00. On April 16, 1996, Esperanza executed a Deed of

Absolute Salein favor of Rodrigo. They also executed on the same day a Joint

Affidavit underwhich they declared that the real price of the property was

P1,000,000.00payable to Esperanza by installments. Only Esperanza and two of her

childrenAntonio and Cristeta knew about the said transaction. When the rest of

thechildren knew of the sale, they wrote to the Register of Deeds saying that

theirmother did not inform them of the sale of a portion of the said property nor

didthey give consent thereto. Nonetheless, Rodrigo made partial payments to Antonio

who is authorized by his mother through a Special Power of Attorney.On October 23, 1996,

Esperanza signed a letter addressed to Rodrigoinforming the latter that her children did

not agree to the sale of the property tohim and that she was withdrawing all her

commitments until the validity of thesale is finally resolved. On October 31, 1996,

Esperanza died intestate and wassurvived by her children. Meanwhile, Rodrigo caused

to be published in theSamar Reporter the Deed of Absolute Sale.On June 27, 1997,

petitioners filed a complaint against Rodrigo with theRegional Trial Court for the

annulment of sale, quieting of title, injunction anddamages. Subsequently, Rodrigo

secured a loan from the Rizal CommercialBanking Corporation in the amount of

P2,000,000.00 and executed a Real EstateMortgage over the property as security thereof.

On motion of the petitioners,they were granted leave to file an amended complaint

impleading the bank asadditional party defendant. On March 30, 1998, the court

issued an orderrejecting the amended complaint of the petitioners. Likewise, the

trial courtdismissed the complaint. It held that pursuant to Article 493 of the Civil Code, ac o -

o w n er i s no t i nv a l id a t ed b y t h e abs en ce o f t h e con s en t o f t h e o th e r co -

owners. Hence, the sale by Esperanza of the property was valid; the excess fromher undivided

share should be taken from the undivided shares of Cristeta and A n to n io , w ho

ex p r es s l y ag r eed t o and b en ef i t f r om th e s a l e . Th e C ou r t o f Appeals

likewise held that the sale was valid and binding insofar as EsperanzaBalite‘s

undivided share of the property was concerned. It affirmed the trial court‘s ruling that

the lack of consent of the co-owners did not nullify the sale.

ISSUE: Whether or not the Deed of Absolute Sale is null and void on the ground that it is

falsified; it has an unlawful cause; and it is contrary to law and/or publicpolicy.

RULING: No. The contract is an example of a simulated contract. Article 1345 of the Civil

Code provides that the simulation of a contract may either be absoluteor relative. In absolute

simulation, there is a colorable contract but without anys u b s t an ce , b ecau s e t h e p a r t i e s

h av e no i n t en t io n to be b ou nd b y i t . An absolutely simulated contract is void,

and the parties may recover from eachother what they may have given under the

―contract‖. On the other hand, if thep a r t i e s s t a t e a f a l s e c au se i s r e l a t i v e l y

s im ul a t ed . H e r e , t he p a r t i e s ‘ r e a l agreement binds them. In the present case, the parties

intended to be bound bythe Contract, even if it did not reflect the actual purchase price of the

property. The letter of Esperanza to respondent and petitioner‘s admission that there waspartial

payment made on the basis of the Absolute Sale reveals that the partiesintended the agreement to

produce legal effect.S i nce th e D eed o f Abso lu t e S a l e w as m ere l y r e l a t i v e l y

s im ul a t ed , i t remains valid and enforceable. All the essential requisites prescribed by law

forthe validity and perfection of contracts is present. However, the parties shall bebound by their

real agreement for a consideration of P1,000,000 as reflected bytheir Joint Affidavit. The petition

is DENIED and the assailed decision AFFIRMED.

CAUSE: TRUE/REAL: SIMULATION OF CONTRACTS

SUNTAY V. COURT OF APPEALS G.R. No. 114950, December 19, 1995

FACTS: Respondent Federico Suntay is the owner of a parcel of land and arice mill, warehouse, and other

improvements situated in the said land. Ar i ce m i l l e r , Fed er i co , i n a l e t t e r ap p l i ed a s

a mi l l e r - co n t r ac t o r o f t he National Rice and Corn Corporation (NARIC). He informed the

NARIC thathe had a daily rice mill output of 400 cavans of palay and

warehousestorage capacity of 150,000 cavans of palay.

His application, althoughprepared by his nephew-lawyer, Rafael Suntay, was disapproved,

becauseat that time he was tied up with several unpaid loans.For purposes of circumvention, he

had thought of allowing Rafael tomake the application for him. Rafael prepared

an absolute deed of salewhereby Federico, for and in consideration of P20,000.00

conveyed toRafael said parcel of land with all its existing structures. Said deed

wasnotarized as Document No. 57 and recorded on Page 13 of Book 1, Seriesof 1962, of the

Notarial Register of Atty. Herminio V. Flores. Less thanthree months after this

conveyance, a counter sale was prepared andsigned by Rafael who also caused its

delivery to Federico. Through thisco u n te r co nv e yan ce , t h e sam e p a r ce l o f l and

w i t h a l l i t s ex i s t i ng structures was sold by Rafael back to Federico for the same

considerationof P20,000.00. Although on its face, this second deed appears to

havebeen notarized as Document No. 56 and recorded on Page 15 of Book 1,Series

of 1962, of the notarial register of Atty. Herminio V. Flores, anexamination thereof

will show that, recorded as Document No. 56 on Page13, is not the said deed of sale but a

certain "real estate mortgage on aparcel of land with TCT No. 16157 to secure a loan of

P3,500.00 in favor of the Hagonoy Rural Bank."Nowhere on page 13 of the same notarial

register could be founda n y e n t r y p e r t a i n i n g t o R a f a e l ' s d e e d o f s a l e .

T e s t i f y i n g o n t h i s irregularity, Atty. Flores admitted that he failed to submit to the Clerk

of Court a copy of the second deed. Neither was he able to enter the samein his notarial

register. Even Federico himself alleged in his Complaint that, when Rafael delivered the

second deed to him, it was neither datednor notarized.Upon the execution and registration of the

first deed, Certificate of Title No. 0-2015 in the name of Federico was cancelled and in lieu

thereof, T C T N o . T - 36 7 14 w as i s s u ed in t h e n am e o f R a f ae l . E ven a f t e r

t h e execution of the deed, Federico remained in possession of the propertysold in

concept of owner. Significantly, notwithstanding the fact thatRafael became the titled

owner of said land and rice mill, he never madea n y a t t em pt t o t ak e p os s es s io n

t h e r eo f a t an y t im e , wh i l e Fed er i co continued to exercise rights of absolute ownership

over the property.In a l e t t e r , d a t ed A u gus t 1 4 , 1 96 9 , Fed e r i co , t h ro u gh h i s

n ew counsel, Agrava & Agrava, requested that Rafael deliver his copy of TCTNo. T-36714 so

that Federico could have the counter deed of sale in his favor registered in his name. The

request having been obviously turneddown, Agrava & Agrava filed a petition with the Court of

First Instance of Bulacan asking Rafael to surrender his owner's duplicate certificate of TCTNo.

T-36714. In opposition thereto, Rafael chronicled the discrepancy in the notarization of

the second deed of sale upon which said petition waspremised and ultimately concluded that said

deed was a counterfeit or "atleast not a public document which is sufficient to transfer

real rightsaccording to law." On September 8, 1969, Agrava & Agrava filed a motionto

withdraw said petition, and, on September 13, 1969, the Court grantedthe same.On July 8,

1970, Federico filed a complaint for reconveyance anddamages against Rafael. In

his answer, Rafael scoffed at the attackagainst the validity and genuineness of the sale to

him of Federico's landand rice mill. Rafael insisted that said property was "absolutely sold

andconveyed . . . for a consideration of P20,000.00, Philippine currency, andfor other valuable

consideration".While the trial court upheld the validi ty and genuineness of thed eed

o f s a l e ex ecu t ed b y Fed e r i co i n f av o r o f R a f ae l , wh i ch d eed i s referred to

above as Exhibit A, it ruled that the counter-deed, referred toas Exhibit B, executed by Rafael in

favor of Federico, was simulated andwithout consideration, hence, null and void

ab initio

.Moreover, while the trial court adjudged Rafael as the owner of theproperty in dispute, it did not

go to the extent of ordering Federico to payback rentals for the use of the property as the court

made the evidentialf i n d i n g t h a t R a f a e l s i m p l y a l l o w e d h i s u n c l e t o h a v e

c o n t i n u o u s possession of the property because or their understanding that Federicowould

subsequently repurchase the same.From the aforecited decision of the trial court, both

Federico andRafael appealed. The Court of Appeals rendered judgment affirming thetrial

court's decision, with a modification that Federico was ordered tosurrender the

possession of the disputed property to Rafael. Counsel of

Federico filed a motion for reconsideration of the aforecited decision.While the

motion was pending resolution, Atty. Ricardo M. Fojas enteredhis appearance in behalf of

the heirs of Rafael who had passed away onNovember 23, 1988. Atty. Fojas prayed that

said heirs be substituted asdefendants-appellants in the case. The prayer for substitution

was dulynoted by the court in a resolution dated April 6, 1993. Thereafter,

Atty.F o j a s f i l e d i n b e h a l f o f t h e h e i r s a n o p p o s i t i o n t o t h e m o t i o n

f o r reconsideration. The parties to the case were heard on oral argument onOctober 12, 1993.

On December 15, 1993, the Court of Appeals reverseditself and rendered an amended judgment.

ISSUE: Whether or not the deed of sale executed by Federico in favor of Rafael is simulated

and fictitious and, hence, null and void.

RULING: I n t h e a g g r e g a t e , t h e e v i d e n c e o n r e c o r d d e m o n s t r a t e

a combination of circumstances from which may be reasonably inferred certain badges

of simulation that attach themselves to the deed of sale inquestion. The complete absence of an

attempt on the part of the buyer toassert his rights of ownership over the land and rice mill in

question is themost protuberant index of simulation. The deed of sale executed by Federico in

favor of his now deceasednephew, Rafael, is absolutely simulated and fictitious and, hence, null

andvoid, said parties having entered into a sale transaction to which they didnot intend to be

legally bound. As no property was validly conveyedunder the deed, the second deed

of sale executed by the late Rafael infavor of his uncle, should be considered ineffective

and unavailing. T h e a l l ega t io n o f R a f ae l t h a t t h e l aps e o f s even yea r s

b e f o re Federico sought the issuance of a new title in his name necessarily makesFederico's

claim stale and unenforceable does not hold water. Federico'stitle was not in the hands of a

stranger or mere acquaintance; it was int h e p oss e s s i on o f h i s n eph ew w ho ,

b e in g h i s l aw ye r , h ad s e r ved h im faithfully for many years. Federico had been all the

while in possession of the land covered by his title and so there was no pressing reaso n

forFederico to have a title in his name issued. Even when the relationship between the

late Rafael and Federico deteriorated, and eventually ended,i t i s n o t a t a l l s t r a n g e

f o r F e d e r i c o t o h a v e b e e n c o m p l a c e n t a n d unconcerned about the status of his

title over the disputed property sincehe has been possessing the same actually, openly, and

adversely, to theexclusion of Rafael. It was only when Federico needed the title in order

toobtain a collaterized loan that Federico began to attend to the task of obtaining a

title in his name over the subject land and rice mill.

CAUSE VS. MOTIVEUY VS. COURT OF APPEALS314 SCRA 69SEPTEMBER 9, 1999FACTS:

Petitioners William Uy and Rodel Roxas are agents authorized to sell eight(8) parcels of land by

the owners thereof. By virtue of such authority, petitionersoffered to sell the lands, located

in Tuba, Tadiangan, Benguet to respondentNational Housing Authority (NHA) to be

utilized and developed as a housingproject.On February 14, 1989, NHA approved the

acquisition of the said parcels of land with an area of 31.8231 hectares at the cost of P23.867

million, pursuant towhich the parties executed a series of Deeds of Absolute Sale

covering thesubject lands. Of the eight parcels of lands, however, only five were paid for bythe

NHA because of the report it received from the Land Geosciences Bureau of the Department of

Environment and Natural Resources that the remaining areais located at an active landslide area

and therefore, not suitable for developmentinto a housing project. NHA eventually

cancelled the sale over the remainingthree (3) parcels of land.On March 9, 1992,

petitioners filed a complaint for damages. After trial, the RTC of Quezon City rendered

the cancellation of contract to be justified andawarded P1.255 million as damages in favor of

petitioners.Upon appeal by petitioners, the Court of Appeals reversed the

decisionan d en t e r ed a n ew on e d i smi s s in g th e com pl a i n t i nc l ud i n g t h e

aw a r d o f damages.

The motion for reconsideration having been denied, petitioners seek relief from this court

contending,

inter alia

, that the CA erred in declaring that NHAhad any legal basis to rescind the subject sale.

ISSUE: Whether or not the contention of petitioner is correct.Whether or not a party‘s entry into a

contract affects the validity of thecontract.

RULING: A n e n t t h e 1

st

issue, NO. Petitioners confuse the cancellation of thecontract by the NHA as a rescission

of the contract under Article 1191 of the CivilCode. The right to rescission is predicated

on a breach of faith by the otherparty that violates the reciprocity between them. The power

to rescind is givento the injured party. In this case, the NHA did not rescind the contract.

Indeed,i t d id n o t h ave th e r i gh t t o d o so f o r t h e o t he r p a r t i e s t o t h e

co n t r ac t , t h e vendors did not commit any breach, much less a substantial breach, of

theiro b l i ga t i on . Th e N H A d id n o t s u f f e r an y i n ju r y. T h e can ce l l a t i on w as

n o t therefore a rescission under Article 1191. Rather, it was based on the negationof the cause

arising from the realization that the lands, which were the objects of the sale, were not suitable

for housing.Anent the 2

nd

issue, as a general rule, a party‘s motives for entering into acontract do not affect the

contract. However, when the motive predetermines the cause, the motive may be regarded

as the cause. As held in

Liguez v. CA

, ...

I t i s we l l t o n o t e , ho w ev er , t h a t M anr es a h ims e l f , w h i l e ma i n t a i n in g

t h e distinction and upholding the inoperativess of the motives of the parties

todetermine the validity of the contract, expressly excepts from the rule

thosecontracts that are conditioned upon the attainment of the motives of either

party.

The same view is held by the Supreme Court of Spain, in its decisions of Fevruary 4, 1941

and December 4, 1946, holdinmg that the motive may beregarded as causa when it

predermones the purpose of the contract.

GRATUITOUS CAUSE1 . L I G U E Z V S . C A , 1 0 2 P H I L

5 7 7 2 . P H I L B A N K V S . L U I S H E , 2 1 S C R A 5 2 CONCHITA LIGUEZ,

petitioner,

VS. THE HONORABLE COURT OF APPEALS,MARIA NGO VDA. DE LOPEZ, ET

AL.,

respondents

102 P 577December 18, 1957G.R. No. L-11240FACTS: The case began upon complaint filed by petitioner -appellant against thew i d ow an d

h e i r s o f t h e l a t e S a l v ad or P . Lo p ez t o r e co ve r a p a r ce l o f 5 1 .8 4 hectares of

land, situated in Barrio Bogac-Linot, of the municipality of Mati,Province of Davao.

Plaintiff averred to be its legal owner, pursuant to a deed of donation of said land, executed in

her favor by the late owner, Salvador P. Lopez,on 18 May 1943. The defense interposed

was that the donation was null andvoid for having an illicit causa or consideration,

which was plaintiff's enteringi n t o m ar i t a l r e l a t i o ns wi t h S a lv ado r P . Lo p ez , a

m a r r i ed m an ; and th a t t h e property had been adjudicated to the appellees as heirs of

Lopez by the Court of First Instance, since 1949. The Court of Appeals found that the deed of

donation was prepared by the Justice of the Peace of Mati, Davao, before whom it was

signed and ratified onthe date aforesaid. At the time, appellant Liguez was a minor, only 16

years of age. Salvador donated it to Liguez out of his love and affection to her. The Courtof

Appeals found that when the donation was made, Lopez had been living withthe parents of

appellant for barely a month; that the donation was made in viewo f th e de s i r e o f S a lv ado r

P . Lo p ez , a m an o f m at u r e yea r s t o h ave s ex u a l relations with appellant Conchita

Liguez; that Lopez had confessed to his love forappellant to the instrumental witnesses, with the

remark that her parents wouldnot allow Lopez to live with her unless he first donated the land in

question; thatafter the donation, Conchita Liguez and Salvador P. Lopez lived

together in thehouse that was built upon the latter's orders, until Lopez was killed on July

1st,1943, by some guerrillas who believed him to be pro-Japanese.It was also ascertained by

the Court of Appeals that the donated landoriginally belonged to the conjugal partnership

of Salvador P. Lopez and his wife,Maria Ngo; that the latter had met and berated Conchita for

living maritally withher husband, sometime during June of 1943; that the widow and

children of Lopez were in possession of the land and made improvements thereon; that theland

was assessed in the tax rolls first in the name of Lopez and later in that of his widow;

and that the need of donation was never recorded.Upon these facts, the Court of Appeals held

that the deed of donation wasinoperative, and null and void (1) because the husband,

Lopez, had no right to

donate conjugal property to the plaintiff appellant; and (2) because the donationwas tainted with

illegal causa or consideration, of which donor and donee wereparticipants.Appellant

vigorously contends that the Court of First Instance as well asthe Court of Appeals

erred in holding the donation void for having an illicit causaor consideration. It is argued

that under Article 1274 of the Civil Code of 1889(which was the governing law in

1943, when the donation was executed), "incontracts of pure beneficence the

consideration is the liberality of the donor",and that liberality per se can never be

illegal, since it is neither against law ormorals or public policy.

ISSUE: Whether or not the deed of donation made by Lopez in favor of Liguez wasvalid.

RULING: Under Article 1274, liberality of the donor is deemed causa only in those contracts

that are of "pure" beneficence; that is to say, contracts designed solelyand exclusively to

procure the welfare of the beneficiary, without any int ent of producing any satisfaction

for the donor; contracts, in other words, in which theidea of self-interest is totally absent on the

part of the transferor.For this very reason, the same Article 1274 provides that in

remuneratorycontracts, the consideration is the service or benefit for which the remunerationi s

g i v en ; c aus a i s n o t l i b e r a l i t y i n t h es e ca s e s becaus e th e co n t r ac t

o r conveyance is not made out of pure beneficence, but "solvendi animo."

Inconsonance with this view, the Court in

Philippine Long Distance Co. vs. Jeturian*G. R. L-7756, July 30, 1955

, like the Supreme Court of Spain in its decision of 16Feb. 1899, has ruled that bonuses granted

to employees to excite their zeal andefficiency, with consequent benefit for the employer, do not

constitute donationhaving liberality for a consideration.Here the facts as found by the Court of

Appeals, which the Supreme Courtcould not vary, demonstrate that in making the

donation in question, the lateSalvador P. Lopez was not moved exclusively by the desire to

benefit appellantConchita Liguez, but also to secure her cohabiting with him, so that

he couldgratify his sexual impulses. This is clear from the confession of Lopez to

thewitnesses Rodriguez and Ragay, that he was in love with appellant, but he rparents

would not agree unless he donated the land in question to her. Actually,therefore, the donation

was but one part of an onerous transaction (at least withappellant's parents) that must be

viewed in its totality. Thus considered, theconveyance was clearly predicated upon an

illicit causa.Appellant seeks to differentiate between the alleged liberality of Lopez, ascausa for

the donation in her favor, and his desire for cohabiting with appellant,as motives that

impelled him to make the donation, and quotes from Manresaand the jurisprudence

of this Court on the distinction that must be maintainedbetween causa and motives.

It is well to note, however, that Manresa himself,while maintaining the distinction

and upholding the inoperativeness of them ot iv es o f t h e p a r t i e s t o d e t e rmi n e

t h e v a l i d i t y o f t h e co n t r ac t , ex p r es s l y excepts from the rule those contracts that are

conditioned upon the attainmentof the motives of either party.Appellees, as successors of

the late donor, being thus precluded frompleading the defense of immorality or

illegal causa of the donation, the total orpartial ineffectiveness of the same must be

decided by different legal principles.In this regard, the Court of Appeals correctly held

that Lopez could not donatethe entirety of the property in litigation, to the prejudice

of his wife Maria Ngo,because said property was conjugal in character, and the right of the

husband todonate community property is strictly limited by law. The situation of the

children and forced heirs of Lopez approximates thatof the widow. As privies of

their parent, they are barred from invoking theillegality of the donation. But their

right to a legitime out of his estate is notthereby affected, since the legitime is

granted them by the law itself, over andabove the wishes of the deceased. Hence, the

forced heirs are entitled to havethe donation set aside in so far as inofficious: i.e., in excess of the

portion of freedisposal , computed as provided in Articles 818 and 819, and bearing in

mindthat "collationable gifts" under Article 818 should include gifts made not only infavor of

the forced heirs, but even those made in favor of strangers, as decided by the Supreme

Court of Spain in its decisions of 4 May 1899 and 16 June 1902.So that in computing the

legitimes, the value of the property donated to hereinappellant, Conchita Liguez,

should be considered part of the donor's estate.Only the court of origin has the requisite

date to determine whether the donationis inofficious or not. With regard to the

improvements in the land in question,the same should be governed by the rules of

accession and possession in goodfaith, it being undisputed that the widow and heirs of

Lopez were unaware of thedonation in favor of the appellant when the improvements were made.

Appellant Conchita Liguez was declared by the Supreme Court entitled toso much of the donated

property as may be found, upon proper liquidation, notto prejudice the share of the widow

Maria Ngo in the conjugal partnership withSalvador P. Lopez or the legitimes of the

forced heirs of the latter.

GRATUITOUS CAUSEPHILIPPINE BANKING CORPORATION, representing the

estate of JUSTINA SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant,VS. LUI SHE, in

her own behalf and as administratrix of theintestate of Wong Heng, deceased, defendant-

appellant21 SCRA 52FACTS: Justina Santos and her sister Lorenza were the owners in common of a piece of land in

Manila. In it are two residential houses. The sisters lived in oneo f t h e hou s es , wh i l e

Wo n g H en g , a C h ine s e , l i v ed wi t h h i s f ami l y i n t h e restaurant. Wong had

been a long time lessee of a portion of the property, paying monthly rentals. On

September 22, 1957, Justina became the owner of the entire property as her sister died with no

other heir.On November 1, 1957, Justina executed a contract of lease in favor of

Wo n g , cov e r i n g a po r t io n a l r ead y l e a sed t o h im an d ano th e r p o r t i on o f

t h e property. The lease was for 50 years, although the lessee was give the right towithdraw at

anytime from the agreement with a stipulated monthly rental.On December 1, she executed

another contract giving Wong the option tobuy the leased premises for P120,000 payable

within 10 years at monthlyinstallment of P1,000. The option was conditioned on his

obtaining Philippinecitizenship, which was then pending. His appli cation for

naturalization waswithdrawn when it was discovered that he was a resident of Rizal.On

November 18,1958, she executed two other contracts one extendingthe term to 99

years and the term fixing the term of the option of 50 years. In the two wills, she bade

her legatees to respect the contract she had entered intowith Wong, but it appears to have a

change of heart in a codicil. Claiming that the various contracts were made because of her

machinations and inducementspracticed by him, she now directed her executor to secure the

annulment of thecontracts.On November 18, the action was filed in the CFI of Manila. The

complaintalleged that Wong obtained the contracts through fraud. Wong denied

havingtaken advantage of her trust in order to secure the execution of the contracts onquestion.

He insisted that the various contracts were freely and voluntarilyentered into by the

parties. The lower court declared all the contracts null and void with the exceptionof the first,

which is the contract of lease of November 15, 1957. From thisd ec i s io n , b o t h

p a r t i e s app ea led d i r ec t l y t o t h e Co u r t . A f t e r t h e ca s e w e re submitted for

decision, both parties died, Wong on 1962, and Justina on 1964. Wong as substituted by

his wife Lui She while Justina by the Philippine BankingCorporation.

ISSUE:

Whether or not the contracts entered into by the parties are void being inviolation of the

Constitutional prohibition on transfer of lands to aliens or thosewho are not citizens of the

Philippines.

RULING: YES. The Court held the lease and the rest of the contracts were obtainedwith the consent of

Justina freely given and voluntarily. However the contactsare not necessarily valid

on the ground that it circumvents the Constitutionalprohibition against the transfer

of lands to aliens. The illicit purpose thenbecomes the illegal causa, rendering the

contracts void.It does not follow from what has been said that because the parties are in

pari delicto

they will be left where they are, without relief. For one thing, theoriginal parties

who were guilty of violation of fundamental charter have diedand have since

substituted by their administrators to whom it would e unjust toimpute their guilt. For another

thing, Article 1416 of the Civil Code provides anexception to the

pari de licto

, that when the agreement is not illegal per se but ismerely prohibited, and the prohibition of the

law is designed for the protection of the plaintiff, he may recover what he has paid or delivered.

FORM AS ESSENTIAL ELEMENT OF CONTRACTSSONIA F. LONDRES, ARMANDO V.

FUENTES, CHI-CHITA FUENTESQUINTIA, ROBERTO V. FUENTES, LEOPOLDO V.

FUENTES, OSCAR V.FUENTES and MARILOU FUENTES ESPLANA petitioners, vs.

THE COURTOF APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS,

THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS,

ELENAALOVERA SANTOS and CONSOLACION ALIVIO ALOVERA, respondentsDec

17, 2002G.R. No. 136427FACTS: The present case stemmed from a battle of ownership over Lots 1320 and1333 both located in

Barrio Baybay, Roxas City, Capiz. Paulina originally ownedthese two parcels of land. After

Paulina‘s death, ownership of the lots passed toher daughter, Filomena. The surviving

children of Filomena, namely, SoniaFuentes Londres, Armando V. Fuentes, Chi -

Chita Fuentes Quintia, Roberto V.Fuentes, Leopoldo V. Fuentes and Maril ou

Fuentes Esplana, herein petitioners,now claim ownership over Lots 1320 and 1333.

On the other hand, privaterespondents Consolacion and Elena anchor their right of

ownership over Lots1320 and 1333 on the Absolute Sale executed by Filomena on

April 24, 1959.Filomena sold the two lots in favor of Consolacion and her husband, Julian.

Elenais the daughter of Consolacion and Julian.On March 30, 1989, petitioners filed a

complaint for the declaration of nullity of contract, damages and just compensation.

Petitioners sought to nullifyt h e A b s o l u t e S a l e c o n v e y i n g L o t s 1 3 2 0 a n d

1 3 3 3 a n d t o r e c o v e r j u s t compensation from public respondents DPWH and

DOTC. Petitioners claimedthat as the surviving children of Filomena, they are the owners of

Lots 1320 and1 3 3 3 . P e t i t i on e r s c l a im ed tha t t h e s e t w o l o t s we r e nev e r so l d

t o J u l i an . Petitioners doubt the validity of the Absolute Sale because it was tampered.

Thecadastral lot number of the second lot mentioned in the Absolute Sale was altered

to read Lot 1333 when it was originally written as Lot 2034. Petitionerspointed out that Lot

2034, situated in Barrio Culasi, Roxas City, Capiz, was alsoowned by their grandmother,

Paulina. And that it was only recently that theylearned of the claim of private respondents

when Consolacion filed a petition forthe judicial reconstitution of the original

certificates of title of Lots 1320 and1333 with the Capiz Cadastre. Upon further inquiry,

petitioners discovered thatthere exists a notarized Absolute Sale executed on April 24, 1959

registered onlyon September 22, 1982 in the Office of the Register of Deeds of Roxas City.

Theprivate respondents‘ copy of the Absolute Sale was tampered so that the secondparcel of

lot sold, Lot 2034 would read as Lot 1333. However, the RecordsManagement and

Archives Office kept an unaltered copy of the Absolute Sale. This other copy shows

that the objects of the sale were Lots 1320 and 2034.Private respondents maintained that

they are the legal owners of Lots1333 and 1320. Julian purchased the lots from Filomena in

good faith and for avalid consideration. Private respondents explained that Julian was

deaf andd u m b an d as s u ch , w as p l aced i n a d i s ad v an t ageou s po s i t i o n

co mp a r ed t o Fi l om en a . J u l i an h ad t o r e l y o n t he r ep r es en ta t i on o f o th e r

p e r so ns in h i s business transactions. After the sale, Julian and Consolacion took possession

of the lots. Up to now, the spouses‘ successors-in-interest are in possession of thelots in the

concept owners. Private respondents claimed that the alteration in theAbsolute Sale was made

by Filomena to make it conform to the description of t h e l o t i n t h e Ab so lu t e

S a l e . P r i v a t e r e sp on d en t s f i l ed a cou n t e r c l a i m wi t h damages. The cross-claim

of petitioners against public respondents was for therecovery of just compensation.

Petitioners claimed that during the lifetime of Paulina, public respondents took a 3,200-

square meter portion of Lot 1320. Thel and w as u s ed as p a r t o f t h e A r n a l do

Bo u lev a rd in R ox as C i t y w i th ou t an y payment of just compensation. In 1988, public

respondents also appropriated a1,786-square meter portion of Lot 1333 as a vehicular parking

area for the RoxasCity Airport. Sonia, one of the petitioners, executed a deed of

absolute sale infavor of the Republic of the Philippines over this portion of Lot

1333. Accordingto petitioners, the vendee agreed to pay petitioners P214,320.00.

Despitedemands, the vendee failed to pay the stipulated amount. The trial court issued its

decision upholding the validity of the AbsoluteSale. This was affirmed by the Court of

Appeals.

ISSUE Whether or not the notarized copy should prevail.

RULING A m on g o th e rs , p e t i t i o ne r s h a r p on t h e f ac t t h a t t h e no t a r i z ed

an d r egi s t e r ed co p y o f t he Ab so l u t e S a l e sh ou ld h ave , b een

co r r es po nd in g l yco r r ec t ed . P e t i t i on e r s b e l i ev e t ha t t h e no ta r i z ed an d

a r ch i v ed co p y s h o u l d prevail. We disagree. A contract of sale is perfected at the

moment there is ameeting of the minds upon the thing which is the object of the contract and

uponthe price. Being consensual, a contract of sale has the force of law between

theco n t r ac t in g pa r t i e s an d th e y a r e ex pec t ed t o ab id e i n go o d f a i t h wi th

t h e i r respective contractual commitments. Article 1358 of the Civil Code,

whichrequires certain contracts to be embodied in a public instrument, is only

forconvenience, and registration of the instrument is needed only to

adverselya f f ec t t h i rd pa r t i e s . Fo rm al r eq u i r em en t s a r e , t he r e f o r e , f o r t h e

p u rp os e o f binding or informing third parties. Non-compliance with formal

requirements

does not adversely affect the validity of the contract or the contractual rights and

obligations of the parties.Decision affirmed with the modification that the cross-claim against

publicrespondents is dismissed.

FORM FOR CONVENIENCE OF CONTRACTS (Art. 1358, CC)1.BALATBAT VS.

CA2.UNIVERSAL ROBINA VS. HEIRS OF TEVESCLARA M. BALATBATVS. COURT

OF APPEALS and Spouses JOSE REPUYAN and AURORAREPUYANG.R. No.

109410August 28, 1996261 SCRA 128FACTS: The lot in question covered by Transfer Certificate of Title No. 51330 wasacquired by plaintiff

Aurelio Roque and Maria Mesina during their conjugal unionand the house constructed thereon

was likewise built during their marital union.Out of their union, plaintiff and Maria

Mesina had four children. When MariaMesina died on August 28, 1966, the only conjugal

properties left are the houseand lot above stated of which plaintiff herein, as the legal

spouse, is entitled toone-half share pro-indiviso thereof. With respect to the one-

half share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the

four children,the defendants here, are each entitled to one-fifth (1/5) share pro-

indiviso.A ur e l io R oqu e t h en en t e r ed i n to a con t r ac t o f A bso lu t e S a l e w i th

t h e spouses Aurora and Jose Repuyan. However, on August 20, 1980, Aurelio filed acomplaint

for Rescission of Contract against Spouses Repuyan for the la tter‘sfailure to pay the

balance of the purchase price. A deed of absolute sale wasthen executed on

February 4, 1982 between Aurelio S. Roque, Corazon Roque,Feliciano Roque, Severa

Roque and Osmundo Roque and Clara Balatbat, marriedto Alejandro Balatbat. On April 14,

1982, Clara Balatbat filed a motion for thei s su an ce o f a w r i t o f po ss es s i on

w h ich w as g r an t ed b y t h e t r i a l co ur t on September 14, 1982 "subject, however,

to valid rights and interest of thirdpersons over the same portion thereof, other than vendor

or any other person orpersons privy to or claiming any rights or interests under it." The

correspondingwrit of possession was issued on September 20, 1982. The lower court then

rendered judgment in favor of the Spouses Repuyanan d d ec l a r ed th e D eed o f A bso lu t e

S a l e as v a l i d . On ap p ea l b y p e t i t i o n er Balatbat, the Court of Appeals affirmed the

lower court‘s decision.

ISSUE: Whether or not the delivery of the owner‘s certificate of title to spouses Repuyan by

Aurelio Roque is for convenience or for validity or enforceability.

RULING: The Supreme Court found that the sale between Aurelio and the SpousesRepuyan is

not merely for the reason that there was no delivery of the subject p r op e r t y an d

t h a t con s i de r a t io n /p r i c e was no t f u l l y p a id b u t t h e s a l e as consummated, hence,

valid and enforceable. The non-delivery of the possession of the subject property to

the privaterespondent, suffice it to say that ownership of the thing sold is acquired

onlyfrom the time of delivery thereof, either actual or constructive. Articl e 1498 of

the Civil Code provides that when the sale is made through a public instrument,the execution

thereof shall be equivalent to the delivery of the thing which is theobject of the contract, if

from the deed the contrary does not appear or cannotbe in ferred. The execution of

the public instrument, without actual delivery of the thing, transfers the ownership

from the vendor to the vendee, who maythereafter exercise the rights of an owner

over the same. In the instant case,v en d o r R oq u e d e l i ve r ed t he o wn e r ' s

c e r t i f i c a t e o f t i t l e t o he r e i n p r iv a t e respondent. It is not necessary that vendee

be physically present at everysquare inch of the land bought by him, possession of the

public instrument of theland is sufficient to accord him the rights of ownership. Thus,

delivery of aparcel of land may be done by placing the vendee in control and

possession of the land (real) or by embodying the sale in a public instrument

(constructive).

The provision of Article 1358 on the necessity of a public document is only for

convenience, not for validity or enforceability. It is not a requirement for the validity

of a contract of sale of a parcel of land that this be embodied in a publicinstrument.

A contract of sale being consensual, it is perfected by the mere consent of t h e p a r t i e s .

D e l i v e r y o f t h e th in g b ou gh t o r p a ym en t o f t h e p r i c e i s n o t

necessary for the perfection of the contract; and failure of the vendee to pay theprice after the

execution of the contract does not make the sale null and void forlack of consideration but results

at most in default on the part of the vendee, forwhich the vendor may exercise his legal

remedies.

Tthe petition for review ishereby dismissed for lack of merit.

FORM FOR CONVENIENCE OF CONTRACTS (Art. 1358, CC)UNIVERSAL ROBINA

SUGAR MILLING CORPORATION, petitioner,VS. HEIRS OF ANGEL TEVES,

respondents2002 Sep 18G.R. No. 128574389 SCRA 316FACTS: Andres Abanto owned two parcels of land situated in Campuyo, Manjuyod,N egr o s O r i en t a l .

O n e lo t i s r eg i s t e r ed i n h i s nam e an d th e o th e r l o t i s unregistered. When he

died, his heirs executed an "Extrajudicial Settlement of the Estate of the Deceased and

Simultaneous Sale." In this document, Abanto'sheirs adjudicated unto themselves the two

lots and sold the unregistered lot tothe United Planters Sugar Milling Company, Inc.

(UPSUMCO), and the registeredl o t t o A n ge l M . T ev es , fo r a t o t a l s um o f

P 11 5 , 00 0 . 00 . Th e sa l e w as no t registered.Out of respect for his uncle Montenegro, who

was UPSUMCO's founder andpresident, Teves verbally allowed UPSUMCO to use the

registered lot for pier andloading facilities, free of charge, subject to the condition that

UPSUMCO shallshoulder the payment of real property taxes and that its occupation shall be

co-terminus with its corporate existence. UPSUMCO then bui lt a guesthouse andpier

facilities on the property. Years later, UPSUMCO‘s properties were acquiredb y t h e

P h i l i pp in e N a t io n a l Ban k (P N B) . La t e r , P N B t r ans f e r r ed th e s am e properties

to the Asset Privatization Trust (APT) which, in turn, sold the same tothe Universal Robina

Sugar Milling Corporation (URSUMCO). URSUMCO then tookpossession of UPSUMCO‘s

properties, including Teves' lot.U p o n l e a rn i n g o f t h e acqu i s i t i o n o f h i s l o t , T eves

f o rm a l l y a s k ed th e corporation to turn over to him possession thereof or the corresponding

rentals.He stated in his demand letters that he merely allowed UPSUMCO to use

hisp r o p er t y u n t i l i t s co r po r a t e d i s s o lu t io n ; and t ha t i t w as n o t m or t gaged

b yUPSUMCO with the PNB and, therefore, not included among the

foreclosedproperties acquired by URSUMCO.URSUMCO refused to heed Teves'

demand, claiming that it acquired theright to occupy the property from UPSUMCO

which purchased it from AndresAbanto; and that it was merely placed in the name of Angel

Teves, as shown bythe "Deed of Transfer and Waiver of Rights and Possession" dated November

26,1987. Under this document, UPSUMCO transferred to URSUMCO its

applicationfor agricultural and foreshore lease. The same document partly states that thelands

subject of the foreshore and agricultural lease applications are bounded onthe north by the

"titled property of Andres Abanto bought by the transferor (UPSUMCO) but placed in

the name of Angel Teves". URSUMCO further claimedthat it was UPSUMCO, not Teves,

which has been paying the correspondingrealty taxes.Consequently, Teves filed a

complaint for recovery of possession of realproperty with damages against

URSUMCO. However, on September 4, 1992, Teves died and was substituted by his heirs.

On April 6, 1994, the RTC held thatURSUMCO has no personality to question the validity of the

sale of the propertybetween the heirs of Andres Abanto and Angel Teves since it is not

a partythereto; that Teves' failure to have the sale registered with the Registry of Deedswould

not vitiate his right of ownership, unless a third party has acquired theland in good

faith and for value and has registered the subsequent deed; thatthe list of properties

acquired by URSUMCO from the PNB does not include thedisputed lot and,

therefore, was not among those conveyed by UPSUMCO to URSUMCO.On appeal by

URSUMCO, the Court of Appeals affirmed the RTC decision,holding that the transaction

between Angel Teves and Andres Abanto's heirs is acontract of sale, not one to sell, because

ownership was immediately conveyedto the purchaser upon payment of P115,000.00. On

October 29, 1996, URSUMCOfiled a motion for reconsideration but was denied by the Appellate

Court. Hence,the instant petition for review on certiorari.

ISSUE: Wh e th e r o r no t t h e r e s po nd en t s h av e es t ab l i s hed a c au se o f a c t i on against

petitioner.

RULING: No. Petitioner URSUMCO contends that respondents have no cause of action

because the "Extrajudicial Settlement of the Estate of the DeceasedAndres Abanto

and Simultaneous Sale" is merely a promise to sell and not anabsolute deed of sale,

hence, did not transfer ownership of the disputed lot toAngel Teves. Assuming that the

document is a contract of sale, the same is voidf o r l a ck o f con s id e r a t i on b ecau s e th e

t o t a l p r i c e o f P1 15 ,0 0 0 . 00 d oes no t specifically refer to the registered lot making the

price uncertain. Furthermore,the transaction, being unregistered, does not bind third

parties.Petitioner's contentions lack merit. As held by the RTC and the Court of

Appeals, the transaction is not merely a contract to sell but a contract of sale. Ina contract of sale,

title to the property passes to the vendee upon delivery of thething sold; while in a contract

to sell, ownership is, by agreement, reserved inthe vendor and is not to pass to the

vendee until full payment of the purchaseprice. In the case at bar, the subject

contract, duly notarized, provides that theAbanto heirs sold to Teves the lot covered by

TCT No. H-37. There is no showingthat the Abanto heirs merely promised to sell the said lot to

Teves. The absolute ownership over the registered land was indeed transferredt o

T ev es i s fu r t h e r sho w n b y h i s a c t s su bs equ en t t o t he ex ecu t i on o f

t h e contract. As found by the trial court, it was Teves, not Andres Abanto's

heirs,who allowed UPSUMCO to construct pier facilities and guesthouse on the

land.When the property was erroneously included among UPSUMCO's properties thatwere

transferred to petitioner URSUMCO, it was Teves, not the heirs of AndresAbanto,

who informed petitioner that he owns the same and negotiated for an arrangement

regarding its use. Teves even furnished petitioner documents andletters showing his

ownership of the lot, such as a copy of the "ExtrajudicialSettlement of the Estate of the

Deceased Andres Abanto and Simultaneous Sale"and a certified true copy of TCT No. H-37

covering the disputed lot. Indeed, thetrial court and the Court of Appeals correctly ruled that

Teves purchased the lotfrom the Abanto heirs.

That the contract of sale was not registered does not affect its validity.Being

consensual in nature, it is binding between the parties, the Abanto heirsand Teves.

Article 1358 of the New Civil Code, which requires the embodimentof certain contracts in a

public instrument, is only for convenience, and theregistration of the instrument

would merely affect third persons. Formal itiesintended for greater efficacy or

convenience or to bind third persons, if not done,would not adversely affect the validity or

enforceability of the contract betweenthe contracting parties themselves. Thus, by virtue of the

valid sale, Angel Tevesstepped into the shoes of the heirs of Andres Abanto and acquired all

their rightsto the property. Thus, petition is denied.

REFORMATION OF INSTRUMENTS: WHEN PROHIBITED (Art. 1366-1367,

CC)1 . S A R M I N G V S . D Y , J U N E 6 , 2 0 0 2 2 . C E B U V S . C A , 4 0 7

S C R A 1 5 4 SARMING VS. DY 383 SCRA 131 JUNE 6, 2002FACTS: Petitioners are the succesors-in-interest of original defendant SilveriaFlores, while

respondents Cresencio Dy and Ludivina Dy-Chan are the succesors-in-interest of the original

plaintiff Alejandra Delfino, the buyer of one of the lotssubject of this case. They were

joined in this petition by the successors-in-i n t e r es t o f Is ab e l , J u an , Hi l a r i o ,

R up e r t o , T om as a , an d Lu i s a an d T r in id ad themselves, all surnamed Flores, who

were also the original plaintiffs in thelower court. They are the descendants of Venancio

and Jose, the brothers of theoriginal defendant Silveria Flores.A controversy arose regarding the

sale of Lot 4163 which was half-ownedby the original defendant, Silveria Flores, although it was

solely registered underher name. The other half was originally owned by Silveria‘s

brother, Jose. On January 1956, the heirs of Jose entered into a contract with

plaintiff AlejandraDelfino, for the sale of their one-half share of Lot 4163 after offering the

same totheir co-owner, Silveria, who declined for lack of money. Silveria did not objectto the

sale of said portion to Alejandra.Atty. Deogracias Pinili, Alejandra‘s lawyer then prepared the

document of sale. In the preparation of the document however, OCT no. 4918-A, covering

Lot5734, and not the correct title covering Lot 4163 was the one delivered to Pinili.

U n a w a r e o f t h e m i s t a k e c o m m i t t e d , A l e j a n d r a i m m e d i a t e l y

t o o k possession of Lot 4163 and introduced improvements on the said lot. Two years later,

when Alejandra Delfino purchased the adjoinin portion of the lot she had been occupying, she

discovered that what was designated in thedeed, Lot 5734, was the wrong lot. Thus, Alejandra

and the vendors filed for thefeformation of the Deed of Sale.

ISSUE: Whether or not reformation is proper in this case.

RULING: YES. Reformation is that remedy in equity by means of which a written instrument is

made or construed so as to express or inform to the real intentionof the parties.An action for

reformation of instrument under this provision of law mayprosper only upon the

concurrence of the following requisites: (1) there musth av e b een a m ee t i n g o f

t h e m in ds o f t h e p a r t i e s t o t h e co n t r ac t ; (2 ) t h e instrument does not express the

true intention of the parties; and (3) the failureof the instrument to express the true

intention of the parties is due to mistake, fraud, inequitable conduct or accident.All of

these requesites are present in this case. There was a meeting of the minds between the

parties to the contract but the deed did not express thetrue intention ot the parties due to the

designation of the lot subject of the deed. There is no dispute as to the intention of the parties to

sell the land to AlejandraDelfino but there was a mistake as to the designation of the

lot intended to besold as stated in the Settlement of Estate and Sale.

REFORMATION OF INSTRUMENTS: WHEN PROHIBITED (Art. 1366-

1367,CC)CEBU CONTRACTORS CONSORTIUM CO., petitioner,VS. COURT OF

APPEALS andMAKATI LEASING & FINANCE CORPORATION, respondentsG.R. No.

107199 July 22, 2003FACTS: The instant Petition for Review on

Certiorari

stems from a complaint forcollection of a sum of money with replevin filed by

respondent Makati Leasingand Finance Corporation (MLFC) against petitioner Cebu

Contractors ConsortiumCompany (CCCC) before the Regional Trial Court of Makati.MLFC

alleges that on August 25, 1976 a lease agreement relating tovarious equipment was

entered into between MLFC, as lessor, and CCCC, aslessee. The terms and

conditions of the lease were defined in said agreementand in two lease schedules of

payment. To secure the lease rentals, a chattelmortgage, and a subsequent

amendment thereto, were executed in favor of MLFC over other various equipment

owned by CCCC.On June 30, 1977, CCCC began defaulting on the lease rentals,

promptingMLFC to send demand letters. When the demand letters were not heeded, MLFCfiled

a complaint for the payment of the rentals due and prayed that a writ of replevin be

issued in order to obtain possession of the equipment leased and toforeclose on the equipment

mortgaged.CCC‘s position is that it is no longer indebted to MLFC because the totalamounts

collected by the latter from the Ministry of Public Highways, by virtue of the deed of

assignment, and from the proceeds of the foreclosed chattels weremore than enough to

cover CCC‘s liabilities. CCC submits that in any event, thedeed of assignment itself already

freed CCC from its obligation to MLFC. The trial court rendered decision upholding the

lease agreement andfinding CCC liable to MLFC in lease rentals. On appeal, the

appellate courtaffirmed the trial court‘s decision.

ISSUE: Whether or not respondent court erred in upholding the so - called sale-lease back

scheme of the private respondent when the same is in reality nothingbut an equitable mortgage.

RULING: The Court finds in favor of CCC.MLFC‘s own evidence discloses that it offers two types of

financing lease:a direct lease and a sale- lease back. The client sells to MLFC equipment that

itowns, which will be leased back to him. The transaction between CCC and MLFCinvolved the

second type of financing lease.CCC argues that the sale and leaseback scheme is nothing

more than an equitable mortgage and consequently,asks for its reformation. The

right of action for reformation accrued from the

date of execution of the contract of lease in 1976. This was properly exercisedby CCC when it

filed its answer with counterclaim to MLFC‘s complaint in 1978and asked for the reformation of

the lease contract.Wherefore, the decision appealed from is hereby affirmed.

INTERPRETATION OF CONTRACT – LITERAL INTERPRETATIONADR SHIPPING

SERVICESS, INC, Petitioner,VS. MARCELINO GALLARDO AND Court OF APPEALS,

RespondentG.R. No. 134873September 17, 2002FACTS: Petitioner ADR Shipping Services, Inc. entered into a contract with privaterespondent

Gallardo for the use of the former‘s vessel MV Pacific Breeze to t r an sp o r t l o gs t o

T a iw an . T h e lo gs we r e t h e su b j ec t o f a s a l es ag r eem en t between private

respondent as seller being a timber concessionaire and logdealer, and Stywood

Philippines, as buyer. Private respondent paid an advancecharter fee of P242,000

representing ten percent of the agreed charter fee.Under the charter agreement, the

boat should be ready to load by February 5,1988. The boat failed to arrive on time,

prompting private respondent to notifypetitioner of its cancellation of the charter

contract and the withdrawal of theadvance payment deposited to the account of

ADR shipping. ADR Shippingrefused to return the advance payment to Gallardo claiming

that the agreementon the date of February 5, 1988 was just the ―reference commencing date‖

andthe true loading date was February 16, 1988. This prompted the latter to file

acase for sum of money and damages. The Regional Trial Court ordered

ADRS h ip p i n g to p ay G a l l a rd o th e adv an ce p a ym en t wi t h 6 p e r cen t i n t e re s t

p e r annum and attorney‘s fees. The decision of the trial court was affirmed by

theCourt of Appeals. Hence, this petition.

ISSUE: Whether or not private respondent is entitled to the refund of the advancep a ym e n t

r ep r es en t i n g h i s d ep os i t f o r t h e ch ar t e r o f t h e sh ip p ro v i ded b y petitioner.

RULING: Yes. Private respondent is entitled to the refund of the advance paymentit made to petitioner.

There was ambiguity in the interpretation of the contract provisions as tothe date of the

loading of the ship. Ambiguities in a contract are interpretedstrictly, albeit not

unreasonably, against the drafter thereof when justified in l i gh t o f t he op e r a t i v e

f ac t s an d su r ro un d in g c i r cum s t an ces . In t h i s c as e , ambiguity must be construed

strictly against ADR which drafted and caused theinclusion of the ambiguous provisions. The

charter agreement explicitly states that February 5, 1988 is the intended date when the

ship is expected ready to load while February 16, 1988is merely the canceling date. Considering

that the subject contract contains theforegoing express provisions, the parties have no other

recourse but to apply theliteral meaning of the stipulations. The cardinal rule is that

when the terms of the contract are clear, leaving no doubt as to the intention of the

parties, theliteral meaning of its stipulations is controlling.P u rs u an t t o t h e p r ov i s i on o f

A r t 11 91 o f t h e C i v i l C od e , t h e po w er t o rescind obligations is implied in

reciprocal ones in case one of the obligorsshould not comply with what is incumbent upon

him, and the injured party mayr e s c i nd t h e ob l i ga t i on , wi th p aym en t o f dam ages .

In t h i s c as e th e p r iv a t e respondent is entitled to the return of his down payment,

subject to a legalinterest of 6 percent per annum, and to the payment of damages.

INTERPRETATION OF CONTRACTS: IN CASE OF DOUBT1 . T S P I C C O R P ,

V S . T S P I C E M P L O Y E E S U N I O N 2 . E S T A N I S L A O V S . E A S T -

W E S T B A N K I N G C O R P . 3 . A Q U I N T E Y V S .

T I B O N G 4 . C R U Z V S . C A , 4 5 6 S C R A 1 6 5 5 . G O N Z A L E Z

V S . C A , 4 5 4 S C R A 8 6 . A L M I R A V S . C A , 3 9 9 S C R A 3 5 1

TSPIC CORPORATION V. TSPIC EMPLOYEES UNION G.R. No. 163419, February 13, 2008

FACTS: TSPIC is engaged in the business of designing, manufacturing, andmarketing integrated

circuits to serve the communication, automotive,d a t a p ro ce ss i ng , and ae r os p ace

i nd us t r i e s . TSP IC E mp lo yees U n io n (Union), on the other hand, is the registered

bargaining agent of the rank-and-file employees of TSPIC. TSPIC and the Union entered into a

CollectiveBargaining Agreement. As a result all the regular rank-and-file employeesof TSPIC

received a 10% increase in their salary. A wage order was issuedby the National Capital Region

which raised the daily minimum wage fromPhP 223.50 to PhP 250, hence, the wages of

17 probationary employeeswere increased to PhP 250.00. TSPIC implemented the new wage

rates asmandated by the CBA. As a result several employees received fewerwage. A

few weeks after the salary increase for the year 2001 became effective, TSPIC notified

some of their employees were overpaid and theoverpayment would be deducted from their

salaries in a staggered basis.

ISSUE: Whether or not deduction of the alleged overpayment from thesalaries of the

affected members of the Union constitute diminution of benefits in violation of law.

RULING: The deduction of the alleged overpayment from the salaries of therespondents is a valid act. T h e

C BA p ro v i d ed in i t s p r ov i s i on i n t h e co mp ut a t io n fo r t h e increase in TSPIC‘s

employees, hence, the intention therein must bepursued basing on the principle that

littera necat spiritus vivificate

.

Thefundamental doctrine in labor law that the CBA is the law between the parties and

they are obliged to comply with its provisions. Therefore, thee r r o r fo u nd b y T SP IC in

p u rs u an ce to t h e t e r m s i n t h e C BA m us t b e sustained. The Court also agrees that

TSPIC in charging the overpaymentsm ad e t o t h e r e sp on den t s t h ro u gh

s t agge r ed d ed uc t i on s f r om th e i r salaries does not constitute diminution of benefits. Any

amount given tot h e emp lo yees in ex ces s o f w ha t t h ey w e r e en t i t l ed to , a s

co mp ut ed above, may be legally deduc ted by TSPIC from the employees‘

salariesbecause on the first place that excess was not vested in them legally as aright because

that will amount to unjust enrichment.

INTERPRETATION OF CONTRACTS: IN CASE OF DOUBT

ESTANISLAO V. EAST WEST BANKING CORPORATION G.R. No. 178537, February 11, 2008

FACTS: Spouses Rafael and Zenaida Estanislao obtained a loan from East West Banking

Corporation videnced by a promissory note and secured by twodeeds of chattel mortgage of two

dump trucks and a bulldozer for the firstand bulldozer and a wheel loader for the other. Spouses

defaulted in theamortizations and the entire obligation became due and demandable. Thebank

filed a suit for replevin with damages but subsequently, the bank m ov ed f o r

s us p en s io n o f t h e p r o ceed i n gs o n accou n t o f an ea r ne s t attempt to arrive at an

amicable settlement of the case. Both partiesexecuted a Deed of Assignment,

drafted by the bank, where it providesthat the two dump trucks and the bulldozer shall be

transferred, assignedan d con v eyed f o r t he fu l l p aym en t o f t he d eb t . Bu t t h e

b ank , f o r an unknown reason failed to sign on the deed, but it accepted the

threeh e a v y v e h i c l e s f r e e l y a n d v o l u n t a r i l y u p o n d e l i v e r y m a d e b y

t h e petitioner. After some time, the bank file a petition in court praying for thed e l i v e r o f t h e

o th e r h eav y v eh i c l es m o r t gaged in t h e s econ d cha t t e l mortgage. The regional

trial court dismissed the complaint for lack of merit but it was reversed and set aside by

the court of appeals.

ISSUE: Whether or not the Deed of Assignment, unsigned by private respondent,extinguishes the whole

and full obligation of the petitioner.

RULING:

T h e d e e d o f a s s i g n m e n t w a s a p e r f e c t e d a g r e e m e n t w h i c h extinguished

petitioner‘s total outstanding obligation to the respondent. T h e d eed ex p l i c i t l y p r o v id e s

t h a t t h e as s i gno r ( pe t i t i on e rs ) , i n f u l l payment of its obligation, shall deliver the three

units of heavy equipmentt o t h e a s s i gn ee ( r e sp o nd en t ) , w h i ch accep t s t h e

a s s i gnm ent i n fu l l payment of the above-mentioned debt. This could only mean that

shouldpetitioners complete the delivery of the three units of heavy

equipmentcovered by the deed, respondent‘s credit would have been satisfied in full,

and petitioner‘s aggregate indebtedness would then be consideredto have been paid in full as

well. The nature of the assignment was a dation in payment, wherebyproperty is

alienated to the creditor in satisfaction of a debt in money.Such transaction is

governed by the law on sales. Even if we were toconsider the agreement as a compromise

agreement, there was no needfor respondent‘s signature on the same, because with the delivery

of theh e a v y e q u i p m e n t w h i c h t h e l a t t e r a c c e p t e d , t h e a g r e e m e n t

w a s c o n s u m m a t e d . R e s p o n d e n t ‘ s a p p r o v a l m a y b e i n f e r r e d f r o m

i t s unqualified acceptance of the heavy equipment.

INTERPRETATION OF CONTRACTS: IN CASE OF DOUBT

QUINTEY V.TIBONG G.R. No. 166704, December 20, 2006

FACTS: Agrifina Aquintey filed a complaint for sum of money and damagesagainst the respondents,

spouses Felicidad and Rico Tibong. Agrifinaalleged that Felicidad had secured loans from

her on several occasions, atmonthly interest rates. Despite demands, the spouses Tibong

failed top a y t h e i r ou t s t an d i n g lo an ex c lu s i v e o f i n t e r es t s . S po us es

T ib on gadmitted that they had secured loans from Agrifina. The proceeds of theloan were

then re-lent to other borrowers at higher interest rates. They, likewise, alleged that they

had executed deeds of assignment in favor of A g r i f i n a , and t h a t t h e i r d eb t o r s h ad

ex ecu t ed p r omi ss o ry n o t e s i n A gr i f i n a ' s f av or . A cco r d i n g t o t h e sp ou s es

T ib on g , t h i s r es u l t ed i n a novation of the original obligation to Agrifina. They insisted

that by virtueof these documents, Agrifina became the new collector of their

debtors;a n d t h e o b l i g a t i o n t o p a y t h e b a l a n c e o f t h e i r l o a n s

h a d b e e n extinguished.

ISSUE: Whether or not consent is necessary in novation.

RULING: Novation which consists in substituting a new debtor (delegado) inthe place of the original

one (delegante) may be made even without theknowledge or against the will of the latter

but not without the consent of the creditor. Substitution of the person of the debtor may be

effected bydelegacion, meaning, the debtor offers, and the creditor

(delegatario),accepts a third person who consents to the substitution and assumes

theobligation. Thus, the consent of those three persons is necessary. In thiskind of novation, it is

not enough to extend the juridical relation to a thirdperson; it is necessary that the old debtor be

released from the obligation,and the third person or new debtor takes his place in the relation.

Withoutsuch release, there is no novation; the third person who has assumed theobligation of the

debtor merely becomes a co-debtor or a surety. If therei s no ag r eem en t a s t o s o l i d a r i t y ,

t h e f i r s t and th e n ew d eb t o r a r e considered obligated jointly. Therefore, the Court

agrees with the appellate court‘s decision thatrespondents' obligation to pay the balance of their

account with petitionerw as ex t in gu i s hed , p ro t an to , b y t h e d eed s o f a s s i gn ment

o f c red i t executed by respondent Felicidad in favor of petitioner.

INTERPRETATION OF CONTRACTS: IN CASE OF DOUBTADORACION E. CRUZ,

THELMA DEBBIE E. CRUZ, GERRY E. CRUZ andNERISSA CRUZ-TAMAYO vs.

THE HONORABLE COURT OF APPEALS,SUMMIT FINANCING CORP., VICTOR

STA. ANA, MAXIMO C. CONTRERAS,RAMON G. MANALASTAS and VICENTE

TORRESG.R. NO.122904

April 15,2005FACTS: Herein petitioner is the mother of her co petitioners Thelma Cruz, GerryC r u z an d

N e r i s sa C ruz - T am ayo , a s we l l a s A rn e l C ruz , wh o w as o ne o f t h e defendants

in Civil Case No. 49466. Petitioners files said case on February 11,1983 against

Arnel Cruz and herein private respondents Summit FinancingCorporation (―Summit‖),

Victor S. Sta. Ana and Maximo C. Contreras, the last twoin their capacity as deputy sheriff and

ex-officio sheriff of Rizal, respectively, andRamon G. Manalastas in his capacity as Acting

Register of Deeds of Rizal. The Complaint alleged that petitioners and Arnel Cruz were co-

owners of aparcel of land situated in Taytay, Rizal. Yet the property, which was then coveredby

Transfer Certificate of Title (TCT) No. 495225, was registered only in the n am e o f

A r n e l C ruz . A cco rd i n g t o pe t i t i o n er s , t h e p r op e r t y w as amo n g t h e properties

they and Arnel Cruz inherited upon the death of Delfin Cruz, husbandof Adoracion Cruz.On

August 22, 1977, petitioners and Arnel Cruz executed a Deed of PartialPartition, distributing

to each of them their shares consisting of several lotsp r ev i o us ly h e l d b y t h em in

co mmo n. Am on g t he p ro p er t i e s ad j ud ica t ed t o defendant Cruz was the parcel of

land covered at the time by TCT No. 495225. Itis the subject of this case.Subsequently, the same

parties to the Deed of Partition agreed in writingto share equally in the proceeds of the sale of the

properties although they havebeen subdivided and individually titled in the names of

the former co-ownersp u rs u an t t o t h e D eed o f P a r t i t i o n . T h i s a r r an gem en t

w as emb od ied in a Memorandum of Agreement executed on August 23, 1977 or a

day after thepartition. The tenor of the Memorandum of Agreement was annotated at

theback of the TCT No. 495225 on September 1, 1977.Sometime in January 1983,

petitioner Thelma Cruz discovered that TCTNo. 514477 was issued on October 18,

1982 in the name of Summit. Uponinvestigation, petitioners learned that Arnel Cruz had

executed a Special Powero f At t o rn e y o n M ay 1 6 , 19 80 in f av or o f on e N e l s on

T am ayo , h us ban d o f petitioner Nerissa Cruz Tamayo, authorizing him to obtain a loan in

the amountof One Hundred Four Thousand Pesos from respondent Summit, to be secured bya

real estate mortgage on the subject parcel of land.Since the loan remained outstanding on

maturity, Summit instituted extra- judicial foreclosure proceedings, and at the foreclosure sale, it

was declared thehighest bidder. Consequently, Sheriff Sta. Ana issued a Certificate of

Sale torespondent Summit which more than a year later consolidated its ownership

of the foreclosed property. Upon presentation of the affidavit of consolidation of

ownership, the Acting Register of Deeds of Rizal cancelled TCT No. 495225 andissued and in

lieu thereof, TCT No. 514477 in the name of respondent Summit.In their complaint before the

RTC, petitioners asserted that they co-ownedthe properties with Arnel Cruz, as evidenced by the

Memorandum of Agreement.Hence, they argued that the mortgage was void since they did not

consent to it.

ISSUE:

Whether or not the real estate mortgage on the property then covered by TCT No. 495225 is

valid and whether the mortgaged property was the exclusiveproperty of Arnel Cruz when it was

mortgaged.

RULING: A reading of the provisions of the Deed of Partition, no other meaning canbe gathered other than

that petitioners and Arnel Cruz had put an end to the co-ownership. In the aforesaid deed,

the shares of petitioners and Arnel Cruz‘s in the mass of co-owned properties were

concretely determined and distributed toeach of them. In particular, to Arnel Cruz was

assigned the disputed property. There is nothing from the words of said deed which

expressly or impliedly statedthat petitioners and Arnel Cruz intended to remain as co-owners

with respect tothe disputed property or to any of the properties for that matter.Petitioners do

not question the validity or efficacy of the Deed of PartialPartition. In fact, they

admitted its existence in their pleadings and submitted itas a part of their evidence. Thus,

the deed is accorded its legal dire effect.Since a partition legally made confers upon each

heir their exclusive ownershipof the property adjudicated to him, it follows that Arnel

Cruz acquired absoluteownership over the specific parcels of land assigned to him in the

Deed of PartialPartition, including the property subject of this case. As the absolute

ownerthereof then, Arnel Cruz had the right to enjoy and dispose of the property,

aswell as the right to constitute a real estate mortgage over the sa me withoutsecuring

the consent of the petitioners.On the other hand, there is absolutely nothing in the

Memorandum of Agreement which diminishes the right of Arnel Cruz to alienate or encumber

theproperties allotted to him in the deed of partition.

A s co r r ec t l y h e ld by t h e C ou r t o f Ap pea l s , t h e p a r t i e s on l y

b o un d th em s e l ve s t o sh a r e i n t he p r o ceed s o f t h e s a l e o f t h e p r op e r t i e s .

T h eagr eem en t do es n o t d i r ec t r e con veyan ce o f t h e p r op e r t i e s t o r e in s t a t e

t h e common ownership of the properties.M o r e o v e r , t o a s c e r t a i n t h e i n t e n t o f

t h e p a r t i e s i n a c o n t r a c t u a l relationship, it is imperative that the various

stipulations provided for in thecontracts be construed together, consistent with the

parties contemporaneousand subsequent acts as regards the execution of the

contract. Subsequent tothe execution of the Deed of Partition and Memorandum of

Agreement, theproperties were titled individually in the names of the co -owners to

which theyw er e r e s pec t i v e l y ad ju d i ca t ed , t o t he ex c lus io n o f t he o th e r co -

o w n er s . Petitioners Adoracion Cruz and Thelma Cruz separately sold the

propertiesdistributed to them as absolute owners thereof. Being clear manifestations

of sole and exclusive dominion over the properties affected, the acts signify

totalincongruence with the state of co-ownership claimed by the petitioners. The real estate

mortgage on the disputed property is valid and does notcontravene the agreement of the

parties.

INTERPRETATION OF CONTRACTS: IN CASE OF DOUBTGONZALES VS. COURT OF

APPEALS354 SCRA 8FACTS: Private respondents, Mr. and Mrs. Gabriel Caballero, are the registeredowneres of

two parcels of land situated in Cubao, Quezon City described in Transfer Certificate fo

Title No. 247309 (Lot 1) and TCT No. 247310 (Lot 2). Thespouses‘ residence stood in Lot

2.Sometime in 1979, they obtained a loan from the Cavite DevelopmentBank in the

amount of P225,000.00. The two lots were mortgaged to securetheir loan. The loan

matured in 1984. To pay the loan they offered Lot 1 for s a l e . Th e o f f e r was

ad v e r t i s ed in t he

Bulletin Today.

However, offers topurchase from prospective buyers did not materialize.On October 24,

1985, a certain Mrs. Lagrimas approached the spousesoffering to broker the sale to an

interested buyer. Initially, the spouses told thebroker that they were selling only to direct buyers.

Nonetheless, Mrs. Lagrimasbrought to the spouses her buyer, herein petitioner

Napoleon H. Gonzales, who turned out to be Mrs. Lagrimas‘ relative.P et i t i on e r o f f e r ed

t o bu y t h e v acan t l o t f o r P 47 0 , 00 0 . 00 . In i t i a l l y , respondents refused to reduce

their asking price. Petitioner bargained for a lower price with the suggestion that on paper

the price will be markedly lower sothe spouses would pay lower capital gains tax. Petitioner

assured the spousest h i s co u l d b e do ne s in ce h e h ad co nn ec t i on s wi th t he

Bu r eau o f In t e r n a l Revenue. The spouses agreed to sell at P470.000.00. Petitioners paid the

bankP375,000.00, to be deducted from the purchase price. After the mortgage wascancelled

and upon release of the two titles, Gonzales asked for the deeds of sale of the two lots

and delivery of the titles to him. Defendants signed the deedof sale covering only Lot 1 but

refused to deliver its title until petitioner paid theremaining balance of P70,000.00 This

prompted petitioner to file a complaint for specific performance anddamages.

ISSUE: Whether or not the sale involved only Lot 1 and not both Lots.

RULING: YES. Principally, the issue here is whether the contract of sale between the parties

involved Lot 1 and 2 as claimed by petitioner or only Lot 1 as privaterespondents contend. In

a case where we have to judge conflicting claims on the intent of the parties, as in this

instance, judicial determination of the parties‘intention is mandated. Contemporaneous

and subsequent acts of the partiesmaterial to the case are to be considered.Petitioner

admits he himself caused the preparation of the deed of salepresented before the lower

court. Yet he could not explain why I referred only tothe sale of Lot 1 and not to the two lots, if

the intention of the parties was reallyto cover the sale of two lots. As the courts a

quo

observed, even if it were truethat two lots were mortgaged and were about to be

foreclosed, the ads privaterespondents placed in the

Bulletin Today

offered only Lot 1 and was strongindication that they did not intend to sell Lot 2. The 501

sq.m. lot was offered forP1,150.00 per sq.m. It alone would have fetched P576,150.00. The loan

still tobe paid the bank was only P375,000.00 which was what petitioner actually paidthe bank.

As the trial court observed, it was incomprehensible why the spouseswould part with two lots,

one with a 2-storey house, and both situated at a primecommercial district for less than the price

of one lot. Contrary to what petitionerwould make us believe, the sale of Lot 1 valued at

P576,150.00 for P470,000.00,

with petitioner assuming the bank loan of P375,000.00 as well as payment of thecapital gains

tax, appears more plausible.

INTERPRETATION OF CONTRACTS: IN CASE OF DOUBTALMIRA VS. COURT OF

APPEALS399 SCRA 351FACTS: P e t i t i on e rs a r e t h e w i f e and th e ch i ld ren o f t he l a t e J u l i o G a r c i a

w h o inherited from his mother, Ma. Alibudbud, a portion of a 90,655 square

meterproperty denominated as lot 1642 of the Sta. Rosa Estate in Brgy. Caingin

Sta.R o s a Lagu n a . Th e l o t w as co - ow n ed an d r eg i s t e r ed i n t h e n am es o f

t h ree persons with the following shares: Vicente de Guzman (1/2), Enrique Hemedes(1/4) and

Francisco Alibudbud, the father of Ma. Alibudbud (1/4). Although therewad no separate title

in the name of Julio Garcia, there were tax declaration inhis name to the intent of

his grandfather‘s share covering the area of 21460square meter.O n J u l y 5 , 19 84 ,

p e t i t i o ne r as h e i r s o f J u l i o G a r c i a , and r es po nd en t Federico Brines entered a

Kasunduan ng Pagbibilihan (Kasunduan for Brevity)over the 21460 squa re meter

portion for the sum of P150.000.00. Respondentpaid P65, 000.00 upon execution of

the contract while the balance of P85,000.00 was made payable within six (6) months from

the date of the executionof the instrument. The time of the execution of the kasunduan,

petitionersallegedly informed respondent that TCT No. RT-1076 was in the

possession of their cousin, Conchila Alibudbud, who having bought Vicente de

Guzman‘s ½shares, owned the bigger portion of lot 1642. This standing

notwithstanding,respondent willingly entered into the Kasunduan provided that the full

paymentof the purchase price will be made upon delivery to him of the title.Respondent took

possession of the property subject of the Kasunduan andmade various payments to petitioiners

amountiong to P58500.00. However uponfailure of petitionere to deliver to him a

separate title to the property in thename of Julio Garcia he refused to make further

payments, prompting petitionerto file a civil action before the RTC for a rescission of

the Kasunduan, return byrespondent to petitioner of the possession of the subject

parcel of land, andpayment by respondent of damages in favour of petitioners.

ISSUE Whether or not the petitioner may rescind the Kasunduan pursuant to Article 1191 of

the Civil Code for the failure of respondent to give full payment of the balance of the purchase

price.

RULING: NO, the right of the parties are governed by the terms ands the nature of the contract they

entered. Hence, although the nature of the Kasunduan wasnever places in dispute by

both parties, it is necessary to ascertain whether theKasunduan is a contract to sell or a contract

of Sale. Although both parties haveconsistency referred to the Kasunduan as a contract to Sell, a

careful reading of the provision of the Kasunduan reveals that it is a contract of Sale.

A deed of sale is absolute in nature in the absence of an any stipulation reserving

title tothe vendor until full payment of the purchase price. The delivery of a separationt i t l e i n

t h e n am e o f J u l io G a r c i a w as a co nd i t i o n i mp os ed o n

r e s po nd en t ‘ s obligation to pay the balance of the purchase price. It was not a

conditionimposed in the perfection of the contract of Sale. The rescission will not prosper since

the power to rescind is only given tothe injured party. The injured party is the party who

has faithfully fulfilled hisobligation. In the case at bar, the petitioners were not ready, willing

and able tocomply with their obligation to deliver a separate title in the name of Julio Garciato

respondent therefore, thy are not in a position to ask for rescission. Failure tocomply with a

condition imposed on the performance of an obligation gives theother party the option either

to refuse to proceed with the sale or to waive thecondition under Art 1545 of the

civil code. Hence it is the respondent who hasthe option.

D O CT RI NE O F “C O MPLE ME NT AR Y CO NT RA CTS

C O NST R UED TOGETHER”1 . PHI L. BA N K O F C O MMUN I C ATI ONS VS .

L I M, 4 55 SC R A 436 2 .R I GO R VS . CON SOL ID AT ED LEA SI N G, 38 7

S C RA 4 37 3 . V E L A S Q U E Z V S . C A , J U N E 3 0 , 1 9 9 9 PHILIPPINE

BANK OF COMMUNICATIONSVS. ELENA LIM, RAMON CALDERON and TRI-ORO

INTERNATIONALTRADING &MANUFACTURING CORPORATIONG.R. NO.

158138April 12, 2005

FACTS: On September 3, 1999, petitioner filed a complaint against respondentsfo0r the

collection of a deficiency amounting to P4,014,297.23 exclusive of i n t e r es t .

P e t i t i on e r a l l eged th a t r es po nd en t s o b ta i n ed a l o an f r om i t an d executed a

continuing surety agreement dated November 16, 1995 in favor of petitioner for all

loans, credits, etc., that were extended or may be extended inth e f u t u r e t o r es po nd en t s .

P e t i t i on e r g r an t ed a r enew al o f s a i d l o an up on respondent‘s request, the most

recent being on January 21, 1998 as evidencedby a promissory note renewal BD-Variable

No. 8298021001 on the amount of P3,000,000.00. it was expressly stipulated therein that

the venue for any legalaction that may arise out of said promissory note shall be

Makati City ―to theex ck lu s io n o f a l l o th e r cou r t s . ‖ R es po nden t a l l eged l y

f a i l ed t o p ay s a i d obligation upon maturity. Thus petitioner foreclosed the real

estate mortgageexecuted by the respondents valued at P1,081,600.00 leaving a

deficiencybalance of P4,014,297.23 as of August 31, 1999.Respondents moved to dismiss

the complaint on the ground of impropervenue, invoking the stipulation contained in the

last paragraph of the promissorynote with respect to the restriction/exclusive venue. The trial

court denied saidmotion asseverating that petitioners had separate causes of action arising

fromthe promissory note and the continuing surety agreement. Thus, under Rule 4,Section 2 of

the 1997 Rules of Civil Procedure, as amended, venue was properlylaid in Manila. The trial

court supported its order with cases where venue washeld to be permissive. A

motion for reconsideration of said order was likewisedenied.

ISSUE: Whether or not the ―complementary-contracts-construed together‖principle is

applicable in the case at bar.

RULING: According to this principle, an accessory contract must be read in itsentirety and

together with the principal agreement. This principle is used inconstruing

contractual stipulations in order to arrive at their true meaning;certain stipulations

cannot be segregated and then made to control. This no-segregation principle is based on

Article 1374 of the Civil Code. The aforementioned doctrine is applicable to the present case. In

capableof standing by itself, the surety agreement can be enforced only in

conjuctionwith the promissory note. The latter documents the debt that is sought to

becollected in the action against the sureties. The factual milieu of the present case shows

that the surety agreementwas entered into to facilitate existing and future loan

agreements. Petitionerapproved the loan covered by the promissory note, partly because of

the suretya g r e e m e n t t h a t a s s u r e d t h e p a y m e n t o f t h e p r i n c i p a l

o b l i g a t i o n . T h e circumstances that relate to the issuance of the promissory note and the

suretyagreement are so intertwined that neither one could be separated from theother.

It makes no sense to argue that the parties to the surety agreement werenot bound by the

stipulations in the promissory note.Notably, the promissory note was a contract of

adhesion that petitionerrequired the principal debtor to execute as a condition of the

approval of theloan. It was made in the form and language prepared by the bank. By

insertingthe provision of that Makati City would be the ―venue for any legal action

thatmay arise out of the promissory note,‖ petitioner also restricted the venue of

actions against the sureties. The legal action against the sureties arose not onlyfrom the security

agreement but also from the promissory note.

DOCTRINE OF “COMPLEMENTARY CONTRACTS CONSTRUED

TOGETHER”SPOUSES EFREN N. RIGOR and ZOSIMA D. RIGOR, for themselves and

asowners of CHIARA CONSTRUCTION, petitioners,VS. CONSOLIDATED ORIX

LEASING and FINANCE CORPORATION,respondent2002 Aug 20FACTS: Petitioners obtained a loan from private respondent Consolidated OrixLeasin g and

Finance Corporation in the amount of P1,630,320.00. Petitionersexecuted a

promissory note on July 31, 1996 promising to pay the loan in 24 eq u a l mo n t h l y

i ns t a l lm en t s o f P6 7 , 9 30 .0 0 ev e r y f i f t h d a y o f t h e mo n th commencing on

September 5, 1996. The promissory note also provides thatdefault in paying any

installment renders the entire unpaid amount due andpayable. To secure payment of the

loan, petitioners executed in favor of privaterespondent a deed of chattel mortgage over two

dump trucks.Petitioners failed to pay several installments despite demand from

privaterespondent.On January 5, 1998, private respondent sought to foreclose the

chattelmortgage by filing a complaint for Replevin with Damages against

petitionersbefore the Regional Trial Court of Dagupan City.After service of

summons,petitioners moved to dismiss the complaint on the ground of improper

venuebased on a provision in the promissory note which states that, x x x all legal

actions arising out of this note or in connection with the chattels subject hereof s h a l l o n l y b e

b r ou gh t i n o r su bmi t t ed t o t h e p ro pe r co u r t i n M aka t i C i ty , Philippines. Private

respondent opposed the motion to dismiss and argued thatvenue was properly laid in Dagupan

City where it has a branch office based on aprovision in the deed of chattel mortgage

which states that, x x x in case of litigation arising out of the transaction that gave rise to

this contract, complete jurisdiction is given the proper court of the city of Makati or

any proper courtwithin the province of Rizal, or any court in the city, or province

where theh o l de r /mo r t gagee h as a b r an ch o f f i c e , w a iv i n g fo r t h i s p u r po s e

an y p r o p er venue. After a further exchange of pleadings, the Dagupan trial court

deniedpetitioners‘ motion to dismiss Not satisfied with the orders, petitioners filed

ap e t i t i on f o r c e r t i o r a r i b e f o r e t h e Co ur t o f A pp ea l s i mp u t i n g g r ave ab us e

o f discretion by the Dagupan trial court in denying the motion to dismiss which wasdenied.

ISSUE: Whether or not venue was properly laid under the provisions of the chattelmortgage contract in

the light of Article 1374 of the Civil Code.

RULING: Yes. Art. 1374 provides that the various stipulations of a contract shall beinterpreted together,

attributing to the doubtful ones that sense which mayresult from all of them taken

jointly.Applying the doctrine to the instant case, we cannot sustain

petitioners‘contentions. The promissory note and the deed of chattel mortgage must

beco n s t r u ed to ge t he r . P r iv a t e r es po nden t ex p l a in ed t h a t i t s o l de r

s t an da r d promissory notes confined venue in Makati City where it had its main

office.A f t e r i t op ened a b ran ch o f f i c e i n D agup an C i t y, p r i v a t e r es po nd en t

m ad e corrections in the deed of chattel mortgage, but due to oversight, failed to makethe

corresponding corrections in the promissory notes. Petitioners affixed theirsignatures in both

contracts. The presumption is applied that a person takesordinary care of his

concerns. It is presumed that petitioners did not sign thedeed of chattel mortgage

without informing themselves of its contents. As aptlystated in a case, they being of age

and businessmen of experience, it must bepresumed that they acted with due care

and have signed the documents inq u es t io n w i th fu l l kn ow l edge o f t he i r i mp or t

an d th e o b l i ga t i on t h ey w e r e assuming thereby. In any event, petitioners did not contest

the deed of chattelmortgage under Section 8, Rule 8 of the Revised Rules of Civil Procedure.As

held in Velasquez, this omission effectively eliminated any defense r e l a t i n g t o t h e

au th en t i c i t y an d due ex ecu t io n o f t h e d eed , e . g . t h a t t h e document was spurious,

counterfeit, or of different import on its face as the oneex ecu t ed b y t h e p a r t i e s ; o r t h a t

t h e s i gn a t u r e s app ea r in g th e r eo n w e r e fo r ge r i es ; o r t h a t t he s i gn a t u re s

w e r e u n au t h or i zed . C l ea r l y, t h e Co u r t o f Appeals did not err in ruling that

venue was properly laid in Dagupan City asp r ov id ed i n t h e d eed o f ch a t t e l

m o r t gage . T h e C our t h o ld s t h a t p r i v a t e respondent is not barred from filing its case

against petitioners in Dagupan Citywhere private respondent has a branch office as

provided for in the deed of chattel mortgage.Petition denied.

DOCTRINE OF “COMPLEMENTARY CONTRACTS CONSTRUED

TOGETHER”RODOLFO P. VELASQUEZ,

petitioner,

VS. COURT OF APPEALS, and PHILIPPINE COMMERCIAL

INTERNATIONALBANK, INC.,

respondents

G.R. No. 124049 June 30, 1999FACTS: The case arose from a complaint for a sum of money with preliminarya t t a ch m ent

f i l ed wi th th e R eg io n a l T r i a l C ou r t o f M ak a t i C i t y b y p r iv a t e respondent

Philippine Commercial International Bank (PCIB) against petitioner Rodolfo P.

Velasquez together with Mariano N. Canilao Jr., Inigo A. Nebrida, CesarR. Dean and Artemio L.

Raymundo.Sometime in December 1994 the Pick-up Fresh Farms, Inc. (PUFFI), of

which petitioner Velasquez was an officer and stockholder, filed an applicatio nfor a

loan of P7,500,000.00 with PCIB under the government's Guarantee Fund f o r Sm al l

an d M ed ium E n t e rp r i se s ( G FS ME ) . On 1 6 Ap r i l 19 85 th e p a r t i e s ex ecu t ed

t h e co r r es p on d in g lo an ag r eem en t . As s ecu r i t y f o r t h e l o an , p r omi ss o r y

n o t e s num b ered T L 1 21 23 1 an d T L 1 21 2 58 f o r t h e amo un t s o f P4,000,000.00

and P3,500,000.00, respectively, were signed by Inigo A. Nebridaand Mariano N. Canilao,

Jr. as officers of and for both PUFFI and Aircon andRefrigeration Industries, Inc.

(ARII). A chattel mortgage was also executed byARII over its equipment and

machineries in favor of PCIB. Petitioner along withNebrida and Canilao, Jr. also executed

deeds of suretyship in favor of PCIB.S ep a r a t e d eed s o f su r e t ys h i p w e r e fu r t h e r

ex ecu t ed b y C es a r R . D ean an d Artemio L. Raymundo. When PUFFI defaulted in

the payment of its obligationsPCIB foreclosed the chattel mortgage. The proceeds

of the sale amounted to

P678,000.00. Thus, PCIB filed an action to recover the remaining balance of the

entireobligation including interests, penalties and other charges. Exemplary damagesand

attorney‘s fees of 25% of the total amount due were also sought. On 9October 1989

a writ of preliminary attachment was granted by the trial court.On 20 June 1990 the

trial court rendered a summary judgment in favor o f PCIBholding petitioner and Canilao

solidarily liable to pay P7,227,624.48 plus annualinterest of 17%, and P700,000.00 as attorney‘s

fees and the costs of suit. Thecase was dismissed without prejudice with regard to the

other defendants asthey were not properly served with summons. On appeal, the Court of

Appealson 28 September 1995 affirmed

in toto

the RTC judgment. Petitioner‘s motionfor reconsideration was thereafter denied. Hence this

petition.

ISSUE: Wh e th e r o r no t t h e ap p e l l a t e co u r t com mi t t ed r eve r s ib l e e r r o r i n sustaining or

affirming the summary judgment despite the existence of genuinetriable issues of facts and

in refusing to set aside the default order againstpetitioner.

RULING: The more appropriate doctrine in this case is that of the ―complementarycontracts construed

together‖ doctrine. The surety bond must be read in itsentirety and together with the

contract between the NPC and the contractors. The provisions must be construed

together to arrive at their true meaning.Certain stipulations cannot be segregated and then

made to control. That the ―complementary contracts construed together‖ doctrine

appliesin this case finds support in the principle that the surety contract is merely

anaccessory contract and must be interpreted with its principal contract, which inthis case was

the loan agreement. This doctrine closely adheres to the spirit of Art. 1374 of the Civil Code

which states thatArt. 1374. The various stipulations of a contract shall be interpretedtogether,

attributing to the doubtful ones that sense which may resultfrom all of them taken

jointly.Applying the ―complementary contracts construed together‖ doctrine leaves no

doubt that it was the intention of the parties that petitioner would bepersonally liable in the deed

of suretyship because the loan agreement, amongothers, provided to further secure the

obligations of the BORROWER to theLENDER, Messrs. Nebrida, Raymundo, Canilao,

Dean and Velasquez and Airconand Refrigeration Ind. Inc. shall each execute a suretyship

agreement in favor of the LENDER in form and substance acceptable to the

LENDER.WHEREFORE, the petition is DENIED. The Decision of 28 September 1995of the

Court of Appeals affirming the 20 June 1990 judgment of the RTC- Br. 61,Makati City, ordering

petitioner Rodolfo P. Velasquez and Mariano N. Canilao, Jr.to solidarily pay respondent

Philippine Commercial and Industrial Bank (PCIB) theamount of P7,227,624.48 with

annual interest of 17% and attorney‘s fees of P700,000.00 plus costs of suit as well

as its Resolution of 19 February 1995denying reconsideration, is AFFIRMED.

RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-

MUTUALRESTITUTION1 .E QU ATO R IAL R EA LTY VS. MA Y FA I R

TH EA TE R, 3 70 SC R A 5 6 2 . S I G U A N V S . L I M , N O V E M B E R 1 9 ,

1 9 9 9 3 . K H E K O N G V S . C A , 3 5 5 S C R A 7 0 1 4 . S U N T A Y V S .

C A , 2 5 1 S C R A 4 3 0 EQUATORIAL REALTY DEVELOPMENT, INC.VS.

MAYFAIR THEATER, INC.370 SCRA 56FACTS: C a rm el o & Bau er man n , In c . (C a rm el o ) us ed to o wn a p a r ce l o f

l and , together with two two-storey buildings constructed thereon. On June 1,

1967,Carmelo entered into a lease with Mayfair Theater, Inc. (Mayfair) for a period of 20

years. The lease covered a portion of the second floor and mezzanine. Two (2) years

later, Mayfair entered into a second lease with Carmelo for the lease of another property, a part

of the second floor and two spaces on the ground floor. The lease was also for a period of

twenty (20) years. Both leases contained aprovision granting Mayfair a right of first

refusal to purchase the said properties.However, on July 30, 1978, within the 20-year-

lease term, Carmelo sold thesubject properties to Equatorial Realty Development,

Inc. (Equatorial) for thesum of P11.3M without their first being offered to Mayfair.

A s a r es u l t , M ayf a i r f i l ed a co mpl a in t f o r s pec i f i c pe r f o rm an ce an d damages.

After trial, the court ruled in favor of Equatorial. On appeal, the Courtof Appeals (CA)

reversed and set aside the judgment of the lower court. OnNovember 21, 1996, the

Supreme Court denied Equatorial‘s petition for reviewand declared the contract between

Carmelo and Equatorial rescinded. Thedecision became final and executory and Mayfair

filed a motion for its execution,which the court granted on April 25, 1997. However, Carmelo

could no longer belocated thus Mayfair deposited with the court its payment to Carmelo. The

lowerco u r t i s s u ed a d eed o f r e co nv e yan ce in f avo r o f Ca r me l o and i s su ed

n ew certificates in the name of Mayfair.On September 18, 1997, Equatorial filed an

action for the collection of s u m o f mo n ey aga i ns t M a yf a i r c l a im in g p aym en t

o f r en t a l s o r r e as onab l e compensation for the defendant‘s use of the premises

after its lease contractshad expired. The lower court debunked the claim of the

petitioner for unpaidrentals, holding that the rescission of the Deed of Absolute

Sale in the mothercase did not confer on Equatorial any vested or residual proprietary rights,

evenin expectancy.

ISSUE: Whether or not Equatorial may collect rentals or reasonable compensationfor Mayfair‘s use of

subject premises after its lease contracts had expired.

RULING: N O . R en t i s a c iv i l f r u i t t h a t b e l on gs to t h e ow n e r o f t h e p r op e r t y producing

it by right of accession. Consequently and ordinarily, the rentals thatf e l l d u e f r om th e t im e

o f t he pe r f ec t i on o f t h e s a l e t o p e t i t i on e r u n t i l i t s rescission by final

judgment should belong to the owner of the property duringthat period.Petitioner never

took actual control and possession of the property sold, inv i ew o f t h e r es po nd en t ‘ s

t im e l y o b j ec t io n t o t h e s a l e an d co n t inu ed ac t u a l po ss es s io n o f t h e

p r op e r t y. T h e ob jec t io n t oo k th e f o rm o f a cou r t ac t i on impugning the sale

that was rescinded by a judgment rendered by the Court inthe mother case. It has

been held that the execution of a contract of sale as a form of constructive delivery is a

legal fiction. It holds true only when there is noimpediment that may prevent the passing of the

property from the hands of thevendor into those of the vendee. When there is such impediment,

fiction yieldsto reality; the delivery has not been effected. Hence, respondent‘s opposition tothe

transfer of property by way of sale to Equatorial was a legally sufficientimpediment

that effectively prevented the passing of the property into the latter‘s hands.Article

1386 of the Civil Code provides rescission, which creates theobligation to return the

things, which were the object of the contract, togetherwith their fruits, and the price with

its interest, but also the rentals paid, if any,had to be returned by the buyer.

RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-MUTUAL

RESTITUTIONMARIA ANTONIA SIGUAN,

petitioner,

VS. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM,

respondents

1999 Nov 19G.R. No. 134685FACTS: On 25 and 26 August 1990, Lim issued two Metrobank checks in the sumsof P300,000 and

P241,668, respectively, payable to "cash." Upon presentmentby petitioner with the drawee

bank, the checks were dishonored for the reason"account closed." Demands to make

good the checks proved futile. As aconsequence, a criminal case for violation of Batas

Pambansa Blg. 22, docketedas Criminal Cases Nos. 22127-28, were filed by petitioner

against LIM withBranch 23 of the Regional Trial Court (RTC) of Cebu City.In its decision

dated 29 December 1992, the court a quo convicted Lim ascharged. The case is pending before

this Court for review and docketed as G.R.No. 134685. It also appears that on 31 July 1990, Lim

was convicted of estafa bythe RTC of Quezon City in Criminal Case No. Q-89-22162

filed by a certainVictoria Suarez. This decision was affirmed by the Court of Appeals. On

appeal,h o w ev e r , t he S up r em e Co u r t , i n a d ec i s io n p r om ul ga t ed on 7 A p r i l

1 9 97 , acquitted Lim but held her civilly liable in the amount of P169,000, as

actualdamages, plus legal interest.Meanwhile, on 2 July 1991, a Deed of Donation conveying

parcels of landand purportedly executed by Lim on 10 August 1989 in favor of her

children,Linde, Ingrid and Neil, was registered with the Office of the Register of Deeds of Cebu

City. New transfer certificates of title were thereafter issued in the namesof the donees.On 23

June 1993, petitioner filed an accion pauliana against Lim and herchildren before

Branch 18 of the RTC of Cebu City to rescind the questionedDeed of Donation and to

declare as null and void the new transfer certificates of title issued for the lots covered by

the questioned Deed. The complaint wasdocketed as Civil Case No. CEB-14181. Petitioner

claimed therein that sometime

in July 1991, Lim, through a Deed of Donation, fraudulently transferred all her real

property to her children in bad faith and in fraud of creditors, including her;t h a t Li m

co ns p i r ed an d con fed e r a t ed wi t h h e r ch i l d r en in an t ed a t in g th e questioned

Deed of Donation, to petitioner's and other creditors' prejudice; andthat Lim, at the time of

the fraudulent conveyance, left no sufficient properties to pay her obligations.On the

other hand, Lim denied any liability to petitioner. She claimed thather convictions in Criminal

Cases Nos. 22127-28 were erroneous, which was thereason why she appealed said decision to

the Court of Appeals. As regards thequestioned Deed of Donation, she maintained that it was not

antedated but wasmade in good faith at a time when she had sufficient property.

Finally, shealleged that the Deed of Donation was registered only on 2 July 1991

becauseshe was seriously ill.In its decision of 31 December 1994 the trial court ordered the

rescissiono f t h e qu es t i on ed d eed o f do n a t io n ; ( 2 ) d ec l a r ed nu l l and v o i d th e

t r an s f e r certificates of title issued in the names of private respondents Linde, Ingrid andNeil

Lim; (3) ordered the Register of Deeds of Cebu City to cancel said titles andto reinstate the

previous titles in the name of Rosa Lim; and (4) directed theLIMs to pay the

petitioner, jointly and severally, the sum of P10,000 as moral damages; P10,000 as

attorney's fees; and P5,000 as expenses of litigation.On appeal, the Court of Appeals, in a

promulgated on 20 February 1998,r ev e r s ed t h e d ec i s i on o f t he t r i a l cou r t an d

d i s mis s ed p e t i t i on er ' s a cc i on pauliana. It held that two of the requisites for filing

an accion pauliana wereabsent, namely, (1) there must be a credit existing prior to the

celebration of thecontract; and (2) there must be a fraud, or at least the intent to commit fraud,

tothe prejudice of the creditor seeking the rescission.A cco rd in g t o t h e Co u r t o f

A p p ea l s , t h e D eed o f Do na t i on , wh ich w as executed and acknowledged before a

notary public, appears on its face to havebeen executed on 10 August 1989. Under Section 23 of

Rule 132 of the Rules of Court, the questioned Deed, being a public document, is

evidence of the factwhich gave rise to its execution and of t he date thereof. No

antedating of theDeed of Donation was made, there being no convincing evidence

on record toindicate that the notary public and the parties did antedate it.Since Lim's

indebtedness to petitioner was incurred in August 1990, or ayear after the execution of the Deed

of Donation, the first requirement for accionpauliana was not met.Anent petitioner's

contention that assuming that the Deed of Donationwas not antedated it was

nevertheless in fraud of creditors because VictoriaSuarez became Lim‘s creditor on 8

October 1987, the Court of Appeals found thesame untenable, for the rule is basic that the

fraud must prejudice the creditorseeking the rescission.

ISSUE: Whether or not the deed of donation is valid.

RULING: The Supreme Court upheld the validity of the deed of donation.A r t i c l e 13 8 1 o f t h e C iv i l

C od e en um er a t es t he con t r ac t s w h i ch a r e r e s c i s s i b l e , an d am on g th em ar e

" t h os e con t r ac t s und e r t ak en i n f r au d o f creditors when the latter cannot in any

other manner collect the claims duethem." The action to rescind contracts in fraud of

creditors is known as accionpauliana. For this action to prosper, the following requisites

must be present: (1)the plaintiff asking for rescission has a credit prior to the

alienation, althoughdemandable later; (2) the debtor has made a subsequent contract

conveying apatrimonial benefit to a third person; (3) the creditor has no other legal remedyto

satisfy his claim; (4) the act being impugned is fraudulent; (5) the third personw h o r ece i ved

t h e p r o pe r t y co n v eyed , i f i t i s b y o n e ro us t i t l e , h a s b een an accomplice in the

fraud. The general rule is that rescission requires the existence of creditors at the time

of the alleged fraudulent alienation, and this must be proved as one of the bases of the judicial

pronouncement setting aside the contract. Without anyprior existing debt, there can neither

be injury nor fraud. While it is necessarythat the credit of the plaintiff in the accion

pauliana must exist prior to thefraudulent alienation, the date of the judgment enforcing it is

immaterial. Evenif the judgment be subsequent to the alienation, it is merely

declaratory, withretroactive effect to the date when the credit was constituted.In the instant

case, the alleged debt of Lim in favor of petitioner wasincurred in August 19 90,

while the deed of donation was purportedly executedon 10 August 1989. The Supreme

Court is not convinced with the allegation of the petitionerthat the questioned deed

was antedated to make it appear that it was made

prior to petitioner's credit. Notably, that deed is a public document, it havingbeen

acknowledged before a notary public. As such, it is evidence of the fact which gave

rise to its execution and of its date, pursuant to Section 23, Rule 132of the Rules of Court.In the

present case, the fact that the questioned Deed was registered onlyon 2 July 1991 is not enough

to overcome the presumption as to the truthfulnessof the statement of the date in the

questioned deed, which is 10 August 1989.Petitioner's claim against Lim was

constituted only in August 1990, or a yearafter the questioned alienation. Thus, the first

two requisites for the rescissionof contracts are absent.Even assuming arguendo that petitioner

became a creditor of Lim prior tothe celebration of the contract of donation, still her

action for rescission wouldnot fare well because the third requisite was not met. Under

Article 1381 of theCivil Code, contracts entered into in fraud of creditors may be

rescinded onlywhen the creditors cannot in any manner collect the claims due them.

Also,Article 1383 of the same Code provides that the action for rescission is but

asubsidiary remedy which cannot be instituted except when the party

sufferingdamage has no other legal means to obtain reparation for the same. The

term"subsidiary remedy" has been defined as "the exhaustion of all remedies by theprejudiced

creditor to collect claims due him before rescission is resorted to." Itis, therefore, essential

that the party asking for rescission prove that he hasexhausted all other legal means

to obtain satisfaction of his claim. Petitionerneither alleged nor proved that she did

so. On this score, her action for therescission of the questioned deed is not maintainable

even if the fraud chargedactually did exist." The fourth requisite for an accion pauliana to

prosper is notpresent either.

RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-MUTUAL

RESTITUTIONRAFAEL G. SUNTAY, substituted by his heirs, namely:

ROSARIO,RAFAEL, JR., APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA

ROSARIOand MARIA LOURDES, all surnamed SUNTAY, petitioners,

VS.

THE HON. COURT OF APPEALS and FEDERICO C. SUNTAY, respondents

G.R. No. 114950December 19, 1995FACTS: Respondent Federico Suntay was the registered owner of a parcel of landwith an area in

Bulacan. On the land may be found: a rice mill, a warehouse,and other

improvements. A rice miller, Federico, in a letter, dated September30, 1960, applied

as a miller-contractor of the then National Rice and CornCorporation (NARIC). He

informed the NARIC that he had a daily rice mill outputof 400 cavans of palay and

warehouse storage capacity of 150,000 cavans of palay.

His application, although prepared by his nephew-lawyer, petitionerRafael Suntay,

was disapproved,

obviously because at that time he was tied upwith several unpaid loans.For purposes of

circumvention, he had thought of allowing Rafael to makethe application for him. Rafael

prepared

an ab so lu t e d eed o f s a l e

wherebyFederico, for and in consideration of P20,000.00 conveyed to Rafael said parcelof land

with all its existing structures. Said deed was notarized as Document No.57 and recorded on

Page 13 of Book 1, Series of 1962, of the Notarial Register of Atty. Herminio V. Flores.

Less than three months after this conveyance, acounter sale was prepared and signed by

Rafael who also caused its delivery toFederico. Through this counter conveyance, the same

parcel of land with all itse x i s t i n g s t r u c t u r e s w a s s o l d b y R a f a e l b a c k t o

F e d e r i c o f o r t h e s a m e consideration of P20,000.00. Although on its face, this second

deed appears tohave been notarized as Document No. 56 and recorded on Page 15 of

Book 1,S e r i e s o f 1 9 6 2 , o f t h e n o t a r i a l r e g i s t e r o f A t t y . H e r m i n i o V .

F l o r e s , a n examination thereof will show that, recorded as Document No. 56 on Page 13,

isnot the said deed of sale but a certain "real estate mortgage on a parcel of landwith TCT No.

16157 to secure a loan of P3,500.00 in favor of the Hagonoy RuralBank."Nowhere on page 13

of the same notarial register could be found anyentry pertaining to Rafael's deed of

sale. Testifying on this irregularity, Atty.F l o r e s admi t t ed th a t h e f a i l ed t o

s ub mi t t o t h e C l e r k o f Co ur t a cop y o f t h e second deed. Neither was he able to

enter the same in his notarial register.Even Federico himself alleged in his

Complaint that, when Rafael delivered thesecond deed to him, it was neither dated nor

notarized.Upon the execution and registration of the first deed, Certificate of Title No.

0-2015 in the name of Federico was cancelled and in lieu thereof, TCT No. T-36714 was issued

in the name of Rafael. Even after the execution of the deed,Fed e r i co r em ai n ed i n

p os s es s io n o f t h e p r o p e r t y s o l d i n concep t o f o w n er . Significantly,

notwithstanding the fact that Rafael became the titled owner of said land and rice mill,

he never made any attempt to take possession thereof atany time, while Federico continued to

exercise rights of absolute ownership overthe property.

In a letter, dated August 14, 1969, Federico, through his new counsel, Agrava &

Agrava, requested that Rafael deliver his copy of TCT No. T-36714 sothat Federico could

have the counter deed of sale in his favor registered in hisname. The request having

been obviously turned down, Agrava & Agrava filed apetition with the Court of First Instance of

Bulacan asking Rafael to surrender hisowner's duplicate certificate of TCT No. T-36714.

In opposition thereto, Rafaelchronicled the discrepancy in the notarization of the

second deed of sale uponwhich said petition was premised and ultimately concluded that said

deed was acounterfeit or "at least not a public document which is sufficient to transfer realrights

according to law." On September 8, 1969, Agrava & Agrava filed a motionto withdraw said

petition, and, on September 13, 1969, the Court granted thesame.On July 8, 1970,

Federico filed a complaint for reconveyance and damagesagainst Rafael. In his answer,

Rafael scoffed at the attack against the validityand genuineness of the sale to him of

Federico's land and rice mill. Rafael i n s i s t ed t h a t s a i d p r op e r ty w as

"ab s o lu t e l y s o l d and co nv e yed . . . fo r a con s i de r a t io n o f P 20 ,0 00 .0 0 ,

P h i l i pp i n e cu r r en cy , an d f o r o th e r v a l uab l e consideration".While the trial court

upheld the validity and genuineness of the deed of sale executed by Federico in favor of

Rafael, which deed is referred to above asExhibit A, it ruled that the counter -deed,

referred to as Exhibit B, executed byRafael in favor of Federico, was simulated and

without consideration, hence, nulland void

ab initio

.M o r eo v er , w h i l e t he t r i a l cou r t ad ju d ged R a f ae l a s t h e o wn e r o f

t h e property in dispute, it did not go to the extent of ordering Federico to pay

backrentals for the use of the property as the court made the evidential finding

thatRafael simply allowed his uncle to have continuous possession of the

propertybecause or their understanding that Federico would subsequently

repurchasethe same.From the aforecited decision of the trial court, both Federico and

Rafaelappealed. The Court of Appeals rendered judgment affirming the trial

court'sd ec i s i on , wi th a mo d i f i c a t i on t ha t Fed e r i co w as o rde r ed to s u r r end e r

t h e possession of the disputed property to Rafael. Counsel of Federico filed a motionfor

reconsideration of the aforecited decision. While the motion was pending resolution,

Atty. Ricardo M. Fojas entered his appearance in behalf of the heirs of Rafael who had passed

away on November 23, 1988. Atty. Fojas prayed thatsaid heirs be substituted as

defendants-appellants in the case. The prayer forsubstitution was duly noted by the

court in a resolution dated April 6, 1993. Thereafter, Atty. Fojas filed in behalf of the heirs

an opposition to the motion forr eco n s id e r a t ion . T he pa r t i e s t o t he ca se w er e

h ea r d on o r a l a r gum ent on October 12, 1993. On December 15, 1993, the Court of

Appeals reversed itself and rendered an amended judgment.

ISSUE: Whether or not the deed of sale executed by Federico in favor of Rafael issimulated and fictitious

and, hence, null and void.

RULING: In the aggregate, the evidence on record demonstrate a combination of

c i r cu ms t an ces f r om w hi ch m a y b e r easo n ab l y i n f e r r ed ce r t a i n b ad ges o f

simulation that attach themselves to the deed of sale in question. The completeabsence of an

attempt on the part of the buyer to assert his rights of ownershipo v e r t h e l and an d r i c e

m i l l i n q u es t io n i s t h e m os t p r o t ub e r an t i n dex o f simulation. T he deed o f

s a l e ex ecu t ed b y Fed e r i co in f avo r o f h i s no w d eceas ed nephew, Rafael, is

absolutely simulated and fictitious and, hence, null and void,said parties having entered into

a sale transaction to which they did not intendto be legally bound. As no property

was validly conveyed under the deed, thesecond deed of sale executed by the late

Rafael in favor of his uncle, should beconsidered ineffective and unavailing. The

allegation of Rafael that the lapse of seven years before Federicosought the

issuance of a new title in his name necessarily makes Feder ico'sclaim stale and

unenforceable does not hold water. Federico's title was not in theh an ds o f a s t r an ge r o r

m e r e acqu a i n t ance ; i t w as i n t h e p oss es s i on o f h i sn eph ew w ho , b e in g h i s

l aw ye r , h ad s e rv ed h im f a i th f u l l y f o r m an y yea r s . Federico had been all the while

in possession of the land covered by his title andso there was no pressing reason for Federico to

have a title in his name issued.Even when the relationship between the late Rafael and

Federico deteriorated,an d ev en t u a l l y en ded , i t i s n o t a t a l l s t r an ge f o r

Fed e r i co to h ave b een complacent and unconcerned about the status of his title

over the disputedproperty since he has been possessing the same actually, openly, and

adversely,to the exclusion of Rafael. It was only when Federico needed the title in order toobtain

a collaterized loan that Federico began to attend to the task of obtaininga title in his name over

the subject land and rice mill.Decision affirmed. Petitioners, the heirs of Rafael G. Suntay, were

orderedto reconvey to private respondent Federico G. Suntay the property described in

paragraph 2.1 of the complaint, within 10 days from the finality of the Decision,and to

surrender to him within the same period the owner's duplicate copy of Transfer

Certificate of Title No. T-36714 of the Registry of Deeds of the Provinceo f Bu l acan . In t h e

ev en t t h a t t h e p e t i t i on e rs f a i l o r r e fu se to ex ecu t e t h e necessary deed of

reconveyance as herein directed, the Clerk of Court of theRegional Trial Court of

Bulacan was ordered to execute the same at the expenseof the aforesaid heirs.

RESCISSIBLE CONTRACTS-NATURE AND EFFECTS-MUTUAL RESTITUTIONKHE

HONG CHENG, alias FELIX KHE, SANDRA JOY KHE andRAY STEVEN KHE,

petitioners,VS. COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI

CITY and PHILAM INSURANCE CO., INC., respondentsG.R. No. 14416928 March 2001355

SCRA 701FACTS: P e t i t i on e r K he Ho ng C h en g , a l i a s Fe l ix Kh e , i s t h e o wn e r o f

Bu t uan Shipping Lines to which the Philippine Agricultural Trading Corporation used

itsvessel M/V Prince Eric Corporation to ship 3,400 bags of Copra at Masbate

fordelivery to Dipolog. Such shipping of 3, 400 bags was covered by a

marineinsurance policy issued by American Home Insurance Company

(eventuallyPhilam). However, M/V Prince Eric sank somewhere between Negros Island

andNorthern Mindanao which resulted to the total loss of the shipment.

InsurerPhilam paid the amount of P 354, 000.00, which is the value of the copra,

toP h i l i p p i ne A gr i cu l tu r a l T r ad in g C o rpo r a t io n . Am er i can H o me w as

t h e r eb ysubrogated unto the rights of the consignee and filed a case to recover

moneypaid to the latter, based on breach of common carriage.W h i l e t h e c a s e w a s

p e n d i n g , K h e H o n g C h e n g e x e c u t e d d e e d s o f donations of parcels of

land in favor of his children. As a consequence of a favorable judgment for American

Home, a writ of execution to garnish Khe HongCheng‘s property was issued but the

sheriff failed to implement the same forC hen g‘ s p ro p e r t y w e r e a l r e ad y

t r an s f e r r ed t o h i s ch i l d r en . Co ns equ en t l y, American home filed a case for the

rescission of the deeds of donation executedby petitioner in favor of children for such

were made in fraud of his creditors.Petitioner answered saying that the action

should be dismissed for it alreadyp r e s c r i bed . Pe t i t i o ne r p os i t ed t h a t t h e

r eg i s t r a t i on o f t he d o na t io n w as on December 27, 1989 and such constituted

constructive notice. And since thecomplaint was filed only in 1997, more than four (4)

years after registration, theaction is thereby barred by prescription.

ISSUE: Whether or not the action for the rescission of the deed o f donation hasprescribed.

RULING: An accion pauliana accrues only when the creditor discovers that he hasno other

legal remedy for the satisfaction of his claim against the debtor other than an accion

pauliana. The accion pauliana is an action of a last resort. Foras long as the creditor still has a

remedy at law for the enforcement of his claimagainst the debtor, the creditor will not

have any cause of action against thecreditor for rescission of the contracts entered

into by and between the debtorand another person or persons. Indeed, an accion

pauliana presupposes a j ud gm ent and t he i s s u an ce b y t h e t r i a l co ur t o f a w r i t

o f ex ecu t i on f o r t he satisfaction of the judgment and the failure of the Sheriff to

enforce and satisfythe judgment of the court. It presupposes that the creditor has

exhausted theproperty of the debtor. The date of the decision of the trial court

against thed eb t o r i s i mm at e r i a l . W ha t i s im p or t an t i s t h a t t h e c r ed i t o f t h e

p l a in t i f f antedates that of the fraudulent alienation by the debtor of his property. Afterall, the

decision of the trial court against the debtor will retroact to the time when the debtor

became indebted to the creditor.Although Article 1389 of the Civil Code provides that ―The

action to claimrescission must be commenced within four (4) years‖ is silent as to

where theprescriptive period would commence, the general rule is such shall be reckonedf r o m

t h e m om ent t h e caus e o f ac t io n acc ru es ; i . e . , t h e l ega l p os s i b i l i t y o f

bringing the action. Since

accion pauliana

is an action of last resort after allother legal remedies have been exhausted and have

been proven futile, in thecase at bar, it was only in February 25, 1997, barely a

month from discoveringthat petitioner Khe Hong Cheng had no other property to

satisfy the judgmentaward against him that the action for rescission accrued. So the

contention of K h e Ho n g C h en g t h a t t h e ac t i on acc r u ed f r om t he t im e o f t h e

co ns t r u c t i v en o t i c e ; i . e . , D ecem b er 27 , 1 98 9 , t h e d a t e t ha t t h e d eed o f

d o na t io n w as registered, is untenable.

EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS1 . V D A . D E A P E V S .

C A , 4 5 6 S C R A 1 9 3 2 . F R A N C I S C O V S . H E R R E R A , 3 9 2 S C R A

3 1 7 3 .B R A GA N ZA V S. VILL A A BR ILL E, 1 05 PHIL . 45 6

4 . M I A I L H E V S . C A , 3 5 4 S C R A 6 7 5 5 . KAT I PU NA N VS.

KA T I PU NA N , JAN U A R Y 30 , 20 02 6 . J U M A L O N V S . C A , J A N U A R Y

3 0 , 2 0 0 2 PERPETUA VDA. DE APE,

petitioner,VS.

THE HONORABLE COURT OF APPEALS and GENOROSA CAWIT VDA.DE

LUMAYNO,

respondents

G.R. No. 133638April 15, 2005FACTS: Cleopas Ape was the registered owner of a parcel of land (Lot No. 2319)which is

covered by Original Certificate of Title (OCT) No. RP 1379 (RP-154[300]). Upon

Cleopas Ape‘s death sometime in 1950, the property passed on tohis wife, Maria Ondoy, and

their eleven (11) children, namely: Fortunato,Cornelio, Bernalda, Bienvenido,

Encarnacion, Loreta, Lourdes, Felicidad, Adela,Dominador, and Angelina. On 15 March 1973,

private respondent, joined by herhusband, Braulio, instituted a case for ―Specific

Performance of a Deed of Salewith Damages‖ against Fortunato and his wife

Perpetua (petitioner herein). Itwas al leged in the complaint that on 11 April 1971,

private respondent andFortunato entered into a contract of sale of land under which for a

considerationof P5,000.00, Fortunato agreed to sell his share in Lot No. 2319 to

privaterespondent. The agreement was contained in a receipt prepared by

privaterespondent‘s son-in-law, Andres Flores, at her behest.As private respondent wanted to

register the claimed sale transaction, shesupposedly demanded that Fortunato executes

the corresponding deed of salea n d t o r e c e i v e t h e b a l a n c e o f t h e

c o n s i d e r a t i o n . H o w e v e r , F o r t u n a t o unjustifiably refused to heed her

demands. Private respondent, therefore,prayed that Fortunato be ordered to execute and

deliver to her ―a sufficient andr eg i s t r ab l e d eed o f s a l e i nv o lv in g h i s o n e - e l ev en t h

( 1 /1 1) s h a re ; t o p ay P5,000.00 in damages; P500.00 reimbursement for litigation expenses

as well asadditional P500.00 for every appeal made; P2,000.00 for attorney‘s fees; and topay the

costs.Fortunato and petitioner denied the material allegations of the complaintand c l a i m ed

t h a t Fo r t un a t o n ev er so ld h i s sh a r e i n Lo t N o . 23 19 to p r iv a t e r e sp on d en t

an d th a t h i s s i gn a tu r e ap pea r i n g o n the pu r po r t ed r ece ip t w as forged. By

way of counterclaim, the defendants below maintained havingentered into a contract of

lease with respondent involving Fortunato‘s portion of Lot No. 2319.In their reply, the

private respondent and her husband alleged that theyhad purchased from

Fortunato‘s co-owners, as evidenced by various writteninstruments, their respective

portions of Lot No. 2319. By virtue of these sales,they insisted that Fortunato was no longer a

co-owner of Lot No. 2319 thus, hisright of redemption no longer existed.At the trial court level,

Fortunato died and was substituted by his childrennamed Salodada, Clarita, Narciso, Romeo,

Rodrigo, Marieta, Furtunato, Jr., andSalvador, all surnamed Ape.During the trial, private

respondent contended that her husband causedthe annotation of an adverse claim on the

certificate of title of Lot No. 2319. Inaddition, she and her husband had the whole Lot No. 2319

surveyed by a certainOscar Mascada who came up with a technical description of said

piece of land.Significantly, private respondent alleged that Fortunato was present

when thesurvey was conducted.After due trial, the court a quo rendered a decision

dismissing both thecomplaint and the counterclaim. The Court of Appeals, reversed

and set asidethe trial court‘s dismissal of the private respondent‘s complaint but

upheld theportion of the court a quo‘s decision ordering the dismissal of petitioner and

herchildren‘s counterclaim. It upheld private respondent‘s position that Exhibit ―G‖which is the

receipt of partial payment had all the earmarks of a valid contract of sale.

ISSUE: Wh e th e r t h e r e ce i p t s i gn ed b y Fo r t u n a t o p ro v es th e ex i s t en ce o f a contract of

sale between him and private respondent.

RULING: No, the Court ruled that the records of this case betray the stance of private

respondent that Fortunato Ape entered into such an agreement with her.A contract of sale is a

consensual contract, thus, it is perfected by mereconsent of the parties. Upon its

perfection, the parties may reciprocally demandperformance, that is, the vendee may compel the

transfer of the ownership andto deliver the object of the sale while the vendor may demand the

vendee to payt h e th in g so ld . Fo r t h e r e t o b e a p e r f ec t ed con t r ac t o f s a l e ,

h o w ev e r , t h e following elements must be present: consent, object, and price in

money or itsequivalent.

To be valid, consent: (a) should be intelligent; (b) should be free and ( c)should be

spontaneous. Intelligence in consent is vitiated by error; freedom byviolence, intimidation or

undue influence; spontaneity by fraud.In this jurisdiction, the general rule is that he who alleges

fraud or mistakein a transaction must substantiate his allegation as the presumption is

that aperson takes ordinary care for his concerns and that private dealings have beenentered into

fairly and regularly. The exception to this rule is provided for underArticle 1332 of the Civil

Code which provides that ―when one of the parties isunable to read, or if the

contract is in a language not understood by him, andmistake or fraud is alleged, the

person enforcing the contract must show that the terms thereof have been fully explained

to the former.‖In t h i s c a s e , a s p r iv a t e r e sp o nd en t i s t h e o ne s eek in g to

en f o rce t he claimed contract of sale, she bears the burden of proving that the terms

of theagreement were fully explained to Fortunato Ape who was an illiterate. This shefailed to

do. While she claimed in her testimony that the contents of the receiptwere made clear to

Fortunato, such allegation was debunked by Andres Floreshimself when the latter took

the witness stand.Flores testified that, while he was very much aware of Fortunato‘s inabilityto

read and write in the English language, he did not bother to fully explain to the latter

the substance of the receipt (Exhibit ―G‖). He even dismissed the ideaof asking somebody

else to assist Fortunato considering that a measly sum of thirty pesos was involved.

Evidently, it did not occur to Flores that the documenthe himself prepared pertains to the transfer

altogether of Fortunato‘s property tohis mother-in-law. It is precisely in situations such as this

when the wisdom of Article 1332 of the Civil Code readily becomes apparent which is

―to protect aparty to a contract disadvantaged by illiteracy, ignorance, mental

weakness orsome other handicap.‖ Thus, the Court annuls the contract of sale

betweenFortunato and private respondent on the ground of vitiated consent.

EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS1.SANCHES VS.

MAPALAD2 . OES ME R VS . PD C 3.VDA. DE APE VS. CA4.BRAGANZA VS.

VILLA ABRILLLE5 . MI ALHE V S. C A 6.KATIPUNAN VS.

KATIPUNAN7 . J U MA LO N VS . C A

SANCHEZ vs. MAPALAD

541 SCRA 397FACTS:Respondent Mapalad was the registered owner of four (4) parcels of land

located along Roxas Boulevard, Baclaran, Parañaque The PCGG issued writs of sequestration for

Mapalad and all its properties. Josef, Vice president/treasurer and General Manager of

Mapaladdiscovered that the 4 TCTs were missing, however the four missing tctsturned out to be

in possession of Nordelak Development Corporation.Nordelak came into possession of the 4

TCTs by deed of sale purportedlyexecuted by Miguel Magsaysay in his capacity as President and

BoardChairman of Mapalad.Mapalad filed an action for annulment of deed of sale and

reconveyanceof title with damages against Nordelak.RTC ruled in favour of Nordelak. The Ca

reversed the decision of RTC.ISSUE:Whether or not there was a valid sale between Mapalad

andNordelak.RULING:In the present case, consent was purportedly given by Miguel

Magsaysay,the person who signed for and in behalf of Mapalad in the deed of absolute sale dated

November 2, 1989. However, as he categoricallystated on the witness stand during trial, he was

no longer connected withMapalad on the said date because he already divested all his interests

insaid corporation as early as 1982. Even assuming, for the sake of argument, that the signatures

purporting to be his were genuine, it wouldstill be voidable for lack of authority resulting in his

incapacity to giveconsent for and in behalf of the corporation.

1944, P40.00 Japanese notes were equivalent to P1.00 of current Philippine money.

EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTSWILLIAM ALAIN

MIALHE, petitioner,VS. COURT OF APPEALS and REPUBLIC OF THE

PHILIPPINES,respondentG.R. No. 10899March 20, 2001FACTS: On March 23, 1990, William Alain Mialhe, on his own behalf and on behalf o f Vi c t o r i a

D es ba r a t s -Mi a lh e , M om iq ue M i a lh e -S i ch er e an d E l a i n e M i a lh e -

Len cq u es a i n g f i l ed a C omp l a in t fo r An n u lm en t o f S a l e , R eco nv e yan ce

an d Damages against Republic of the Philippines and defendant Development Bankof the

Philippines before the court.On May 25, 1990 filed its Answer denying the substantial facts

allrged inthe complaint and raising, as special and affirmative defenses, that there was

noforcible take-over of the subject properties and that the amount paid to

privaterespondents was fair and reasonable Defendant DBP also filed its Answer raisingas

Special and Affirmative Defense that action had already prescribed.On September 11, 1992, the

court issued an Order. The Court of Appeals ruled that petitioner‘s action had

prescribed. A suitto annul a voidable contract may be filed within four (4) years from the time

thedefect ceases. The CA also ruled that Article 1155 of the Civil Code, according to which

awritten extrajudicial demand by the creditors would interrupt prescription, referred

only to a creditor-debtor relationship, which is not the case here.

ISSUE: Whether or not the action for the annulment of the Contract of Sale hasprescribed.

RULING: CA correctly set aside the Order of the trial court. The records in this case indubitably

show the lapse of the prescriptiveperiod, thus warranting the immediate dismissal of the

Complaint. The suit before the trial court was an action for the annulment on

theContract of Sale on the alleged ground of vitiation of consent by intimidation.

The reconveyance of the three parcels of land, which the petitioner half-heatedlyespouses as

the real nature of the action, can prosper only if and when theContract of Sale covering

the subject lots is annulled. Thus, the reckoning periodf o r p r es c r i p t i on w o u l d be t h a t

p e r t a in i n g t o an ac t i on fo r t h e ann u l men t o f contract; that is, four years from the

time the defect in the consent ceases. There is as yet no obligation in existence. Respondent has

no obligation toreconvey the subject lots because of the existing Contract of Sale.

Althoughallegedly voidable, it is binding unless annulled by a proper action in court.

Notbinding a determinate conduct that can be extra judicially demanded, it cannot be

considered as an obligation either. Since Article 1390 of the Civil Code statesthat voidable

―contracts are binding,

unless they are annulled by a proper actionin court,‖

it is clear that the defendant were not obligated to accede to any extra judicial demand to annul

the Contract of Sale.

EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTSKATIPUNAN VS. KATIPUNAN375

SCRA 199FACTS: Respondent is the owner of a lot and a five-door apartment constructedthereon

occupied by lessees. On December 29, 1985, respondent, assisted byhis brother,

petitioner, entered into a Deed of Absolute Sale with their otherbrothers (co-

petitioners, represented by their father, Atty. Balguma involving thesubject property for

P187, 000. 00. Consequently, respondent‘s title to theproperty was cancelled and in

lieu thereof, a new TCT was issued in favor of petitioners. Thereafter, respondent

filed with the RTC a complaint for annulment of the above Deed of Absolute Sale on the

ground that petitioners, with evident badfaith, conspired with one another in taking advantage of

his ignorance, he being

only a third grader and through insidious words and machinations, they made him

sign a document purportedly a contract of employment, which turned out tobe a Deed of

Absolute Sale. The lower court dismissed the complaint holding that respondent failed toprove

his causes of action since he admitted that: 1.) He obtained loans from theBalgumas; 2.) He

signed the Deed of Absolute Sale; and 3.) He acknowledgedselling the property and that

he stopped collecting the rentals. The said decision was however reversed by the Court of

Appeals.

ISSUE: Whether or not the subject contract is

void ab initio

or voidable on theground that one of the parties is incapable of giving consent or where

consent isvitiated by mistake, fraud, or intimidation.

RULING: A contract of sale is born from the moment there is meeting of minds u p o n t h e

t h i n g w hi ch i s t h e o b j ec t o f t h e co n t rac t and u po n th e p r i c e . Th i s meeting of

minds speaks of the intent of the parties in entering into the contractrespecting the subject matter

and the consideration thereof. Thus, the elementsof a contract of sale are consent, object,

and price in money or its equivalent.Under Article 1330 of the Civil Code, consent

may be vitiated by any of thefollowing: 1.) mistake, 2.) violence, 3.) intimidation, 4.) undue

influence, and 5.)fraud. The presence of any of these vices renders the contract voidable.A

co n t r ac t w h er e o n e o f t he pa r t i e s i s i ncap ab l e o f g i v in g con s en t o r where

the consent is vitiated by mistake, fraud, or intimidation, is not void ab initio but only

voidable and is binding upon the parties unless annulled by propercourt action. The effect of

annulment is to restore the parties to the status quoante in so far as legally and equitably

possible. As an exception, however, to theprinciple of mutual restitution, Article 1399 provides

that when the defect of thecontract consists in the incapacity of one of the parties, the

incapacitatedperson is not obliged to make restitution, except when he has been benefited

bythe things or price received by him. Since the Deed of Absolute Sale

betweenRespondent and the Balguma brothers is voidable, and hereby annulled ,

thenthe restitution of the property and its fruits to respondent is just and proper. Therefore, the

petitioners are hereby ordered to turn over to respondentBraulio Katipunan, Jr. the

rentals they received for the five-door apartmentcorresponding to the period from

January, 1986 up to the time the property shallhave been returned to him, with interest at the

legal rate.

EFFECTS OF ANNULMENT OF VOIDABLE CONTRACTS JUMALON VS. COURT OF

APPEALS375 SCRA 175 JANUARY 30, 2002FACTS: On July 16, 1991, petitioner and complainant entered into a ConditionalSales

Agreement whereby the latter purchased from the former a house and lot.On July 24, 1991,

petitioner executed in favor of complainant a Deed of AbsoluteSale. Title was transferred to

complainant on July 29, 1991. Thereafter, complainant learned from neighboring

residents that thepresence of high-tension wires in the subdivision where the house

and lot islocated generate tremendous static electricity and produce electric

sparkswhenever it rains. Upon complainant‘s inquiries to the Meralco and HLURB,

hefound out that the subject house and lot was built within the 30 -meter right of

way of Meralco wherein high tension wires carrying 115, 000 volts are located which

posed serious risks on the property and its occupants.Consequently, sometime in November

1992, complainant filed a case fordeclaration of nullity or annulment of sale of real property

before the R.T.C.. Thelower court dismissed the case. Thereafter, complainant filed before the

HLURBa complaint before the HLURB seeking the rescission of the Conditional

SalesA gr eem en t an d th e A bs o l u t e D eed o f S a l e on th e g r ou n d o f f r aud .

H LU R B rendered decision in favor of complainant which was upheld by the Court

of Appeals, hence this petition.

ISSUE: Whether or not there was fraud on the part of petitioner as to warrant therescission of the

Conditional Sales Agreement and of the Absolute Deed of Sale.

RULING: T h e Su pr eme C ou r t f ou nd t h e pe t i t i o n w i t ho u t m e r i t f o r i t

i nv o l vedq u es t io ns o f f ac t wh i ch i s n o t r ev i ewab l e u n l es s i t i s wi th i n th e

am bi t o f exceptions.Nonetheless, SC agrees with the Court of Appeals that respondent de

Leonwas entitled to annul the sale. There was fraud in the sale of the subject house.I t i s n o t

s a f e l y h ab i t ab l e . I t i s b u i l t i n a s ub d iv i s i o n a r ea wh e r e th e r e i s an existing

30-meter right of way of the Manila Electric Company (Meralco) withhigh -tension

wires over the property, posing a danger to life and property. The co ns t r u c t i on o f

h o us es u nd e rn ea th t h e h i gh t en s io n wi r e s i s p r oh i b i t ed a sh az a rd ou s to l i f e

an d p ro p er t y b ecaus e t he l i n e ca r r i es 1 1 5 , 00 0 vo l t s o f electricity, generates

tremendous static electricity and produces electric sparkswhenever it rained.

CABALES, ET. AL vs COURT OF APPEALS August 31, 2007FACTS:Saturnina and her children Bonifacio, Albino, Francisco,

Leonara,Alberto and petitioner Rito inherited a parcel of land. They sold

suchproperty to Dr. Cayetano Corrompido with a right to repurchase within 8years.Alberto

secured a note from Dr. Corrompido in the amount of Php300.00.Alberto died leaving a

wife and son, petitioner Nelson.Within the 8-year redemption period, Bonifacio and Albino

tenderedtheir payment to Dr. Corrompido. But Dr. Corrompido only released

thedocument of sale with pacto de retro after Saturnina paid the share of herdeceased son,

Alberto, plus the note.Saturnina and her children executed an affidavit to the effect

thatpetitioner Nelson would only receive the amount of Php 176.34

fromrespondents-spouses when he reaches the age if 21 considering thatSaturnina

paid Dr. Corrompido Php 966.66 for the obligation of petitionerNelson‘s late father

Alberto.ISSUE:Whether or not the slae entered into is valid and binding.RUKING: The legal

guardian only has the plenary power of administration of the minor‘s property. It does not

include the power to alienation whichn eed s j ud ic i a l au t ho r i t y . Th us w h en

S a t u rn i n a , a s l ega l gu a r d i an o f petitioner Rito, sold the latter‘s pro indiviso share in

subject land, she didnot have the legal authority to do so. The contarct of sale as to the

proindiviso share of Petitioner Rito was unenforceable. However when

heack n o wl ed ged r ece i p t o f t h e p ro ceed s o f t h e s a l e on J u l y2 4 ,

1 9 86 , petitioner Rito effectively ratified it. This act of ratification rendered the sale

valid and binding as to him.

NECESSITY OF WRITING1.SHOEMAKER VS. LA TONDENA2 . PN B VS .

PV O C

SHOEMAKER vs. LA TONDEMA 68 Phil 24FACTS:D ef en d an t comp an y, La t on d en a , In c . en t e red i n to a

w r i t t en contract of lease of services with plaintiff Harry Ives Shoemaker for

ap e r i od o f 5 yea r s , w i t h a com p en s a t i on co ns i s t i n g o f 8 % o f t he

n e t earnings of defendant. That during each year that the contract was in force,

plaintiff would receive monthly during the period of the contract of t h e s um o f Ph p

1 , 50 0 . 00 o r P hp 1 8 , 0 00 .0 0 pe r an num a s mi n im um compensation if 8% of the

net earnings of the aforementioned allegedbusiness would not reach the amount.

The defendant company alleged that there were changes in the contract in which both

the parties agreed upon.P l a i n t i f f f i l e d a c o m p l a i n t a g a i n s t d e f e n d a n t

c o m p a n y . T h e defendant interposed a demurrer based on the ground that the

factstherein alleged do not constitute a cause of action, since it is not averredthat the alleged

mutual agreement modifying the contract of lease of services, has been put in

writing, whereas it states that its terms andconditions may only be modified upon the

written consent of both parties.ISSUE:Whether or not the ocurt a quo ered in sustaining

the demurrerinterposed by the defendant company to the second amended complaintf i l ed b y

p l a in t i f f , o n t h e g r o u nd th a t t h e f a c t s a l l eged t he r e i n do n o t constitute a couse

of action.RUKING:When in an oral contract which by its terms, is not to be performedwithin 1

year from the execution thereof, one of the contracting partieshas complied within

the year with the obligations imposed on him saidcontract, the other party cannot avoid

the fulfillment of what is incumbenton him under the same contract by invoking the statute of

frauds becausethe latter aims to prevent and not to protect fraud.

EXECUTORY VS. EXECUTEDPNB vs. PHILIPPINE VEGETABLE OIL COMPANY 49 Phil 897FACTS: This appeal involves the legal right of the PNB to obtain a judgementagainst

Vegetable Oil Co., Inc., for Php 15,812,454 and to foreclose amortgage on the property of the

PVOC for Php 17,000,000.00 and thelegal right of the Phil C. Whitaker as intervenor to obtain a

judgementdeclaring the mortgage which the PNB seeks to foreclose to be withoutforce and

effect, requiring an accouting from the PNB of the sales of theproperty and assets of the

Vegetable Co. and ordering the PVOC and thePNB to pay him the sum of Php 4,424,418.37In

1920, the Vegetable Oil Company, found itself in financial straits. It wasin debt to the extent of

approximately Php 30,000,000.00. The PNB wasthe largest creditor. The VOC owed the bank

Php 17,000,000.00. The PNBwas securedly principally by a real and chattel mortgage in favor of

thebank on its vessels Tankerville and H.S. Everett to guarantee the paymentof sums not exceed

Php 4,000,000.00ISSUE:Whether or not the plaintiff had failed to comply with the contract, that

itwas alleged to have celebrated with the defendant and the intervenor,that it would furnish funds

to the defendant so that it could continueoperating its factory.RUKING:In the present instance, it

is found that the Board of Directors of the PNBhad not consented to an agreement for

practically unlimited backing of the V corporation and had not ratified any promise to trhat

effect made byits general manager.All the evidence, documentary and oral, pertinent to the issue

consideredand found to disclose no binding promise, tacit, or express made by thePNB to

continue indefinitely the operation of the V corporation.Accordingly, intervenor Whitaker is not

entitled to recover damages fromthe bank.

EXECUTORY VS. EXECUTEDTAN vs VILLAPAZ 475 SCRA 720 November 22, 2005FACTS:

R esp on den t C a rm el i to V i l l apaz i s su ed a Ph i l i p p i n e Bank o f

Communications (PBCom) crossed check in the amount of P250,000.00, payable to the

order of petitioner Tony Tan. The Malita, Davao del Sur Police i ssued an invitation-

request topetitioner Antonio Tan inviting him to appear before the Deputy Chief of P o l i c e

O f f i c e o n J u n e 2 7 , 1 9 9 4 a t 9 : 0 0 o ‘ c l o c k i n t h e m o r n i n g ― i n connection

with the request of [herein respondent] Carmelito Villapaz, forconference of vital importance.‖

The invitation-request was received by petitioner Antonio Tan on June 22, 1994 but

on the advice of his lawyer, he did not show up at theMalita, Davao del Sur Police

Office.R es p on d en t f i l ed a Co mpl a in t fo r su m o f m on e y aga i n s t p e t i t i on e r s -

spouses, alleging that, , his issuance of the February 6, 1992 PBCom crossed check

which loan was to be settled interest-free in six (6) months;on the maturity date of the loan or on

August 6, 1992, petitioner Antonio Tan failed to settle the same, and despite repeated demands,

petitionersnever did.Petitioners alleged that they never received from respondent any demandfor

payment, be it verbal or written, respecting the alleged loan; since thealleged loan was one

with a period — payable in six months, it shouldhave been expressly stipulated

upon in writing by the parties but it wasnot. ISSUE: Whether or not Honorable Court

of Appeals erred in concludingthat the transaction in dispute was a contract of loan

and not a merematter of check encashment as found by the trial court. RUKING:At all events,

a check, the entries of which are no doubt in writing,could prove a loan transaction. T h a t

p e t i t i o n e r A n t o n i o T a n h a d , o n F e b r u a r y 6 , 1 9 9 2 , a n outstanding

balance of more than P950,000.00 in his account at PBComMonteverde branch where

he was later to deposit respondent‘s check didnot rule out petitioners‘ securing a loan. It is pure

naivete to believe thatif a businessman has such an outstanding balance in his bank account,

hewould have no need to borrow a lesser amount.In f i n e , a s p e t i t i o ne r s ‘ s i d e o f t h e

ca s e i s i nc r ed ib l e as i t i s i n con s i s t en t w i t h t h e p r i nc ip l e s b y w h i ch m en

s imi l a r l y s i t u a t ed a r e governed, whereas respondent‘s claim that the proceeds of

the check,w h i ch w e re admi t t ed l y r ece i ved b y p e t i t i o n e rs , r ep r e s en t ed a

l o an extended to petitioner Antonio Tan is credible, the preponderance of evidence

inclines on respondent.

EXECUTORY VS. EXECUTEDSPOUSES VENANCIO DAVID and PATRICIA

MIRANDA DAVID andFLORENCIA VENTURA VDA. DE BASCO, petitioners,vs.

ALEJANDRO and GUADALUPE TIONGSON, respondents.

G.R. No. 108169 August 25, 1999FACTS: Three sets of plaintiffs, namely spouses Ventura,

spouses David andVda. De Basco, filed a complaint for specific performance with

damges,against private respondents spouses Tiongson, alleging that the lattersold to

them lots located in Pampanga. The parties expressly agredd that in case of payment has been

fullypaid respondents would execute an individual deed of absolute sale in plaintiffs

flavor. The respondents demanded the executuion of a deed of sale andissuance of

certificate of titile but the respondents refused to issue thesame. The trial court

rendered its decision in favor of the respondents.H o w ev e r t h e C A r u l ed t h a t

co n t r ac t o f s a l e w as n o t b een pe r f r ec t ed between spouses David and/or Vda. De

Basco and respondents. As withregard to the spouses Ventura, the CA affirmed the

RTC.ISSUE:

W h e t h e r o r n o t c o n t r a c t o f s a l e h a s n o t b e e n p e r f e c t e d b u t petitioners

and respondents.RUKING: T he SC ru l ed th a t t he r e w as a p e r fec t ed co n t ac t .

H o w ev e r , t h e statute of frauds is inapplicable. The rule is settled that the statute of

f r au ds app l i es o n l y to ex ecu to r and n o t t o co mp le t ed , ex ecu t ed o r partially

executed contract. In the case of spouses David, the paymentmade rendered the

sales contract beyong the ambit of the statutre of frauds/ The CA erred in concluding that

there was no perfected contract of sale. However, in view of the stipulation of the

parties that the deed of s a l e an d co r r e sp on d i n g ce r t i f i c a t e o f t i t l e wo u l d be

i s s u ed a f t e r fu l l payment, then, they ad entered into a contract to sell and not a contractof

sale.

EXECUTORY VS. EXECUTEDGENARO CORDIAL, petitioner, vs. DAVID MIRANDA,

respondent. December 14, 2000FACTS:David Miranda, a businessman from Angeles City, was

engaged inrattan business. Gener Buelva was the supplier of David but the

formerm e t an acc i d en t and d i ed . Gen e ro C o rd i a l an d Mi r an d a m et

t h ro u gh Buelva‘s widow, Cecilla. They agreed that Cordial will be his supplier of rattan poles.

Cordials h i pp ed r a t t an po l e s as t o t h e ag r eed n umb er o f p i ece s an d

s i z e s however Miranda refused to pay the cost of the rattan poles delivered.Miranda

alleged that there exist no privity of contract between Mirandaand Cordial.C or d i a l

f i l ed a com pl a i n t aga i n t M i r and a . Th e RT C r en d er ed i t s decision in favor of

the petitioner. The CA reversed the decision of theRTC.ISSUE:Whether or not Statute of

Frauds applies in this case.RUKING: The CA and respondent Miranda stress the absence

of a ―writtenmemorandum of the alleged contract between the parties‖. Respondentimplicity

agrues that the alleged contract is unenforceable under theStatute of Frauds however,

the statute of frauds applies only to executorand not to completed, executed, or partially

executed contracts. Thus,were one party has performed one‘s obligation, oral

evidence will beadmitted to prove the agreement. In the present case, it has already

beenestablished that petitioner had delivered the rattan poles to respondent. The contract was

partially executed, the Statute of Frauds does not apply.

EXECUTORY VS. EXECUTEDVILLANUEVA-MIJARES petitioners,vs.THE COURT OF

APPEALS, respondents .G.R. No. 108921 April 12, 2000FACTS:During the lifetime, Felipe, owned real

property, a parcel of landsituated at Estancia, Kalibo, Capiz. Upong Felipe‘s death,

ownership of theland was passed on to his children. Pedro, on of the children, got

hisshare. The remaining undivided portion of the land was held in trust by leon. His

co-heirs made several seasonable and lawful demands upon himto subdivide the partition the

property, but no subdivision took place.After the death of Leon, private respondents

discovered that theshares of four of the heirs of Felipe was purchased by Leon as evidencedby

Deed of Sale.ISSUE:Whether or not the appellate court erred in declaring the Deed of

Sale unenforceable against the private respondent fro being unauthorizedcontract.RUKING: The

court has ruled that the nullity of the unenforceable contract isof a permanent nature and it will

exist as long the unenforceable contractis not duly ratifired. The mere lapse of time cannot igve

efficacy to such aco n t rac t . Th e d e f ec t i s su ch th a t i t c an no t be cu red ex cep t b y

t h e subsequent ratification of the unenforceable contract by the person inwhose

name the contract was executed. In the instant case, there is noshowing of any express

or implied ratification of the assailed Deed of Saleby the private respondents Procerfina,

Ramon,. Prosperidad, and Rosa. Thus, the said Deed of Sale must remain unenforceable as

to them.

REMEDIESROSENCOR DEVELOPMENT CORPORATION and RENE

JOAQUIN,petitioners,vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO

BANTUGAN,FERNANDO MAGBANUA and LIZZA TIANGCO, respondents. G.R. No. 140479 March 8, 2000FACTS:Plaintiffs and plaintiffs-intervenors averred that they are

the lessess since1971 of a two-story residential apartment and owned by spouses Faustinoand

Cresencia Tiangco. The lease was nocovered by any contract. The lesses were renting

the premises then for Php 150.00 a month and werea l l eged l y v e r b a l l y g r an t ed b y t h e

l e s s o r s t h e p r e - empt iv e r i gh t t o purchase the property if ever they decide to sell the

same.Upon the death of the spouses Tiangco, the management of the propertywas adjudicated to

their heirs who were represented by Eufrocina deLeon. The lessees received a letter from de

Leon advising them that the heirs of the late spouses have already sold the property to Resencor.

The lessees filed an action f \before th RTC praying for the following: a)rescission of

the Deed of Absolute Sale between de Leon and Rocencor, b)t h e d e f endan t s

R os enco r /R ene J o aq u i n b e o rd e r ed to r e co nv ey t h e property to de Leon, c) de

Leon be ordered to reimburse the plaintiffs fort h e r ep a i r o f t h e p r op er t y o r ap p l y t h e

s a id amo un t as p a r t o f t h e purchase of the property. The RTC dismissed the

complaint while the Ca reversed the decision of the RTC.ISSUE:W h e th e r o r no t a

r i gh t o f f i r s t r e f us a l i s i nd eed co v e r ed b y t h e provisions of the NCC on the Statute

of Frauds.RUKING:A right of first refusal is not among those listed as

unenforceableunder the statute of frauds. Furthermore, the application of Article 1403,

par. 2(e) of the NCC, presupposes the existence of a perfected, albeit u n w r i t t en ,

co n t r ac t o f s a l e . A r i gh t o f f i r s t r e f us a l , su ch as t h e on e involved in the instant

case, is not by any means a perfected contract of sale of real property. At best, it is a

contractual grant, not of the sale of the real property involed byt of the right of first refusal

over the propertysought to be sold.It is thus evident that the statute of frauds does not

contemplatecases involving a right of right of first refusal. As such, a right of

firstrefusal need not be written to be enforceable and may be proven by oralevidence.

An action for recovery of what has been paid without just cause has beendesignated as an accion

in rem verso. This provision does not apply if, asi n t h i s c as e , t h e a c t io n i s p r os c r ib ed

b y t h e Co ns t i t u t i on o r b y t h e application of the pari delicto doctrine. 68 It may

be unfair and unjust tobar the petitioner from filing an accion in rem verso over the

subjectproperties, or from recovering the money he paid for the said properties,but, as Lord

Mansfield stated in the early case of Holman vs. Johnson:69"The objection that a contract is

immoral or illegal as between the plaintiff an d th e d e f en d an t , s ou nd s a t a l l t im es

v e r y i l l i n t h e m ou th o f t h ed e f en dan t . I t i s n o t f o r h i s s ake , h o w ev e r , t ha t

t h e ob j ec t io n i s eve r a l l ow ed ; b u t i t i s f ou nd ed in gen e r a l p r i nc ip l e s o f

p o l i c y, w h i ch th e defendant has the advantage of, contrary to the real justice, as betweenhim

and the plaintiff."

VOID/ INEXISTENT CONTRACTS: WHO MAY BRING ACTION

FORDECLARATION OF NULLITY

LA BUGA’AL-BLAAN vs RAMOS December 1, 2004FACTS: The Petition for Prohibition and Mandamus before the Court

challengesthe constitutionality of (1) Republic Act No. [RA] 7942 (The

PhilippineMining Act of 1995); (2) its Implementing Rules and Regulations

(DENRAdministrative Order No. [DAO] 96-40); and (3) the FTAA dated March 30,1995,

executed by the government with Western Mining Corporation (Philippines), Inc.

(WMCP).On January 27, 2004, the Court en banc promulgated its Decision grantingthe Petition

and declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of

the entire FTAA executed between thegovernment and WMCP, mainly on the finding

that FTAAs are servicecontracts prohibited by the 1987 Constitution.ISSUE:Whether or nor

it is a void contract.RULING:Section 7.9 of the WMCP FTAA has effectively given

away the State'ss h a r e w i th ou t an yt h i n g in ex ch an ge . M or eov e r , i t

co ns t i t u t es u n j us t enrichment on the part of the local and foreign stockholders in

WMCP,because by the mere act of divestment, the local and foreign stockholdersge t a

w i nd f a l l , a s t h e i r sh a r e i n t h e ne t min i n g rev en u es o f WM CP

i s automatically increased, without having to pay anything for it.Beinggrossly

disadvantageous to government and detrimental to the Filipinopeople, as well as

violative of public policy, Section 7.9 must therefore bestricken off as invalid.Section 7.8(e) of

the WMCP FTAA likewise is invalid, since by allowing thes u m s sp en t b y go v e r n men t

f o r t h e b en ef i t o f t h e co n t r ac to r t o be deductible from the State's share in net

mining revenues, it results inbenefiting the contractor twice over. This constitutes

unjust enrichmenton the part of the contractor, at the expense of government. For

beinggrossly disadvantageous and prejudicial to government and contrary to public

policy, Section 7.8(e) must also be declared without effect. It maylikewise be stricken off

without affecting the rest of the FTAA.

HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITEVS.

RODRIGO N. LIM,G.R. No. 152168, December 10, 2004446 SCRA 56FACTS: The spouses Aurelio and Esperanza Balite were the owners of a parcel of land,

located at Poblacion Barangay Molave, Catarman, Northern Samar, with anarea of 17,551

square meters. When Aurelio died intestate in 1985, his wife,Esperanza Balite, and

their children, petitioner Antonio Balite, Flor Balite-Zamar,Visitacion Balite-Difuntorum,

Pedro Balite, Pablo Balite, Gaspar Balite, CristetaBalite and Aurelio Balite, Jr.,

inherited the subject property and became co-owners thereof, with Esperanza

inheriting an undivided share of 9,751 squaremeters.In the meantime, Esperanza became

ill and was in dire need of money forher hospital expenses. She, through her daughter,

Cristeta, offered to sell toRodrigo Lim, her undivided share for the price of P1,000,000.00.

Esperanza andRodrigo agreed that, under the ―Deed of Absolute Sale‖, to be executed

byEsperanza over the property, it will be made to appear that the purchase price of the property

would be P150,000.00, although the actual price agreed upon by them for the property

was P1,000,000.00.Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale,

and onAugust 21, 1996, they wrote a letter to the Register of Deeds [RD] of

NorthernSamar, saying that they were not informed of the sale of a portion of the

saidproperty by their mother nor did they give their consent thereto, and requestedthe RD to

hold the approval of any application for the registration of title of o w n e r s h i p i n

t h e n a m e o f t h e b u y e r o f s a i d l o t w h i c h h a s n o t y e t b e e n partitioned

judicially or extrajudicially, until the issue of the legality/validit y of the above sale

has been cleared.On October 23, 1996, Esperanza signed a letter addressed to

Rodrigoinforming the latter that her children did not agree to the sale of the property to

him and that she was withdrawing all her commitments until the val idity of thesale is

finally resolved. On October 31, 1996, Esperanza died intestate and wassurvived by her

children.On June 27, 1997, petitioners filed a complaint against Rodrigo with

theRegional Trial Court of Northern Samar for ―Annulment of Sale, Quieting of Title,Injunction

and Damages. The trial court dismissed the Complaint. The Court of Appeals held

thatthe sale was valid and binding insofar as Ezperanza Balite‘s undivided share of

the property was concerned.Hence, this Petition.

ISSUE: Whether or not the heirs of Esperanza has the right to question the said contract.

RULING: T h e Su pr eme C ou r t h e l d t h a t t h e p e t i t i o n e rs cann o t b e p e rm i t t ed t o unmake

the Contract voluntarily entered into by their predecessor, even if the stated

consideration included therein was for an unlawful purpose. The bindingforce of a contract must

be recognized as far as it is legally possible to do so.Article 1345 of the Civil Code

provides that the simulation of a contractmay either be absolute or relative. In

absolute simulation, there is a colorablecontract but without any substance, because the

parties have no intention to bebound by it. An absolutely simulated contract is void, and

the parties mayrecover from each other what they may have given under the ―contract.‖ On

theother hand, if the parties state a false cause in the contract to conceal their realagreement,

such a contract is relatively simulated. Here, the parties‘ real agreement binds them.In

the present case, the parties intended to be bound by the Contract,even i f it did not

reflect the actual purchase price of the property. That theparties intended the agreement

to produce legal effect is revealed by the letterof Esperanza Balite to respondent dated

October 23, 1996 and petitioners‘admission that there was a part ial payment of

P320,000 made on the basis of the Deed of Absolute Sale. There was an intention to

transfer the ownership of over 10,000 square meters of the property. The Deed of

Absolute Sale wasm er e l y r e l a t i v e l y s imu l a t ed , i t r em a in s va l i d and

en f o rceab l e b e t w een t h ep a r t i e s and the i r su cces so r s i n i n t e r es t s in ce a l l

t h e es s en t i a l r equ i s i t e s prescribed by law for the validity and perfection of contracts are

present.

V O I D / I N E X I S T E N T C O N T R A C T S : W H O M A Y B R I N G A C T I O N

F O R DECLARATION OF NULLITY ALEJANDRIA PINEDA and SPOUSES

ADEODATO DUQUE, JR., andEVANGELINE MARY JANE DUQUE, petitioners,VS.

COURT OF APPEALS and SPOUSES NELSON BAÑEZ andMERCEDES BAÑEZ,

respondents2002 Feb 6FACTS: The appellees and the petitioner, Pineda, executed an Agreement toExchange Real

Properties. The appellees exchanging their property at WhitePlains with that of the

Pinedas located in California. At the time of the executionof the agreement, the white plains

property was mortgaged with the GSIS, whilet h e C a l i fo r n i a p ro p er ty a l s o h ad a

m o r t gaged o b l i ga t io n . As s t a t ed in t he exchange agreement, Pineda paid the

appellees the total amount of $12, 000.Pineda and the spouses Duque executed an

agreement to sell over the whiteplains property, whereby Pineda sold the property

in the amount of P1.6M.P in ed a p a id t he m o r t gage o f t h e wh i t e p l a in s

p r op e r t y an d requ es t ed th e appellees for a written authority for the release of the

title from GSIS. Theappellees gave Pineda the authority with the understanding that

Pineda willdeliver the title to the appel lees. Upon their return to the Philippines,

theappellees discovered that the spouses Duque were occupying the white

plainsproperty and a fictitious deed of sale in the name of Pineda. In a civil case filedby the

appellees, the trial court declared them as the absolute owners of theproperty located

in White Plains.

ISSUE: Whether petitioners validly acquired the subject property.

RULING: No. The Court denies the petition. It appears that the Bañez spouseswere the

original owners of the parcel of land and improvements located at 32Sarangaya St.,

White Plains, Quezon City. On January 11, 1983, the Bañez s p o us e s and

p e t i t i o ne r P i n ed a ex ecu t ed an ag r eem en t t o ex ch an ge r ea l

properties. However, the exchange did not materialize. Petitioner Pineda‘s " s a l e " o f

t h e p r o pe r t y t o p e t i t i o ne r s Du qu e was n o t au t ho r i zed b y t h e r ea l owners of the

land, respondent Bañez. The Civil Code provides that in a sale of aparcel of land or any interest

therein made through an agent, a special power of attorney is essential. This authority must be in

writing; otherwise the sale shallbe void. In his testimony, petitioner Adeodato Duque confirmed

that at the timehe "purchased" respondents‘ property from Pineda, the latter had no

SpecialPower of Authority to sell the property.A special power of attorney is necessary

to enter into any contract bywhich the ownership of an immovable is transmitted or

acquired for a valuableconsideration. Without an authority in writing, petitioner Pineda could

not validlysell the subject property to petitioners Duque. Hence, any "sale" in favor

of petitioners Duque is void. Further, Article 1318 of the Civil Code lists

ther eq u i s i t e s o f a va l i d and p e r f ec t ed co n t r ac t , nam el y: ( 1 ) co ns en t o f

t h e contracting parties; (2) object certain which the subject matter of the

contract;(3) cause of the obligation which is established. Pineda was not authorized

toenter into a contract to sell the property. As the consent of the real owner of theproperty was

not obtained, no contract was perfected. Consequently, petitionerDuque failed to validly acquire

the subject property.

V O I D / I N E X I S T E N T C O N T R A C T S : W H O M A Y B R I N G A C T I O N

F O R DECLARATION OF NULLITY LA BUGAL-B’LAAN TRIBAL ASSOCIATION, INC. et

al VS. RAMOSG.R. No. 127882December 1, 2004445 SCRA 1FACTS: Petitioners challenged constitutionality of Republic Act No. 7942 (ThePhilippine

Mining Act of 1995) and its Implementing Rules and Regulations andt h e F i n an c i a l and

T echn i ca l As s i s t ance A gr eem en t d a t ed M ar ch 30 , 19 95 , executed by the

government with Western Mining Corporation (Philippines), Inc.On January 27, 2004, the

Supreme Court en banc promulgated its decisiondeclaring the unconstitutionality of

certain provisions of RA 7942 as well as of the entire FTAA executed between the

government and WMCP, mainly on thefinding that FTAAs are service contracts

prohibited by the 1987 Constitution.Subsequently, respondents filed separate Motions for

Reconsideration.In a Res o l u t i on d a t ed M ar ch 9 , 20 04 , t h e Sup r em e C ou r t

r eq u i r ed petitioners to comment. The case was set for Oral Argument on June 29, 2004.After

hearing the opposing sides, the Court required the parties to submit their respective

memoranda in amplification of their arguments. On the same day, theCourt noted inter alia, the

Manifestation and Motion for Intervention filed by theOffice of the Solicitor General on behalf

of public respondents. The OSG said thatit was not interposing any objection to the

Motion for Intervention filed by theChamber of Mines of the Philippines, Inc. and

was in fact joining and adoptingthe latter‘s Motion for Reconsideration. Memoranda were

accordingly filed by theintervenor as well as by petitioners, public respondents, and private

respondent,dwelling at length on three issues, namely, (1) mootness of the case by the saleof

WMC shares in WMCP to Sagittarius which 60% its equity is owned by Filipinosand by the

subsequent transfer and registration of the FTAA from WMCP to Sagittarius; (2)

constitutionality of the assailed provisions of the Mining Law, itsIm p l em en t i n g Ru l es and

R egu l a t io ns an d t he W MCP FT A A; an d , ( 3 ) p r op e r interpretation of the phrase

―agreements involving either technical of financialassistance contained in paragraph 4 of

Section 2 of Article XII of the Constitution.Among the assailed provisions of the Mining Law

were Section 80 and thecolatilla in Section 84, as well as Section 112. The petitioners alleged

that thesesections limit the State‘s share in a mineral production-sharing agreement to justthe

excise tax on the mineral product and the WMCP FTAA contains a provisionwhich grants the

contractor unbridled and automatic authority to convert theFTAA into MPSA

(mineral production-sharing agreements. However, the Court r u l ed t h a t t h es e

w e r e n o t a r gu ed upo n b y t h e p a r t i e s i n t h e i r r e sp ec t iv e pleadings. Also, the

Court stated that these particular provisions do not comewithin issues that were

defined and delineated by during the Oral Argument,particularly the third issue, which

pertained exclusively to FTAAs.La t e r , WMCP s ubm i t t ed i t s R ep l y M emo r and um,

w h i l e t h e OS G, i n compliance to the order of the Supreme Court, filed a

Compliance submittingcopies of more FTAAs entered into by the government.

ISSUE: Whether or not petitioners have a right to assail the statutory provisions (Sections 80,

84 and 112) for its unconstitutionality.

RULING: T h e Su pr eme C ou r t h e l d t h a t i t c an no t r u l e o n m er e su rm is e s and hypothetical

assumptions, without firm factual anchor, in relation to the assailedprovisions. Stated in Article

1421, ―The defense of illegality of contracts is notavailable to third persons whose

interests are not directly affected.‖ The Court

thus held that due process requires hearing the parties who have a real legalinterests

in the MPSAs (i.e. the parties who executed them) before the MPSAs can be reviewed,

or worse, struck down by the Court. Thus, the petitioners have no right to question the assailed

provisions.

V O I D / I N E X I S T E N T C O N T R A C T S : W H O M A Y B R I N G A C T I O N

F O R DECLARATION OF NULLITY COMMISSION ON ELECTIONS, COMELEC

CHAIRMAN ALFREDO L.BENIPAYO, COMELEC COMMISSIONERS

RESURRECCION Z. BORRA andFLORENTINO A. TUASON, JR.,

petitioners

,VS. JUDGE MA. LUISA QUIJANO-PADILLA, REGIONAL TRIAL COURT

OFQUEZON CITY, BRANCH 215 and PHOTOKINA MARKETING CORP.,

respondents

September 18, 2002G.R. No. 151992FACTS: In 1996, the Philippine Congress passed Republic Act No. 8189, otherwiseknown as the "Voter's

Registration Act of 1996," providing for the modernizationand computerization of the voters'

registration list and the appropriate of fundstherefor "in order to establish a clean, complete,

permanent and updated list of voters."Pursuant thereto, the Commission on Elections

(COMELEC) promulgatedResolution No. 00-0315 approving in principle the Voter's

Registration andIdentification System Project [(VRIS) Project]. The VRIS Project

envisions acomputerized database system for the May 2004 Elections. The idea is to havea

national registration of voters whereby each registrant's fingerprints will be digitally

entered into the system and upon completion of registration, comparedand matched with other

entries to eliminate double entries. A tamper-proof andco u n t e r fe i t - r es i s t an t v o t e r ' s

i d en t i f i c a t i on ca r d w i l l t h en b e i s su e s t o e ach registrant as a visual record of the

registration.On September 9, 1999, the COMELEC issued invitations to pre-qualify andbid for

the supply and installations of information technology equipment andancillary

services for its VRIS Project. Private respondent Photokina MarketingCorporation

(PHOTOKINA) pre-qualified and was allowed to participate as one of the bidders, and

eventually won. A contract was perfected between the parties,but COMELEC failed to

comply with the contract due to insufficiency of funds.Respondent filed a suit against

petitioner, of which respondent judge granted thew r i t o f p r o h i b i t o r y i n j u n c t i o n t o

p r i v a t e r e s p o n d e n t . U p o n m o t i o n f o r reconsideration of both parties, respondent

judge granted the writ of mandatoryinjunction of respondent and denying the Omnibus

Motion of petitioner. Hence,the instant petition for certiorari filed by the Office of the

Solicitor General (OSG)in behalf of then COMELEC. PHOTOKINA filed a Comment with

Motion to Dismiss,the present petition, on two procedural grounds. First, the petition violates

thedoctrine of hierarchy of courts. And second, the OSG has no authority

and/ors t an d in g to f i l e t h e p e t i t i on co ns i d e r in g th a t t he p e t i t i o n e rs h av e n o t

b een a u t h o r i z e d b y t h e C O M E L E C e n b a n c t o t a k e s u c h a c t i o n .

W i t h o u t t h e concurrence of at least a majority of the members of the COMELEC,

neitherpetitioners nor the OSG could file the petition in behalf of the COMELEC.

ISSUE: Whether or not the Office of the Solicitor-General has no authority and/ors t and i n g t o f i l e

t h e p e t i t i o n con s ide r in g th a t t h e p e t i t i o n e rs h ave n o t b een authorized by the

COMELEC en banc to take such action.

RULING: The OSG is an independent office. Its hands are not shackled to thecause of its client

agency. In the discharge of its task, the primordial concern of the OSG is to see to it that the best

interest of the government is upheld. This isr egar d l e s s o f t h e f ac t t h a t wh a t i t

p e r ce i v ed as t h e "be s t i n t e r es t o f t he government" runs counter to its client agency‘s

position. Endowed with a broadperspective that spans the legal interest of virtually the

entire governmentofficialdom, the OSG may transcend the parochial concerns of a particular

clientagen c y an d ins t ead , p ro mot e an d p r o t ec t t h e p ub l i c w ea l t h . T h e

S up r em e Court‘s ruling in Orbos vs. Civil Service Commission, is relevant, thus:"x x x It is

incumbent upon him (Solicitor General) to present to the court what he considers

would legally uphold the best interest of the government althoughit may run counter to a client‘s

position. x x x."In the present case, it appears that after the Solicitor General studied theissues he

found merit in the cause of the petitioner based on the applicable lawand jurisprudence. Thus,

it is his duty to represent the petitioner as he did byfiling this petition. He cannot be

disqualified from appearing for the petitionereven if in so doing his representation runs

against the interests of the CSC.

This is not the first time that the Office of the Solicitor General has taken ap os i t i on ad v er s e

t o h i s c l i en t s l i k e t h e CSC , th e N a t io na l Lab o r R e l a t i on s Commission, among

others, and even the People of the Philippines. x x x"Hence, while petitioners‘ stand is

contrary to that of the majority of theCommissioners, still, the OSG may represent

the COMELEC as long as in itsassessment, such would be for the best interest of the

government. For, indeed,in the final analysis, the client of the OSG is not the agency but no less

than theRepublic of the Philippines in whom the plenum of sovereignty resides.Moreover, it

must be emphasized that petitioners are also public officialsentitled to be represented by the

OSG. Under Executive Order No. 292 andP r e s i d en t i a l D ec r ee N o . 47 8 , t he

O S G i s t h e l aw ye r o f t he go ve r nm en t , i t s agencies and instrumentalities, and its

officials or agents. Surely, this mandateincludes the three petitioners who have been

impleaded as public respondentsin Special Civil Action No. Q-01-45405.Anent the

alleged breach of the doctrine of hierarchy of courts, suffice it to say that it is not an

iron-clad dictum. On several instances where this Courtwas confronted with cases of

national interest and of serious implications, itnever hesitated to set aside the rule and

proceed with the judicial determinationof the case. The case at bar is of similar import. It is in the

interest of the Statethat questions relating to government contracts be settled without delay. This

ismore so when the contract, as in this case, involves the disbursement of publicfunds and the

modernization of our country‘s election process, a project that haslong been overdue.

V O I D / I N E X I S T E N T C O N T R A C T S : W H O M A Y B R I N G A C T I O N

F O R DECLARATION OF NULLITY MANSUETO CUATON,

petitioner,VS

. REBECCA SALUD andCOURT OF APPEALS (Special Fourteenth Division),

respondents

G.R. No. 158382 January 27, 2004FACTS: On January 5, 1993, respondent Rebecca Salud, joined by her husbandRolando

Salud, instituted a suit for foreclosure of real estate mortgage with damages against

petitioner Mansueto Cuaton and his mother, Conchita Cuaton,with the trial court. The trial

court rendered a decision declaring the mortgageconstituted on October 31, 1991 as void,

because it was executed by MansuetoCuaton in favor of Rebecca Salud without

expressly stating that he was merelyacting as a representative of Conchita Cuaton, in whose

name the mortgaged lotwas titled. The court ordered petitioner to pay Rebecca Salud,

inter alia

, thel o an secu r ed b y th e mo r t gage i n t he amo un t o f P1 ,0 00 , 0 00 p l us a

t o t a l P610,000.00 representing interests of 10% and 8% per month for the

periodFebruary 1992 to August 1992.Both parties filed their respective notices of appeal. The

Court of Appeals affirmed the judgment of the trial court. Petitioner filed a motion for

partial reconsideration of the trial court‘s decision with respectto the award of interest in the

amount of P610,000.00, arguing that the samewas iniquitous and exorbitant. This was

denied by the Court of Appeals.

ISSUE: Whether or not the excessive interest rates cannot be considered as anissue presented

for the first time on appeal.

RULING: The contention regarding the excessive interest rates cannot be considereda s an i s su e

p r e s en t ed f o r t he f i r s t t im e on ap p ea l . T h e r eco r ds s ho w th a t petitioner raised

the validity of the 10% monthly interest in his answer filed withthe trial court.

To deprive him of his right to assail the imposition of excessiveinterests would be to sacrifice

justice to technicality. Furthermore, an appellateco u r t i s c lo th ed wi th am pl e au t h o r i t y

t o r ev i ew ru l in gs ev en i f t h ey a r e n o t assigned as errors. This is especially so if the

court finds that their considerationis necessary in arriving at a just decision of the case

before it. The Court hasconsistently held that an unassigned error clos ely related to

an error properlyassigned, or upon which a determination of the question raised by

the errorp r o p e r l y a s s i gn ed i s d ep en d en t , wi l l b e con s id e r ed b y t h e

ap p e l l a t e co u r t notwithstanding the failure to assign it as an error.

Since respondents pointedout the matter of interest in their Appellants‘ Brief before the

Court of Appeals,the fairness of the imposition thereof was opened to further

evaluation. TheCourt therefore is empowered to review the same.Petition granted. Decision

modified. The interest rates of 10% and 8% permonth imposed by the trial court is reduced to

12% per annum, computed fromthe date of the execution of the loan on October 31,

1991 until finality of thisdecision. After the judgment becomes final and executory until the

obligation issatisfied, the amount due shall further earn interest at 12% per year.

V O I D / I N E X I S T E N T C O N T R A C T S : W H O M A Y B R I N G A C T I O N

F O R DECLARATION OF NULLITY

DEMOSTHENES P. AGAN, JR., et al.,

petitioners, VS.

PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA

INTERNATIONAL AIRPORT AUTHORITY,DEPARTMENT OF TRANSPORTATION

AND COMMUNICATIONS and SECRETARY LEANDRO M. MENDOZA,

respondents

G.R. No. 155001January 21, 2004FACTS: On October 5, 1994, Asia‘s Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal

to the PhilippineGovernment through the Department of Transportation and Communication

(DOTC) and Manila International Airport Authority(MIAA) for the construction and

development of the NAIA IPT III under a build-operate-and-transfer arrangement pursuant

toR.A. No. 6957, as amended by R.A. No. 7718 (BOT Law). In accordance with the BOT Law

and its Implementing Rules andRegulations (Implementing Rules), the DOTC/MIAA invited the

public for submission of competitive and comparative proposalsto the unsolicited proposal of

AEDC.On September 20, 1996 a consortium composed of the People‘s Air Cargo and

Warehousing Co., Inc. (Paircargo),Phil. Air and Grounds Services, Inc. (PAGS) and Security

Bank Corp. (Security Bank) (collectively, Paircargo Consortium),submitted their competitive

proposal to the Prequalification Bids and Awards Committee (PBAC).After finding that the

PaircargoConsortium submitted a bid superior to the unsolicited proposal of AEDC and after

failure by AEDC to match the said bid, theDOTC issued the notice of award for the NAIA IPT

III project to the Paircargo Consortium, which later organized into hereinrespondent PIATCO.

Hence, on July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and

PIATCO,through its President, Henry T. Go, signed the ―Concession Agreement for the Build-

Operate-and-Transfer Arrangement of theNinoy Aquino International Airport Passenger

Terminal III‖ (1997 Concession Agreement).On November 26, 1998, the 1997 Concession

Agreement was superseded by the Amended and Restated ConcessionAgreement (ARCA)

containing certain revisions and modifications from the original contract. A series of

supplementalagreements was also entered into by the Government and PIATCO. The First

Supplement was signed on August 27, 1999, theSecond Supplement on September 4, 2000, and

the Third Supplement on June 22, 2001 (collectively, Supplements) (the 1997Concession

Agreement, ARCA and the Supplements collectively referred to as the PIATCO Contracts).On

September 17, 2002,various petitions were filed before this Court

to annul the 1997 Concession Agreement, the ARCA and theSupplements and to prohibit the public respondents DOTC and MIAA from implementing them.In a decision

dated May 5, 2003, this Court granted the said petitions and declared the 1997 Concession

Agreement,the ARCA and the Supplements null and void.Respondent PIATCO, respondent-

Congressmen and respondents-intervenors nowseek the reversal of the May 5, 2003 decision and

pray that the petitions be dismissed. In the alternative, PIATCO prays thatthe Court should not

strike down the entire 1997 Concession Agreement, the ARCA and its supplements in light of

theirseparability clause.Respondent-Congressmen and NMTAI also pray that in the alternative, the

cases at bar should be referred toarbitration pursuant to the provisions of the ARCA. PIATCO-

Employees pray that the petitions be dismissed and remanded tothe trial courts for trial on the

merits or in the alternative that the 1997 Concession Agreement, the ARCA and the

Supplementsbe declared valid and binding.

ISSUE :Whether or not that petitioners lack legal personality to file the cases at bar as they are not real

parties in interestwho are bound principally or subsidiarily to the PIATCO Contracts.

RULING: The determination of whether a person may institute an action or become a party to

a suit brings to fore theconcepts of real party in interest, capacity to sue and standing to sue.

To the legally discerning, these three concepts aredifferent although commonly directed towards

ensuring that only certain parties can maintain an action. As defined in theRules of Court, a real

party in interest is the party who stands to be benefited or injured by the judgment in the suit or

theparty entitled to the avails of the suit.Capacity to sue deals with a situation where a person

who may have a cause of action isdisqualified from bringing a suit under applicable law or is

incompetent to bring a suit or is under some legal disability thatwould prevent him from

maintaining an action unless represented by a guardian

ad litem

.Legal standing is relevant in the realm of public law. In certain instances, courts have allowed

private parties toinstitute actions challenging the validity of governmental action for violation of

private rights or constitutional principles. Inthese cases, courts apply the doctrine of legal

standing by determining whether the party has a direct and personal interest inthe controversy

and whether such party has sustained or is in imminent danger of sustaining an injury as a result

of the actcomplained of, a standard which is distinct from the concept of real party in interest.

Measured by this yardstick, theapplication of the doctrine on legal standing necessarily involves

a preliminary consideration of the merits of the case and isnot purely a procedural

issue.Considering the nature of the controversy and the issues raised in the cases at bar, this

Court affirms its ruling thatthe petitioners have the requisite legal standing. The petitioners in

G.R. Nos. 155001 and 155661 are employees of serviceproviders operating at the existing

international airports and employees of MIAA while petitioners-intervenors are serviceproviders

with existing contracts with MIAA and they will all sustain direct injury upon the

implementation of the PIATCOContracts. The 1997 Concession Agreement and the ARCA both

provide that upon the commencement of operations at theNAIA IPT III, NAIA Passenger

Terminals I and II will cease to be used as international passenger terminals. Further, the

ARCAprovides:(d)For the purpose of an orderly transition, MIAA shall not renew any expired

concession agreementrelative to any service or operation currently being undertaken at the Ninoy

Aquino International Airport Passenger Terminal I, or extend any concession agreement which

may expire subsequent hereto, except to the extent thatthe continuation of the existing services

and operations shall lapse on or before the In-Service Date.Beyond iota of doubt, the

implementation of the PIATCO Contracts, which the petitioners and petitioners-

intervenorsdenounce as unconstitutional and illegal, would deprive them of their sources of

livelihood.Under settled jurisprudence, one's employment, profession, trade, or calling is a

property right and is protected fromwrongful interference. It is also self evident that the

petitioning service providers stand in imminent danger of losing legitimatebusiness investments

in the event the PIATCO Contracts are upheld.Over and above all these, constitutional and other

legal issues with far-reaching economic and social implicationsare embedded in the cases at bar,

hence, this Court liberally granted legal standing to the petitioning members of the House of

RepresentativesFirst, at stake is the build-operate-and–transfer contract of the country‘s premier

international airport with aprojected capacity of 10 million passengers a year. Second, the huge

amount of investment to complete the project isestimated to be P13,000,000,000.00.

Third, the primary issues posed in the cases at bar demand a di scussion

andinterpretation of the Constitution, the BOT Law and its implementing rules which have not

been passed upon by this Court inprevious cases. They can chart the future inflow of investment

under the BOT Law. The Court notes the bid of new parties to participate in the cases at bar as

respondents-intervenors, namely, (1) thePIATCO Employees and (2) NMTAI (collectively, the

New Respondents-Intervenors). After the Court‘s Decision, the NewRespondents-Intervenors

filed separate Motions for Reconsideration-In-Intervention alleging prejudice and direct

injury.PIATCO employees claim that ―they have a direct and personal interest [in the

controversy]... since they stand to lose their jobsshould the government‘s contract with PIATCO

be declared null and void.‖ NMTAI, on the other hand, represents itself as acorporation

composed of responsible tax-paying Filipino citizens with the objective of ―protecting and

sustaining the rights of its members to civil liberties, decent livelihood, opportunities for social

advancement, and to a good, conscientious and honestgovernment.‖ The Rules of Court govern

the time of filing a Motion to Intervene. Section 2, Rule 19 provides that a Motion toIntervene

should be filed ―before rendition of judgment....‖ The New Respondents-Intervenors filed their

separate motions aftera decision has been promulgated in the present cases. They have not

offered any worthy explanation to justify their lateintervention. Consequently, their Motions for

Reconsideration-In-Intervention are denied for the rules cannot be relaxed toawait litigants who

sleep on their rights. In any event, a sideglance at these late motions will show that they hoist no

novelarguments.

V O I D / I N E X I S T E N T C O N T R A C T S : W H O M A Y B R I N G A C T I O N

F O R DECLARATION OF NULLITY SENATOR ROBERT S. JAWORSKI, petitioner,

vs. PHILIPPINE AMUSEMENTAND GAMING CORPORATION and SPORTS AND GAMES

ENTERTAINMENTCORPORATION, respondents2004 Jan 14G.R. No. 144463FACTS:

On March 31, 1998, PAGCOR‘s board of directors approved an instrumentdenominated as

―Grant of Authority and Agreement for the Operation of SportsBetting and Internet

Gaming‖, which granted SAGE the authority to operate andmaintain Sports Betting station

in PAGCOR‘s casino locations, and InternetGaming facilities to service local and

international bettors, provided that to thesatisfaction of PAGCOR, appropriate safeguards and

procedures are establishedto ensure the integrity and fairness of the games.Petitioner, in his

capacity as member of the Senate and Chairman of theSenate Committee on Games,

Amusement and Sports, files the instant petition,praying that the grant of authority by PAGCOR

in favor of SAGE be nullified. Hemaintains that PAGCOR committed grave abuse of discretion

amounting to lackor excess of jurisdiction when it authorized SAGE to operate

gambling on theinternet. He contends that PAGCOR is not authorized under its

legislativefranchise, P.D. 1869, to operate gambling on the internet for the simple reasonthat

the said decree could not have possibly contemplated internet gambl ings i n ce a t

t h e t im e o f i t s en ac t men t o n J u l y 1 1 , 19 8 3 t h e i n t e rn e t w as ye t inexistent

and gambling activities were confined exclusively to real -space.Fu r th e r , h e

a r gu es th a t t h e i n t e r n e t , b e i n g an in t e rn a t io n a l n e t w or k o f computers,

necessarily transcends the territorial jurisdiction of the Philippines,and the grant to

SAGE of authority to operate internet gambling contravenes thelimitation in PAGCOR‘s

franchise, under Section 14 of P.D. No. 1869. Accordingto petitioner, internet gambling

does not fall under any of the categories of theauthorized gambling activities

enumerated under Section 10 of P.D. No. 1869which grants PAGCOR the ―right,

privilege and authority to operate and maintaingambling casinos, clubs, and other

recreation or amusement places, sportsgaming pools, within the territorial jurisdiction of

the Republic of the Philippines.‖Respondents argue that petitioner does not have the

requisite personaland substantial interest to impugn the validity of PAGCOR‘s grant of

authority toSAGE.

ISSUE: Whether or not the petitioner has legal standing to file the instant petitionas a concerned citizen

or as a member of the Philippine Senate.

RULING: Objections to the legal standing of a member of the Senate or House of

Representative to maintain a suit and assail the constitutionality or validity of laws,

acts, decisions, rulings, or orders of various government agencies

orinstrumentalities are not without precedent. Ordinarily, before a member of

Congress may properly challenge the validity of an official act of any departmentof the

government there must be an unmistakable showing that the challengedofficial act affects or

impairs his rights and prerogatives as legislator. Howeverin a number of cases, the Court

clarified that where a case involves an issue of utmost importance, or one of overreaching

significance to society, the Court, inits discretion, can brush aside procedural technicalities and

take cognizance of the petition. Considering that the instant petition involves legal

questions thatmay have serious implications on public interests, petitioner has the

requisitelegal standing to file this petition. The instant petition is GRANTED. The ―Grant of

Authority and Agreementto Operate Sports Betting and Internet Gaming‖ executed by PAGCOR

in favor of SAGE is declared NULL and VOID.

PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONEPARTY IS

INNOCENT / DISADVANTAGED1 . I N F O R M A T I O N T E C H .

F O U N D A T I O N V S . C O M E L E C , J A N . 1 3 , 20042 . P A B U G A I S V S .

S A H I J W A N I , 4 2 3 S C R A 5 9 6 3 . L I G U E Z V S . C A , 1 0 2 P H I L

5 7 7 4 . P H I L B A N K V S . L U I S H E , 2 1 S C R A 5 2 5 .E PG

C O NST R UCT IO N V S. VI GIL AR , 35 4 SC R A 56 6 6 . G O C H A N V S .

Y O U N G , 3 5 4 S C R A 5 6 6 7 . F R A N C I S C O V S . H E R R E R A , 3 9 2

S C R A 3 1 7 8 . M E N D E Z O N A V S . O Z A M I Z , 3 7 6 S C R A

4 8 2 INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINESVS.

COMMISSION ON ELECTIONS2004 Jan 13G.R. No. 159139FACTS: On June 7, 1995, Congress passed Republic Act 8046, which authorizedComelec to

conduct a nationwide demonstration of a computerized electionsystem and allowed

the poll body to pilot-test the system in the March 1996elections in the Autonomous

Region in Muslim Mindanao (ARMM). On December22, 1997, Congress enacted Republic

Act 8436authorizing Comelec to use anautomated election system (AES) for the

process of voting, counting votes and

canvassing/consolidating the results of the national and local elections. It alsom and a t ed t h e

p o l l bo d y t o a cq u i re au t om at ed co un t in g m ach i n es ( AC Ms ) , computer

equipment, devices and materials; and to adopt new electoral formsand printing

materials.Initially intending to implement the automation during the May 11,

1998p r e s id en t i a l e l e c t i on s , Co m el ec ev en t u a l l y d ec id ed aga i n s t f u l l

n a t io n a l implementation and limited the automation to the Autonomous Region in

MuslimMindanao (ARMM). However, due to the failure of the machines to read correctlysome

automated ballots in one town, the poll body later ordered their manual count for the

entire Province of Sulu.In the May 2001 elections, the counting and canvassing of

votes for bothnational and local positions were also done manually, as no additional ACMs

hadbeen acquired for that electoral exercise allegedly because of time constraints.O n O cto b e r

2 9 , 20 02 , C om el ec ad op t ed in i t s Reso l u t i on 0 2 -0 17 0 a modernization

program for the 2004 elections. It resolved to conduct biddingsfor the three (3)

phases of its Automated Election System; namely, Phase I -Voter Registration and

Validation System; Phase II - Automated Counting andCanvassing System; and Phase III

- Electronic Transmission.On January 24, 2003, President Macapagal-Arroyo issued EO

No. 172,which allocated the sum of P2.5 billion to fund the AES for the May 10,

2004e l ec t io ns . Up on t h e r eq u es t o f C om el ec , sh e au t ho r i zed t h e r e l e as e o f

a n additional P500 million.On January 28, 2003, the Commission issued an ―Invitation

to Apply forEligibility and to Bid.On February 17, 2003, the poll body released the

Request for Proposal( R FP ) t o p r o cu r e the e l e c t io n au t om at io n m ach i n es . Th e

B i ds an d A w ar ds Committee (BAC) of Comelec convened a pre-bid conference on

February 18,2 0 0 3 and gav e p ro sp ec t i v e b id d er s un t i l M ar ch 10 , 20 03 to

s ub mi t t he i r respective bids.Among others, the RFP provided that bids from

manufacturers, suppliersand/or distributors forming themselves into a joint venture may be

entertained,provided that the Philippine ownership thereof shall be at least 60 percent.

Jointv en tu r e i s d e f i ned i n t h e R FP a s ― a g r o up o f t wo o r mo r e

m anu f ac t u r e r s , suppliers and/or distributors that intend to be jointly and severally responsible

orliable for a particular contract.‖ Basically, the public bidding was to be conductedunder a

two-envelope/two stage system. The bidder‘s first envelope or theE l i g ib i l i t y

E n ve lo p e sh ou l d e s t ab l i sh th e b id d er ‘ s e l i g ib i l i t y t o b i d an d

i t s qualifications to perform the acts if accepted. On the other hand, the

secondenvelope would be the Bid Envelope itself.O u t o f t h e 57 b id de r s , t h e BAC

f o un d MPC and t h e T o t a l In f o rm at io n Management Corporation (TIMC)

eligible. For technical evaluation, they wererefe rred to the BAC‘s Technical

Working Group (TWG) and the Department of Science and Technology (DOST).In its

Report on the Evaluation of the Technical Proposals on Phase II, DOST said that both

MPC and TIMC had obtained a number of failed marks in thetechnical evaluation.

Notwithstanding these failures, Comelec en banc, on April15, 2003, promulgated

Resolution No. 6074 awarding the project to MPC. TheCommission publicized this

Resolution and the award of the project to MPC onMay 16, 2003.O n M a y 2 9 , 20 03 ,

f i ve i nd iv i du a l s and en t i t i e s ( i n c l ud i ng t h e h e r e in Petitioners Information

Technology Foundation of the Philippines, represented byits president, Alfredo M. Torres; and

Ma. Corazon Akol) wrote a letter to ComelecChairman Benjamin Abalos Sr. They

protested the award of the Contract toRespondent MPC ―due to glaring irregularities in the

manner in which the biddingprocess had been conducted.‖ Citing therein the noncompliance

with eligibilityas well as technical and procedural requirements (many of which have

beendiscussed at length in the Petition), they sought a re -bidding. However,

theComelec chairman -- speaking through Atty. Jaime Paz, his head

executiveassistant -- rejected the protest and declared that the award ―would stand up tothe

strictest scrutiny.‖Hence, the present Petition.

ISSUE: Whether or not the Commission on Elections, the agency vested with thee x c lu s iv e

co ns t i t u t i on a l m and a t e t o ov e rs ee e l ec t i on s , g r ave l y ab u s ed i t s discretion

when, in the exercise of its administrative functions, it awarded to MPC the contract

for the second phase of the comprehensive Automated ElectionSystem.

RULING: Yes. There is grave abuse of discretion (1) when an act is done contrary t o t h e

C on s t i t u t io n , t h e l aw o r j u r i s p ru d en ce ; o r ( 2 ) wh en i t i s

ex ecu t ed whimsically, capriciously or arbitrarily out of malice, ill will or personal

bias. In

the present case, the Commission on Elections approved the assailed Resolutionand aw ar ded

t h e su b j ec t Co n t r ac t n o t o n l y i n c l e a r v io l a t i on o f l aw and j u r i s p ru d en ce ,

b u t a l s o in re ck l es s d i s reg a r d o f i t s o wn b id d i n g r u l e s an d procedure.For the

automation of the counting and canvassing of the ballots in the2004 elections, Comelec

awarded the Contract to ―Mega Pacific Consortium‖ anentity that had not participated in the

bidding. Despite this grant, the poll bodysigned the actual automation Contract with

―Mega Pacific eSolutions, Inc.,‖ acompany that joined the bidding but had not met the

eligibility requirements.Comelec awarded this billion-peso undertaking with

inexplicable haste,without adequately checking and observing mandatory financial,

technical andlegal requirements. It also accepted the proferred computer hardware

andsoftware even if, at the time of the award, they had undeniably failed to

passeight critical requirements designed to safegua rd the integrity of

elections,especially the following three items: (a) They failed to achieve the

accuracyrating criteria of 99.9995 percent set-up by the Comelec itself, (b) They were notab l e

t o d e t ec t p r ev io us ly d o w n lo ad ed r es u l t s a t v a r i ou s canv as s i n g

o r consolidation levels and to prevent these from being inputted again and (c) Theywere unable

to print the statutorily required audit trails of the count/canvass atdifferent levels without any loss

of dataBecause of the foregoing violations of law and the glaring grave abuse of discretion

committed by Comelec, the Court declared null and void the assailedResolution and the subject

Contract. The illegal, imprudent and hasty actions of the Commission have not only

desecrated legal and jurisprudential norms, buth av e a l s o ca s t s e r i ou s do ub t s

u p on th e p o l l b od y‘ s ab i l i t y an d cap ac i t y t o conduct automated elections. Truly, the

pith and soul of democracy -- credible,orderly, and peaceful elections -- has been put in

jeopardy by the illegal andgravely abusive acts of Comelec. The letter-protest is sufficient

compliance with the requirement to exhaustadministrative remedies particularly because

it hews closely to the procedureoutlined in Section 55 of RA 9184. And even

without that May 29, 2003 letter-protest, the Court still holds that petitioners need

not exhaust administrativeremedies in the light of Paat v. Court of Appeals. Paat enumerates

the instanceswhen the rule on exhaustion of administrative remedies may be disregarded,

asfollows: ―(1) when there is a violation of due process, (2) when the issue involvedis purely a

legal question, (3) when thead mi n i s t r a t i v e ac t io n i s p a t en t l y i l l ega l am ou n t i n g t o

l a ck o r ex ces s o f jurisdiction, (4) when there is estoppel on the part of the

administrativeagency concerned, (5) when there is irreparable injury, (6) when the

respondentis a department secretary whose acts as an alter ego of the President bears theimplied

and assumed approval of the latter, (7) when to require exhaustion of administrative

remedies would be unreasonable, (8) when it would amount to anullification of a claim, (9) when

the subject matter is a private land in land caseproceedings, (10) when the rule does not provide a

plain, speedy and adequater em ed y, an d ( 11 ) w h en t h e re a r e c i r cu ms tan ces

i nd ica t in g th e u r gen c y o f judicial intervention.‖ The present controversy precisely falls

within the exceptions listed as Nos.― ( 7 ) w h e n t o r e q u i r e e x h a u s t i o n o f

a d m i n i s t r a t i v e r e m e d i e s w o u l d b e unreasonable; (10) when the rule does not

provide a plain, speedy and adequater em ed y, an d ( 11 ) w h en t he r e a r e

c i r cu ms t an ces i n d ica t i n g t h e u r gen c y o f judicial intervention.‖ As already stated,

Comelec itself made the exhaustion of administrative remedies legally impossible or, at the very

least, ―unreasonable.‖

PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS

INNOCENT / DISADVANTAGEDTEDDY G. PABUGAIS v. DAVE P. SAHIJWANIG.R. No.

156846February 23, 2004423 SCRA 596FACTS: Pursuant to an ―Agreement And Undertaking‖ on December 3, 1993, petitioner Teddy

G. Pabugais, in consideration of the amount of P15,487,500.00,agreed to sell to respondent

Dave P. Sahijwani a lot containing 1,239 squaremeters located at Jacaranda Street,

North Forbes Park, Makati, Metro Manila.Respondent paid petitioner the amount of

P600,000.00 as option/reservation feeand the balance of P14,887,500.00 to be paid within 60

days from the executionof the contract, simultaneous with delivery of the owner‘s

duplicate TransferC er t i f i c a t e o f T i t l e i n r e sp on d en t ‘ s nam e th e D eed o f

A b so l u t e S a l e ; t h eC e r t i f i c a t e o f No n -T ax D el in qu enc y o n r ea l e s t a t e t ax e s

an d C l ea r an ce on Payment of Association Dues. The parties further agreed that failure on the

partof respondent to pay the balance of the purchase price entitles petitioner to forfeit

the P600,000.00 option/reservation fee; while non-delivery by the latter

o f t he nece ss a r y d o cu m ent s ob l i ge s h im t o r e t u r n to r e spo n den t t h e

s a id option/reservation fee with interest at 18% per annum.Petitioner failed to deliver the

required documents. In compliance witht h e i r a g r e e m e n t , h e r e t u r n e d t o

r e s p o n d e n t t h e l a t t e r ‘ s P 6 0 0 , 0 0 0 . 0 0 option/reservation fee by way of Far

East Bank & Trust Company Check, whichwas, however, dishonored.Petitioner claimed

that he twice tendered to respondent, through hisc o u n s e l , t h e a m o u n t o f

P 6 7 2 , 9 0 0 . 0 0 ( r e p r e s e n t i n g t h e P 6 0 0 , 0 0 0 . 0 0 option/reservation fee plus 18%

interest per annum computed from December 3,1 9 9 3 t o A u gus t 3 , 19 9 4) i n t h e f o r m

o f Fa r E as t Ban k & T ru s t Co mp an y Manager‘s Check No. 088498, dated August 3,

1994, but said counsel refused toaccept the same. On August 11, 1994, petitioner wrote

a letter to respondentsaying that he is consigning the amount tendered with the

Regional Trial Courtof Makati City. On August 15, 1994, petitioner filed a complaint for

consignation.Respondent‘s counsel, on the other hand, admitted that his office

receivedp e t i t i on e r ‘ s l e t t e r d a t ed Au gu s t 5 , 1 99 4 , b u t c l a im ed t h a t no ch eck

w as ap p en d ed t he r e to . H e av e r red th a t t h e r e w as no v a l id t en d e r o f

p a ym en tb ecaus e no ch eck w as t end e r ed an d th e com pu ta t i on o f t h e am o un t

t o b e tendered was insufficient, because petitioner verbally promised to pay

3%monthly interest and 25% attorney‘s fees as penalty for default, in addition to the

interest of 18% per annum on the P600,000.00 option/reservation fee.On November 29, 1996,

the trial court rendered a decision declaring theconsignation invalid for failure to

prove that petitioner tendered payment torespondent and that the latter refused to receive

the same. Petitioner appealedthe decision to the Court of Appeals. Petitioner‘s motion to

withdraw the amountconsigned was denied by the Court of Appeals and the decision of the trial

courtwas affirmed.O n a mo t io n f o r r e co ns id e r a t io n , t h e C ou r t o f A pp ea l s

d ec l a r ed t h e consignation as valid in an Amended Decision dated January 16, 2003.

It heldthat the validity of the consignation had the effect of extinguishing

petitioner‘sobligation to return the option/reservation fee to respondent. Hence, petitionercan

no longer withdraw the same.Unfazed, petitioner filed the instant petition for review contending

that hecan withdraw the amount deposited with the trial court as a matter of

rightbecause at the time he moved for the withdrawal thereof, the Court of

Appealshas yet to rule on the consignation‘s validity and the respondent had not

yetaccepted the same.

ISSUE: Whether or not assigning the amount of P672, 900.00 to Atty. De Guzmanis prohibited.

RULING: The amount consigned with the trial court can no longer be withdrawn bypetitioner because

respondent‘s prayer in his answer that the amount consignedbe awarded to him is equivalent to

an acceptance of the consignation, which hasthe effect of extinguishing petitioner‘s

obligation.Moreover, petitioner failed to manifest his intention to comply with

the―Agreement And Undertaking‖ by delivering the necessary documents and thelot

subject of the sale to respondent in exchange for the amount deposited. W i t hd r awa l

o f t he m on e y co n s ign ed wo u ld en r i ch p e t i t i o ne r an d un j us t l y prejudice

respondent.

The withdrawal of the amount deposited in order to pay attorney‘s fees to petitioner‘s counsel,

Atty. De Guzman, Jr., violates Article 1491 of the Civil Codewhich forbids lawyers from

acquiring by assignment, property and rights whichare the object of any litigation in which

they may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of

Professional Ethics providesthat ―the lawyer should not purchase any interest in the

subject matter of thelitigation which he is conducting.‖ The assailed transaction

falls within the prohibition because the Deed assigning the amount of P672,900.00 to Atty.

DeGuzman, Jr., as part of his attorney‘s fees was executed during the pendency of this case with

the Court of Appeals. In his Motion to Intervene, Atty. De Guzman, Jr., not only asserted

ownership over said amount, but likewise prayed that thesame be released to him. That petitioner

knowingly and voluntarily assigned thesubject amount to his counsel did not remove their

agreement within the ambit of the prohibitory provisions. To grant the withdrawal

would be to sanction avoid contract.

WHEREFORE, in view of all the foregoing, the instant petition for review isDENIED.

PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS

INNOCENT / DISADVANTAGED

LIGUEZ VS. COURT OF APPEALS102 PHIL 577FACTS: Petitioner filed a complaint for the recovery of parcel of land against the widow and

heirs of Salvador Lopez. Petitioner averred that he is the owner of theaforementioned parcel

of land pursuant to a Deed of Donation executed in her f av o r b y t h e l a t e ow n er ,

S a l v ad o r Lo p ez . The d e fens e i n t e rp os ed t h a t t h e donation was null and void for

having illicit cause or consideration which was thepetitioner‘s entering into a marital

relations with Salvador, a married man, andthat the property had been adjudicated

to the appellees as heirs of SalvadorLopez by the Court of First Instance.Meanwhile, the

Court of Appeals found that the Deed of Donation wasprepared by a Justice of

Peace and was ratified and signed when petitionerLiquez was still a minor, 16 years of

age. It was the ascertainment of the Court of Appeals that the donated land belonged to the

conjugal partnership of Salvadorand his wife and that the Deed of Donation was never

recorded. Hence, theCourt of Appeals held that the Deed of Donation was

inoperative and null andvoid because the donation was tainted with illegal cause or

consideration.

ISSUE: Whether or not the Deed of Donation is void for having illicit cause or consideration.

RULING: N O . U nd e r A r t i c l e 1 2 79 o f t h e C i v i l Co d e o f 19 89 , wh i ch w as t h e governing

law during the execution of the Deed of Donation, the liberality of thedonor is deemed cover

only in those contracts that are pure beneficence. In t h e s e co n t rac t s , t h e i d ea o f

s e l f i n t e r es t i s t o t a l l y ab s en t i n t h e pa r t o f t h e transferee. Here, the facts as

found demonstrated that in making the donation,Salvador Lopez was not moved

exclusively by the desire to benefit the petitionerbut also to secure her cohabiting with

him. Petitioner seeks to differentiatebetween the liberality of Lopez as cause and

his desire as a motive. However,motive may be regarded as cause when it

predetermined the purpose of thecontract. The Court of Appeals rejected the claim of

petitioner on the ground onthe rule on pari delicto embodied in Article 1912 of the Civil Code.

However, thisrule cannot be applied in the case because it cannot be said that both

partieshad equal guilt where petitioner was a mere minor when the donation was madeand that

it was not shown that she was fully aware of the terms of the said donation.

PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS

INNOCENT / DISADVANTAGEDPHILBANK VS. LUI SHE21 SCRA 52FACTS: Justinia Santos was the owner of the property where a restaurant owned by Weng

Heng is located. Being 90 years of age, without any surviving relatives,d e l i v e r e d t o

W e n g b e i n g c l o s e d t o h e r t h e n , v a r i o u s s u m o f m o n e y

f o r safekeeping. Subsequently, she executed a contract of lease in favor of Weng for

a period of 50 years. However, the lessee was given the right to withdraw atany time from the

agreement. Subsequently, she again executed anotherco n t r ac t g i v i n g Wen g t h e

o p t io n t o bu y t h e p r emi s es . Th e o p t i on w as conditioned on Weng‘s obtaining a

Filipino citizenship, which however, Wengfailed to obtain. After which, Justinia

again executed two other contracts,extending the term of the lease to 99 years and

another fixing the term of theoption to 50 years. However, a year later, she filed a complaint

before the trialco u r t a l l eg in g th a t t h e v a r io us co n t r ac t s w er e ex ecu t ed b y h e r

b ecaus e o f machination, and inducement practiced by Weng, thereby she directed

herexecutor to secure the annulment of the contract.

ISSUE: Whether or not the various contracts were void.

RULING: Article 1308 of the Civil Code creates no impediment to the insertion in acontract of a resolutory

condition permitting the cancellation of the contract byone of the parties. Such a stipulation

does not make either the validity or thef u l f i l lm en t o f t h e con t rac t d ep end en t

u p on th e w i l l o f t he p a r t y t o wh om I t conceded the privilege of the cancellation.In

the case, the lease for an alien for a reasonable period is valid. So is t h e o p t i on

g i v in g t h e a l i en th e r i gh t t o b u y t h e r ea l p ro p e r t y s u b j ec t t o t h e condition that

he must obtain Filipino citizenship. Since alien‘s residence in thePhilippines is temporary,

they may be grated temporary rights such as a leasecontract which is not forbidden.

However, if the alien is given not only the leaseof, but also the option to buy a piece of land by

virtue of which the Filipino ownercannot sell, or otherwise dispose of his property, this to last for

50 years, then it

becomes clear that the arrangement is a virtual transfer of ownership. As such,the constitutional

ban against alien landholding is in grave peril.However, it does not follow that because

the parties are in pari delicto,they will be left where they are without relief. Article

1416 of the Civil Codeprovides an exception when the agreement is not illegal per

se but is merelyp r o h ib i t ed , and t h e p r oh i b i t i o n b y l aw i s d es i gn ed f o r t h e

p r o t ec t i on o f t he plaintiff, he may, if public policy is thereby enhanced, recover what he had

paidon delivery.

PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS

INNOCENT / DISADVANTAGEDEPG CONSTRUCTION VS. VIGILAR259 SCRA

566FACTS: I n 1 9 8 9 , t h e M i n i s t r y o f H u m a n S e t t l e m e n t t h r o u g h t h e

B L I S S Development Corporation, initiated a housing project on a government property.For

this purpose, the MHS entered into a Memorandum of Agreement (MOA) w i t h t h e

M in i s t r y o f Pu b l i c Wo r ks ( MPW H) and Hi gh w ay w h e r e th e l a t t e r undertook to

develop the housing site and construct therein 145 housing units.By virtue of the MOA, the

MPWH forged individual contracts with petitioners fort h e co ns t r u c t i on o f t h e ho us i n g

u n i t s . Un d er t h e con t rac t s , t h e s co pe o f construction covered only 2/3 of each

housing unit. After complying, the MPWHundersecretary made a verbal request for the

additional construction, for thecompletion of the housing units, which the petitioner agreed.

Subsequently, petitioner received payment for the construction work dulyc o v e r ed b y t h e

i nd iv i du a l co n t r ac t s , ho w eve r , t h e amo u n t cov e r i n g th e additional contracts were

unpaid. The petitioner then sent a demand letter. TheMPWH assistant secretary averred

that the money claim should be based onquantum meruit to be forwarded to t he

COA. The amount of money was finallyreleased, however, the MPWH secretary denied the

subject money claim, whichprompted the petitioner to file a case before the RTC.

However, the trial courtdismissed the case.

ISSUE: Whether or not the petitioner has the right to be compensated for thepublic works

housing project by virtue of the implied contract which was verballyexecuted.

RULING: YES, the petitioner has the right to be compensated for the additionalconstruction

applying the principle of quantum meruit. Notably, the peculiarc i r cum s t ances

p r e s en t i n t h e in s t an t c as e b u t t r e s s p e t i t i o n e r ‘ s c l a im f o r compensation for

the additional construction, despite the illegality and voidnature of the ―implied

contracts‖ forged between the MPWH and petitioners. Int h i s m a t t e r , i t i s b ea r s t r es s in g

t h a t , t h e i l l ega l i t y o f t he s ub j ec t con t rac t s proceeds from the express declaration or

prohibition of the law, and not for anyintrinsic illegality. Stated differently, the subject contracts

are not illegal per se. The Court cannot sanction an injustice so patent on its face and

allowi t s e l f t o b e an i ns t r um en t i n t h e pe r p e t r a t io n t h e r eo f . J u s t i c e an d

eq u i t ydemands that the State‘s cloak of invincibility against suit be shred in

thisparticular case and that the petitioners-contractors be duly compensated, on thebasis of

quantum meruit, for the construction done on the public housing project.Petition is granted.

Accordingly, the Commission on Audit is herebydirected to determine as ascertain

with dispatch the total compensation duepeti tioners for the additional constructions

on the housing project and to allowpayment thereof.

PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS

INNOCENT / DISADVANTAGEDGO CHAN VS. YOUNG354 SCRA 201FACTS: G o c h a n R e a l t y w a s r e g i s t e r e d w i t h t h e S e c u r i t y a n d

E x c h a n g e Commission with Felix Gochan Sr., Maria Tiong, Pedro Gochan, Tomasa

Gochan,Esteban Gochan and Crispo Gochan as its incorporators. Later, Felix

GochanSr.‘s daughter, Alice, mother of herein respondents, inherited 50 shares of stocksin

Gochan Realty from the former. Alice subsequently died leaving the 50 sharesto her husband,

John Young Sr. Sometime in 1962, the RTC adjudicated 6/14 of these shares to her children.

When her children, herein respondents, reachedthe age of majority, their father requested

Gochan Realty to partition the shares

of his late wife by canceling the stock certificate in his name and issuing, in lieuthereof, a new

stock certificate in favor of his children. The Realty however, refused.Meanwhile,

fifteen years later, Cecilia Uy and Miguel Uy filed a complaintwith the SEC for issuance of

shares of stocks to the rightful owners, nullificationo f s h ar e s o f s to ck , r e con ve yan ce

o f t he p r op e r t y i mpr e s sed wi th t ru s t an d damages. The petitioners moved to dismiss

the complaint. The SEC thereafterheld that the Youngs were not shown to have been

stockholders stock holders of Gochan Realty to confer them with the legal capacity to bring and

maintain theirac t io n . T h a t i s wh y t h e ca se cann o t b e con s id er ed as an in t r a -

co r po r a t e controversy within the jurisdiction of the Commission. The Court of Appeals,

onappeal, held that the SEC had no jurisdiction over the case as far as the heirs of Alice Gochan

were concerned; however, it upheld the capacity of Cecilia GochanUy and her spouse, Miguel

Uy.

ISSUE:

Whether or not the spouses Uy have personality to file the suit before theSecurity and Exchange

Commission.

RULING: YES, the spouses have the personality. As a general rule, the jurisdictionof a court or tribunal

over the subject matter is determined by the allegation inthe complaint. The spouse

averment in the complaint that the purchase of herstocks by the corporation was null and void

ab initio

was deemed admitted. It iselementary that a void contract produces no effect either

against or in favor of anyone; it cannot create, modify or extinguish the juridical relations to

where itattaches. Thus, Cecilia remains a stockholder of the corporation in view of

thenullity of the contract of sale. Although she was no longer registered as a stockholder in the

corporate record, the admitted allegation in the complaint madeher still a bona fide

stock holder of the corporation.

PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS

INNOCENT / DISADVANTAGEDFRANCISCO VS. HERRERA392 SCRA 317FACTS: Eligio Herrera Sr. was the owner of 2 parcels of land located in Cainta,Rizal. On

January 3, 1991, petitioner Julian Francisco bought from Herrera thefirst parcel of

land covered by tax Declaration No. 01-00495 for P1M pain ininstallments from

November 30, 1990 to August 10, 1991. Eventually, Franciscobought the second parcel of land

covered by TD No. 01-00497 for P750T. Thereafter, the children of Eligio Sr. tried to

negotiate with petitioner toincrease the purchase price contending that it was

grossly inadequate. Whenpetitioner refused, respondent Pastor Herrera, son of Eligio, filed a

complaint foran n u l men t o f s a l e . H e c l a im ed ow n e rs h ip o v er t h e s eco nd p a r ce l

o f l an d allegedly by virtue of a sale in his favor since 1973. Moreover, he claimed thatthe first

lot was subject to co-ownership of the surviving heirs of his parentsbefore the

alleged sale to Francisco. Ultimately, Pastor alleged that the sale of the 2 parcels of

land was null and void on the ground that at the time of sale,Eligio Sr. was already

incapacitated to give consent to a contract because of Senile Dementia which is

characterized by deteriorating mental and physicalcondition including loss of

memory.A t v a r i an ce , F r an c i s co a l l eged t h a t r e sp on den t was es to pp ed

f r om assailing the sale of the lots because respondent had effectively ratified

bothsales by receiving the consideration offered in each transaction.On November 14, 1994, the

trial court declared the Deeds of Sale null andv o id . Fr an c i s co w as o rd e r ed t o r e t u rn

t h e l o t s i n qu es t i o n in c l ud in g a l l improvements. Concomitantly, Herrera was ordered to

return the purchase priceof the lots sold.

ISSUE: Whether or not the assailed contracts of sale are void or merely voidableand hence capable of

being ratified.

RULING: YES, the Supreme Court ruled that the contracts are merely voidable orannullable.

Note that Article 1390 of the Civil Code specifically provides thatwhen an insane or

demented person enters into a contract, the legal effect is t h a t t he con t r ac t i s

v o i d ab l e , no t vo i d o r i nex i s t en t p e r s e . Th e r e f o r e , t h e contracts of sale entered

into by Eligio Sr. are valid and binding unless annulledthrough a proper action filed in court

seasonably. Furthermore, the questionedan n u l l ab l e con t r ac t w as r en d e r ed p e r fec t l y

v a l id i n t h i s c as e becau se o f respondent‘s acts of ratification. He actually received the

payments on behalf of his father further manifesting that he was agreeable to the contracts.

Similarly,

respondent‘s previous negotiation for an increase in the price bolster that indeedthere was

ratification of what he himself questions as a void contract.

PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS

INNOCENT / DISADVANTAGEDMENDEZONA VS. OZAMIZ376 SCRA 4822002 Feb

6FACTS: A civil case for quieting of title was instituted on September 25, 1991 bypetitioner

spouses Mendezona as plaintiffs.In t h e i r com pl a i n t , t h e p e t i t i o n e rs , a s p l a i n t i f f s

t h e r e in , a l l eged t h a t petitioner spouses own a parcel of land each with almost

similar areas coveredand described in Transfer Certificates of Title (TCT). The petitioners

ultimatelytraced their titles of ownership over their respective properties from a notarizedDeed

of Absolute Sale dated April 28, 1989 executed in their favor by Carmen Ozamiz for

and in consideration of the sum of One Million Forty Thousand Pesos(P1,040,000.00). T h e

p e t i t i o n e r s i n i t i a t e d t h e s u i t t o r e m o v e a c l o u d o n t h e i r

s a i d respective titles caused by the inscription thereon of a notice of lis

pendens,which came about as a result of an incident in a Special Proceeding of the RTC. This

Special Proceeding is a proceeding for guardianship over the person and properties of

Carmen Ozamiz.In the course of the guardianship proceeding, the petitioners and

theoppositors thereto agreed that Carmen Ozamiz needed a guardian ove r herperson

and her properties, and thus respondent Montalvan was designated as gu a r d i an

o v e r t h e p e r s on o f C a rm en Oz amiz w hi l e p e t i t i o ne r M endezo n a , respondents

Roberto J. Montalvan and Julio H. Ozamiz were designated as jointguardians over the properties

of the said ward. The respondents opposed the petitioners‘ claim of ownership of the

Lahugproperty and alleged that the titles issued in the petitioners names are defectiveand illegal,

and the ownership of the said property was acquired in bad faith andwithout value inasmuch

as the consideration for the sale is grossly inadequateand unconscionable. Respondents

further alleged that at the time of the sale onApril 28, 1989 Carmen Ozamiz was already

ailing and not in full possession of h e r m e n t a l f a c u l t i e s ; a n d t h a t h e r

p r o p e r t i e s h a v i n g b e e n p l a c e d i n administration, she was in effect incapacitated to

contract with petitioners. T r i a l o n t h e m e r i t s e n s u e d a n d t h e l o w e r c o u r t

r u l e d i n f a v o r o f petitioners. The appellate court reversed the factual findings

of the trial courtand ruled that the Deed of Absolute Sale dated April 28, 1989 was

a simulatedcontract since the petitioners failed to prove that the consideration was

actuallypaid, and, furthermore, that at the time of the execution of the contract

themental faculties of Carmen Ozamiz were already seriously impaired. Thus, theappellate court

declared that the Deed of Absolute Sale of April 28, 1989 is nulland void. It ordered the

cancellation of the certificates of title issued in thepetitioners‘ names and directed the

issuance of new certificates of title in favorof Carmen Ozamiz or her estate. The motion for

reconsideration was denied.

ISSUE: Whether or not the CA erred in ruling that the Deed of Absolute Sale datedon April 28, 1989 was

a Simulated Contract.

RULING: Y ES . S im ul a t i on i s d e f in ed a s " th e d ec l a r a t i on o f a f i c t i t i ou s

w i l l , deliberately made by agreement of the parties, in order to produce, for

thepurposes of deception, the appearances of a juridical act which does not exist ori s

d i f f e r en t f ro m wh a t t h a t wh i ch w as r ea l l y ex ecu ted . " Th e r eq u i s i t e s o f

simulation are: (a) an outward declaration of will different from the will of

thep a r t i e s ; ( b ) t h e f a l s e a p p e a r a n c e m u s t h a v e b e e n i n t e n d e d b y

m u t u a l agreement; and (c) the purpose is to deceive third persons. None of these wereclearly

shown to exist in the case at bar.Contrary to the erroneous conclusions of the appellate court, a

simulatedcontract cannot be inferred from the mere non-production of the checks. It wasnot the

burden of the petitioners to prove so. It is significant to note that theD eed o f

A b so l u t e S a l e d a t ed Ap r i l 28 , 19 89 i s a n o t a r i z ed d o cu men t

d u l ya c k n o w l e d g e d b e f o r e a n o t a r y p u b l i c . A s s u c h , i t h a s i n i t s

f a v o r t h e presumption of regularity, and it carries the evidentiary weight conferred upon

itwith respect to its due execution.It is admissible in evidence without further proof of its

authenticity and isentitled to full faith and credit upon its face.

Payment is not merely presumed from the fact that the notarized Deed of Absolute Sale dated

April 28, 1989 has gone through the regular procedure as evidenced by the transfer

certificates of title issued in petitioners‘ names by theRegister of Deeds.C on s i d er in g t h a t

C a rm en Oz amiz ack n ow led ged , o n th e f ace o f t h en o t a r i z ed deed , t ha t sh e

r ece i v ed t h e con s ide r a t i on a t O ne M i l l i on Fo r t y Thousand Pesos (P1,040,000.00),

the appellate court should not have placed toomuch emphasis on the checks, the presentation of

which is not really necessary.Besides, the burden to prove alleged non-payment of the

consideration of thesale was on the respondents, not on the petitioners. Also, between its

conclusionbased on inconsistent oral testimonies and a duly notarized document

thatenjoys presumption of regularity, the appellate court should have given

moreweight to the latter. Spoken words could be notoriously unreliable as against

awritten document that speaks a uniform language.It has been held that a person is not

incapacitated to contract merelybecause of advanced years or by reason of physical

infirmities. Only when suchage or infirmities impair her mental faculties to such extent

as to prevent herfrom properly, intelligently, and fairly protecting her property

rights, is sheconsidered incapacitated. The respondents utterly failed to show adequate proof

that at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly lostcontrol of her

mental faculties.A person is presumed to be of sound mind at any particular time and

theco n d i t i on i s p r e su m ed to co n t i nu e to ex i s t , i n t h e ab s en ce o f p ro o f t o

t h e contrary. Competency and freedom from undue influence, shown to have existedin the other

acts done or contracts executed, are presumed to continue until thecontrary is

shown.WHEREFORE, the instant petition is hereby GRANTED and the

assailedDecision and Resolution of the Court of Appeals are hereby REVERSED

and SETASIDE. The Decision dated September 23, 1992 of the Regional Trial

Court of C e b u C i t y , B r a n c h 6 , i n C i v i l C a s e N o . C E B - 1 0 7 6 6 i s

R E I N S T A T E D . N o pronouncement as to costs.

NATURAL OBLIGATIONS: KINDS (1424-1430)1 . M A N Z A N I L L A V S . C A ,

M A R C H 1 5 , 1 9 9 0 2 .R U R AL BA N K O F PA R A Ñ AQ UE V S.

R E MOL A DO , MAR C H 18 , 1985MANZANILLA VS. COURT OF APPEALS183 SCRA

207FACTS: In 1963, spouses Celedonio and Dolores Manzanilla sold on installment anundivided one-half

portion of their residential house and lot. At the time of thesale, the said property

was mortgaged to the Government Service InsuranceSystem (GSIS), which fact was

known to the vendees, spouses Magdaleno and Justina Campo. The Campo spouses

took possession of the premises uponpayment of the first installment. Some payments were

made to petitioners whilesome were made directly to GSIS.On May 17, 1965, the GSIS filed its

application to foreclose the mortgageo n th e p ro p e r t y f o r f a i l u r e o f t h e M anz an i l l a

s po us e s t o p ay t h e i r m o n th l yamortizations.On October 11, 1965, the property was sold

at public auction where GSISwas the highest bidder. Two months before the expiration of

the period to redeem or on August31, 1966, the Manzanilla spouses executed a Deed

of Absolute Sale of theundivided one half portion of their property in favor of the Campo

spouses.U p on t h e exp i ra t i on o f t h e p e r io d to r ed eem w i th ou t t h e

M anz an i l l a s po us e s ex e r c i s in g th e i r r i gh t o f r ed em pt io n , t i t l e t o t h e

p r op e r t y w as consolidated in favor of the GSIS and a new title issued in its name.In

J anu a r y 1 9 69 , t h e M anz an i l l a sp ou s es m ad e r ep re s en ta t i on s and succeeded in

re-acquiring the property form the GSIS. Upon full payment of thepurchase price, an

Absolute Deed Of Sale was executed by GSIS in favor of theManzanilla spouses.On

May 14, 1973, the Manzanilla spouses mortgaged the property to theBiñan Rural Bank. On

September 7, 1973, petitioner Ines Carpio purchased theproperty from the Manzanilla

spouses and agreed to assume the mortgage infavor of Biñan Rural Bank.On November

12, 1973, private respondent Justina Campo registered heradverse claim over the said lot.

On October 3, 1977, petitioner Carpio filed an ejectment case against private

respondent Justina Campo.On July 31, 1979, private respondent Justina Campo (already

a widow)filed a complaint for quieting of title against the Manzanilla spouses and

InesCarpio praying among others, for the issuance to her of a certificate of title overthe

undivided one-half portion of the property. The trial court rendered its decision in favor of

Campo. The decision wasappealed by petitioners to the Court of Appeals; however it

only affirmed thedecision of the trial court. Petitioners‘ Motion for reconsideration was

denied.

ISSUE: Wh e th e r o r no t p e t i t i o ne r s a r e un d er an y l ega l d u t y t o r e co n ve y

t h e undivided one-half portion of the property to private respondent Justina Campo.

RULING: NO, there may be a moral duty on the part of petitioners to convey the one-half portion

of the property previously sold to private respondent. However,they are under no legal obligation

to do so. Hence, the action to quiet title filedby private respondent must fail.

NATURAL OBLIGATIONS: KINDS (1424-1430)RURAL BANK OF PARAÑAQUE,

INC., petitioner,VS. ISIDRA REMOLADO and COURT OF APPEALS, respondents1985

March 18FACTS: This case is about the repurchase of mortgaged property after the periodo f r ed emp t io n h ad

ex p i r ed . I s i d r a R em ol ad o , 6 4 , a wi dow , an d r es id en t o f Makati, Rizal, owned

a lot with an area of 308 square meters, with a bungalowthereon, which was leased to

Beatriz Cabagnot. In 1966 she mortgaged it to theRural Bank of Parañaque, Inc. as

security for a loan of P15,000. She paid theloan. On April 17, 1971 she mortgaged

it again to the bank. She eventuallys ecu r ed lo ans to t a l l i n g P 18 , 00 0 . T h e l o an s

b ec om e ov e r du e . Th e b ank f o r ec l os ed th e m or t gage on J u ly 2 1 , 19 72 and

b o u gh t t h e p ro p e r ty a t t h e foreclosure sale for P22,192.70. The one-year, period

of redemption was toexpire on August 21, 1973. On August 8, 1973 the bank advised

Remolado thatshe had until August 23 to redeem the property. On August 9, 1973 or 14

daysbefore the expiration of the one-year redemption period, the bank gave her

astatement showing that she should pay P25,491.96 for the redemption of the property

on August 23. No redemption was made on that date. On September3, 1973 the bank

consolidated its ownership over the property. Remolado's titlew as can ce l l ed . A n ew t i t l e ,

T CT No . 41 87 37 , was i s su ed to t h e b an k o n September 5. On September 24,

1973, the bank gave Remolado up to teno ' c l o ck in t h e m o rn i ng o f Oc to b er 3 1 ,

1 9 73 , o r 3 7 d ays , w i t h i n wh ich to r epu r ch as e ( no t r ed eem s i n ce th e p e r io d

o f r ed em pt i on h ad ex p i r ed ) t h e property. The bank did not specify the price.On

October 26, 1973 Remolado and her daughter, Patrocinio Gomez,promised to pay

the bank P33,000 on October 31 for the repurchase of theproperty. Contrary to her

promise, Remolado did not repurchase the property onOctober 31. Five days later, or on

November 5, Remolado and her daughterdelivered P33,000 cash to the bank's

assistant manager as repurchase price. The amount was returned to them the next

day, November 6, 1973. At thattime, the bank was no longer willing to allow the repurchase.

Remolado filed anaction to compel the bank to reconvey the property to her for

P25,491.96 plusinterest and other charges and to pay P35,000 as damages. The

repurchaseprice was not consigned. A notice of lis pendens was registered. On November15,

the bank sold the property to Pilar Aysip for P50,000. A new title was issuedto Aysip with an

annotation of lis pendens The trial court ordered the bank to return the property to Remolado

uponpayment of the redemption price of P25,491.96 plus interest and other

bankcharges and to pay her P15,000 as damages. The Appellate Court affirmed the judgment.

ISSUE: Whether or not the appellate court erred in reconveying the disputed property to

Remolado.

RULING: Yes. We hold that the trial court and the Appellate Court erred in orderingthe reconveyance of

the property. There was no binding agreement for itsrepurchase. Even o n the

assumption that the bank should be bound by itscommitment to allow repurchase on or

before October 31, 1973, still Remoladohad no cause of action because she did not

repurchase the property on thatdate. Justice is done according to law. As a rule, equity

follows the law. Therem a y b e a m o r a l ob l i ga t i on , o f t en r ega rded as an

eq u i t ab l e con s i d er a t io n

(meaning compassion), but if there is no enforceable legal duty, the action mustfail although

the disadvantaged party deserves commiseration or sympathy. The choice between what

is legally just and what is morally just, when these twooptions do not coincide, is explained

by Justice Moreland in

Vales vs. Villa, 35Phil. 769, 788

where he said: "Courts operate not because one person has beend e f ea t ed o r o v e rco m e b y

an o t h er , bu t b ecause h e h as b een d e f ea t ed o r overcome illegally. Men may do

foolish things, make ridiculous contracts, usemiserable judgment, and lose money

by them - indeed, all they have in theworld; but not for that alone can the law intervene and

restore. There must be,in addition, a violation of law, the commission of what the law

knows as anactionable wrong before the courts are authorized to lay hold of the

situationand remedy it."In the instant case, the bank acted within its legal rights when

it refusedto give Remolado any extension to repurchase after October 31, 1973. It

hadgiven her about two years to liquidate her obligation. She failed to do so. Thus,the Appellate

Court's judgment is reversed and set aside.

KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST1 . H U A N G V S .

C A , 2 3 6 S C R A 4 2 0 2 . V D A . D E E S C O N D E V S . C A , 2 5 3 S C R A

6 6 3 . A N C O G V S . C A , J U N E 3 0 , 1 9 9 7 4 . M O R A L E S V S . C A ,

J U N E 1 9 , 1 9 9 7 5 .T AL A RE ALT Y V S. B A NC O FIL I PI NO , 39 2 SC R A

5 0 6SPS. RICARDO AND MILAGROS HUANG, Petitioner,VS. COURT OF

APPEALS,Et. al, RespondentsG.R. No. 108525September 13, 1994FACTS: Private respondents Dolores and Aniceto Sandoval wanted to buy two lotsin Dasmarinas Village,

Makati but was allowed to buy only one lot per policy of the subdivision owner. Private

respondents bought Lot 21 and registered it intheir name. Respondents also bought

Lot 20 but the deed of sale was in thename of petitioner Ricardo Huang and

registered in his name. Respondentsconstructed a house on Lot 21 while petitioners were

allowed by respondents tobuild a house on Lot 20. Petitioners were also allowed to mortgage the

Lot 20 tothe SSS to secure a loan. Respondents actually financed the construction of thehouse,

the swimming pool, and the fence surrounding the properties on theu n d e r s t an d in g

t h a t t h e p e t i t i on e rs w ou ld m ere l y h o ld t i t l e i n t r us t fo r t he respondents‘

beneficial interest.Petitioner Huangs leased the property to Deltron Corporation for its

officialquarters without the permission of the respondents. But later, the

lesseesprohibited the use of the swimming pool by the respondents, and the

Huangsb egan ch a l l en g i n g t he r es po nd en t s ‘ o wn e rs h i p o f t h e p r op e r t y.

T h us , respondents filed a complaint before the trial court for the nullification of

thedeed of sale to the petitioners and the quieting of title of Lot 20. The trial court found that the

respondents were the real owners of the Lot20 and therefore ordered the petitioners to

vacate the property and to remit tothe respondents the rentals earned from Lot 20. The

Court of Appeals affirmedthe lower court‘s decision. Hence, the instant recourse.

ISSUE: Whether or not petitioners can claim ownership of the property registeredin their name but for

which was paid by the respondents.

RULING: No. Respondent Sandoval provided the money for the purchase of Lot 20but the corresponding

deed of sale and transfer certificate of title were placed inthe name of petitioner Huang.

Through this transaction, a resulting trust wascreated. Petitioner became the trustee

of Lot 20 and its improvements for thebenefit of respondent as owner. Article 1448 of the

New Civil Code provides thatthere is an implied trust when property is sold and the legal estate

is granted too n e p a r t y b u t t he p r i c e i s pa id b y an o th e r f o r t he pu r po s e o f

h av i n g th e beneficial interest for the property. A resulting trust arises because of

thepresumption the he who pays for a thing intends a beneficial therein for himself.Given these

provisions of law, petitioner was only a trustee of the propertyin question for the benefit of

the respondent who is the real owner. Therefore,petitioner cannot claim ownership of the

property even when it was registered inhis name. Thus, petition is denied. The decision of the

trial court as sustainedby the Court of Appeals is affirmed, with costs against petitioners.

KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST

CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA. DEPERALTA,

ELENITA ESCONDE and BENJAMIN ESCONDE,

petitioners,

VS. HONORABLE COURT OF APPEALS and PEDRO ESCONDE,

respondents

1996 February 01G.R. No. 103635FACTS: Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are the

children of the late Eulogio Esconde and petitioner Catalina Buan.Eulogio Esconde was one of

the children and heirs of Andres Esconde. Andres isthe brother of Estanislao Esconde, the

original owner of the disputed lot whodied without issue on April 1942. Survived by his

only brother, Andres, Estanislaoleft an estate consisting of four (4) parcels of land in Samal,

Bataan.Eulogio died in April, 1944 survived by petitioners and private respondent.At that time,

Lazara and Ciriaca, Eulogio's sisters, had already died without having partitioned the

estate of the late Estanislao Esconde.On December 5, 1946, the heirs of Lazara, Ciriaca and

Eulogio executed adeed of extrajudicial partition, with the heirs of Lazara identified

therein as theParty of the First Part, that of Ciriaca, the Party of the Second Part

and that of E u l o gi o , t h e P a r t y o f t h e Th i r d P a r t . S in ce th e ch i ld r en o f

E u l o g io , wi t h t h e exception of Constancia, were then all minors, they were

represented by theirmother and judicial guardian, petitioner Catalina Buan vda. de

Esconde whorenounced and waived her usufructuary rights over the parcels of land in favor of

her children in the same deed. The deed bears the thumbmark of Catalina Buanand the signature

of Constancia Esconde, as well as the approval and signatureof Judge Basilio Bautista.Pursuant

to the same deed, transfer certificates of title were issued to thenew owners of the properties.

Transfer Certificate of Title No. 394 for Lot No.1700 was issued on February 11,

1947 in the name of private respondent butCatalina kept it in her possession until

she delivered it to him in 1949 whenprivate respondent got married.Meanwhile,

Benjamin constructed the family home on Lot No. 1698-Bwhich is adjacent to Lot

No. 1700. A portion of the house occupied an area of twenty (20) square meters, more or

less, of Lot No. 1700. Benjamin also built aconcrete fence and a common gate enclosing

the two (2) lots, as well as anartesian well within Lot No. 1700.Sometime in December,

1982, Benjamin discovered that Lot No. 1700 wasregistered in the name of his brother, private

respondent. Believing that the lotwas co-owned by all the children of Eulogio Esconde,

Benjamin demanded hisshare of the lot from private respondent. However, private respondent

assertedexclusive ownership thereof pursuant to the deed of extrajudicial partition and,in 1985

constructed a "buho" fence to segregate Lot No. 1700 from Lot No. 1698-B.Hence, on

June 29, 1987, petitioners herein filed a complaint before theRegional Trial Court

of Bataan against private respondent for the annulment of TCT No. 394. They

further prayed that private respondent be directed to enter into a partition agreement

with them, and for damages (Civil Case No. 5552).In its decision of July 31, 1989, the

lower court dismissed the complaintand the counterclaims. It found that the deed of

extrajudicial partition was anunenforceable contract as far as Lot No. 1700 was concerned

because petitionerCatalina Buan vda. de Esconde, as mother and judicial guardian of her

children,exceeded her authority as such in "donating" the lot to private respondent

orwaiving the rights thereto of Benjamin and Elenita in favor of private respondent.Because of

the unenforceability of the deed, a trust relationship was createdwith private

respondent as trustee and Benjamin and Elenita as beneficiariesHowever, the lower court

ruled that the action had been barred by bothprescription and laches. Lot No. 1700

having been registered in the name of p r i va t e r e sp on d en t o n Feb r u a r y 1 1 ,

1 9 47 , t h e ac t io n t o an nu l su ch t i t l e prescribed within ten (10) years on February

11, 1957 or more than thirty (30)years before the action was filed on June 29, 1987. T h us ,

ev en i f Ar t . 1 96 3 o f t h e o l d C iv i l Co de p ro v i d in g f o r a 30 -

yea r p r e s c r ip t iv e p e r i od f o r r e a l a c t io ns o v e r i mm ov ab l e p r o p e r t i e s w er e to

b e applied, still, the action would have prescribed on February 11, 1977.

Hence,petitioners elevated the case to the Court of Appeals which affirmed the

lowercourt's decision. The appellate court held that the deed of extrajudicial partitionestablished

"an implied trust arising from the mistake of the judicial guardian infavoring one heir by

giving him a bigger share in the hereditary property." Itstressed th at "an action for

reconveyance based on implied or constructivetrust" prescribes in ten (10) years "counted

from the registration of the propertyin the sole name of the co-heir."

ISSUE: W h e t h e r o r n o t t h e a c t i o n w a s a l r e a d y b a r r e d w i t h l a c h e s

a n d prescription.

RULING: Trust is the legal relationship between one person having an equitable o w n e rs h i p

i n p ro p er t y an d an o t h er p e r so n ow ni n g th e l ega l t i t l e t o su ch property, the

equitable ownership of the former entitling him to the performanceof certain duties and the

exercise of certain powers by the latter. Trusts areeither express or implied. An express

trust is created by the direct and positiveacts of the parties, by some writing or deed or

will or by words evidencing anintention to create a trust. No particula r words are

required for the creation of an express trust, it being sufficient that a trust is clearly

intended.O n t h e o t he r h an d , im pl i ed t rus t s a r e t h os e w hi ch , w i t ho u t

b e in gexpressed, are deducible from the nature of the transaction as matters of intentor which

are superinduced on the transaction by operation of law as matters of equity,

independently of the particular intention of the parties. In turn, impliedtrusts are

either resulting or constructive trusts. These two are differentiated from each other as

follows:R es u l t i n g t r us t s a r e b a sed on t he equ i t ab l e d o c t r i ne th a t

v a lu ab l e consideration and not legal title determines the equitable title or interest and

arepresumed always to have been contemplated by the parties. They arise from thenature or

circumstances of the consideration involved in a transaction wherebyone person thereby

becomes invested with legal title but is obligated in equity tohold his legal title for the

benefit of another. On the other hand, constructivetrusts are created by the

construction of equity in order to satisfy the demandso f j u s t i c e an d p r ev en t

u n j us t en r i chm en t . T h ey a r i s e co n t r a r y to i n t en t io n against one who, by fraud,

duress or abuse of confidence, obtains or holds thelegal right to property which he

ought not, in equity and good conscience, tohold.While the deed of extrajudicial

partition and the registration of Lot No.1700 occurred in 1947 when the Code of Civil

Procedure or Act No. 190 was yetin force, the Supreme Court held that the trial court

correctly applied Article1456.A d eep e r an a l ys i s o f A r t i c l e 1 456 r ev ea l s t h a t i t

i s no t a t r us t i n t h e technical sense for in a typical trust, confidence is reposed in one

person who isnamed a trustee for the benefit of another who is called the cestui que

trust,respecting property which is held by the trustee for the benefit of the cestui quetrust. A

constructive trust, unlike an express trust, does not emanate from, orgenerate a

fiduciary relation. While in an express trust, a beneficiary and atrustee are linked

by confidential or fiduciary relations, in a constructive trust, there is neither a promise

nor any fiduciary relation to speak of and the so-calledt r us t ee n e i th e r accep t s an y t r u s t

n o r i n t end s ho ld i n g th e p r op e r t y f o r t he beneficiary.In the case at bench, petitioner

Catalina Buan vda. de Esconde, as motheran d l ega l gu a rd i an o f h e r ch i l d r en ,

ap p ear s t o h ave f avo r ed h er e l de r s on , private respondent, in allowing that he

be given Lot No. 1700 in its entirety inthe extrajudicial partition of the Esconde

estate to the prejudice of her otherchildren. Although it does not appear on record

whether Catalina intentionallygranted private respondent that privileged bestowal, the fact is

that, said lot wasregistered in private respondent's name. After TCT No. 394 was handed to

himb y h i s m oth e r , p r i va t e r es po nd en t ex e r c i s ed ex c l us i v e r i gh t s o f

o w n er sh ip therein to the extent of even mortgaging the lot when he needed money.If, as

petitioners insist, a mistake was committed in allotting Lot No. 1700to private respondent,

then a trust relationship was created between them andprivate respondent. However,

private respondent never considered himself a trustee. If he allowed his brother Benjamin

to construct or make improvementsthereon, it appears to have been out of tolerance to a

brother.Consequently, if indeed, by mistake, private respondent was given theentirety

of Lot No. 1700, the trust relationship between him and petitioners wasa constructive, not

resulting, implied trust. Petitioners, therefore, correctlyq u es t i on ed p r i va t e

r e s po nd en t ' s ex er c i s e o f abs o l u t e o wne r s h ip o v e r t h e property. Unfortunately,

however, petitioners assailed it long after their right todo so had prescribed. The rule that a

trustee cannot acquire by prescription ownership overproperty entrusted to him until

and unless he repudiates the trust, applies toexpress trusts and resulting implied

trusts. However, in constructive impliedtrusts, prescription may supervene even if

the trustee does not repudiate ther e l a t io nsh ip . N eces sa r i l y , r ep u d i a t i on o f t h e

s a id t ru s t i s n o t a co n d i t i on precedent to the running of the prescriptive period.Since the

action for the annulment of private respondent's title to Lot No.1700 accrued during the

effectivity of Act No. 190, Section 40 of Chapter III thereof applies. It provides: Sec. 40.

Period of prescription as to real estate. Anaction for recovery of title to, or possession of,

real property, or an interest

therein, can only be brought within ten years after the cause of such action accrues.

Thus, in Heirs of Jose Olviga v. Court of Appeals, the Court ruled that theten-year

prescriptive period for an action for reconveyance of real propertyb as ed o n

i mpl i ed o r con s t ru c t iv e t rus t w h i ch i s co un t ed f r om th e da t e o f registration of

the property, applies when the plaintiff is not in possession of theco n te s t ed p r op e r t y. In

t h i s c as e , p r iv a t e r e s po nd en t , no t p e t i t i o ne r s wh o instituted the action, is in

actual possession of Lot No. 1700. Having filed theiraction only on June 29, 1987,

petitioners' action has been barred by prescription.Not only that. Laches has also circumscribed

the action for, whether the impliedt r u s t i s c o n s t r u c t i v e o r r e s u l t i n g , t h i s

d o c t r i n e a p p l i e s . 2 3 A s r e g a r d s constructive implied trusts, the Court held in Diaz,

et al. v. Gorricho and Aguadothat:. . . in constructive trusts (that are imposed by law), there is

neither promise norfiduciary relation; the so-called trustee does not recognize any trust and has

nointent to hold for the beneficiary; therefore, the latter is not justified in delayingaction to

recover his property. It is his fault if he delays; hence, he may beestopped by his own

laches.It is tragic that a land dispute has once again driven a wedge betweenbrothers.

However, credit must be given to petitioner Benjamin Esconde forresorting to all

means possible in arriving at a settlement between him and hisbrother in accordance

with Article 222 of the Civil Code. Verbally and in twoletters, he demanded that

private respondent give him and his sisters theirshare in Lot No. 1700. He even reported

the matter to the barangay authoritiesf o r w h i ch th r ee con f e r en ces w e r e h e l d .

U n f o r tu n a t e l y, h i s e f f o r t s d r ov ed fruitless. Even the action he brought before the court

was filed too late.On the other hand, private respondent should not be unjustly enriched bythe

improvements introduced by his brother on Lot No. 1700 which he himself had

tolerated. He is obliged by law to indemnify his brother, petitioner BenjaminEsconde, for

whatever expenses the latter had incurred.

KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUST JOVITA YAP ANCOG,

and GREGORIO YAP, JR.,

petitioners

,VS. COURT OF APPEALS, ROSARIO DIEZ, and CARIDAD YAP,

respondents

G.R. No. 112260 June 30, 1997

FACTS: The land, with improvements thereon, was formerly the conjugal property of the spouses

Gregorio Yap and RosarioDiez. In 1946, Gregorio Yap died, leaving his wife, private respondent

Rosario Diez, and children, petitioners Jovita Yap Ancogand Gregorio Yap, Jr., and private

respondent Caridad Yap as his heirs. In 1954 and again 1958, Rosario Diez obtained loansfrom

the Bank of Calape, secured by a mortgage on the disputed land, which was annotated on its

Original Certificate of TitleNo. 622. When Rosario Diez applied again for a loan to the bank,

offering the land in question as security, the bank‘s lawyer,Atty. Narciso de la Serna, suggested

that she submit an extrajudicial settlement covering the disputed land as a means of facilitating

the approval of her application. The suggestion was accepted and on April 4, 1961, Atty. de la

Serna prepared anextrajudicial settlement, which the heirs, with the exception of petitioner

Gregorio Yap, Jr., then only 15 years old, signed. As aresult, OCT No. 622 was cancelled and

Transfer Certificate of Title No. 3447 (T-2411) was issued on April 13, 1961. On April 14,1961,

upon the execution of a real estate mortgage on the land, the loan was approved by the bank.

Rosario Diez exercisedrights of ownership over the land. In 1985, she brought an ejectment suit

against petitioner Jovita Yap Ancog‘s husband andson to evict them from the ground floor of the

house built on the land for failure to pay rent. Shortly thereafter, petitioner Jovita Ancog learned

that private respondent Rosario Diez had offered the land for sale.Petitioner Ancog immediately

informedher younger brother, petitioner Gregorio Yap, Jr., who was living in Davao, of their

mother‘s plan to sell the land. On June 6,1985, they filed this action for partition in the Regional

Trial Court of Bohol where it was docketed as Civil Case No. 3094. Asprivate respondent

Caridad Yap was unwilling to join in the action against their mother, Caridad was impleaded as a

defendant.Petitioners alleged that the extrajudicial instrument was simulated and therefore void.

They claimed that in signingthe instrument they did not really intend to convey their interests in

the property to their mother, but only to enable her toobtain a loan on the security of the land to

cover expenses for Caridad‘s school fees and for household repairs. The trial courtrendered

judgment dismissing petitioners‘ action. It dismissed petitioners‘ claim that the extrajudicial

settlement wassimulated and held it was voluntarily signed by the parties. Observing that even

without the need of having title in her nameRosario Diez was able to obtain a loan using the land

in question as collateral, the court held that the extrajudicial settlementcould not have been

simulated for the purpose of enabling her to obtain another loan. Petitioners failed to overcome

thepresumptive validity of the extrajudicial settlement as a public instrument. The court instead

found that petitioner Ancog had waived her right to the land, as shown by the fact that on

February28, 1975, petitioner‘s husband, Ildefonso Ancog, leased the property from private

respondent Diez. Furthermore, when thespouses Ancog applied for a loan to the Development

Bank of the Philippines using the land in question as collateral, theyaccepted an appointment

from Rosario Diez as the latter‘s attorney-in-fact. The court also found that the action

forpartition had already prescribed.On appeal, the Court of Appeals upheld the validity of the

extrajudicial settlement andsustained the trial court‘s dismissal of the case. The appellate court

emphasized that the extrajudicial settlement could nothave been simulated in order to obtain a

loan, as the new loan was merely ―in addition to‖ a previous one which privaterespondent Diez

had been able to obtain even without an extrajudicial settlement. Neither did petitioners adduce

evidence toprove that an extrajudicial settlement was indeed required in order to obtain the

additional loan. The appellate court held thatconsidering petitioner Jovita Yap Ancog‘s

educational attainment (Master of Arts and Bachelor of Laws), it was improbable thatshe would

sign the settlement if she did not mean it to be such. Hence, this petition.

ISSUE: Whether or not the appellate court erred in ruling that petitioner Gregorio Yap, Jr., one of the co-

owners of thelitigated property, had lost his rights to the property through prescription or laches.

RULING: In this case, the trial court and the Court of Appeals found no evidence to show that the

extrajudicial settlement wasrequired to enable private respondent Rosario Diez to obtain a loan

from the Bank of Calape. Petitioners merely claimed thatthe extrajudicial settlement was

demanded by the bank.To the contrary, that the heirs (Jovita Yap Ancog and Caridad Yap)meant

the extrajudicial settlement to be fully effective is shown by the fact that Rosario Diez performed

acts of dominion overthe entire land, beginning with its registration, without any objection from

them. Instead, petitioner Jovita Ancog agreed tolease the land from her mother, private

respondent Rosario Diez, and accepted from her a special power of attorney to use theland in

question as collateral for a loan she was applying from the DBP. Indeed, it was private

respondent Diez who paid theloan of the Ancogs in order to secure the release of the property

from mortgage Petitioner Jovita Yap Ancog contends that shecould not have waived her share in

the land because she is landless. For that matter, private respondent Caridad Yap is alsolandless,

but she signed the agreement. She testified that she did so out of filial devotion to her mother.

Thus, what the recordof this case reveals is the intention of Jovita Ancog and Caridad Yap to

cede their interest in the land to their mother RosarioDiez. It is immaterial that they had been

initially motivated by a desire to acquire a loan. Under Art. 1082 of the Civil Code,every act

which is intended to put an end to indivision among co-heirs is deemed to be a partition even

though it shouldpurport to be a sale, an exchange, or any other transaction.

The Supreme Court held that the Court of Appeals erred in ruling that the claim of petitioner

Gregorio Yap, Jr. wasbarred by laches. In accordance with Rule 74, §1

of the Rules of Court, as he did not take part in the partition, he is not boundby the settlement.

It is uncontroverted that, at the time the extrajudicial settlement was executed, Gregorio Yap, Jr.

was aminor. For this reason, he was not included or even informed of the partition. Instead, the

registration of the land in RosarioDiez‘s name created an implied trust in his favor by analogy to

Art. 1451 of the Civil Code, which provides: ―When land passesby succession to any person and

he causes the legal title to be put in the name of another, a trust is established by implicationof

law for the benefit of the true owner.‖ In the case of

O‘Laco v. Co Cho Chit

, Art. 1451 was held as creating a resulting trust,which is founded on the presumed intention of

the parties. As a general rule, it arises where such may be reasonablypresumed to be the intention

of the parties, as determined from the facts and circumstances existing at the time of

thetransaction out of which it is sought to be established. In this case, the records disclose that

the intention of the parties to theextrajudicial settlement was to establish a trust in favor of

petitioner Yap, Jr. to the extent of his share. Rosario Diez testifiedthat she did not claim the

entire property, while Atty. de la Serna added that the partition only involved the shares of the

threeparticipants.A

cestui que trust

may make a claim under a resulting trust within 10 years from the time the trust is

repudiated.Although the registration of the land in private respondent Diez‘s name operated as a

constructive notice of her claim of ownership, it cannot be taken as an act of repudiation adverse

to petitioner Gregorio Yap, Jr.‘s claim, whose share in theproperty was precisely not included by

the parties in the partition. Indeed, it has not been shown whether he had beeninformed of her

exclusive claim over the entire property before 1985 when he was notified by petitioner Jovita

Yap Ancog of their mother‘s plan to sell the property.This Court has ruled that for prescription to

run in favor of the trustee, the trust must berepudiated by unequivocal acts made known to

the

cestui que trust

and proved by clear and conclusive evidence.Furthermore, the rule that the prescriptive

period should be counted from the date of issuance of the Torrens certificate of titleapplies only

to the remedy of reconveyance under the Property Registration Decree. Since the action brought

by petitioner Yapto claim his share was brought shortly after he was informed by Jovita Ancog

of their mother‘s effort to sell the property,Gregorio Yap, Jr.‘s claim cannot be considered barred

either by prescription or by laches.

WHEREFORE , the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that this case is

REMANDEDto the Regional Trial Court for the determination of the claim of petitioner

Gregorio Yap, Jr.

KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUSTRODOLFO MORALES,

represented by his heirs, and PRISCILA MORALES,petitioners,VS. COURT OF APPEALS

(Former Seventeenth Division), RANULFOORTIZ, JR., and ERLINDA ORTIZ,

respondents Jun 19, 1997G.R. No. 117228FACTS: This is an action for recovery of possession of land and damages with aprayer for a

writ of preliminary mandatory injunction filed by private respondentsherein, spouses Ranulfo

Ortiz, Jr. and Erlinda Ortiz, against Rodolfo Morales. Thecomplaint prayed that private

respondents be declared the lawful owners of aparcel of land and the two-storey

residential building standing thereon, and thatMorales be ordered to remove whatever

improvements he constructed thereon,vacate the premises, and pay actual and moral

damages, litigation expenses,attorney's fees and costs of the suit.Priscila Morales, one of

the daughters of late Rosendo Avelino and JuanaRicaforte, filed a motion to intervene in

the case. No opposition thereto havingbeen filed, the motion was granted on March 4,

1988. On November 30, 1988Rodolfo Morales passed away. The trial court allowed

his substitution by hisheirs, Roda, Rosalia, Cesar and Priscila, all surnamed

Morales. The trial courtr en d e r ed i t s d ec i s io n in f avo r o f p l a i n t i f f s , p r iv a t e

r e s po nd en t s h e r e i n . Dissatisfied with the trial court's decision, defendants heirs of

Rodolfo Moralesand intervenor Priscila Morales, petitioners herein, appealed to the

Court of Appeals which in turn affirmed the decision.

ISSUE: Whether or not Celso Avelino purchase the land in question from theMendiolas as a

mere trustee for his parents and siblings.

RULING: Trusts are either express or implied.Express trusts are created by the intention of the trustor or of

the parties,w h i l e i mpl i ed t r us t s com e in to be in g b y o p e r a t ion o f l aw, e i t h e r

t h ro u gh implication of an intention to create a trust as a matter of law or through

theimposition of the trust irrespective of, and even contrary to, any such intention.In turn,

implied trusts are either resulting or constructive trusts.R es u l t i n g t r us t s a r e ba s ed o n

t h e equ i t ab l e d o c t r in e t h a t v a l uab l e consideration and not legal title determines the

equitable title or interest and arepresumed always to have been contemplated by the

parties. They arise fromt h e n a tu r e o r c i r cu ms tan ces o f t h e co ns id e r a t i on

i nv o l ved in a t r ansac t i on whereby one person thereby becomes invested with legal title

but is obligated inequity to hold his legal title for the benefit of another.On the other hand,

constructive trusts are created by the construction of equity in order to satisfy the

demands of justice and prevent unjust enrichment. They arise contrary to intention against

one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to

property which he ought not, inequity and good conscience, to hold.In the instant case,

petitioners' theory is that Rosendo Avelino owned themoney for the purchase of the property and

he requested Celso, his son, to buythe property allegedly in trust for the former. The fact

remains, however, thatt i t l e t o t h e p r op e r ty w as con v eyed t o C e l so .

A cco rd in g l y, t h e s i t u a t i on i s governed by or falls within the exception under the

third sentence of Article1448, ―However, if the person to whom the title is conveyed is a

child, legitimateor illegitimate, of the one paying the price of the sale, no trust is implied by

law,it being disputably presumed that there is a gift in favor of the child.‖

The preponderance of evidence, as found by the trial court and affirmedby the Court

of Appeals, established positive acts of Celso Avelino indicating,without doubt, that

he considered the property he purchased from the Mendiolasas his exclusive property. He

had its tax declaration transferred in his name,caused the property surveyed for him by

the Bureau of Lands, and faithfully paidthe realty taxes. Finally, he sold the property to

private respondents. Thetheory of implied trust with Celso Avelino as the trustor and his

parents RosendoAvelino and Juan Ricaforte as trustees is not even alleged, expressly or

impliedly.Decision affirmed.

KINDS OF TRUSTS: EXPRESS TRUST VS. IMPLIED TRUSTTALA REALTY

SERVICES CORPORATION, petitioner,VS. BANCO FILIPINO SAVINGS AND

MORTGAGE BANK, respondent2004 Jan 29G.R. No. 143263FACTS: In 1979, Banco Filipino, respondent, had to unload some of its branch sitessince it has

reached its allowable limit under Section 25(a) and 34 of RepublicAct 337, as

amended, otherwise known as the General Banking Act. The major stockholders of Banco

Filipino formed a corporation known as TALA Realty Services Corporation, herein

petitioner. TALA stands for the namesof Banco Filipino‘s four major stockholders, namely,

Antonio Tiu, Tomas Aguirre,Nancy Lim and Pedro Aguirre.On August 25, 1981, respondent

bank executed in favor of petitioner TALAeleven deeds of sale transferring to the latter its

branch sites. In turn, petitionerleased these branch sites to respondent through separate contracts

of lease fora period of twenty years, renewable for another twenty years, at the option

of respondent, with a monthly rental of P12,000.00 and require respondent bank topay petitioner

P602,500.00 as advance rentals. That day, another lease contract was executed by the

parties coveringeach branch site providing for a period of eleven years, renewable

for anothernine years at the option of respondent. And respondent bank was

required topay P602,500.00 as security deposit for the performance of the terms

andconditions of the contract.In August 1992, petitioner wrote respondent informing it of the

expirationof the 11-year lease contract. They failed to reach an agreement. Thus, on April1 4 ,

1 9 94 , pe t i t i o ne r n o t i f i ed r e sp on d en t t h a t t h e l ea s e sh a l l n o lo n ge r

b e renewed and demanded that it vacate the premises and pay the rents in arrearsamounting to

P2,057,600.00. Respondent did not heed such demand, promptingpetitioner to file civil case for

illegal detainer.On February 5, 1998, the RTC rendered its Decision dismissing

petitioner‘scomplaint for ejectment for lack of merit. On appeal via a petition for

review,the Court of Appeals, on July 23, 1999, had dismissed the petition and upholdingthe 20-

year lease contract between the parties.

ISSUE: Whether respondent may be ejected from the leased premises for non -payment of rent.

RULING: No, the Supreme Court ruled that the parties deliberately circumventedthe real

estate investment limit under Sections 25(a) and 34 of the General Banking Act. Being

in pari delicto, they should suffer the consequences of theirdeception by denying them any

affirmative relief. Equity dictates that Talashould not be allowed to colle ct rent

from the Bank. Both the Bank and Talaparticipated in the deceptive creation of a

trust to circumvent the real estatei n v es tm en t l imi t un d er S ec t io ns 2 5 ( a ) an d 34

o f t he G en e r a l Bank in g A ct . Upholding Tala‘s right to collect rent from the period during

which the Bank wasarbitrarily closed would allow Tala to benefit from the illegal

‗warehousingagreement.‘ This would result in the application of the Bank‘s advance

rentalscovering the eleventh to the twentieth years of the lease, to the rentals due

forthe period during which the Bank was arbitrarily closed. With the advancerentals

already used up, and the Bank having stopped payment of the rent on the thirteenth

year of the lease or in April 1994, rentals would be due Tala fromthe time the Bank stopped

paying rent in April 1994 up to the expiration of the lease period. The Bank should not be

allowed to dispute the sale of its lands to Tala nor should Tala be allowed to further collect rent

from the Bank. The cleanhands doctrine will not allow the creation or the use of a juridical

relation such asa trust to subvert, directly or indirectly, the law. Neither the Bank nor Tala

cameto court with clean hands; neither will obtain relief from the court as one

whoseeks equity and justice must come to court with clean hands Thus, the petition is

DENIED. The challenged Decision of the Court of A p p ea l s d a t ed J u l y 2 3 , 19 99

an d i t s R es o l u t i on d a t ed M ay 1 6 , 2 000 , a r e REVERSED and SET ASIDE.

I MPL IED T R USTS : PR ES C RI PTI VE PER IO DS O F AC TI ON

TO ENFORCE IMPLIED TRUSTS: IN ACTIONS TO QUIET TITLE1 .HE IRS O F

KI O NIS AL A VS . HE I RS O F D A C UT , 37 8 S C R A 20 6 2 . R A M O S V S .

R A M O S , 6 1 S C R A 2 8 4 3 . I NTESTA TE EST ATE O F T Y VS . C A, 3 56

S C RA 6 61 4 . V D A . D E R E T E R T O V S . B A R Z , 3 7 2 S C R A 7 1 2 5 . C H I A

L I O N G T A N V S . C A , 2 2 8 S C R A 7 5 6 . O ’ L A C O V S . C O C H O

C H I T , 2 2 0 S C R A 6 5 6 HEIRS OF AMBROCIO KIONISALA, namely, ANA,

ISABEL, GRACE, JOVENand CARMELO, all surnamed KIONISALA vVS. HEIRS OF

HONORIO DACUTG.R. No. 147379February 27, 2002378 SCRA 206FACTS:

O n 1 9 D e c e m b e r 1 9 9 5 p r i v a t e r e s p o n d e n t s f i l e d a c o m p l a i n t

f o r declaration of nullity of titles, reconveyance and damages against petitioners inthe Regional

Trial Court of Manolo Fortich, Bukidnon. This complaint involved 2parcels of land known as

Lot No. 1017 and Lot No. 1015 with areas of 117,744square meters and 69,974 square

meters respectively, located in Pongol, Libona,Bukidnon. On 7 September 1990 Lot No.

1017 was granted a free patent topetitioners Heirs of Ambrocio Kionisala under Free Patent

No. 603393, and on 13N o v em b er 1 99 1 Lo t 1 0 15 w as be s t ow ed u po n Is ab e l

K i on i s a l a , o n e o f t h e impleaded heirs of Ambrocio Kionisala under Free Patent

No. 101311-91-904. Thereafter, on 19 November 1990 Lot 1017 was registered

under the Torrenssystem and was issued Original Certificate of Title No. P -19819 in

petitioners‘name, while on 5 December 1991 Lot No. 1015 was registered in the

name of Isabel Kionisala under Original Certificate of Title No. P-20229.In support of their

causes of action for declaration of nullity of titles andreconveyance, private respondents

claimed absolute ownership of Lot 1015 and1 0 1 7 ev en p r io r t o t h e i s s u an ce o f t h e

co r r es po nd in g f r ee p a t en t s and certificates of title.A f t e r t he h ea r in g o n 3

D ecemb er 19 96 t h e t r i a l cou r t d i s mis sed t h e complaint on the ground that the

cause of action of private respondents wast r u l y f o r r ev e r s i o n so t h a t on l y t h e

D i r ec to r o f Lan ds co u l d h av e f i l ed t h e c o m p l a i n t . O n 2 3 D e c e m b e r

1 9 9 6 p r i v a t e r e s p o n d e n t s m o v e d f o r reconsideration of the order of

dismissal but on 3 June 1997 the motion wasdenied by the trial court.On 7 June 1997

private respondents appealed the order of dismissal to theCourt of Appeals. On 15 February

2000 the appellate court promulgated itsassailed Decision reversing the order of dismissal.

On 7 March 2000 petitionersmoved for reconsideration of the CA Decision. On 22 January 2001

the appellatecourt denied the motion for lack of merit, hence this petition for review.

ISSUE: Whether or not the action for nullity of free patents and certificates of titleof Lot 1015 and Lot

1017 or the action for reconveyance based on implied trustof the same lots has prescribed.

RULING: The Supreme Court ruled that neither the action for declaration of nullityof free patents and

certificates of title of Lot 1015 and Lot 1017 nor the actionfor reconveyance based

on an implied trust of the same lots has prescribed. Itruled that ―a free patent issued over

private land is null and void, and producesno legal effects whatsoever. Moreover, private

respondents‘ claim of open,public, peaceful, continuous and adverse possession of the 2

parcels of land andi t s i l l ega l i n c l us io n i n t h e f re e p a t en t s o f pe t i t i on e rs an d i n

t h e i r o r i g in a l ce r t i f i c a t es o f t i t l e a l so am ou n t s t o an ac t ion fo r q u i e t i n g o f

t i t l e w h i ch i s imprescriptible. The action for reconveyance based on implied trust, on

the other hand,prescribes only after 10 years from 1990 and 1991 when the free

patents andthe certificates of title over Lot 1017 and Lot 1015, respectively, were

registered.Obviously the action had not prescribed when private respondents

filedtheir complaint against petitioners on 19 December 1995. At any rate, theaction

for reconveyance in the case at bar is also significantly deemed to be anac t io n t o qu i e t t i t l e

f o r p u r po s es o f d e t e r mi n i n g th e p r es c r i p t i v e p e r io d on account of private

respondents‘ allegations of actual possession of the disputedlots. In such a case, the cause of

action is truly imprescriptible.

Wherefore, the instant petition for review is denied.

IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO

ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLERAMOS VS.

RAMOS61 SCRA 284FACTS: Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and O c t o b e r

2 6 , 18 80 , r es p ec t i ve l y. T h ey w e r e su rv iv ed b y t h e i r 3 ch i ld r en . Moreover,

Martin was survived by his 7 natural children. In December 1906, a special proceeding

for the settlement of the intestate estate of said spouses wasconducted. Rafael Ramos, a brother

of Martin, administered the estate for morethan 6 years. Eventually, a partition project was

submitted which was signed bythe 3 legitimate children and 2 of the 7 natural children.

A certain TimoteoZayco signed in representation of the other 5 natural children who were

minors. The partition was sworn to before a justice of peace. The conjugal hereditary estate was

appraised at P74,984.93, consisting of 18 parcels of land, some head of cattle and the

advances to the legitimatechildren. ½ thereof represented the estate of Martin. 1/3

thereof was the freeportion or P12,497.98. The shares of the 7 natural children were

to be takenfrom that 1/3 free portion. Indeed, the partition was made in accordance with

theOld Civil code. Thereafter, Judge Richard Campbell approved the

partitionproject. The court declared that the proceeding will be considered closed

andthe record should be archived as soon as proof was submitted that each he3irhad

received the portion adjudicated to him.On February 3, 1914, Judge Nepumoceno asked

the administrator tosubmit a report showing that the shares of the heirs had been delivered to

themas required by the previous decision. Nevertheless, the manifestation was not instrict

conformity with the terms of the judge‘s order and with the partition project itself. 8

lots of the Himamaylan Cadastre were registered in equal sharesin the names of Gregoria (widow

of Jose Ramos) and her daughter, when in factthe administrator was supposed to pay the cash

adjudications to each of them asenshrined in the partition project. Plaintiffs were then

constrained to bring thes u i t b e f o r e t h e c o u r t s e e k i n g f o r t h e

r e c o n v e y a n c e i n t h e i r f a v o r t h e i r corresponding participations in said

parcels of land in accordance with Article840 of the old Civil Code. Note that 1/6

of the subject lots represents the 1/3 free portion of martin‘s shares which will eventually

redound to the shares of his7 legally acknowledged natural children. The petitioners‘ action was

predicatedo n t h e t h eor y t h a t t h e i r sh a r es w e r e mer e l y h e l d in t r us t b y

d e f end an t s . Nonetheless, no Deed of Trust was alleged and proven. Ultimately, the

lowercourt dismissed the complaint on the grounds of res judicata, prescription

andlaches.

ISSUE: Whether or not the plaintiffs‘ action was barred by prescription, laches and

res judicata

to the effect that they were denied of their right to share in theirfather‘s estate.

RULING: YES, there was inexcusable delay thereby making the plain tiffs‘

actionunquestionably barred by prescription and laches and also by res

judicata.Inextricably interwoven with the questions of prescription and res judicata is

thequestion on the existence of a trust. It is noteworthy that the main thrust of

plaintiffs‘ action is the alleged holding of their shares in trust by

defendants.Emanating from such, the Supreme Court elucidated on the nature of trusts andthe

availability of prescription and laches to bar the action for reconveyance of

property allegedly held in trust. It is said that trust is the right, enforceablesolely in

equity to the beneficial enjoyment of property, the legal title to which isvested in another. It

may either be express or implied. The latter ids further subdivided into resulting and

constructive trusts. Applying it now to the case atbar, the plaintiffs did not prove any

express trust. Neither did they specify thekind of implied trust contemplated in their

action. Therefore, its enforcementmaybe barred by laches and prescription whether they

contemplate a resultingor a constructive trust.

IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO

ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLETHE INTESTATE

ESTATE OF ALEXANDER T. TY, represented by theAdministratrix, SYLVIA S. TE,

petitioner,VS. COURT OF APPEALS, HON. ILDEFONSO E. GASCON,and

ALEJANDRO B. TY, respondentsG.R. No. 112872April 19, 2001FACTS: Petitioner Sylvia S. Tywas married to Alexander T. Ty, son of private respondent

Alejandro b. ty, on January 11, 1981. Alexander died of leukemia onMay 19, 1988 and was

survived by his wife, petitioner Silvia, and only child,

K r i z i a K a t r i n a . In t h e s e t t l em en t o f h i s e s t a t e , p e t i t i on e r w as

ap po in t ed administratrix of her late husband‘s intestate estate.O n N o vem b er 4 , 1 99 2 ,

p e t i t i o ne r f i l ed a mo t i on f o r l e av e t o se l l o r mo r t gage e s t a t e p ro p e r t y i n

o r d e r t o gen e r a t e fu n ds f o r t h e p aym en t o f deficiency estate taxes in the sum of

P4,714,560.00.Privite respondent Alejandro Ty then filed two complaints for the recoveryof the

above-mentioned property, praying for the declaration of nullity of thedeed of

absolute sale of the shares of stock executed by private respondent in f av o r o f t h e

d eceas ed Al ex an d er , p r a yi n g f o r t h e re co v er y o f t h e p i ece s o f p ro p e r t y

t h a t w e r e p l aced i n t h e n am e o f d eceas ed Al ex an d er , t h ey w e r e a c q u i r e d

t h r o u g h p r i v a t e - r e s p o n d e n t ‘ s m o n e y , w i t h o u t a n y c a u s e

o r consideration from deceased Alexander. The motions to dismiss were denied.

Petitioner then filed petitions forcertiorari in the Courts of Appeals, which were also

dismissed for lack of merit. Thus, the present petitions now before the Court.

ISSUE: Whether or not an express trust was created by private respondent whenhe transferred the

property to his son.

RULING: Private respondent contends that the pieces of property were transferredin the name of the

deceased Alexander for the purpose of taking care of theproperty for him and his

siblings. Such transfer having been effected withoutcause of consideration, a resulting

trust was created.WHEREFORE, the petition for certiorari in G.R. No. 112872 is

DISMISSED,having failed to show that grave abuse of discretion was committed in

declaringthat the regional trial court had jurisdiction over the case. The petition

forreview on certiorari in G.R. 114672 is DENIED, having found no reversible errorwas

committed.

IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO

ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLEVDA. DE RETUERTO

VS. BARZ372 SCRA 712FACTS: Petitioners are the heirs of Panfilo Retuerto, while respondents are theheirs of

Pedro Barz who is the sole heir of Juana Perez Barz. Juana Perez Barz was the original

owner of Lot No. 896 having an area of 13,160 square meters.Before her death on April 16,

1929, Juana Perez executed a Deed of AbsoluteSale in favor of Panfilo Retuerto over a

parcel of land, identified as Lot No. 896-A,a subdivision of Lot No. 896, with an approximate

area of 2,505 square meters.On July 22, 1940, the Court issued an Order directing the

Land RegistrationC om mis s io n f o r t h e i s s u an ce o f t h e app r op r i a t e D ecr ee i n

f av o r o f P an f i lo Retuerto over the said parcel of land. However, no such Decree

was issued asdirected by the Court because, by December 8, 1941, the Second

World Warensued in the Pacific. However, Panfilo failed to secure the appropriate decreeafter

the war.Sometime in 1966, Pedro Barz, as the sole heir of Juana Perez, filed

andapplication, with the then CFI of Cebu for the confirmation of his title over

Lot896 which included the Lot sold to Panfilo Retuerto. The Court ruled in his favordeclaring

him the lawful owner of the said property, and thus Original Certificateof Title No. 521 was

issued. Lot No. 896-A however was continuously occupiedby the petitioners. Thus, a

confrontation arose and as a result respondents filedan action on September 5, 1989 for

―Quieting of Title, Damages and Attorney‘sFees.‖ In their answer, petitioners claimed

that they were the owners of ap o r t io n o f t h e l o t w h i ch w as r eg i s t e r ed un de r

t h e n am e o f P edr o Ba r z and therefore the issuance of the Original Certificate of Title in

Pedro Barz‘s name didnot vest ownership but rather it merely constituted him as a

trustee under aconstructive trust. Petitioners further contend that Pedro Barz

misrepresentedw i t h th e l and r eg i s t ra t i on cou r t t h a t h e in h er i t ed th e w h o l e

l o t t h e r eb yconstituting fraud on his part.

ISSUE: Whether or not petitioners‘ defense is tenable.

RULING: NO, the contention is bereft of merit. Constructive trusts are created in equity to

prevent unjust enrichment, arising against one who, by fraud, duress orabuse of confidence,

obtains or holds the legal right to property which he oughtnot, in equity and good

conscience, to hold. Petitioners failed to substantiate their allegation that their

predecessor-in-interest had acquired any legal right tothe property subject of the present

controversy. Nor had they adduced evidenceto show that the certificate of title of Pedro Barz was

obtained through fraud.

Even assuming

arguendo

that Pedro Barz acquired title to the propertythrough mistake or fraud, petiti oners

are nonetheless barred from filing theirc l a i m o f o w n er sh ip . An ac t i on fo r

r e co nv eyan ce b a s ed on an imp l i ed o r constructive trust prescribes within ten

years from the time of its creation orupon the alleged fraudulent registration of the

property. Since registration of real property is considered a constructive notice to all

persons, then the ten-yearp r e s c r ip t iv e p e r i od i s r e cko n ed f r om th e t i m e o f s u ch

r eg i s t e r i n g , f i l i n g o r entering. Thus, petitioners should have filed an action for

reconveyance withinten years from the issuance of OCT No. 521 in November 16,

1968. This, theyfailed to do so.

IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO

ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLECHIAO LIONG TAN VS.

COURT OF APPEALS228 SCRA 75FACTS: Petitioner Chiao Liong Tan claims to be the owner of a motor vehicle, particularly

described as Isuzu Elf van, 1976 Model that he purchased in March1987. As owner thereof,

petitioner says he has been in possession, enjoymentand utilization of the said motor

vehicle until his older brother, Tan Ban Yong, the private respondent, took it from

him.Petitioner relies principally on the fact that the van is registered in hisname

under Certificate of Registration. He claims in his testimony before thetrial court

that the said motor vehicle was purchased from Balintawak IsuzuMotor Center for a

price of over P100, 000. 00; that he sent his brother to pay forthe van and the receipt fro

payment was placed in his name because it was hismoney that was used to pay for

the vehicle; that he allowed his brother to usethe van because the latter was working for

his company, the CLT Industries; andthat his brother later refused to return the van to

him and appropriated thesame for himself.On the other hand, private respondent

testified that CLT Industries is afamily business that was placed in petitioner‘s

name because at that time hewas then leaving for the United Stated and petitioner

remaining Filipino in thefamily residing in the Philippines. When the family business needed

a vehicle in1987 for use in the deliver of machinery to its customers, he asked petitioner tolook

for a vehicle and gave him the amount of P5,000.00 to be deposited as down payment

for the van, which would be available in about a month. After amonth, he himself paid the

whole price out of a loan of P140, 000.00 from hisfriend Tan Pit Sin. Nevertheless,

respondent allowed the registration of thevehicle in petitioner‘s name. It was also their

understanding that he would keepthe van for himself because CLT Industries was not in

a position to pay him.Hence, from the time of the purchase, he had been in

possession of the vehicleincluding the original registration papers thereof, but

allowing petitioner fromtime to time to use the van for deliveries of machinery.After hearing,

the trial court found for the private respondent. Finding nomerit in the appeal, the Court of

Appeals affirmed the decision of the trail court.

ISSUE: Whether or not the petitioner-appellant established proof of ownershipover the subject

motor vehicle.

RULING: N o . P e t i t i o n e r d i d n o t h a v e i n h i s p o s s e s s i o n t h e C e r t i f i c a t e o f

Registration of the motor vehicle and the official receipt of payment for thesame,

thereby lending credence to the claim of private respondent who haspossession

thereof, that he owns the subject motor vehicle. A certificate of r e g i s t r a t i o n o f

a m o t o r v e h i c l e i n o n e ‘ s n a m e i n d e e d c r e a t e s a s t r o n g presumption of

ownership. For all practical purposes, the person in whose favorit has been issued is

virtually the owner thereof unless proved otherwise. Inother words, such presumption is

rebuttable by competent proof. The New Civil Code recognizes cases of implied trusts

other than thoseenumerated therein. Thus, although no specific provision could be cited to

applyto the parties herein, it is undeniable that an implied trust was created when thecertificate

of registration of the motor vehicle was placed in the name of the p e t i t i o ne r

a l t ho u gh th e p r i c e t h e r eo f w as n o t p a id b y h i m bu t b y p r iv a t e respondent. The

principle that a trustee who puts a certificate of registration inhis name cannot repudiate the trust

relying on the registration is one of the well-known limitations upon a title. A trust, which

derives its strength from theconfidence one reposes on another especially between

brothers, does not losethat character simply because of what appears in a legal

document.WHEREFORE, the instant petition for review is hereby DENIED for lack

of merit.

IMPLIED TRUSTS: PRESCRIPTIVE PERIODS OF ACTION TO

ENFORCEIMPLIED TRUSTS: IN ACTIONS TO QUIET TITLEO'LACO VS. CO CHO

CHIT220 SCRA 6561993 Mar 31FACTS: This Case involves half-sisters each claiming ownership over a parcel of land. While

petitioner Emilia O'Laco asserts that she merely left the certificate of title covering the

property with private respondent O Lay Kia for safekeeping, t h e l a t t e r w ho i s t h e

f o rm er ' s o l d e r s i s t e r i n s i s t s t h a t t h e t i t l e w as in h e rp os se s s io n b ecaus e s h e

an d h e r hu sb an d bou gh t t h e p ro p er t y f r o m t h e i r conjugal funds. T he t r i a l co u r t

d ec l a r ed t h a t t h e r e w as n o t r us t r e l a t i on o f an y s o r t between the sisters. The

Court of Appeals ruled otherwise. Hence, the instantpetition for review on certiorari of the

decision of the appellate court togetherwith its resolution denying reconsideration.

ISSUE: Whether a resulting trust was intended by them in the acquisition of the property;

Whether Prescription has set in.

HELD: I . Y E S . B y d e f i n i t i o n , t r u s t r e l a t i o n s b e t w e e n p a r t i e s m a y e i t h e r

b e express or implied.Express trusts are those which are created by the direct and positive actsof

the parties, by some writing or deed, or will, or by words evincing an intentionto create a trust.

Implied trusts are those which, without being express, arededucible from the nature

of the transaction as matters of intent, or which ares u p e r i nd u ced o n th e

t r an s ac t i on b y o p e ra t i on o f l aw as m at t e r s o f eq u i t y, independently of the

particular intention of the parties. Implied trusts mayeither be resulting or constructive

trusts, both coming into being by operation of law.A resulting trust was indeed intended by the

parties under Art. 1448 of theNew Civil Code which states ----

"Art. 1448. There is an implied trust when property is sold, and the legal estate is

granted to one party but the price is paid by another for the purpose of having the beneficial

interest of the property. The former is the trustee, while the latter is the beneficiary . . ."

I I . A s d i f f e r en t i a t ed f r om con s t ru c t iv e t r us t s , w h e r e t h e s e t t l ed ru l e i s that

prescription may supervene, in resulting trust, the rule of imprescriptibilitymay apply for as

long as the trustee has not repudiated the trust. Once there sulting trust is

repudiated, however, it is converted into a constructive trust and is subject to

prescription.A resulting trust is repudiated if the following requisites concur: (a)

thetrustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui

qui trust; (b) such positive acts of repudiation have been made knownto the cestui qui trust; and,

(c) the evidence thereon is clear and convincing.In

Tale v. Court of Appeals

, the Court categorically ruled that an action forreconveyance based on an implied or

constructive trust must perforce prescribein

ten (10) years , and not otherwise, thereby modifying previous decisionsholding that the prescriptive

period was four (4) years.N e i t h e r t h e r eg i s t ra t i on o f t he Or o qu ie t a p ro p e r t y i n

t h e n am e o f petitioner Emilia O'Laco nor the issuance of a new Torrens title in

1944 in hername in lieu of the alleged loss of the original may be made the basis for

thecommencement of the prescriptive period. For, the issuance of the Torrens titlei n t h e

n am e o f E mi l i a O 'Laco co u ld n o t b e con s i d er ed adv e rs e , m u ch

l e s s fraudulent. Precisely, although the property was bought by respondent-spouses,the legal

title was placed in the name of Emilia O'Laco. The transfer of the Torrens title in

her name was only in consonance with the deed of sale in her f a v o r .

C o n s e q u e n t l y , t h e r e w a s n o c a u s e f o r a n y a l a r m o n t h e p a r t o f

respondent-spouses. As late as 1959, or just before she got married, Emilia continued

to recognize the ownership of respondent-spouses over the Oroquietaproperty. Thus, until that

point, respondent-spouses were not aware of any act of E m i l i a wh i ch w ou ld

co nv e y t o t h em t h e id ea th a t s h e w as rep ud i a t i n g th e resulting trust. The second

requisite is therefore absent. Hence, prescription didnot begin to run until the sale of the

Oroquieta property, which was clearly anact of repudiation. But immediately after

Emilia sold the Oroquieta propertyw h i ch i s o bv io us l y a d i s avo w al o f t he

r e s u l t i n g t r us t , r e s p o nd en t - sp ou s es instituted the present suit for breach of trust.

Correspondingly, laches cannot lieagainst them.

After all, so long as the trustee recognizes the trust, the beneficiary mayrely upon the

recognition, and ordinarily will not be in fault for omitting to bringan action to enforce his

rights. There is no running of the prescriptive period if the trustee expressly

recognizes the resulting trust. Since the complaint forbreach of trust was filed by

respondent-spouses two (2) months after acquiringknowledge of the sale, the action

therefore has not yet prescribed.WHEREFORE, the Petition for Review on Certiorari is

DENIED. The Decisiono f t h e Co u r t o f Ap p ea l s o f 9 Ap r i l 19 81 , wh ich r ev er s ed

t h e t r i a l cou r t , i s AFFIRMED. Costs against petitioners.

T H E E N D

Note: This is page 188A of Casebook (Part I-Obligations)IDENTITY OF PRESTATION (WHERE

PAYMENT MUST BE MADE)BINALBAGAN VS. COURT OF APPEALSG.R. No.

100594March 10, 1993FACTS: On May 11, 1967, private respondents, through Angelina P. Echaus, in hercapacity as Judicial

Administrator of the intestate estate of Luis B. Puentevella,executed a Contract to

Sell and a Deed of Sale of forty-two subdivision lotsw i t h in th e P h ib - Kh ik

S ub d iv i s i on o f t he P u en t ev e l l a f ami l y, con v eyi n g an d transferring said lots to

petitioner Binalbagan Tech., Inc. (hereinafter referred toas Binalbagan). In turn Binalbagan,

through its president, petitioner Hermilo J.Nava (hereinafter referred to as Nava),

executed an Acknowledgment of Debtw i t h Mo r t gage A gr eem en t , m or t gag in g

s a id lo t s i n f av or o f t h e e s t a t e o f Puentevella.Upon the transfer to Binalbagan of

titles to the 42 subdivision lots, saidp e t i t i on e r t o o k pos s es s io n o f t h e lo t s and

t h e bu i ld in g an d imp r ov em ent s thereon. Binalbagan started operating a school on the

property from 1967 whenthe titles and possession of the lots were transferred to it.It appears that

there was a pending case, Civil Case No. 7435 of Regional Trial Court stationed at

Himamaylan, Negros Occidental. In this pending casethe intestate estate of the late

Luis B. Puentevella, thru Judicial Administratrix,Angelina L. Puentevella sold said

aforementioned lots to Raul Javellana with thecondition that the vendee-promisee would

not transfer his rights to said lotswithout the express consent of Puentevella and

that in case of the cancellationo f t h e con t rac t b y r ea s on o f t he v i o l a t i on o f

an y o f t h e t e r ms the r eo f , a l l payments therefor made and all improvements introduced

on the property shallpertain to the promissor and shall be considered as rentals for the

use andoccupation thereof. Javellana having failed to pay the installments for a period

of five years,Civil Case No. 7435 was filed by defendant Puentevella against Raul

Javellanaand the Southern Negros Colleges which was impleaded as a party defendant itbeing

in actual possession thereof, for the rescission of their contract to sell andthe recovery of

possession of the lots and buildings with damages.Accordingly, after trial, judgment was

rendered in favor of Puentevella.Came December 29, 1965 when the plaintiffs in the instant

case on appeal filedtheir Third-Party Claim based on an alleged Deed of Sale executed in their

favorby spouses Jose and Lolita Lopez, thus Puentevella was constrained to

assertp h y s i c a l p o s s e s s i o n o f t h e p r e m i s e s t o c o u n t e r a c t t h e

f i c t i t i o u s a n d unenforceable claim of herein plaintiffs.

Upon the filing of the instant case for injunction and damages on January3, 1966, an

ex-parte

writ of preliminary injunction was issued by the HonorableP r e s id i n g Ju d ge C a r l os

A b ie r a , wh i ch o rd er , h o wev e r , w as e l ev a t ed to t h e Honorable Court of Appeals

which issued a writ of preliminary injunction ordering Judge Carlos Abiera or any other

person or persons in his behalf to refrain fromfurther enforcing the injunction

issued by him in this case and from furtherissuing any other writs or prohibitions

which would in any manner affect theenforcement of the judgment rendered in Civil Case

7435, pending the finality of t h e d ec i s io n o f t h e Ho no r ab l e Co ur t o f A pp ea l s i n

t h e l a t t e r c as e . Th us , defendant Puentevella was restored to the possession of the

lots and buildingssubject of this case. However, plaintiffs filed a petition for review

with theS u p r em e Cou r t wh i ch i s su ed a r e s t r a i n i n g o rd e r aga i n s t t h e s a l e o f

t h e properties claimed by the spouses-plaintiffs.When the Supreme Court dissolved the aforesaid

injunction issued by theCourt of Appeals, possession of the building and other property was

taken frompetitioner Binalbagan and given to the third-party claimants, the de la

Cruzspouses. Petitioner Binalbagan transferred its school to another location. In

them ean t i m e , t h e d e f en d an t s i n C i v i l Cas e N o . 2 93 wi t h the Co ur t o f

A p p ea l s interposed an appeal. On October 30, 1978, the Court of Appeals rendered

judgment, reversing the appealed decision in Civil Case No. 293. On April 29 ,1981,

judgment was entered in CA-G.R. No. 42211, and the record of the casewas

remanded to the court of origin on December 22, 1981. Consequently, in1982 the

judgment in Civil Case No. 7435 was finally executed and enforced, and petitioner was

restored to the possession of the subdivision lots an May 31,1982. It will be noted that petitioner

was not in possession of the lots from 1974to May 31, 1982.A f t e r pe t i t i o n e r B in a l b agan

w as aga i n p l aced in p oss e s s i on o f t h e subdivision lots, private respondent

Angelina Echaus demanded payment frompetitioner Binalbagan for the subdivision lots,

enclosing in the letter of demand astatement of account as of September 1982 showing a

total amount due of P367,509.93, representing the price of the land and accrued interest as of

thatdate.As petitioner Binalbagan failed to effect payment, private

respondentAngelina P. Echaus filed on October 8, 1982 Civil Case No. 1354 of the Regional

T r i a l Co ur t o f t h e S ix t h J u d i c i a l R eg io n s t a t i o n ed in Him am a yl an ,

N egr o s Occ id en t a l aga i n s t p e t i t i o n e rs fo r r ecov e r y o f t i t l e and d amages .

P r i v a t e respondent Angelina P. Echaus filed an amended complaint by including

hermother, brothers, and sisters as co-plaintiffs, which was admitted by the

trialcourt on March 18, 1983. The trial court rendered a decision in favor of the

petitioner because of prescription. Nonetheless, the Court of Appeals reversed said decision.

ISSUE: Whether or not the petition is with merit.

RULING: No. A party to a contract cannot demand performance of the other party'so b l i ga t i ons u n l e s s

h e i s i n a p os i t i on to co mpl y w i th h i s o w n ob l i ga t io ns . Similarly, the right to

rescind a contract can be demanded only if a party theretois ready, willing and able to

comply with his own obligations there under (Art.1191,

Civil Code

).In a contract of sale, the vendor is bound to transfer the ownership of anddeliver, as well as

warrant, the thing which is the object of the sale (Art. 1495,

Civil Code

); he warrants that the buyer shall, from the time ownership is passed,have and enjoy the

legal and peaceful possession of the thing. As afore-stated,petitioner was evicted

from the subject subdivision lots in 1974 by virtue of a court order in Civil Case No. 293

and reinstated to the possession thereof only in1982. During the period, therefore, from 1974 to

1982, seller private respondentA n ge l i n a E ch au s ' w ar r an t y aga i n s t ev i c t io n g i v en

t o bu ye r p e t i t i o ne r w as breached though, admittedly, through no fault of her own. It

follows that duringthat period, 1974 to 1982, private respondent Echaus was not in a legal

positionto demand compliance of the prestation of petitioner to pay the price of

saidsubdivision lots. In short, her right to demand payment was suspended

duringthat period, 1974-1982. The prescriptive period within which to institute an action upon a

writtencontract is ten years (Art. 1144,

Civil Code

) . T h e caus e o f a c t io n o f p r iv a t e respondent Echaus is based on the deed of sale

afore-mentioned. The deed of s a l e w h e r e b y p r i v a t e r e s p o n d e n t E c h a u s

t r a n s f e r r e d o w n e r s h i p o f t h e subdivision lots was executed on May 11, 1967. She

filed Civil Case No. 1354 forrecovery of title and damages only on October 8, 1982. From May

11, 1967 toOctober 8, 1982, more than fifteen (15) years elapsed. Seemingly, the 10-

yearprescriptive period had expired before she brought her action to recover

title.H o w ev e r , t h e pe r io d 1 97 4 t o 19 82 s ho u l d b e d ed uc t ed in com pu t i n g

t h e prescriptive period for the reason that, as above discussed, from 1974 to 1982,private

respondent Echaus was not in a legal position to initiate action againstpetitioner

since as afore-stated, through no fault of hers, her warranty againstevictio n was

breached. In the case of it was held that a court order deferring

action on the execution of judgment suspended the running of the 5-year periodfor execution

of a judgment. Here the execution of the judgment in Civil Case No. 7435 was stopped

by the writ of preliminary injunction issued in Civil CaseNo. 293. It was only when Civil

Case No. 293 was dismissed that the writ of ex ecu t i on in C i v i l C as e N o . 7 43 5

co u l d b e i mpl em en ted an d p e t i t i o n e r Binalbagan restored to the possession of the

subject lots.Deducting eight years (1974 to 1982) from the period 1967 to 1982, onlyseven years

elapsed. Consequently, Civil Case No. 1354 was filed within the 10-yea r p r e s c r ip t iv e

p e r i od . Wo rk i n g aga i ns t p e t i t i on e r ' s po s i t i o n to o i s t h ep r i n c ip l e aga in s t

u n j us t en r i chm en t , w h ich w ou l d ce r t a in l y b e th e r esu l t i f petitioner were

allowed to own the 42 lots without full payment thereof.W H E RE FOR E , th e p e t i t i on i s

D E N IE D an d t h e d ec i s io n o f t h e Co ur t o f Appeals in CA-G.R. CV No. 24635 is

AFFIRMED.