CASE

DIGESTS ON
Traders Royal Bank v. Cuison Lumber Co., Inc.
CONTRACTS
Sta. Lucia Realty v. Buenaventura

Contracts

Martin v. DBS Bank Philippines, Inc.

Heirs of Zabala v. Court of Appeals
Polytechnic University of the Phils v. Golden Horizon Realty Corp.
Saludo, Jr. v. Security Bank Corp.
Allan Go v. Cordero
Ordua, et. Al. v. Fuentebella, et. Al.
Vega v. Social Security System
Movido v. Pastor
Mangahas v. Brobio
Fuentes v. Roca
Municipality of Hagonoy v. Dumdum
International Freeport Traders, Inc. v. Danzas
Edralin v. Philippines Veterans Bank
Calilap Asmeron v. Development Bank of the Phils.
Catindig v. Vda. De Meneses
Lee v. Bangkok Bank Public Company, Ltd.
Hernandez v. Hernandez
De Quano v. Republic of the Philippines
Vigilar v. Aquino
Heirs of Go, Sr., v. Servacio
Pert/CPM Manpower Exponent Co., Inc v. VInuya
Fontana Resort and Country Club, Inc. v. Tan
Viloria v. Continental Airlines, Inc.
Villaceran v. De Guzman
David v. Misamis Occidental II Electric Cooperative, Inc.
Goldloop Properties, Inc. v. GSIS
Luz v. Baylon
The Roman Catholic Church v. Pante
Department of Public Works and Highways v. Quiwa
Manotok IV v. Heirs of Barque
P.L. Uy Realty Corporation v. ALS Management & Devt. Corporation
Heirs of Intac v. Court of Appeals
Cojuangco, Jr. v. Republic of the Philippines
Beumer v. Amores
Robern Devt Corp. v. Peoples Landless Association
Cabahug v. Natl Power Corp.
Heirs of Ignacio v. Home Bankers Savings and Trust Co.,
Cruz v. Gruspe
Star Two (SPV AMC), Inc. v. Cacayurin
J Plus Asia Devt Corp v. Utility Assurance Corp.
Fil-Estate Gold And Devt Inc., v. Vertex Sales and Trading, Inc.
Borromeo v. Juan T. Mina
Sandoval Shipyards, Inc. v. Philippine Merchant Marin Academy (PMMA)

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TRADERS ROYAL BANK v. CUISON LUMBER CO., INC.

G.R. No. 174286, June 5, 2009
FACTS:
On July 14, 1978 and December 9, 1979, respectively, CLCI, through its then
president, Roman Cuison Sr., obtained two loans from the bank. The loans were
secured by a real estate mortgage over a parcel of land covered by Transfer Certificate
of Title No. 10282 (subject property). CLCI failed to pay the loan, prompting the bank to
extra judicially foreclose the mortgage on the subject property. The bank was declared
the highest bidder at the public auction that followed, conducted on August 1, 1985. A
Certificate of Sale and a Sheriffs Final Certificate of Sale were subsequently issued in
the banks favor.
In a series of written communications between CLCI and the bank, CLCI
manifested its intention to restructure its loan obligations and to repurchase the subject
property. On July 31, 1986, Mrs. Cuison, the widow and administratrix of the estate of
Roman Cuison Sr., wrote the banks Officer-in-Charge, Remedios Calaguas, a letter
indicating her offered terms of repurchase.
CLCI paid the bank P50,000.00 (on August 8, 1986) and P85,000.00 (on
September 3, 1986). The bank received and regarded these amounts as earnest
money for the repurchase of the subject property. On October 20, 1986, the bank sent
Atty. Roman Cuison, Jr. (Atty. Cuison), as the president and general manager of CLCI, a
letter informing CLCI of the banks board of directors resolution of October 10,
1986 (TRB Repurchase Agreement), laying down the conditions for the repurchase of
the subject property.
CLCI failed to comply with the terms notwithstanding the extensions of time given
by the bank. Nevertheless, CLCI tendered, on February 3, 1987, a check
forP135,091.57 to cover fifty percent (50%) of the twenty percent (20%) bid price. The
check, however, was returned for insufficiency of funds. On May 13, 1987, CLCI
tendered an additional P50,000.00. On May 29, 1987, the bank sent Atty. Cuison a
letter informing him that the P185,000.00 CLCI paid was not a deposit, but formed part
of the earnest money under the TRB Repurchase Agreement. On August 28, 1987, Atty.
Cuison, by letter, requested that CLCIs outstanding obligation of P1,221,075.61 (as of
July 31, 1987) be reduced to P1 million, and the amount of P221,075.61 be condoned
by the bank. To show its commitment to the request, CLCI paid the bank P100,000.00
and P200,000.00 on August 28, 1987. The bank credited both payments as earnest
money.
A year later, CLCI inquired about the status of its request. The bank responded
that the request was still under consideration by the banks Manila office. On
September 30, 1988, the bank informed CLCI that it would resell the subject property at
an offered price of P3 million, and gave CLCI 15 days to make a formal offer; otherwise,
the bank would sell the subject property to third parties. On October 26, 1988, CLCI

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offered to repurchase the subject property for P1.5 million, given that it had already
tendered the amount ofP400,000.00 as earnest money.
CLCI subsequently claimed that the bank breached the terms of repurchase, as it
had wrongly considered its payments (in the amounts of P140,485.18, P200,000.00
andP100,000.00) as earnest money, instead of applying them to the purchase price.
Through its counsel, CLCI demanded that the bank rectify the repurchase agreement to
reflect the true consideration agreed upon for which the earnest money had been given.
The bank did not act on the demand. Instead, it informed CLCI that the amounts it
received were not earnest money, and that the bank was willing to return these sums,
less the amounts forfeited to answer for the unremitted rentals on the subject property.
In view of these developments, CLCI and Mrs. Cuison, on February 10, 1989,
filed with the RTC a complaint for breach of contract, specific performance, damages,
and attorneys fees against the bank. On April 20, 1989, the bank filed its Answer
alleging that the TRB repurchase agreement was already cancelled given CLCIs failure
to comply with its provisions.
ISSUE:
Whether or not a perfected contract of repurchase existed and can be enforced
between the parties.
HELD:
Yes.
Under the law, a contract is perfected by mere consent, that is, from the moment
that there is a meeting of the offer and the acceptance upon the thing and the cause
that constitute the contract. The law requires that the offer must be certain and the
acceptance absolute and unqualified. An acceptance of an offer may be express and
implied; a qualified offer constitutes a counter-offer. Case law holds that an offer, to be
considered certain, must be definite, while an acceptance is considered absolute and
unqualified when it is identical in all respects with that of the offer so as to produce
consent or a meeting of the minds. We have also previously held that the
ascertainment of whether there is a meeting of minds on the offer and acceptance
depends on the circumstances surrounding the case.
The clear and neat principle is that the offer must be certain and definite with
respect to the cause or consideration and object of the proposed contract, while the
acceptance of this offer express or implied must be unmistakable, unqualified, and
identical in all respects to the offer. The required concurrence, however, may not
always be immediately clear and may have to be read from the attendant
circumstances; in fact, a binding contract may exist between the parties whose minds
have met, although they did not affix their signatures to any written document. The facts
of the present case, although ambivalent in some respects, point on the whole to the
conclusion that both parties agreed to the repurchase of the subject property.

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STA. LUCIA REALTY & DEVELOPMENT, INC. v. BUENAVENTURA

G.R. No. 177113, October 2, 2009
FACTS:
On January 16, 1996, respondent-spouses Francisco Segismundo and Emilia
Buenaventura, represented by Ricardo Segismundo, filed before the Housing and Land
Use Regulatory Board (HLRUB) a Complaint against petitioner Sta. Lucia Realty &
Development, Inc. for Specific Performance, Damages and Attorneys
Fees. Respondents alleged that they bought a lot known as Lot 3, Block 4, Phase II at
Greenwood Executive Village, Cainta, Rizal from Loida Gonzales Alfonso (Alfonso) on
August 16, 1989; that the said lot is part of a subdivision project owned and being
developed by petitioner; that in the course of the construction of their house,
respondents discovered that their lot had been subdivided and occupied by
MarilouPanlaque (Panlaque) and Ma. Veronica Banez (Banez); and that like
respondents, the two occupants were also issued a construction permit by
petitioner. Respondents thus demanded from petitioner the rightful possession of their
lot; but to no avail.
In its Answer, petitioner averred that respondents had no cause of action against
it because it has no transaction record regarding Lot 3, Block 4, Phase II; that the said
lot actually belonged to ACL Development Corporation, its joint-venture partner; that it
was RCD Realty Corporation which caused the subdivision of the lot and constructed
separate residential buildings thereon; that RCD Realty Corporations lot was actually
Lot 3, Block 4, Phase II-A; and that respondents, in bad faith and in a retaliatory
manner, erected their own house on Lot 4 which belonged to a different
owner. Petitioner suggested that to remedy the situation, respondents, RCD Realty
Corporation, and the real owner of Lot 4, should agree to a three-way exchange of their
respective properties as it has been verified that the areas of their lots are the same.
On September 1, 1997, petitioner filed a third-party complaint against ACL
Development Corporation and RCD Realty Corporation. Petitioner prayed that in the
event that it be adjudged liable for any of the claims of respondents, ACL Development
Corporation and RCD Realty Corporation should be held jointly and severally liable for
said claims or an amount equivalent thereto.
ACL Development Corporation alleged that petitioner was responsible for the
issuance of all construction permits on the subdivision project; hence, it was the one
that caused the confusion among all parties. On the other hand, RCD Realty
Corporation alleged that it was a builder in good faith; that it constructed the residential
building on Lot 3, Block 4, Phase II upon issuance of a construction permit by petitioner.
On June 16, 1998, the HLURBs Arbiter for the National Capital Region (NCR)
Field Office issued a Decision. The HLURB Arbiter found that while RCD Realty
Corporation constructed a residential building on the wrong lot, such construction was
allowed by petitioner as evidenced by the permit it issued. As the owner-developer of

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the subdivision project, petitioner knew the location of all lots therein and was tasked to
properly enforce the restrictions it caused to be annotated on their corresponding
certificates of title. The HLURB Arbiter thus concluded that it was petitioners neglect
that ultimately led to the instant dispute.
On June 24, 1999, the HLURB Board of Commissioners affirmed the Decision of
the HLURB Arbiter with modification that the market value of the subject lot, stated in
paragraph 2 of the dispositive portion, be reduced from P4,500.00 to P3,200.00 per
square meter, plus 12% interest per annum from the time of the filing of the complaint.
On July 18, 2003, the Office of the President issued a Decision affirming the
June 24, 1999 Decision of the HLURB Board of Commissioners. Subsequently, it
issued a Resolution dated November 28, 2003 denying petitioners Motion for
Reconsideration.
On December 21, 2006, the Court of Appeals affirmed the Decision of the Office
of the President. The appellate court found that it was petitioner who caused the
confusion in the identity of the lots by its issuance of a construction permit to RCD
Realty Corporation; that petitioner was remiss and negligent in complying with its
obligations towards its buyers, their heirs, assignees, and/or successors-in-interest
when it failed to deliver the property described in respondents title.
On March 21, 2007, the Court of Appeals denied petitioners Motion for
Reconsideration. Hence, this Petition for Review on Certiorari.
ISSUE:
Whether or not petitioner Sta. Lucia Realty & Development, Inc. has no privity of
contract with respondents Buenaventura as it did not directly sell the subject property to
them.
HELD:
No.
Petitioner originally sold the subject lot to Alfonso, and the latter subsequently
sold the same to herein respondents. As assignees or successors-in-interest of Alfonso
to Lot 3, Block 4, Phase II in petitioners subdivision project, respondents succeed to
what rights the former had; and what is valid and binding against Alfonso is also valid
and binding as against them. In effect, respondents stepped into the shoes of Alfonso
and such transfer of rights also vests upon them the power to claim ownership and the
authority to demand to build a residential house on the lot to the same extent as Alfonso
could have enforced them against petitioner.
Article 1311 of the New Civil Code states that, contracts take effect only between
the parties, their assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by stipulation or by

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provision of law. In this case, the rights and obligations between petitioner and Alfonso
are transmissible. There was no mention of a contractual stipulation or provision of law
that makes the rights and obligations under the original sales contract for Lot 3, Block 4,
Phase II intransmissible. Hence, Alfonso can transfer her ownership over the said lot to
respondents and petitioner is bound to honor its corresponding obligations to the
transferee or new lot owner in its subdivision project.

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MARTIN v. DBS BANK PHILIPPINES, INC.

G.R. No. 174632, June 16, 2010
FACTS:
On March 27, 1997 Felicidad T. Martin, Melissa M. Isidro, Grace M. David,
Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr. (the Martins), as
lessors, entered into a lease contract with the DBS Bank Philippines, Inc. (DBS),
formerly known as Bank of Southeast Asia and now merged with Bank of the Philippine
Islands, as lessee, covering a commercial warehouse and lots that DBS was to use for
office, warehouse, and parking yard for repossessed vehicles. The lease was for five
years, from March 1, 1997 to March 1, 2002, at a monthly rent of P300,000.00 for the
first year, P330,000.00 for the second year, P363,000.00 for the third year, P399,300.00
for the fourth year, and P439,230.00 for the final year, all net of withholding taxes. DBS
paid a deposit of P1,200,000.00 and advance rentals of P600,000.00.
On May 25 and August 13, 1997 heavy rains flooded the leased property and
submerged into water the DBS offices there along with its 326 repossessed
vehicles. As a result, on February 11, 1998 DBS wrote the Martins demanding that they
take appropriate steps to make the leased premises suitable as a parking yard for its
vehicles. DBS suggested the improvement of the drainage system or the raising of the
propertys ground level. In response, the Martins filled the propertys grounds with soil
and rocks.
But DBS lamented that the property remained unsuitable for its use since the
Martins did not level the grounds. Worse, portions of the perimeter fence collapsed
because of the excessive amount of soil and rock that were haphazardly dumped on
it. In June 1998, DBS vacated the property but continued paying the monthly rents. On
September 11, 1998, however, it made a final demand on the Martins to restore the
leased premises to tenantable condition on or before September 30, 1998, otherwise, it
would rescind the lease contract.
On September 24, 1998 the Martins contracted the services of Altitude Systems
& Technologies Co. for the reconstruction of the perimeter fence on the property. On
October 13, 1998 DBS demanded the rescission of the lease contract and the return of
its deposit. At that point, DBS had already paid the monthly rents from March 1997 to
September 1998. The Martins refused, however, to comply with DBS demand.
On July 7, 1999 DBS filed a complaint against the Martins for rescission of the
contract of lease with damages before the Regional Trial Court (RTC)
of Makati City. Claiming that the leased premises had become untenantable, DBS
demanded rescission of the lease contract as well as the return of its deposit
ofP1,200,000.00.
On November 12, 2001 the Makati City RTC rendered a decision, dismissing the
complaint against the Martins. The trial court found that, although the floods submerged
DBS vehicles, the leased premises remained tenantable and undamaged. Moreover,

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the Martins had begun the repairs that DBS requested but were not given sufficient time
to complete the same. It held that DBS unjustifiably abandoned the leased premises
and breached the lease contract. Thus, the trial court ordered its deposit
of P1,200,000.00 deducted from the unpaid rents due the Martins and ordered DBS to
pay them the remaining P15,198,360.00 in unpaid rents.
On appeal to the Court of Appeals (CA), the latter court rendered judgment
dated April 26, 2006, reversing and setting aside the RTC decision. The CA found that
floods rendered the leased premises untenantable and that the RTC should have
ordered the rescission of the lease contract especially since the contract provided for
such remedy. The CA ordered the Martins to apply the deposit of P1,200,000.00 to the
rents due up to July 7, 1999 when DBS filed the complaint and exercised its option to
rescind the lease. The CA ordered the Martins to return the remaining balance of the
deposit to DBS.
DBS moved for partial reconsideration, claiming that it rescinded the lease
contract on October 13, 1998 and not on July 7, 1999. The CA should not require DBS
to pay rents from October 1998 to July 7, 1999. It should rather order the Martins to
return its deposit in full. For their part, the Martins asked the CA to reconsider its
decision, pointing out that they undertook the necessary repairs and restored the leased
premises to tenantable condition. Thus, DBS no longer had the right to rescind the
lease contract.
With the denial of their separate motions for reconsideration, DBS and the
Martins filed their respective petitions for review before this Court.
ISSUES:
1. Whether or not the CA erred in holding that the Martins allowed the leased premises to
remain untenantable after the floods, justifying DBS rescission of the lease agreement
between them.
2. In the affirmative, whether or not the CA erred in holding that DBS is entitled to the
rescission of the lease contract only from July 7, 1999 when it filed its action for
rescission.
HELD:
1. Yes.
Unless the terms of a contract are against the law, morals, good customs,
and public policy, such contract is law between the parties and its terms bind them. In
Felsan Realty & Development Corporation v. Commonwealth of Australia, the Court
regarded as valid and binding a provision in the lease contract that allowed the lessee
to pre-terminate the same when fire damaged the leased building, rendering it
uninhabitable or unsuitable for living.

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Here, paragraph VIII of the lease contract between DBS and the Martins
permitted rescission by either party should the leased property become untenantable
because of natural causes.
xxx. Under their agreement, the remedy of rescission would become unavailable
to DBS only if the Martins, as lessors, made the required repair and reconstruction after
the damages by natural cause occurred, which meant putting the premises after the
floods in such condition as would enable DBS to resume its use of the same for the
purposes contemplated in the agreement, namely, as office, warehouse, and parking
space for DBS repossessed vehicles.
Here, it is undisputed that the floods of May 25 and August 13, 1997 submerged
the DBS offices and its 326 repossessed vehicles. The floods rendered the place
unsuitable for its intended uses. And, while the Martins did some repairs, they did not
restore the place to meet DBS needs.
2. Yes.
As for the effective date of rescission, the record shows that DBS made a
final demand on the Martins on September 11, 1998, giving the latter up to September
30, 1998 within which to fully restore the leased property to a tenantable condition,
otherwise, it would rescind their lease contract. Consequently, the Martins may be
regarded in default with respect to their obligation to repair and rehabilitate the leased
property by the end of September 1998 when they did not comply with the
demand. Contrary to the ruling of the CA, it is not the filing of the action for rescission
that marks the violation of the lease agreement but the failure of the Martins to repair
and rehabilitate the property despite demand.

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HEIRS OF ALFREDO ZABALA v. COURT OF APPEALS

G.R. No. 189602, May 6, 2010
FACTS:
On April 1, 2002, respondent Vicente T. Manuel filed a Complaint for ejectment
with damages against Alfredo Zabala before the Municipal Trial Court in Cities (MTCC)
of Balanga, Bataan. Respondent alleged that he was in actual and peaceful possession
of a fishpond located in Ibayo, Balanga City; that Zabala allegedly entered the fishpond
without authority, and dumped soil into the fishpond without an Environment
Compliance Certificate; thatZabala continued such action until the time of the filing of
the Complaint, killing the fish products that respondent was raising in the fishpond.
Thus, respondent asked that Zabala be restrained from touching and destroying the
fishpond; be ejected therefrom; and for actual and moral damages and attorneys fees.
Zabala moved for the dismissal of the Complaint for non-compliance with the
requirement under the Local Government Code to bring the matter first
to barangayconciliation before filing an action in court. Respondent subsequently filed a
Motion for Judgment on the ground of petitioners failure to file a responsive pleading or
answer.
The MTCC granted Zabalas motion and dismissed the Complaint, holding that
respondent indeed violated the requirement of barangayconciliation. On appeal, the
Regional Trial Court (RTC)reversed the MTCCs Order and rendered judgment directing
Zabala, his heirs or subalterns to immediately vacatethe premises and restore
respondent to his peaceful possession thereof.
Zabala then filed a Petition for Review before the Court of Appeals (CA).The CA
promulgated a Decision upholding the RTCs reversal of the MTCCs Order. Zabala
filed a Motion for Reconsideration, which the CA denied. Thus, Zabalas heirs filed this
Verified Petition for Certiorari.
ISSUE:
Whether or not the compromise agreement valid and binding between the
parties.
HELD:
Yes.
Under Article 2028 of the Civil Code, a compromise agreement is a contract
whereby the parties, by making reciprocal concessions, avoid litigation or put an end to
one already commenced. Compromise is a form of amicable settlement that is not only
allowed, but also encouraged in civil cases.

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Contracting parties may establish such stipulations, clauses, terms, and

conditions as they deem convenient, provided that these are not contrary to law, morals,
good customs, public order, or public policy.
Thus, finding the above Compromise Agreement to have been validly executed
and not contrary to law, morals, good customs, public order, or public policy, we approve
the same.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES v. GOLDEN HORIZON REALTY

CORPORATION
G.R. No. 183612, March 15, 2010
FACTS:
Petitioner National Development Company (NDC) is a government- owned and
controlled corporation, created under Commonwealth Act No. 182, as amended by
Com. Act No. 311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic
University of the Philippines (PUP) is a public, non-sectarian, non-profit educational
institution created in 1978 by virtue of P.D. No. 1341.
In the early sixties, NDC had in its disposal a ten (10)-hectare property located
along Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC
Compound and covered by Transfer Certificate of Title Nos. 92885, 110301 and
145470.
On September 7, 1977, NDC entered into a Contract of Lease (C-33-77) with
Golden Horizon Realty Corporation (GHRC) over a portion of the property, with an area
of 2,407 square meters for a period of ten (10) years, renewable for another ten (10)
years with mutual consent of the parties.
On May 4, 1978, a second Contract of Lease (C-12-78) was executed between
NDC and GHRC covering 3,222.80 square meters, also renewable upon mutual
consent after the expiration of the ten (10)-year lease period. In addition, GHRC as
lessee was granted the option to purchase the area leased, the price to be negotiated
and determined at the time the option to purchase is exercised.
Under the lease agreements, GHRC was obliged to construct at its own expense
buildings of strong material at no less than the stipulated cost, and other improvements
which shall automatically belong to the NDC as lessor upon the expiration of the lease
period. Accordingly, GHRC introduced permanent improvements and structures as
required by the terms of the contract. After the completion of the industrial complex
project, for which GHRC spent P5 million, it was leased to various manufacturers,
industrialists and other businessmen thereby generating hundreds of jobs.
On June 13, 1988, before the expiration of the ten (10)-year period under the
second lease contract, GHRC wrote a letter to NDC indicating its exercise of the option
to renew the lease for another ten (10) years. As no response was received from NDC,
GHRC sent another letter on August 12, 1988, reiterating its desire to renew the
contract and also requesting for priority to negotiate for its purchase should NDC opt to
sell the leased premises. NDC still did not reply but continued to accept rental payments
from GHRC and allowed the latter to remain in possession of the property.
Sometime after September 1988, GHRC discovered that NDC had decided to
secretly dispose the property to a third party. On October 21, 1988, GHRC filed in the

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RTC a complaint for specific performance, damages with preliminary injunction and
temporary restraining order.
In the meantime, then President Corazon C. Aquino issued Memorandum Order
No. 214 dated January 6, 1989, ordering the transfer of the whole NDC Compound to the
National Government, which in turn would convey the said property in favor of PUP at
acquisition cost. The memorandum order cited the serious need of PUP, considered the
Poor Mans University, to expand its campus, which adjoins the NDC Compound, to
accommodate its growing student population, and the willingness of PUP to buy and of
NDC to sell its property. The order of conveyance of the 10.31-hectare property would
automatically result in the cancellation of NDCs total obligation in favor of the National
Government in the amount of P57,193,201.64.
On February 20, 1989, the RTC issued a writ of preliminary injunction enjoining
NDC and its attorneys, representatives, agents and any other persons assisting it from
proceeding with the sale and disposition of the leased premises.
On February 23, 1989, PUP filed a motion to intervene as party defendant,
claiming that as a purchaser pendente lite of a property subject of litigation it is entitled
to intervene in the proceedings. The RTC granted the said motion and directed PUP to
file its Answer-in-Intervention.
PUP also demanded that GHRC vacate the premises, insisting that the latters
lease contract had already expired. Its demand letter unheeded by GHRC, PUP filed an
ejectment case (Civil Case No. 134416) before the Metropolitan Trial Court (MeTC) of
Manila on January 14, 1991.
Due to this development, GHRC filed an Amended and/or Supplemental
Complaint to include as additional defendants PUP, Honorable Executive Secretary
Oscar Orbos and Judge Ernesto A. Reyes of the Manila MeTC, and to enjoin the aforementioned defendants from prosecuting Civil Case No. 134416 for ejectment; and in its
Second Amended and/or Supplemental Complaint, GHRC argued that Memorandum
Order No. 214 is a nullity, for being violative of the writ of injunction issued by the trial
court, apart from being an infringement of the Constitutional prohibition against
impairment of obligation of contracts, an encroachment on legislative functions and a bill
of attainder. In the alternative, should the trial court adjudge the memorandum order as
valid, GHRC contended that its existing right must still be respected by allowing it to
purchase the leased premises.
ISSUE:
Whether or not a right of first refusal was entered into by GHRC and NDC in their
second lease contract and not an option contract.

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HELD:
Yes.
An option is a contract by which the owner of the property agrees with another
person that the latter shall have the right to buy the formers property at a fixed price
within a certain time. It is a condition offered or contract by which the owner stipulates
with another that the latter shall have the right to buy the property at a fixed price within
a certain time, or under, or in compliance with certain terms and conditions; or which
gives to the owner of the property the right to sell or demand a sale. It binds the
party, who has given the option, not to enter into the principal contract with any other
person during the period designated, and, within that period, to enter into such contract
with the one to whom the option was granted, if the latter should decide to use the
option.
Upon the other hand, a right of first refusal is a contractual grant, not of the sale
of a property, but of the first priority to buy the property in the event the owner sells the
same. As distinguished from an option contract, in a right of first refusal, while the
object might be made determinate, the exercise of the right of first refusal would be
dependent not only on the owners eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that are yet to be firmed up.
As the option to purchase clause in the second lease contract has no definite
period within which the leased premises will be offered for sale to respondent lessee
and the price is made subject to negotiation and determined only at the time the option
to buy is exercised, it is obviously a mere right of refusal, usually inserted in lease
contracts to give the lessee the first crack to buy the property in case the lessor decides
to sell the same.

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ANICETO G. SALUDO, JR v. SECURITY BANK CORPORATION

G.R. No. 184041
October 13, 2010
FACTS:
On 30 May 1996, Booklight was extended an omnibus line credit facility by SBC
in the amount of P10, 000,000.00. Said loan was covered by a Credit Agreement and a
Continuing Suretyship with petitioner as surety, to secure full payment and performance
of the obligations arising from the credit accommodation.
Booklight drew several availments of the approved credit facility from 1996 to
1997 and faithfully complied with the terms of the loan. On 30 October 1997, SBC
approved the renewal of credit facility of Booklight in the amount ofP10,000,000.00
under the prevailing security lending rate. From August 3 to 14, 1998, Booklight
executed nine (9) promissory notes in favor of SBC in the aggregate amount
of P9,652,725.00. For failure to settle the loans upon maturity, demands were made on
Booklight and petitioner for the payment of the obligation but the duo failed to pay. As of
15 May 2000, the obligation of Booklight stood at P10,487,875.41, inclusive of interest
past due and penalty.
On 16 June 2000, SBC filed against Booklight and herein petitioner an action for
collection of sum of money with the RTC. In his Answer, Booklight asserted that the
amount demanded by SBC was not based on the omnibus credit line facility of 30 May
1996, but rather on the amendment of the credit facilities on 15 October 1996 increasing
the loan line fromP8,000,000.00 to P10,000,000.00. Booklight denied executing the
promissory notes. It also claimed that it was not in default as in fact, it paid the sum
of P1,599,126.11 on 30 September 1999 as a prelude to restructuring its loan for which
it earnestly negotiated for a mutually acceptable agreement until 5 July 2000, without
knowing that SBC had already filed the collection case.
In his Answer to the complaint, herein petitioner alleged that under the
Continuing Suretyship, it was the parties understanding that his undertaking and liability
was merely as an accommodation guarantor of Booklight. He countered that he came to
know that Booklight offered to pay SBC the partial payment of the loan and proposed
the restructuring of the obligation. Petitioner argued that said offer to pay constitutes a
valid tender of payment which discharged Booklights obligation to the extent of the
offer.
After trial, the RTC ruled that petitioner is jointly and solidarily liable with
Booklight under the Continuing Suretyship Agreement. The Court of Appeals affirmed in
toto the ruling of the RTC.
ISSUES:

Contracts

1. Whether or not petitioner should be held solidarily liable for the second credit
facility extended to Booklight.
2. Whether or not there was a novation of the contract.
HELD:
1. Yes.
There is no doubt that Booklight was extended two (2) credit facilities, each with
a one-year term, by SBC. Booklight availed of these two (2) credit lines. While Booklight
was able to comply with its obligation under the first credit line, it defaulted in the
payment of the loan obligation amounting to P9, 652,725.00 under the second credit
line. There is likewise no dispute that the first credit line facility, with a term from 30 June
1996 to 30 June 1997, was covered by a Continuing Suretyship with petitioner acting as
the surety. The dispute is on the coverage by the Continuing Suretyship of the loan
contracted under the second credit facility.
Under the Continuing Suretyship, petitioner undertook to guarantee the following
obligations:
a) "Guaranteed Obligations" the obligations of the Debtor arising from all credit
accommodations extended by the Bank to the Debtor, including increases, renewals,
roll-overs, extensions, restructurings, amendments or novations thereof, as well as (i) all
obligations of the Debtor presently or hereafter owing to the Bank, as appears in the
accounts, books and records of the Bank, whether direct or indirect, and (ii) any and all
expenses which the Bank may incur in enforcing any of its rights, powers and remedies
under the Credit Instruments as defined hereinbelow; 16 (Emphasis supplied.)
Whether the second credit facility is considered a renewal of the first or a brand
new credit facility altogether was indirectly answered by the trial court when it invoked
paragraph 10 of the Continuing Suretyship which provides:
10. Continuity of Suretyship. This Suretyship shall remain in full force and effect until
full and due payment and performance of the Guaranteed Obligations. This Suretyship
shall not be terminated by the partial payment to the Bank of Guaranteed Obligations by
any other surety or sureties of the Guaranteed Obligations, even if the particular surety
or sureties are relieved of further liabilities and concluded that the liability of petitioner
did not expire upon the termination of the first credit facility.
This very renewal is explicitly covered by the guaranteed obligations of the
Continuing Suretyship.
The essence of a continuing surety has been highlighted in the case of Totanes v.
China Banking Corporation in this wise:

Contracts

Comprehensive or continuing surety agreements are, in fact, quite commonplace

in present day financial and commercial practice. A bank or financing company which
anticipates entering into a series of credit transactions with a particular company
normally requires the projected principal debtor to execute a continuing surety
agreement along with its sureties. By executing such an agreement, the principal places
itself in a position to enter into the projected series of transactions with its creditor; with
such suretyship agreement, there would be no need to execute a separate surety
contract or bond for each financing or credit accommodation extended to the principal
debtor.
In Gateway Electronics Corporation v. Asianbank Corporation, the Court
emphasized that "[b]y its nature, a continuing suretyship covers current and future
loans, provided that, with respect to future loan transactions, they are x x x within the
description or contemplation of the contract of guaranty."

2. There is no novation to speak of. It is the first credit facility that expired and not
the Credit Agreement. There was a second loan pursuant to the same credit agreement.
The terms and conditions under the Credit Agreement continue to apply and the
Continuing Suretyship continues to guarantee the Credit Agreement.
The lameness of petitioners stand is pointed up by his attempt to escape from
liability by labelling the Continuing Suretyship as a contract of adhesion.
A contract of adhesion is defined as one in which one of the parties imposes a
ready-made form of contract, which the other party may accept or reject, but which the
latter cannot modify. One party prepares the stipulation in the contract, while the other
party merely affixes his signature or his adhesion thereto, giving no room for
negotiation and depriving the latter of the opportunity to bargain on equal footing.
A contract of adhesion presupposes that the party adhering to the contract is a
weaker party. That cannot be said of petitioner. He is a lawyer. He is deemed
knowledgeable of the legal implications of the contract that he is signing.

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ALLAN C. GO, doing business under the name and style "ACG Express Liner," vs.
MORTIMER F. CORDERO,
G.R. No. 164703
May 4, 2010
FACTS:
Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing
Corporation (Pamana), ventured into the business of marketing inter-island passenger
vessels. After contacting various overseas fast ferry manufacturers from all over the
world, he came to meet Tony Robinson, an Australian national based in Brisbane,
Australia, who is the Managing Director of Aluminium Fast Ferries Australia (AFFA).
Between June and August 1997, Robinson signed documents appointing
Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels in
the Philippines. As such exclusive distributor, Cordero offered for sale to prospective
buyers the 25-meter Aluminium Passenger catamaran known as the SEACAT 25.
After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C.
Go who is the owner/operator of ACG Express Liner of Cebu City, a single
proprietorship, Cordero was able to close a deal for the purchase of two (2) SEACAT
25. Accordingly, the parties executed Shipbuilding Contract No. 7825 for one (1) highspeed catamaran (SEACAT 25) for the price of US$1,465,512.00. Per agreement
between Robinson and Cordero, the latter shall receive commissions totalling
US$328,742.00, or 22.43% of the purchase price, from the sale of each vessel.
Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on
one (1) occasion even accompanied Go and his family and Landicho, to monitor the
progress of the building of the vessel. He shouldered all the expenses for airfare, food,
hotel accommodations, transportation and entertainment during these trips. He also
spent for long distance telephone calls to communicate regularly with Robinson, Go,
Tecson and Landicho.
However, Cordero later discovered that Go was dealing directly with Robinson
when he was informed by Dennis Padua of Wartsila Philippines that Go was canvassing
for a second catamaran engine from their company which provided the ship engine for
the first SEACAT 25. Padua told Cordero that Go instructed him to fax the requested
quotation of the second engine to the Park Royal Hotel in Brisbane where Go was then
staying. Cordero tried to contact Go and Landicho to confirm the matter but they were
nowhere to be found, while Robinson refused to answer his calls. Cordero immediately
flew to Brisbane to clarify matters with Robinson, only to find out that Go and Landicho
were already there in Brisbane negotiating for the sale of the second SEACAT 25.
Despite repeated follow-up calls, no explanation was given by Robinson, Go, Landicho

Contracts

and Tecson who even made Cordero believe there would be no further sale between
AFFA and ACG Express Liner.
In a handwritten letter, Cordero informed Go that such act of dealing directly with
Robinson violated his exclusive distributorship and demanded that they respect the
same, without prejudice to legal action against him and Robinson should they fail to
heed the same. Corderos lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also
wrote ACG Express Liner assailing the fraudulent actuations and misrepresentations
committed by Go in connivance with his lawyers (Landicho and Tecson) in breach of
Corderos exclusive distributorship appointment.
Having been apprised of Corderos demand letter, Thyne & Macartney, the
lawyer of AFFA and Robinson, faxed a letter to ACCRA law firm asserting that the
appointment of Cordero as AFFAs distributor was for the purpose of one (1) transaction
only, that is, the purchase of a high-speed catamaran vessel by ACG Express Liner in
August 1997. The letter further stated that Cordero was offered the exclusive
distributorship, the terms of which were contained in a draft agreement which Cordero
allegedly failed to return to AFFA within a reasonable time, and which offer is already
being revoked by AFFA.
On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold
Robinson, Go, Tecson and Landicho liable jointly and solidarily for conniving and
conspiring together in violating his exclusive distributorship in bad faith and wanton
disregard of his rights, thus depriving him of his due commissions (balance of unpaid
commission from the sale of the first vessel in the amount of US$31,522.01 and unpaid
commission for the sale of the second vessel in the amount of US$328,742.00) and
causing him actual, moral and exemplary damages, including P800,000.00 representing
expenses for airplane travel to Australia, telecommunications bills and entertainment, on
account of AFFAs untimely cancellation of the exclusive distributorship agreement.
Cordero also prayed for the award of moral and exemplary damages, as well as
attorneys fees and litigation expenses.
ISSUE:
Whether or not the respondents may be held liable for damages to Cordero for
his unpaid commissions and termination of his exclusive distributorship appointment by
the principal, AFFA.
HELD:
Article 1314 of the Civil Code provides:
Art. 1314. Any third person who induces another to violate his contract shall be
liable for damages to the other contracting party.

Contracts

The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of a contract; and (3)
interference of the third person is without legal justification.
The presence of the first and second elements is not disputed. Through the
letters issued by Robinson attesting that Cordero is the exclusive distributor of AFFA in
the Philippines, respondents were clearly aware of the contract between Cordero and
AFFA represented by Robinson. In fact, evidence on record showed that respondents
initially dealt with and recognized Cordero as such exclusive dealer of AFFA high-speed
catamaran vessels in the Philippines. In that capacity as exclusive distributor, petitioner
Go entered into the Memorandum of Agreement and Shipbuilding Contract No. 7825
with Cordero in behalf of AFFA.
As to the third element, our ruling in the case of So Ping Bun v. Court of
Appeals is instructive, to wit:
A duty which the law of torts is concerned with is respect for the property of
others, and a cause of action ex delicto may be predicated upon an unlawful
interference 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 renege on or violate
his undertaking under a contract. In the case before us, petitioners Trendsetter
Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner
deprived respondent corporation of the latters property right. Clearly, and as correctly
viewed by the appellate court, the three elements of tort interference above-mentioned
are present in the instant case.
Authorities debate on whether interference may be justified where the defendant
acts for the sole purpose of furthering his own financial or economic interest. One view
is that, as a general rule, justification for interfering with the business relations of
another exists where the actors motive is to benefit himself. Such justification does not
exist where his sole motive is to cause harm to the other. Added to this, some
authorities believe that it is not necessary that the interferers interest outweigh that of
the party whose rights are invaded, and that an individual acts under an economic
interest that is substantial, not merely de minimis, such that wrongful and malicious
motives are negatived, for he acts in self-protection. Moreover, justification for protecting
ones financial position should not be made to depend on a comparison of his economic
interest in the subject matter with that of others. It is sufficient if the impetus of his
conduct lies in a proper business interest rather than in wrongful motives.
As early as Gilchrist vs. Cuddy, we held that where there was no malice in the
interference of a contract, and the impulse behind ones conduct lies in a proper
business interest rather than in wrongful motives, a party cannot be a malicious
interferer. Where the alleged interferer is financially interested, and such interest
motivates his conduct, it cannot be said that he is an officious or malicious intermeddler.

Contracts

In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI
to lease the warehouse to his enterprise at the expense of respondent corporation.
Though petitioner took interest in the property of respondent corporation and benefited
from it, nothing on record imputes deliberate wrongful motives or malice in him.
While we do not encourage tort interferers seeking their economic interest to
intrude into existing contracts at the expense of others, however, we find that the
conduct herein complained of did not transcend the limits forbidding an obligatory award
for damages in the absence of any malice. The business desire is there to make some
gain to the detriment of the contracting parties. Lack of malice, however, precludes
damages. But it does not relieve petitioner of the legal liability for entering into contracts
and causing breach of existing ones. The respondent appellate court correctly
confirmed the permanent injunction and nullification of the lease contracts between
DCCSI and Trendsetter Marketing, without awarding damages. The injunction saved the
respondents from further damage or injury caused by petitioners interference.
Malice connotes ill will or spite, and speaks not in response to duty. It implies an
intention to do ulterior and unjustifiable harm. Malice is bad faith or bad motive. In the
case of Lagon v. Court of Appeals, we held that to sustain a case for tortuous
interference, the defendant must have acted with malice or must have been driven by
purely impure reasons to injure the plaintiff; in other words, his act of interference
cannot be justified. We further explained that the word "induce" refers to situations
where a person causes another to choose one course of conduct by persuasion or
intimidation. As to the allegation of private respondent in said case that petitioner
induced the heirs of the late Bai Tonina Sepi to sell the property to petitioner despite an
alleged renewal of the original lease contract with the deceased landowner, we ruled as
follows:
Assuming ex gratia argumenti that petitioner knew of the contract, such
knowledge alone was not sufficient to make him liable for tortuous interference.
Furthermore, the records do not support the allegation of private respondent that
petitioner induced the heirs of Bai Tonina Sepi to sell the property to him. The word
"induce" refers to situations where a person causes another to choose one course of
conduct by persuasion or intimidation. The records show that the decision of the heirs of
the late Bai Tonina Sepi to sell the property was completely of their own volition and that
petitioner did absolutely nothing to influence their judgment. Private respondent himself
did not proffer any evidence to support his claim. In short, even assuming that private
respondent was able to prove the renewal of his lease contract with Bai Tonina Sepi, the
fact was that he was unable to prove malice or bad faith on the part of petitioner in
purchasing the property. Therefore, the claim of tortuous interference was never
established.57

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ANTHONY ORDUA, et.al, v. EDUARDO J. FUENTEBELLA, et.al.

G.R. No. 176841
June 29, 2010
FACTS:
Sometime in 1996, Gabriel Sr. sold the subject lot to petitioner Antonita Ordua
(Antonita), but no formal deed was executed to document the sale. The contract price
was apparently payable in installments as Antonita remitted from time to time and
Gabriel Sr. accepted partial payments. One of the Orduas would later testify that
Gabriel Sr. agreed to execute a final deed of sale upon full payment of the purchase
price.
As early as 1979, however, Antonita and her sons, Dennis and Anthony Ordua,
were already occupying the subject lot on the basis of some arrangement undisclosed
in the records and even constructed their house thereon. They also paid real property
taxes for the house and declared it for tax purposes.
After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr.,
secured TCT No. T-71499 over the subject lot and continued accepting payments from
the petitioners. On December 12, 1996, Gabriel Jr. wrote Antonita authorizing her to
fence off the said lot and to construct a road in the adjacent lot. Gabriel Jr.
acknowledged receipt of a PhP 40,000 payment from petitioners. Through a letter ,
Gabriel Jr. acknowledged that petitioner had so far made an aggregate payment of PhP
65,000, leaving an outstanding balance of PhP 60,000. A receipt Gabriel Jr. issued
reflected a PhP 10,000 payment.
Badly in need of money, Gabriel Jr. borrowed from Bernard the amount of PhP
50,000, payable in two weeks at a fixed interest rate, with the further condition that the
subject lot would answer for the loan in case of default. Gabriel Jr. failed to pay the loan
and this led to the execution of a Deed of Sale and the issuance later of TCT No. T72782 for subject lot in the name of Bernard upon cancellation of TCT No. 71499 in the
name of Gabriel, Jr. As the RTC decision indicated, the reluctant Bernard agreed to
acquire the lot, since he had by then ready buyers in respondents Marcos Cid and
Benjamin F. Cid (Marcos and Benjamin or the Cids).
Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed
with a Deed of Absolute Sale of a Registered Land , the Cids were able to cancel TCT
No. T-72782 and secure TCT No. 72783 covering the subject lot. Just like in the
immediately preceding transaction, the deed of sale between Bernard and the Cids had
respondent Eduardo J. Fuentebella (Eduardo) as one of the instrumental witnesses.

Contracts

Marcos and Benjamin, in turn, ceded the subject lot to Eduardo through a Deed
of Absolute Sale dated May 11, 2000. Thus, the consequent cancellation of TCT No. T72782 and issuance on May 16, 2000 of TCT No. T-3276 over subject lot in the name of
Eduardo.
As successive buyers of the subject lot, Bernard, then Marcos and Benjamin, and
finally Eduardo, checked, so each claimed, the title of their respective predecessors-ininterest with the Baguio Registry and discovered said title to be free and unencumbered
at the time each purchased the property. Furthermore, respondent Eduardo, before
buying the property, was said to have inspected the same and found it unoccupied by
the Orduas.
Sometime in May 2000, or shortly after his purchase of the subject lot, Eduardo,
through his lawyer, sent a letter addressed to the residence of Gabriel Jr. demanding
that all persons residing on or physically occupying the subject lot vacate the premises
or face the prospect of being ejected.
Learning of Eduardos threat, petitioners went to the residence of Gabriel Jr. at
No. 34 Dominican Hill, Baguio City. There, they met Gabriel Jr.s estranged wife,
Teresita, who informed them about her having filed an affidavit-complaint against her
husband and the Cids for falsification of public documents on March 30, 2000.
According to Teresita, her signature on the June 30, 1999 Gabriel Jr.Bernard deed of
sale was a forgery. Teresita further informed the petitioners of her intent to honor the
aforementioned 1996 verbal agreement between Gabriel Sr. and Antonita and the
partial payments they gave her father-in-law and her husband for the subject lot.
On July 3, 2001, petitioners, joined by Teresita, filed a Complaint for Annulment
of Title, Reconveyance with Damages against the respondents before the RTC,
specifically praying that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be
annulled. Corollary to this prayer, petitioners pleaded that Gabriel Jr.s title to the lot be
reinstated and that petitioners be declared as entitled to acquire ownership of the same
upon payment of the remaining balance of the purchase price therefor agreed upon by
Gabriel Sr. and Antonita.
The CA, just as the RTC, ruled that the contract is unenforceable for noncompliance with the Statute of Frauds.
ISSU E:
Whether or not the Statute of Frauds bars the enforcement of the verbal sale
contract between Gabriel Sr. and Antonita
HELD:
No.

Contracts

The Statute of Frauds expressed in Article 1403, par. (2), of the Civil Code
applies only to executory contracts, i.e., those where no performance has yet been
made. Stated a bit differently, the legal consequence of non-compliance with the Statute
does not come into play where the contract in question is completed, executed,
or partially consummated.
The Statute of Frauds, in context, provides that a contract for the sale of real
property or of an interest therein shall be unenforceable unless the sale or some note or
memorandum thereof is in writing and subscribed by the party or his agent. However,
where the verbal contract of sale has been partially executed through the partial
payments made by one party duly received by the vendor, as in the present case, the
contract is taken out of the scope of the Statute.
The purpose of the Statute is to prevent fraud and perjury in the enforcement of
obligations depending for their evidence on the unassisted memory of witnesses, by
requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged. The Statute requires certain contracts to be
evidenced by some note or memorandum in order to be enforceable. The term
"Statute of Frauds" is descriptive of statutes that require certain classes of contracts to
be in writing. The Statute does not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulates the formalities of the
contract necessary to render it enforceable.
Since contracts are generally obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present, the
Statute simply provides the method by which the contracts enumerated in Art. 1403 (2)
may be proved but does not declare them invalid because they are not reduced to
writing. In fine, the form required under the Statute is for convenience or evidentiary
purposes only.
There can be no serious argument about the partial execution of the sale in
question. The records show that petitioners had, on separate occasions, given Gabriel
Sr. and Gabriel Jr. sums of money as partial payments of the purchase price. These
payments were duly receipted by Gabriel Jr. To recall, in his letter of May 1, 1997,
Gabriel, Jr. acknowledged having received the aggregate payment of PhP 65,000 from
petitioners with the balance of PhP 60,000 still remaining unpaid. But on top of the
partial payments thus made, possession of the subject of the sale had been transferred
to Antonita as buyer. Owing thus to its partial execution, the subject sale is no longer
within the purview of the Statute of Frauds.
Lest it be overlooked, a contract that infringes the Statute of Frauds is ratified by
the acceptance of benefits under the contract. Evidently, Gabriel, Jr., as his father
earlier, had benefited from the partial payments made by the petitioners. Thus, neither
Gabriel Jr. nor the other respondentssuccessive purchasers of subject lotscould
plausibly set up the Statute of Frauds to thwart petitioners efforts towards establishing
their lawful right over the subject lot and removing any cloud in their title. As it were,

Contracts

petitioners need only to pay the outstanding balance of the purchase price and that
would complete the execution of the oral sale.

SPS. ANTONIO & LETICIA VEGA, v. SOCIAL SECURITY SYSTEM (SSS) & PILAR
DEVELOPMENT CORPORATION,
G.R. No. 181672
September 20, 2010
FACTS:
Magdalena V. Reyes (Reyes) owned a piece of titled land 1 in Pilar Village, Las
Pias City. On August 17, 1979 she got a housing loan from respondent Social Security
System (SSS) for which she mortgaged her land. In late 1979, however, she asked the
petitioner spouses Antonio and Leticia Vega (the Vegas) to assume the loan and buy
her house and lot since she wanted to emigrate.
Upon inquiry with the SSS, an employee there told the Vegas that the SSS did
not approve of members transferring their mortgaged homes. The Vegas could,
however, simply make a private arrangement with Reyes provided they paid the monthly
amortizations on time. This practice, said the SSS employee, was commonplace. Armed
with this information, the Vegas agreed for Reyes to execute in their favor a deed of
assignment of real property with assumption of mortgage and paid Reyes P20,000.00
after she undertook to update the amortizations before leaving the country. The Vegas
then took possession of the house in January 1981.
But Reyes did not readily execute the deed of assignment. She left the country
and gave her sister, Julieta Reyes Ofilada (Ofilada), a special power of attorney to
convey ownership of the property. Sometime between 1983 and 1984, Ofilada finally
executed the deed promised by her sister to the Vegas. Ofilada kept the original and
gave the Vegas two copies. The latter gave one copy to the Home Development
Mortgage Fund and kept the other. Unfortunately, a storm in 1984 resulted in a flood
that destroyed the copy left with them.
In 1992, the Vegas learned that Reyes did not update the amortizations for they
received a notice to Reyes from the SSS concerning it. They told the SSS that they
already gave the payment to Reyes but, since it appeared indifferent, on January 6,
1992 the Vegas updated the amortization themselves and paid P115,738.48 to the SSS,
through Antonio Vegas personal check. They negotiated seven additional remittances
and the SSS acceptedP8,681.00 more from the Vegas.
Meanwhile, on April 16, 1993 respondent Pilar Development Corporation (PDC)
filed an action for sum of money against Reyes before the Regional Trial Court (RTC) of
Manila in Civil Case 93-6551. PDC claimed that Reyes borrowed from Apex Mortgage

Contracts

and Loans Corporation (Apex) P46,500.00 to buy the lot and construct a house on
it. Apex then assigned Reyes credit to the PDC on December 29, 1992, hence, the suit
by PDC for the recovery of the unpaid debt. On August 26, 1993 the RTC rendered
judgment, ordering Reyes to pay the PDC the loan of P46,398.00 plus interest and
penalties beginning April 11, 1979 as well as attorneys fees and the costs. Unable to do
so, on January 5, 1994 the RTC issued a writ of execution against Reyes and its Sheriff
levied on the property in Pilar Village.
On February 16, 1994 the Vegas requested the SSS to acknowledge their status
as subrogees and to give them an update of the account so they could settle it in full.
The SSS did not reply. Meantime, the RTC sheriff published a notice for the auction sale
of the property on February 24, March 3 and 10, 1994. He also served on the Vegas
notice of that sale on or about March 20, 1994. On April 5, 1994, the Vegas filed an
affidavit of third party claimant and a motion for leave to admit a motion in intervention
to quash the levy on the property.
Still, stating that Vegas remedy lay elsewhere, the RTC directed the sheriff to
proceed with the execution. Meantime, the Vegas got a telegram dated August 29,
1994, informing them that the SSS intended to foreclose on the property to satisfy the
unpaid housing debt of P38,789.58. On October 19, 1994 the Vegas requested the SSS
in writing for the exact computation of the indebtedness and for assurance that they
would be entitled to the discharge of the mortgage and delivery of the proper
subrogation documents upon payment. They also sent aP37,521.95 managers check
that the SSS refused to accept.
On November 8, 1994 the Vegas filed an action for consignation, damages, and
injunction with application for preliminary injunction and temporary restraining order
against the SSS, the PDC, the sheriff of RTC Branch 19, and the Register of Deeds
before the RTC of Las Pias. Still, while the case was pending, the SSS released the
mortgage to the PDC. And on August 22, 1996 the Register of Deeds issued TCT T56657 to the PDC. A writ of possession subsequently evicted the Vegas from the
property.
On May 8, 2002 the RTC decided Civil Case 94-2943 in favor of the Vegas. It
ruled that the SSS was barred from rejecting the Vegas final payment of P37, 521.95
and denying their assumption of Reyes debt, given the SSS previous acceptance of
payments directly from them. The Vegas were subrogated to the rights of Reyes and
substituted her in the SSS housing loan and mortgage contract. That the Vegas had the
receipts show that they were the ones who made those payments. The RTC ordered the
PDC to deliver to the Vegas the certificate of title covering the property. It also held the
SSS and PDC solidarily liable to the Vegas for P300, 000.00 in moral damages, P30,
000.00 in exemplary damages, and P50, 000.00 in attorneys fees and for costs of the
suit.
The SSS appealed to the Court of Appeals. The CA ruled that, under Article
1237 of the Civil Code, the Vegas who paid the SSS amortizations except the last on

Contracts

behalf of Reyes, without the latters knowledge or against her consent, cannot compel
the SSS to subrogate them in her rights arising from the mortgage. Further, said the CA,
the Vegas claim of subrogation was invalid because it was done without the knowledge
and consent of the SSS as required under the mortgage agreement.
ISSUE:
Whether or not Article 1237 of the Civil Code is applicable in the case at bar.
HELD:
No.
Article 1237. Whoever pays on behalf of the debtor without the knowledge or
against the will of the latter, cannot compel the creditor to subrogate him in his rights,
such as those arising from a mortgage, guaranty, or penalty. (1159a)
But Article 1237 cannot apply in this case since Reyes consented to the transfer
of ownership of the mortgaged property to the Vegas. Reyes also agreed for the Vegas
to assume the mortgage and pay the balance of her obligation to SSS. Of course,
paragraph 4 of the mortgage contract covering the property required Reyes to secure
SSS consent before selling the property. But, although such a stipulation is valid and
binding, in the sense that the SSS cannot be compelled while the loan was unpaid to
recognize the sale, it cannot be interpreted as absolutely forbidding her, as owner of the
mortgaged property, from selling the same while her loan remained unpaid. Such
stipulation contravenes public policy, being an undue impediment or interference on the
transmission of property.30
Besides, when a mortgagor sells the mortgaged property to a third person, the
creditor may demand from such third person the payment of the principal obligation.
The reason for this is that the mortgage credit is a real right, which follows the property
wherever it goes, even if its ownership changes. Article 2129 of the Civil Code gives the
mortgagee, here the SSS, the option of collecting from the third person in possession of
the mortgaged property in the concept of owner. More, the mortgagor-owners sale of
the property does not affect the right of the registered mortgagee to foreclose on the
same even if its ownership had been transferred to another person. The latter is bound
by the registered mortgage on the title he acquired.
After the mortgage debt to SSS had been paid, however, the latter had no further
justification for withholding the release of the collateral and the registered title to the
party to whom Reyes had transferred her right as owner. Under the circumstance, the
Vegas had the right to sue for the conveyance to them of that title, having been validly
subrogated to Reyes rights.

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VALENTIN MOVIDO, substituted by MARGINITO MOVIDO, v. LUIS REYES

PASTOR.
G.R. No. 172279
February 11, 2010
FACTS:
The respondent and the petitioner executed a kasunduan sa bilihan ng
lupa where the latter agreed to sell a parcel of land with an area of some 21,000 sq. m.
out of the 22,731 sq. m. covered by Transfer Certificate of Title (TCT) No. 362995
at P400/sq. m.
Another kasunduan was later executed supplementing the kasunduan sa bilihan
ng lupa. It provided that, if a Napocor power line traversed the subject lot, the purchase
price would be lowered toP200/sq. m. beyond the distance of 15 meters on both sides
from the center of the power line while the portion within a distance of 15 meters on
both sides from the center of the power line would not be paid.
Respondent paid petitioner P5 million out of the original purchase price of P8.4
million stated in the kasunduan sa bilihan ng lupa. He was willing and ready to pay the
balance of the purchase price but due to petitioners refusal to have the property
surveyed despite incessant demands, his unpaid balance could not be determined with
certainty.So he filed a complaint for specific performance in the Regional Trial Court
(RTC) of Imus, Cavite, praying that petitioner Valentin Movido be compelled to cause the
survey of a parcel of land subject of their contract to sell.
Petitioner in his answer charged respondent with delay in paying several
installments due and did not pay the 7th installment in the amount of P1 million. This
was allegedly a material breach because they agreed that the survey of the property
would only be done after respondent would have paid the 7th installment. Due to
respondents failure to fulfill his obligations, petitioner claimed that he had no choice
except to rescind the kasunduan sa bilihan ng lupa. He, however, was willing to
reimburse 50% of whatever respondent had paid him so far.
After hearing, the RTC ruled in favor of petitioner and held that
the kasunduan preceded the kasunduan sa bilihan ng lupa. Thus, the RTC dismissed

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the complaint of respondent for lack of merit and/or cause of action. It also ordered the
rescission of the kasunduan sa bilihan ng lupa as well as the forfeiture of 50% of the
amount already paid by respondent (but ordered petitioner to return to respondent 50%
of the amount already paid.
On appeal, the Court of Appeals (CA) reversed the RTC and held that
the kasunduan sa bilihan ng lupa was the first document executed by the parties, not
the kasunduan. Thus, the CA ordered respondent to pay the heirs of petitioner the
balance of the purchase price in the amount of P2,796,400. The CA also ordered that,
upon complete payment by respondent, Marginito Movido (the substitute of petitioner)
should execute the necessary deed of absolute sale in favor of respondent and comply
with petitioners other obligations under the kasunduan sa bilihan ng lupa.
Marginito Movidos motion for reconsideration did not have its desired
result. Hence, this petition for review on certiorari, where he insists that it was
the kasunduan, not the kasunduan sa bilihan ng lupa, which was first executed by the
parties. He likewise claims that the failure of respondent to pay the 7th and 8th
installments of the purchase price gave petitioner the right to rescind the contract.
ISSUE:
Whether or not the failure of respondent to pay the 7th and 8th installments of
the purchase price gave petitioner the right to rescind the contract.
HELD:
No.
Rescission is only allowed when the breach is so substantial and fundamental as
to defeat the object of the parties in entering into the contract. We find no such
substantial or material breach.
It is true that respondent failed to pay the 7th and 8th installments of the
purchase price. However, considering the circumstances of the instant case, particularly
the provisions of the kasunduan, respondent cannot be deemed to have committed a
serious breach. In the first place, respondent was not in default as petitioner never
made a demand for payment.
Moreover, the kasunduan sa bilihan ng lupa and the kasunduan should both be
given effect rather than be declared conflicting, if there is a way of reconciling them.
Petitioner and respondent would not have entered into either of the agreements if they
did not intend to be bound or governed by them. Indeed, taken together, the two
agreements actually constitute a single contract pertaining to the sale of a land to
respondent by petitioner. Their stipulations must therefore be interpreted together,
attributing to the doubtful ones that sense that may result from all of them taken
jointly. Their proper construction must be one that gives effect to all.

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In this connection, the kasunduan sa bilihan ng lupa contains the general terms
and conditions of the agreement of the parties. On the other hand, the kasunduan refers
to a particular or specific matter, i.e., that portion of the land that is traversed by a
Napocor power line. As the kasunduan pertains to a special area of the agreement, it
constitutes an exception to the general provisions of the kasunduan sa bilihan ng
lupa, particularly on the purchase price for that portion. Specialibus derogat generalibus.
Under both the kasunduan sa bilihan ng lupa and the kasunduan, petitioner
undertook to cause the survey of the property in order to determine the portion excluded
from the sale, as well as the portion traversed by the Napocor power line. Despite
repeated demands by respondent, however, petitioner failed to perform his obligation.
Thus, considering that there was a breach on the part of petitioner (and no material
breach on the part of respondent), he cannot properly invoke his right to rescind the
contract.

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CARMELA BROBIO MANGAHAS, v. EUFROCINA A. BROBIO

G.R. No. 183852
October 20, 2010
FACTS:
On January 10, 2002, Pacifico S. Brobio (Pacifico) died intestate, leaving three
parcels of land. He was survived by his wife, respondent Eufrocina A. Brobio, and four
legitimate and three illegitimate children; petitioner Carmela Brobio Mangahas is one of
the illegitimate children.
On May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial
Settlement of Estate of the Late Pacifico Brobio with Waiver. In the Deed, petitioner and
Pacificos other children, in consideration of their love and affection for respondent and
the sum of P150,000.00, waived and ceded their respective shares over the three
parcels of land in favor of respondent. The respondent promised to give her an
additional amount for her share in her fathers estate. Thus, after the signing of the
Deed, petitioner demanded from respondent the promised additional amount, but
respondent refused to pay, claiming that she had no more money.
A year later, while processing her tax obligations with the Bureau of Internal
Revenue (BIR), respondent was required to submit an original copy of the Deed. Left
with no more original copy of the Deed, respondent summoned petitioner to her office
on May 31, 2003 and asked her to countersign a copy of the Deed. Petitioner refused to
countersign the document, demanding that respondent first give her the additional
amount that she promised. Considering the value of the three parcels of land (which she
claimed to be worth P20M), petitioner asked for P1M, but respondent begged her to
lower the amount. Petitioner agreed to lower it to P600, 000.00. Because respondent
did not have the money at that time and petitioner refused to countersign the Deed
without any assurance that the amount would be paid, respondent executed a
promissory note. Petitioner agreed to sign the Deed when respondent signed the
promissory note
When the promissory note fell due, respondent failed and refused to pay despite
demand. Petitioner made several more demands upon respondent but the latter kept on
insisting that she had no money.

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On January 28, 2004, petitioner filed a Complaint for Specific Performance with
Damages against the respondent.
In her Answer, respondent admitted that she signed the promissory note but
claimed that she was forced to do so. More specifically, she contended that defendant
was practically held "hostage" by the demand of the plaintiff. At that time, defendant was
so much pressured and was in a hurry to submit the documents to the Bureau of
Internal Revenue because of the deadline set and for fear of possible penalty if not
complied with. Defendant pleaded understanding but plaintiff was adamant. Her hand
could only move in exchange for 1 million pesos.
The RTC rendered a decision in favor of petitioner. The RTC found that the
alleged "pressure and confused disposition" experienced by respondent and the
circumstances that led to the execution of the promissory note do not constitute undue
influence as would vitiate respondents consent thereto.
The CA reversed the RTC decision and dismissed the complaint. The court noted
that "financial assistance" was not the real reason why respondent executed the
promissory note, but only to secure petitioners signature.
ISSUE:
Whether or not the alleged "pressure and confused disposition" experienced by
respondent will render the contract voidable.
HELD:
No.
Contracts are voidable where consent thereto is given through mistake, violence,
intimidation, undue influence, or fraud. In determining whether consent is vitiated by any
of these circumstances, courts are given a wide latitude in weighing the facts or
circumstances in a given case and in deciding in favor of what they believe actually
occurred, considering the age, physical infirmity, intelligence, relationship, and conduct
of the parties at the time of the execution of the contract and subsequent thereto,
irrespective of whether the contract is in a public or private writing.
Nowhere is it alleged that mistake, violence, fraud, or intimidation attended the
execution of the promissory note. Still, respondent insists that she was "forced" into
signing the promissory note because petitioner would not sign the document required by
the BIR. In one case, the Court in characterizing a similar argument by respondents
therein held that such allegation is tantamount to saying that the other party exerted
undue influence upon them. However, the Court said that the fact that respondents were
"forced" to sign the documents does not amount to vitiated consent.

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There is undue influence when a person takes improper advantage of his power
over the will of another, depriving the latter of a reasonable freedom of choice. For
undue influence to be present, the influence exerted must have so overpowered or
subjugated the mind of a contracting party as to destroy his free agency, making him
express the will of another rather than his own.
Respondent may have desperately needed petitioners signature on the Deed,
but there is no showing that she was deprived of free agency when she signed the
promissory note. Being forced into a situation does not amount to vitiated consent
where it is not shown that the party is deprived of free will and choice. Respondent still
had a choice: she could have refused to execute the promissory note and resorted to
judicial means to obtain petitioners signature. Instead, respondent chose to execute the
promissory note to obtain petitioners signature, thereby agreeing to pay the amount
demanded by petitioner.
Contrary to the CAs findings, the situation did not amount to intimidation that
vitiated consent. There is intimidation when one of the contracting parties is compelled
to give his consent by a reasonable and well-grounded fear of an imminent and grave
evil upon his person or property, or upon the person or property of his spouse,
descendants, or ascendants. Certainly, the payment of penalties for delayed payment of
taxes would not qualify as a "reasonable and well-grounded fear of an imminent and
grave evil."
We join the RTC in holding that courts will not set aside contracts merely
because solicitation, importunity, argument, persuasion, or appeal to affection was used
to obtain the consent of the other party. Influence obtained by persuasion or argument
or by appeal to affection is not prohibited either in law or morals and is not obnoxious
even in courts of equity.

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MANUEL O. FUENTES et.al v. CONRADO G. ROCA et.al.

G.R. No. 178902
April 21, 2010
FACTS:
Sabina Tarroza owned a titled 358-square meter lot in Canelar, Zamboanga City.
On October 11, 1982 she sold it to her son, Tarciano T. Roca (Tarciano) under a deed of
absolute sale. But Tarciano did not for the meantime have the registered title transferred
to his name.
Six years later in 1988, Tarciano offered to sell the lot to petitioners Manuel and
Leticia Fuentes (the Fuentes spouses). They arranged to meet at the office of Atty.
Romulo D. Plagata whom they asked to prepare the documents of sale. They later
signed an agreement to sell that Atty. Plagata prepared dated April 29, 1988, which
agreement expressly stated that it was to take effect in six months.
The agreement required the Fuentes spouses to pay Tarciano a down payment
of P60,000.00 for the transfer of the lots title to him. And, within six months, Tarciano
was to clear the lot of structures and occupants and secure the consent of his estranged
wife, Rosario Gabriel Roca (Rosario), to the sale. Upon Tarcianos compliance with
these conditions, the Fuentes spouses were to take possession of the lot and pay him
an additional P140, 000.00 or P160, 000.00, depending on whether or not he
succeeded in demolishing the house standing on it. If Tarciano was unable to comply
with these conditions, the Fuentes spouses would become owners of the lot without any
further formality and payment.
The parties left their signed agreement with Atty. Plagata who then worked on the
other requirements of the sale. According to the lawyer, he went to see Rosario in one
of his trips to Manila and had her sign an affidavit of consent. As soon as Tarciano met
the other conditions, Atty. Plagata notarized Rosarios affidavit in Zamboanga City. On
January 11, 1989 Tarciano executed a deed of absolute sale in favor of the Fuentes
spouses. They then paid him the additional P140,000.00 mentioned in their agreement.
A new title was issued in the name of the spouses who immediately constructed a

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building on the lot. On January 28, 1990 Tarciano passed away, followed by his wife
Rosario who died nine months afterwards.
Eight years later in 1997, the children of Tarciano and Rosario, namely,
respondents Conrado G. Roca, Annabelle R. Joson, and Rose Marie R. Cristobal,
together with Tarcianos sister, Pilar R. Malcampo, represented by her son, John Paul
M. Trinidad (collectively, the Rocas), filed an action for annulment of sale and
reconveyance of the land against the Fuentes spouses before the Regional Trial Court
(RTC) of Zamboanga City. The Rocas claimed that the sale to the spouses was void
since Tarcianos wife, Rosario, did not give her consent to it. Her signature on the
affidavit of consent had been forged. They thus prayed that the property be reconveyed
to them upon reimbursement of the price that the Fuentes spouses paid Tarciano.
On February 1, 2005 the RTC rendered judgment, dismissing the case. It ruled
that the action had already prescribed since the ground cited by the Rocas for annulling
the sale, forgery or fraud, already prescribed under Article 1391 of the Civil Code four
years after its discovery. In this case, the Rocas may be deemed to have notice of the
fraud from the date the deed of sale was registered with the Registry of Deeds and the
new title was issued. Here, the Rocas filed their action in 1997, almost nine years after
the title was issued to the Fuentes spouses on January 18, 1989.
On appeal, the Court of Appeals (CA) reversed the RTC decision. The CA found
sufficient evidence of forgery and did not give credence to Atty. Plagatas testimony that
he saw Rosario sign the document in Quezon City. Its jurat said differently. Also, upon
comparing the questioned signature with the specimen signatures, the CA noted
significant variance between them. That Tarciano and Rosario had been living
separately for 30 years since 1958 also reinforced the conclusion that her signature had
been forged.
ISSUE:
Whether or not the action has already prescribed.
HELD:
No.
Under the provisions of the Civil Code governing contracts, a void or inexistent
contract has no force and effect from the very beginning. And this rule applies to
contracts that are declared void by positive provision of law, as in the case of a sale of
conjugal property without the other spouses written consent. A void contract is
equivalent to nothing and is absolutely wanting in civil effects. It cannot be validated
either by ratification or prescription.
But, although a void contract has no legal effects even if no action is taken to set
it aside, when any of its terms have been performed, an action to declare its inexistence

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is necessary to allow restitution of what has been given under it. This action, according
to Article 1410 of the Civil Code does not prescribe. Thus: Art. 1410. The action or
defense for the declaration of the inexistence of a contract does not prescribe.
Here, the Rocas filed an action against the Fuentes spouses in 1997 for
annulment of sale and reconveyance of the real property that Tarciano sold without their
mothers (his wifes) written consent. The passage of time did not erode the right to
bring such an action.
Besides, even assuming that it is the Civil Code that applies to the transaction as
the CA held, Article 173 provides that the wife may bring an action for annulment of sale
on the ground of lack of spousal consent during the marriage within 10 years from the
transaction. Consequently, the action that the Rocas, her heirs, brought in 1997 fell
within 10 years of the January 11, 1989 sale. It did not yet prescribe.
THE MUNICIPALITY OF HAGONOY, BULACAN, represented by the HON. FELIX V.
OPLE, Municipal Mayor, and FELIX V. OPLE, in his personal capacity, Petitioners,
v.
HON. SIMEON P. DUMDUM, JR., in his capacity as the Presiding Judge of the
REGIONAL TRIAL COURT, BRANCH 7, CEBU CITY; HON. CLERK OF COURT &
EX-OFFICIO SHERIFF of the REGIONAL TRIAL COURT of CEBU CITY; HON.
CLERK OF COURT & EX-OFFICIO SHERIFF of the REGIONAL TRIAL COURT of
BULACAN and his DEPUTIES; and EMILY ROSE GO KO LIM CHAO, doing
business under the name and style KD SURPLUS,
G.R. No. 168289

March 22, 2010

FACTS:
The case stems from a Complaint filed by herein private respondent Emily Rose
Go Ko Lim Chao against herein petitioners, the Municipality of Hagonoy, Bulacan and
its chief executive, Felix V. Ople (Ople) for collection of a sum of money and damages.
It was alleged that sometime in the middle of the year 2000, respondent, doing business
as KD Surplus and as such engaged in buying and selling surplus trucks, heavy
equipment, machinery, spare parts and related supplies, was contacted by petitioner
Ople. Respondent had entered into an agreement with petitioner municipality through
Ople for the delivery of motor vehicles, which supposedly were needed to carry out
certain developmental undertakings in the municipality. Respondent claimed that
because of Oples earnest representation that funds had already been allocated for the
project, she agreed to deliver from her principal place of business in Cebu City twentyone motor vehicles whose value totaledP5,820,000.00. To prove this, she attached to
the complaint copies of the bills of lading showing that the items were consigned,

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delivered to and received by petitioner municipality on different dates.[6] However,

despite having made several deliveries, Ople allegedly did not heed respondents claim
for payment. As of the filing of the complaint, the total obligation of petitioner had
already totaled P10,026,060.13 exclusive of penalties and damages. Thus, respondent
prayed for full payment of the said amount, with interest at not less than 2% per month,
plus P500,000.00 as damages for business losses, P500,000.00 as exemplary
damages, attorneys fees ofP100,000.00 and the costs of the suit.
Instead of addressing private respondents allegations, petitioners filed a Motion
to Dismiss on the ground that the claim on which the action had been brought was
unenforceable under the statute of frauds, pointing out that there was no written
contract or document that would evince the supposed agreement they entered into with
respondent. They averred that contracts of this nature, before being undertaken by the
municipality, would ordinarily be subject to several preconditions such as a public
bidding and prior approval of the municipal council which, in this case, did not obtain.
From this, petitioners impress upon us the notion that no contract was ever entered into
by the local government with respondent. To address the claim that respondent had
made the deliveries under the agreement, they advanced that the bills of lading
attached to the complaint were hardly probative, inasmuch as these documents had
been accomplished and handled exclusively by respondent herself as well as by her
employees and agent.

ISSUE:
Whether or not the trial court is wrong for not dismissing the complaint despite the fact
that the alleged contract was unenforceable under the statute of frauds.

HELD:
The Statute of Frauds found in paragraph (2), Article 1403 of the Civil Code,
requires for enforceability certain contracts enumerated therein to be evidenced by
some note or memorandum. The term Statute of Frauds is descriptive of statutes that
require certain classes of contracts to be in writing; and that do not deprive the parties
of the right to contract with respect to the matters therein involved, but merely regulate
the formalities of the contract necessary to render it enforceable.[21]
In other words, the Statute of Frauds only lays down the method by which the
enumerated contracts may be proved. But it does not declare them invalid because
they are not reduced to writing inasmuch as, by law, contracts are obligatory in

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whatever form they may have been entered into, provided all the essential requisites for
their validity are present. The object is to prevent fraud and perjury in the enforcement
of obligations depending, for evidence thereof, on the unassisted memory of witnesses
by requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged. The effect of noncompliance with this requirement is
simply that no action can be enforced under the given contracts. If an action is
nevertheless filed in court, it shall warrant a dismissal under Section 1(i), Rule 16 of the
Rules of Court, unless there has been, among others, total or partial performance of the
obligation on the part of either party.
It has been private respondents consistent stand, since the inception of the
instant case that she has entered into a contract with petitioners. As far as she is
concerned, she has already performed her part of the obligation under the agreement
by undertaking the delivery of the 21 motor vehicles contracted for by Ople in the name
of petitioner municipality. This claim is well substantiated at least for the initial
purpose of setting out a valid cause of action against petitioners by copies of the bills
of lading attached to the complaint, naming petitioner municipality as consignee of the
shipment. Petitioners have not at any time expressly denied this allegation and, hence,
the same is binding on the trial court for the purpose of ruling on the motion to dismiss.
In other words, since there exists an indication by way of allegation that there has been
performance of the obligation on the part of respondent, the case is excluded from the
coverage of the rule on dismissals based on unenforceability under the statute of
frauds, and either party may then enforce its claims against the other.

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INTERNATIONAL FREEPORT TRADERS, INC., v.

ABAD, and MENDOZA, JJ. DANZAS INTERCONTINENTAL,
G.R. No. 181833
January 26, 2011

FACTS:
In March 1997 petitioner International Freeport Traders, Inc. (IFTI) ordered
a shipment of Toblerone chocolates and assorted confectioneries from Jacobs Suchard
Tobler Ltd. of Switzerland (Jacobs) through its Philippine agent, Colombo Merchants
Phils., Inc., under the delivery term F.O.B. Ex-Works.
To ship the goods, Jacobs dealt with Danmar Lines of Switzerland (Danmar)
which issued to Jacobs negotiable house bills of lading[1] signed by its agent,
respondent Danzas Intercontinental, Inc. (Danzas). The bills of lading stated that the
terms were F.O.B. and freight payable at destination, with Jacobs as the shipper,
China Banking Corporation as the consignee, and IFTI as the party to be notified of the
shipment. The shipment was to be delivered at the Clark Special Economic Zone with
Manila as the port of discharge. The goods were also covered by Letters of Credit MK97/0467 and MK-97/0468 under a freight collect arrangement.
Since Danmar did not have its own vessel, it contracted Orient Overseas
Container Line (OOCL) to ship the goods from Switzerland. OOCL issued a nonnegotiable master bill of lading,[2] stating that the freight was prepaid with Danmar as
the shipper and Danzas as the consignee and party to be notified. The shipment was to
be delivered at Angeles City in Pampanga. Danmar paid OOCL an arbitrary fee of
US$425.00 to process the release of the goods from the port and ship the same to

Contracts

Clark in Angeles City. The fee was to cover brokerage, trucking, wharfage, arrastre, and
processing expenses.
The goods were loaded on board the OOCL vessel on April 20, 1997 and arrived
at the port of Manila on May 14, 1997. Upon learning from Danmar that the goods had
been shipped, Danzas immediately informed IFTI of its arrival. IFTI prepared the import
permit needed for the clearing and release of the goods from the Bureau of Customs
and advised Danzas on May 20, 1997 to pick up the document. Danzas got the import
permit on May 26, 1997. At the same time, it asked IFTI to 1) surrender the original bills
of lading to secure the release of the goods, and 2) submit a bank guarantee inasmuch
as the shipment was consigned to China Banking Corporation to assure Danzas that it
will be compensated for freight and other charges.
But IFTI did not provide Danzas a bank guarantee, claiming that letters of credit
already covered the shipment. IFTI insisted that Danzas should already endorse the
import permit and bills of lading to OOCL since the latter had been paid an arbitrary fee.
But Danzas did not do this. Because IFTI did not provide Danzas with the original bills
of lading and the bank guarantee, the latter withheld the processing of the release of the
goods. Danzas reiterated to IFTI that it could secure the release of the goods only if
IFTI submitted a bank guarantee. Ultimately, IFTI yielded to the request and applied for
a bank guarantee which was approved on May 23, 1997. It claimed to have advised
Danzas on even date of its availability for pick up but Danzas secured it only on June 6,
1997.
ISSUE:
Whether or not a contract of lease of service exists between IFTI and Danzas.
HELD:
What is clear to the Court is that, by acceding to all the documentary
requirements that Danzas imposed on it, IFTI voluntarily accepted its services. The
bank guarantee IFTI gave Danzas assured the latter that it would eventually be paid all
freight and other charges arising from the release and delivery of the goods to it.
Another indication that IFTI recognized its contract with Danzas is when IFTI requested
Danzas to have the goods released pending payment of whatever expenses the latter
would incur in obtaining the release and delivery of the goods at Clark. It also admitted
that it initially settled with Danzas General Manager and OOCLs Mabazza the issue
regarding the charges on the goods after Danzas agreed to bill IFTI for the electric
charges and storage fees totaling P56,000.00. Certainly, this concession indicated that
their earlier agreement did not push through.

Contracts

Every contract has the elements of (1) consent of the contracting parties; (2)
object certain which is the subject matter of the contract; and (3) cause of the obligation
which is established. A contract is perfected by mere consent, which is manifested by
the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract.
Generally, contracts undergo three distinct stages: (1) preparation or negotiation;
(2) perfection; and (3) consummation. Negotiation begins from the time the prospective
contracting parties manifest their interest in the contract and ends at the moment of
agreement of the parties. The perfection or birth of the contract takes place when the
parties agree upon the essential elements of the contract. The last stage is the
consummation of the contract where the parties fulfill or perform the terms they agreed
on, culminating in its extinguishment. Here, there is no other conclusion than that the
parties entered into a contract of lease of service for the clearing and delivery of the
imported goods.

SPS. FERNANDO and ANGELINA EDRALIN, v. PHILIPPINE VETERANS BANK

G.R. No. 168523

March 9, 2011

FACTS:
On February 5, 1976, Veterans Bank granted petitioner spouses Fernando and
Angelina Edralin (Edralins) a loan in the amount of Two Hundred Seventy Thousand
Pesos (P270,000.00). As security thereof, petitioners executed a Real Estate Mortgage
(REM) in favor of Veterans Bank over a real property situated in the Municipality of
Paraaque and registered in the name of petitioner Fernando Edralin. The mortgaged
property is more particularly described in Transfer Certificate of Title (TCT) No. 204889.
The REM was registered with the Registry of Deeds of the Province of Rizal.7 The REM
and its subsequent amendments8 were all duly annotated at the back of TCT No.
204889.The Edralins failed to pay their obligation to Veterans Bank. Thus, on June 28,
1983, Veterans Bank filed a Petition for Extrajudicial Foreclosure10 of the REM with the
Office of the Clerk of Court and Ex-Officio Sheriff of Rizal.
In due course, the foreclosure sale was held on September 8, 1983, in which the
Ex-Officio Sheriff of Rizal sold the mortgaged property at public auction. Veterans Bank
emerged as the highest bidder at the said foreclosure sale and was issued the
corresponding Certificate of Sale. The said Certificate of Sale was registered with the

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Registry of Deeds of the Province of Rizal and annotated at the back of TCT No.
204889 under Entry No. 83-62953/T-No. 43153-A on October 25, 1983.Upon the
Edralins failure to redeem the property during the one-year period provided under Act
No. 3135, Veterans Bank acquired absolute ownership of the subject property.
Consequently, Veterans Bank caused the consolidation of ownership of the subject
property in its name on January 19, 1994.13 The Register of Deeds of Paraaque,
Metro Manila cancelled TCT No. 204889 under the name of Fernando Edralin and
replaced it with a new transfer certificate of title, TCT No. 78332,14 in the name of
Veterans Bank on February 3, 1994.
Despite the foregoing, the Edralins failed to vacate and surrender possession of
the subject property to Veterans Bank. Thus, on May 24, 1996, Veterans Bank filed an
Ex-Parte Petition for the Issuance of a Writ of Possession, docketed as Land
Registration Case (LRC) No. 06-060 before Branch 274 of the Regional Trial Court
(RTC) of Paraaque City. The same, however, was dismissed for Veterans Banks
failure to prosecute.

ISSUE:
. Whether the issuance of a writ of possession under Act [No.] 3135 is subject to
the statute of limitations
HELD:
No, The aforequoted Section 18 grants to mortgagors of Veterans Bank the right
to redeem their judicially foreclosed properties. This provision had to be included
because in judicial foreclosures, mortgagors generally do not have the right of
redemption unless there is an express grant by law.
But, contrary to petitioners averments, there is nothing in Section 18 which can
be interpreted to mean that Veterans Bank is limited to judicial foreclosures only, or that
it cannot avail itself of the benefits provided under Act No. 3135,42 as amended,
allowing extrajudicial foreclosures. Moreover, the availability of extra-judicial foreclosure
to a mortgagee depends upon the agreement of the contracting parties. Section 1 of Act
No. 3135 provides:
Section 1. When a sale is made under a special power inserted in or attached to any
real-estate mortgage hereafter made as security for the payment of money or the
fulfillment of any other obligation, the provisions of the following sections shall govern as

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to the manner in which the sale and redemption shall be effected, whether or not
provision for the same is made in the power.
In the case at bar, paragraph (c) of the parties REM granted Veterans Bank the special
power as attorney-in-fact of the petitioners to perform all acts necessary for the purpose
of extrajudicial foreclosure under Act No. 3135. Thus, there is no obstacle preventing
Veterans Bank from availing itself of the remedy of extrajudicial foreclosure.

LINA CALILAP-ASMERON v. DEVELOPMENT BANK OF THE PHILIPPINES

G.R. No. 157330

November 23, 2011

FACTS:
The thrust of the petitioners suit is that DBP accorded to her a preferential
right to repurchase the property covered by TCT No. 164117. Her version follows.
In August 1982, the petitioner negotiated with DBP to buy back the property
covered by TCT No. 164117 by offering P15,000.00 as downpayment. Her offer was
rejected by an executive officer of DBPs Acquired Assets Department, who required her
to pay the full purchase price of P55,500.00 for the property within ten days.[6] She
returned to DBP with the amount, only to be told that DBP would not sell back only one

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lot. Being made to believe that the lot covered by TCT No. 164117 would be released
after paying two amortizations for the other lot (TCT No. 160929), however, she signed
the deed of conditional sale covering both lots for the total consideration of
P157,000.00. When she later on requested the release of the property under TCT No.
164117 after paying two quarterly amortizations, DBP did not approve the release. She
continued paying the amortizations until she had paid P40,000.00 in all, at which point
she sought again the release of the lot under TCT No. 164117. DBP still denied her
request, warning that it would rescind the contract should her remaining amortizations
be still not paid. On August 7, 1985, DBP rescinded the deed of conditional sale over
her objections.
On November 25, 1987, DBP sold the lot covered by TCT No. 164117 to
respondent Pablo Cruz via a deed of absolute sale. The petitioner consequently filed a
complaint for the rescission of the sale to Cruz on January 30, 1987. Notwithstanding
their knowledge of her pending suit against Cruz, respondents Emerenciana Cabantog
and Eni S.P. Atienza still bought the property from Cruz. Hence, Cabantog and Atienza
were impleaded as additional defendants by amendment.

ISSUE:
Whether or not article 1332 is applicable to the acts of the petitioner?
HELD:
No, The petitioner would have us consider that she had not given her full consent
to the deed of conditional sale on account of her lack of legal and technical knowledge.
In effect, she pleads for the application of Article 1332 of the Civil Code, which provides:
Article 1332. When one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been fully explained to the former.
It is quite notable that the petitioner did not specify which of the stipulations of the
deed of conditional sale she had difficulty or deficiency in understanding. Her
generalized averment of having been misled should, therefore, be brushed aside as
nothing but a last attempt to salvage a hopeless position. Our impression is that the
stipulations of the deed of conditional sale were simply worded and plain enough for
even one with a slight knowledge of English to easily understand.
The petitioner was not illiterate. She had appeared to the trial court to be
educated, its cogent observation of her as lettered (supra, at p. 7 hereof) being based
on how she had composed her correspondences to DBP. Her testimony also revealed

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that she had no difficulty understanding English. Thereby revealed was her distinctive
ability to understand written and spoken English, the language in which the terms of the
contract she signed had been written. Clearly, Article 1332 of the Civil Code does not
apply to the petitioner.

MANUEL CATINDIG v. AURORA IRENE VDA. DE MENESES

G.R. No. 165851

February 2, 2011

FACTS:
The property subject of this controversy pertains to a parcel of land situated in
Malolos, Bulacan, with an area of 49,139 square meters, titled in the name of the late
Rosendo Meneses, Sr., under Transfer Certificate of Title (TCT) No. T-1749 (hereinafter
referred to as the Masusuwi Fishpond). Respondent Aurora Irene C. Vda. de Meneses
is the surviving spouse of the registered owner, Rosendo Meneses, Sr.. She was issued
Letters of Administration over the estate of her late husband in Special Proceedings
Case No. 91498 pending before the then Court of First Instance of the City of Manila,
Branch 22. On May 17, 1995, respondent, in her capacity as administratrix of her

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husband's estate, filed a Complaint for Recovery of Possession, Sum of Money and
Damages against petitioners Manuel Catindig and Silvino Roxas, Sr. before the
Regional Trial Court of Malolos, Bulacan, to recover possession over the Masusuwi
Fishpond.
Respondent alleged that in September 1975, petitioner Catindig, the first cousin
of her husband, deprived her of the possession over the Masusuwi Fishpond, through
fraud, undue influence and intimidation. Since then, petitioner Catindig unlawfully leased
the property to petitioner Roxas. Respondent verbally demanded that petitioners vacate
the Masusuwi Fishpond, but all were futile, thus, forcing respondent to send demand
letters to petitioners Roxas and Catindig. However, petitionersstill ignored said
demands. Hence, respondent filed a suit against the petitioners to recover the property
and demanded payment of unearned income, damages, attorney's fees and costs of
suit. In his Answer, petitioner Catindig maintained that he bought the Masusuwi
Fishpond from respondent and her children in January 1978, as evidenced by a Deed of
Absolute Sale. Catindig further argued that even assuming that respondent was indeed
divested of her possession of the Masusuwi Fishpond by fraud, her cause of action had
already prescribed considering the lapse of about 20 years from 1975, which was
allegedly the year when she was fraudulently deprived of her possession over the
property.

Petitioner Roxas, on the other hand, asserted in his own Answer that respondent
has no cause of action against him, because Catindig is the lawful owner of the
Masusuwi Fishpond, to whom he had paid his rentals in advance until the year 2001.
ISSUE:
Whether or not the cause of action is one for annulment of contract under Arts.
1390-1391 of the NCC.
HELD:
No, the Deed of Absolute Sale executed between respondent and petitioner was
simulated and fictitious, and therefore, did not convey title over the subject property to
petitioner. Apparently, respondent was convinced by petitioner to sign the said deed of
sale because it was intended to be a mere proposal subject to the approval of the trial
court wherein the proceedings for the settlement of the estate owning the property was
still pending. The Supreme Court also agreed to the observation that the deed lacked
consideration because respondent never received the stipulated purchase price for the
subject property. According to the Supreme Court, a sale that lacks consideration is void

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from the beginning and produces no legal effect. The right to declare it as such does not
prescribe either:
It is a well-entrenched rule that where the deed of sale states that the purchase
price has been paid but in fact has never been paid, the deed of sale is null and void ab
initio for lack of consideration. Moreover, Article 1471 of the Civil Code, provides that if
the price is simulated, the sale is void, which applies to the instant case, since the price
purportedly paid as indicated in the contract of sale was simulated for no payment was
actually made.
Since it was well established that the Deed of Sale is simulated and, therefore
void, petitioners claim that respondent's cause of action is one for annulment of
contract, which already prescribed, is unavailing, because only voidable contracts may
be annulled. On the other hand, respondent's defense for the declaration of the
inexistence of the contract does not prescribe.

SAMUEL U. LEE and PAULINE LEE and ASIATRUST DEVELOPMENT BANK, INC., v.
BANGKOK BANK PUBLIC COMPANY, LIMITED,
G.R. No. 173349 February 9, 2011
FACTS:
Midas Diversified Export Corporation (MDEC) and Manila Home Textile, Inc. (MHI) entered
into twoseparate Credit Line Agreements (CLAs) with Respondent Bangkok Bank Public Company,
Limited(Bangkok Bank) on November 29, 1995 and April 17, 1996, respectively. MDEC and MHI are
ownedand controlled by the Lee family: Thelma U. Lee, Maybelle L. Lim, Daniel U. Lee and Samuel
U. Lee(Samuel). Both corporations have interlocking directors and management led by the Lee

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family.Bangkok Bank required guarantees from the Lee family for the two CLAs. Consequently, the
Lee familyexecuted guarantees in favor of Bangkok Bank for the CLA of MDEC and for the CLA of
MHI. Under the guarantees, the Lee family irrevocably and unconditionally guaranteed, as principal
debtors, thepayment of any and all indebtedness of MDEC and MHI with Bangkok Bank. MDEC was
likewisegranted a loan facility by Asiatrust Development Bank, Inc. (Asiatrust). MDEC availed itself of
theomnibus credit line granted by Asiatrust and when MDEC had defaulted in the payment of its loan
thatmatured, Asiatrust initiated negotiations with MDEC and the negotiation was concluded when
Asiatrust had agreed to Samuels proposition that he would mortgage the subject Antipolo properties
to secure the loan, and therefore execute a Rescission of Real Estate Mortgage (REM) over the
properties.MDEC, MHI, and three other corporations owned by the Lee family filed before the
Securities andExchange Commission (SEC) a Consolidated Petition for the Declaration of a State of
Suspension of Payments and for Appointment of a Management Committee/Rehabilitation Receiver.
Said petition acknowledged, among others, MDEC and MHIs indebtedness with Bangkok Bank, and
admitted that matured and maturing obligations could not be met due to liquidity problems. Notably,
the list of properties attached to the petition indicated that the subject Antipolo properties of the
spouses Lee had already been earmarked, or that they had already served as security, for MDECs
unpaid obligation with Asiatrust. The SEC then issued a
Suspension Order
enjoining the Lee corporations from disposing of their property in any manner except in the
ordinary course of business, and from making any paymentsoutside the legitimate expenses of their
business during the pendency of the petition.Bangkok Bank instituted an action before the RTC,
Branch 141 in Makati City to recover the loansextended to MDEC and MHI under the guarantees.
Bangkok Banks application for the issuance of a writ of preliminary attachment was granted, covering
the properties of the Lee family in Antipolo, Cavite,Quezon City, and Baguio, among others but
Bangkok Bank discovered that the spouses Lee hadexecuted a REM over the subject Antipolo
properties in favor of Asiatrust; and that the REM hadpreviously been annotated on the titles. Thus, the
writs of preliminary attachment were also inscribed atthe back of the TCTs covering the subject
Antipolo properties, next to the annotation of the REM.Bangkok Bank filed an instant case
before the RTC, Branch 73 in Antipolo City, for the rescission of theREM over the subject
properties, annulment foreclosure sale, cancellation of the new TCTs issued infavor of Asiatrust, and
damages amounting to PhP 600,000. In its action, Bangkok Bank alleged,among others, that the
presumption of fraud under Article 1387 of the Civil Code applies, consideringthat a writ of preliminary
attachment was issued in January 1998 in favor of SBC against Samuel. Italso claimed that collusion
and fraud transpired between the spouses Lee and Asiatrust in theexecution of the REM. After due
hearing with the parties presenting their evidence, RTC rendered a Decision dismissing the case.
Aggrieved, Bangkok Bank appealed the trial courts decision before the CA; and the appellate court
rendered the assailed decision, which granted the appeal, and reversedand set aside the RTC
decision. Hence, this Petition for Review on Certiorari.
ISSUE:
Whether or not the properties owned by private individuals should be covered by a suspension
order issued by the SEC in an action for suspension of payments.
HELD:

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No, the properties are not covered under the suspension order of SEC.The Supreme Court
Under Sec. 5.2 of RA 8799, the SECs original and exclusive jurisdiction over all cases enumerated
under Sec. 5 of PD 902-A was transferred to the appropriate RTC. RA 8799, Sec. 5.2, however,
expressly stated as an exception, that "[t]he Commission shall retain jurisdiction over pending
suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed. Accordingly,
the Consolidated Petition for the Declaration of a State of Suspension of Payments and
for Appointment of a Management Committee/Rehabilitation Receiver filed on February
16, 1998 byMDEC, MHI and three other corporations owned by the Lee family, remained under the
jurisdiction of the SEC until finally disposed of pursuant to the last sentence of Sec. 5.2 of RA 8799.PD
902-A vested the SEC with jurisdiction on petitions for suspension of payments only on corporations,
partnerships and associations; not on individual persons
The SECs jurisdiction is evident from the statutorily vested power of jurisdiction, supervision
and control by the SEC over all corporations, partnerships or associations, which are grantees of
primary franchise, license or permit issued by the government to operate in the Philippines, and its
then original and exclusive jurisdiction over petitions for suspension of payments of said entities. Secs.
3 and 5 of PD 902-A pertinently provides this.
Indeed, settled is the rule that it is axiomatic that jurisdiction is the authority
to hear and determine a cause, which is conferred by law and not by the policy of any
court or agency. Private individuals and their privately owned properties cannot be placed under the
jurisdiction of the SEC in a petition for suspension of payments. In Chung Ka Bio v. Intermediate
Appellate Court, Supreme Court resolved in the negative the Issue of whether private individuals
can file with the SEC petitions for declaration in a state of suspension of payments. We
held that Sec. 5(d) of PD 902-A clearly does not allow a mere individual to file the petition,
which is limited to "corporations, partnerships or associations."

CORNELIA M. HERNANDEZ, vs. CECILIO F. HERNANDEZ

G.R. No. 158576

March 9, 2011

FACTS:
The controversy between the parties began when the Republic of the Philippines,
through the Department of Public Works and Highways (DPWH), offered to purchase a
portion of a parcel of land with an area of 80,133 square meters, located at San Rafael,

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Sto. Tomas, Batangas, for use in the expansion of the South Luzon Expressway. The
land is pro-indiviso owned by Cornelia M. Hernandez (Cornelia), petitioner herein, Atty.
Jose M. Hernandez, deceased father of respondent Cecilio F. Hernandez
(Cecilio), represented by Paciencia Hernandez (Paciencia) and Mena Hernandez
(Mena), also deceased and represented by her heirs.
The initial purchase price that was offered by the government was allegedly at ThirtyFive pesos (P35.00) per square meter for 14,643 square meters of the aforementioned
land. The Hernandez family rejected the offer. After a series of negotiations with the
DPWH, the last offer stood at Seventy Pesos (P70.00) per square meter. They still did
not accept the offer and the government was forced to file an expropriation case.
On 11 November 1993, the owners of the Hernandez property executed a letter
indicating: (1) Cecilio as the representative of the owners of the land; and (2) the
compensation he gets in doing such job.
On 6 October 1999, petitioner executed a Revocation of the SPA withdrawing the
authority earlier granted to Cecilio in the SPA dated 18 October 1996. On 7 February
2000, Cornelia received from Cecilio a Bank of the Philippine Islands Check amounting
to One Million One Hundred Twenty-Three Thousand Pesos (P1,123,000.00).20 The
check was however accompanied by a Receipt and Quitclaim 21 document in favor of
Cecilio. In essence it states that: (1) the amount received will be the share of Cornelia in
the just compensation paid by the government in the expropriated property; (2) in
consideration of the payment, it will release and forever discharge Cecilio from any
action, damages, claims or demands; and (3) Cornelia will not institute any action and
will not pursue her complaint or opposition to the release to Cecilio or his heirs or
assigns, of the entire amount deposited in the Land Bank of the Philippines, Tanauan,
Batangas, or in any other account with any bank, deposited or will be deposited therein,
in connection with Civil Case No C-023, representing the total just compensation of
expropriated properties under the aforementioned case.

ISSUE:
Whether or not the receipt and quitclaim document is valid.
HELD:
No.
The trial court awarded the Hernandez family, among others, a total amount
of P21,964,500.00 for the expropriation of 14,643 square meters of land to be used as
extension of the South Luzon Expressway. The three co-owners of the said land,
Cornelia, Mena and Paciencia were listed as item number twenty (20) in the decision
dated 7 January 1998, as one of the recipients of the just compensation to be given by

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the government. As pro-indiviso landowners of the property taken, each one of them
ought to receive an equal share or one third (1/3) of the total amount which is equivalent
to P7,321,500.00.
The equal division of proceeds, however, was contested by Cecilio. He avers that he is
the agent of the owners of the property. He bound himself to render service on behalf of
her cousins, aunt and mother, by virtue of the request of the latter. As an agent, Cecilio
insists that he be given the compensation he deserves based on the agreement made
in the letter dated 11 November 1993, also called as the service contract, which was
signed by all the parties. This is the contract to which Cecilio anchors his claim of
validity of the receipt and quitclaim that was signed in his favor.
A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable. In determining whether consent is vitiated by any of the
circumstances mentioned, courts are given a wide latitude in weighing the facts or
circumstances in a given case and in deciding in their favor what they believe to have
actually occurred, considering the age, physical infirmity, intelligence, relationship, and
the conduct of the parties at the time of the making of the contract and subsequent
thereto, irrespective of whether the contract is in public or private writing. And, in order
that mistake may invalidate consent, it should refer to the substance of the thing which
is the object of the contract, or those conditions which have principally moved one or
both parties to enter the contract.
The compensation scheme of 20% of any amount over P70.00 per square meter and
everything above P300.00 per square meter was granted in favor of Cecilio by the
Hernandezes on 11 November 1993. At that time, the Hernandezes had
just rejected the governments offer of P35.00 per square meter, which offer last stood
atP70.00 per square meter. It was the rejection likewise of the last offer that led to the
filing of the expropriation case on 9 August 1993. It was in this case, and for Cecilios
representation in it of the Hernandezes, that he was granted the compensation scheme.
Clear as day, the conditions that moved the parties to the contract were the base price
at P70.00 per square meter, the increase of which would be compensated by 20% of
whatever may be added to the base price; and the ceiling price of P300.00 per square
meter, which was considerably high reckoned from the base at P70.00, which would
therefore, allow Cecilio to get all that which would be in excess of the elevated ceiling.
The ceiling was, from the base, extraordinarily high, justifying the extraordinary grant to
Cornelio of all that would exceed the ceiling.
It was on these base and ceiling prices, conditions which principally moved both parties
to enter into the agreement on the scheme of compensation, that an obvious mistake
was made. The trial court, deviating from the principle that just compensation is
determined by the value of the land at the time either of the taking or filing, which was in
1993, determined the compensation as the 1998 value of P1,500.00 per square meter.
The trial court ratiocinated that the 1998 value was considered for the reason, among
others that:

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Cecilios position would give him 83.07% of the just compensation due Cornelia as a coowner of the land. The preparation by Cecilio of the receipt and quitclaim document
which he asked Cornelia to sign, indicate that even Cecilio doubted that he could validly
claim 83.07% of the price of Cornelias land on the basis of the 11 November 1993
agreement. Based on the attending circumstances, the receipt and quitclaim document
is an act of fraud perpetuated by Cecilio. Very clearly, both the service contract of 11
November 1993 letter- agreement, and the later receipt and quitclaim document, the
first vitiated by mistake and the second being fraudulent, are void.

ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO ARNAIZ,

and CIELO OUANO MARTINEZ,
G.R. No. 168770

February 9, 2011

vs.

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THE REPUBLIC OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL

AIRPORT AUTHORITY, and THE REGISTER OF DEEDS FOR THE CITY OF CEBU,
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA),
vs.
RICARDO L. INOCIAN, in his personal capacity and as Attorney-in-Fact of
OLYMPIA E. ESTEVES, EMILIA E. BACALLA, RESTITUTA E. MONTANA, and RAUL
L. INOCIAN; and ALETHA SUICO MAGAT, in her personal capacity and as
Attorney-in-Fact of PHILIP M. SUICO, DORIS S. DELA CRUZ, JAMES M. SUICO,
EDWARD M. SUICO, ROSELYN SUICO-LAWSIN, REX M. SUICO, KHARLA SUICOGUTIERREZ, ALBERT CHIONGBIAN, and JOHNNY CHAN,
G.R. No. 168812
FACTS:
In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency, pursued
a program to expand the Lahug Airport in Cebu City. Through its team of negotiators,
NAC met and negotiated with the owners of the properties situated around the airport,
which included Lot Nos. 744-A, 745-A, 746, 747, 761-A, 762-A, 763-A, 942, and 947 of
the Banilad Estate. As the landowners would later claim, the government negotiating
team, as a sweetener, assured them that they could repurchase their respective lands
should the Lahug Airport expansion project do not push through or once the Lahug
Airport closes or its operations transferred to Mactan-Cebu Airport. Some of the
landowners accepted the assurance and executed deeds of sale with a right of
repurchase. Others, however, including the owners of the aforementioned lots, refused
to sell because the purchase price offered was viewed as way below market, forcing the
hand of the Republic, represented by the then Civil Aeronautics Administration (CAA),
as successor agency of the NAC, to file a complaint for the expropriation of Lot Nos.
744-A, 745-A, 746, 747, 761-A, 762-A, 763-A, 942, and 947, among others, docketed
as Civil Case No. R-1881 entitled Republic v. Damian Ouano, et al.
In view of the adverted buy-back assurance made by the government, the owners of the
lots no longer appealed the decision of the trial court. Following the finality of the
judgment of condemnation, certificates of title for the covered parcels of land were
issued in the name of the Republic which, pursuant to Republic Act No. 6958, were
subsequently transferred to MCIAA.
At the end of 1991, or soon after the transfer of the aforesaid lots to MCIAA, Lahug
Airport completely ceased operations, Mactan Airport having opened to accommodate
incoming and outgoing commercial flights. On the ground, the expropriated lots were

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never utilized for the purpose they were taken as no expansion of Lahug Airport was
undertaken. This development prompted the former lot owners to formally demand from
the government that they be allowed to exercise their promised right to repurchase. The
demands went unheeded. Civil suits followed.
G.R. No. 168770 (Ouano Petition)
Soon after the MCIAA jettisoned the Lahug Airport expansion project, informal settlers
entered and occupied Lot No. 763-A which, before its expropriation, belonged to the
Ouanos. The Ouanos then formally asked to be allowed to exercise their right to
repurchase the aforementioned lot, but the MCIAA ignored the demand.
ISSUE:
Whether or not petitioner Ouanos are entitled to reconveyance of the subject properties
on the basis of an alleged verbal promise or assurance of the NAC officials that the
properties will be returned if the airport project would be abandoned.

HELD:
The petition is meritorious.
At the outset, three (3) fairly established factual premises ought to be emphasized:
First, the MCIAA and/or its predecessor agency had not actually used the lots subject of
the final decree of expropriation in Civil Case No. R-1881 for the purpose they were
originally taken by the government, i.e., for the expansion and development of Lahug
Airport.
Second, the Lahug Airport had been closed and abandoned. A significant portion of it
had, in fact, been purchased by a private corporation for development as a commercial
complex.
Third, it has been preponderantly established by evidence that the NAC, through its
team of negotiators, had given assurance to the affected landowners that they would be
entitled to repurchase their respective lots in the event they are no longer used for
airport purposes. "No less than Asterio Uy," the Court noted in Heirs of Moreno, "one of
the members of the CAA Mactan Legal Team, which interceded for the acquisition of the
lots for the Lahug Airports expansion, affirmed that persistent assurances were given to
the landowners to the effect that as soon as the Lahug Airport is abandoned or

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transferred to Mactan, the lot owners would be able to reacquire their properties." 22 In
Civil Case No. CEB-20743, Exhibit "G," the transcript of the deposition 2of Anunciacion
vda. de Ouano covering the assurance made had been formally offered in evidence and
duly considered in the initial decision of the RTC Cebu City. In Civil Case No. CEB18370, the trial court, on the basis of testimonial evidence, and later the CA, recognized
the reversionary rights of the suing former lot owners or their successors in
interest24 and resolved the case accordingly. In point with respect to the representation
and promise of the government to return the lots taken should the planned airport
expansion do not materialize is what the Court said in Heirs of Moreno, thus:
This is a difficult case calling for a difficult but just solution. To begin with there exists
an undeniable historical narrative that the predecessors of respondent MCIAA had
suggested to the landowners of the properties covered by the Lahug Airport expansion
scheme that they could repurchase their properties at the termination of the airports
venue. Some acted on this assurance and sold their properties; other landowners held
out and waited for the exercise of eminent domain to take its course until finally coming
to terms with respondents predecessors that they would not appeal nor block further
judgment of condemnation if the right of repurchase was extended to them. A handful
failed to prove that they acted on such assurance when they parted with ownership of
their land.25 (Emphasis supplied; citations omitted.)
For perspective, Heirs of Morenolater followed by MCIAA v. Tudtud (Tudtud) and the
consolidated cases at baris cast under the same factual setting and centered on the
expropriation of privately-owned lots for the public purpose of expanding the Lahug
Airport and the alleged promise of reconveyance given by the negotiating NAC officials
to the private lot owners. All the lots being claimed by the former owners or successorsin-interest of the former owners in the Heirs of Moreno, Tudtud, and the present cases
were similarly adjudged condemned in favor of the Republic in Civil Case No. R-1881.
All the claimants sought was or is to have the condemned lots reconveyed to them upon
the payment of the condemnation price since the public purpose of the expropriation
was never met. Indeed, the expropriated lots were never used and were, in fact,
abandoned by the expropriating government agencies.
In all then, the issues and supporting arguments presented by both sets of petitioners in
these consolidated cases have already previously been passed upon, discussed at
length, and practically peremptorily resolved in Heirs of Moreno and the November
2008 Tudtud ruling. The Ouanos, as petitioners in G.R. No. 168770, and the Inocians,
as respondents in G.R. No. 168812, are similarly situated as the heirs of Moreno
in Heirs of Moreno and Benjamin Tudtud in Tudtud. Be that as it may, there is no reason
why the ratio decidendi in Heirs of Moreno and Tudtudshould not be made to apply to
petitioners Ouanos and respondents Inocians such that they shall be entitled to recover

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their or their predecessors respective properties under the same manner and
arrangement as the heirs of Moreno and Tudtud. Stare decisis et non quieta movere (to
adhere to precedents, and not to unsettle things which are established). 27
Under the rule on the Statute of Frauds, as expressed in Article 1403 of the Civil Code,
a contract for the sale or acquisition of real property shall be unenforceable unless the
same or some note of the contract be in writing and subscribed by the party charged.
Subject to defined exceptions, evidence of the agreement cannot be received without
the writing, or secondary evidence of its contents.
MCIAAs invocation of the Statute of Frauds is misplaced primarily because the statute
applies only to executory and not to completed, executed, or partially consummated
contracts. Carbonnel v. Poncio, et al., quoting Chief Justice Moran, explains the
rationale behind this rule, thusly:
x x x "The reason is simple. In executory contracts there is a wide field for fraud
because unless they may be in writing there is no palpable evidence of the intention of
the contracting parties. The statute has been precisely been enacted to prevent fraud."
x x x However, if a contract has been totally or partially performed, the exclusion of
parol evidence would promote fraud or bad faith, for it would enable the defendant to
keep the benefits already derived by him from the transaction in litigation, and at the
same time, evade the obligations, responsibilities or liabilities assumed or contracted by
him thereby. (Emphasis in the original.)
Analyzing the situation of the cases at bar, there can be no serious objection to the
proposition that the agreement package between the government and the private lot
owners was already partially performed by the government through the acquisition of
the lots for the expansion of the Lahug airport. The parties, however, failed to
accomplish the more important condition in the CFI decision decreeing the expropriation
of the lots litigated upon: the expansion of the Lahug Airport. The projectthe public
purpose behind the forced property takingwas, in fact, never pursued and, as a
consequence, the lots expropriated were abandoned. Be that as it may, the two groups
of landowners can, in an action to compel MCIAA to make good its oral undertaking to
allow repurchase, adduce parol evidence to prove the transaction.
The Court, in the recent MCIAA v. Lozada, Sr., revisited and abandoned the Fery ruling
that the former owner is not entitled to reversion of the property even if the public
purpose were not pursued and were abandoned, thus:
On this note, we take this opportunity to revisit our ruling in Fery, which involved an
expropriation suit commenced upon parcels of land to be used as a site for a public

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market. Instead of putting up a public market, respondent Cabanatuan constructed

residential houses for lease on the area. Claiming that the municipality lost its right to
the property taken since it did not pursue its public purpose, petitioner Juan Fery, the
former owner of the lots expropriated, sought to recover his properties. However, as he
had admitted that, in 1915, respondent Cabanatuan acquired a fee simple title to the
lands in question, judgment was rendered in favor of the municipality, following
American jurisprudence, particularly City of Fort Wayne v. Lake Shore & M.S. RY.
Co.,McConihay v. Theodore Wright, and Reichling v. Covington Lumber Co., all
uniformly holding that the transfer to a third party of the expropriated real property,
which necessarily resulted in the abandonment of the particular public purpose for
which the property was taken, is not a ground for the recovery of the same by its
previous owner, the title of the expropriating agency being one of fee simple.
Obviously, Fery was not decided pursuant to our now sacredly held constitutional right
that private property shall not be taken for public use without just compensation. It is
well settled that the taking of private property by the Governments power of eminent
domain is subject to two mandatory requirements: (1) that it is for a particular public
purpose; and (2) that just compensation be paid to the property owner. These
requirements partake of the nature of implied conditions that should be complied with to
enable the condemnor to keep the property expropriated.

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GREGORIO R. VIGILAR, SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND

HIGHWAYS (DPWH), DPWH UNDERSECRETARIES TEODORO E. ENCARNACION AND
EDMUNDO E. ENCARNACION AND EDMUNDO V. MIR, DPWH ASSISTANT SECRETARY JOEL
L. ALTEA, DPWH REGIONAL DIRECTOR VICENTE B. LOPEZ, DPWH DISTRICT ENGINEER
ANGELITO M. TWAO, FELIX A. DESIERTO OF THE TECHNICAL WORKING GROUP
VALIDATION AND AUDITING TEAM, AND LEONARDO ALVARO, ROMEO N. SUPAN,
VICTORINO C. SANTOS OF THE DPWH PAMPANGA 2ND ENGINEERING DISTRICT,
vs. ARNULFO D. AQUINO,
G.R. No. 180388

January 18, 2011

FACTS:
On 19 June 1992, petitioner Angelito M. Twao, then Officer-in-Charge (OIC)-District
Engineer of the Department of Public Works and Highways (DPWH) 2nd Engineering
District of Pampanga sent an Invitation to Bid to respondent Arnulfo D. Aquino, the
owner of A.D. Aquino Construction and Supplies. The bidding was for the construction
of a dike by bulldozing a part of the Porac River at Barangay Ascomo-Pulungmasle,
Guagua, Pampanga.
Subsequently, on 7 July 1992, the project was awarded to respondent, and a "Contract
of Agreement" was thereafter executed between him and concerned petitioners for the
amount of PhP1,873,790.69, to cover the project cost.
By 9 July 1992, the project was duly completed by respondent, who was then issued a
Certificate of Project Completion dated 16 July 1992. The certificate was signed by
Romeo M. Yumul, the Project Engineer; as well as petitioner Romeo N. Supan, Chief of
the Construction Section, and by petitioner Twao.

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Respondent Aquino, however, claimed that PhP1,262,696.20 was still due him, but
petitioners refused to pay the amount. Petitioners, for their part, set up the defense 4 that
the Complaint was a suit against the state; that respondent failed to exhaust
administrative remedies; and that the "Contract of Agreement" covering the project was
void for violating Presidential Decree No. 1445, absent the proper appropriation and the
Certificate of Availability of Funds.
ISSUE:
Whether or not the doctrine of non-suability of the state has no application in this case.
HELD:
The Court finds the Petition to be without merit.
Secondly, in ordering the payment of the obligation due respondent on a quantum
meruit basis, the Court of Appeals correctly relied on Royal Trust Corporation v.
COA, Eslao v. COA, Melchor v. COA,12 EPG Construction Company v. Vigilar,13 and
Department of Health v. C.V. Canchela & Associates, Architects. All these cases
involved government projects undertaken in violation of the relevant laws, rules and
regulations covering public bidding, budget appropriations, and release of funds for the
projects. Consistently in these cases, this Court has held that the contracts were void
for failing to meet the requirements mandated by law; public interest and equity,
however, dictate that the contractor should be compensated for services rendered and
work done.
Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the
contracts involved in both cases failed to comply with the relevant provisions of
Presidential Decree No. 1445 and the Revised Administrative Code of 1987.
Nevertheless, "(t)he illegality of the subject Agreements proceeds, it bears emphasis,
from an express declaration or prohibition by law, not from any intrinsic illegality. As
such, the Agreements are not illegal per se, and the party claiming thereunder may
recover what had been paid or delivered."
The government project involved in this case, the construction of a dike, was completed
way back on 9 July 1992. For almost two decades, the public and the government
benefitted from the work done by respondent. Thus, the Court of Appeals was correct in
applying Eslao to the present case. In Eslao, this Court stated:
...the Court finds that the contractor should be duly compensated for services rendered,
which were for the benefit of the general public. To deny the payment to the contractor

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of the two buildings which are almost fully completed and presently occupied by the
university would be to allow the government to unjustly enrich itself at the expense of
another. Justice and equity demand compensation on the basis of quantum meruit.
Neither can petitioners escape the obligation to compensate respondent for services
rendered and work done by invoking the states immunity from suit. This Court has long
established in Ministerio v. CFI of Cebu, and recently reiterated in Heirs of Pidacan v.
ATO, the doctrine of governmental immunity from suit cannot serve as an instrument for
perpetrating an injustice to a citizen. As this Court enunciated in EPG Construction:

HEIRS OF PROTACIO GO, SR. et. al. v. SERVACIO and GO

G.R. No. 157537, September 7, 2011
FACTS:
Gaviola and Protacio, Jr. entered into a contract ofsale of a parcel of land. 23 years
later, Protacio, Jr executed an Affidavit of Renunciation and Waiver affirming under oath
that it was his father Protacio Go, Sr.(Married to Marta Go) who purchased the said
property. Subsequently, Protacio Go together with his son Rito Go sold a portion of the
property to herein respondent Ester Servacio. On March 2, 2001, the petitioners
demanded the return of the property, but Servacio refused to heed their demand; hence
this case for the annulment of sale of the property. The contention of the petitioner was
that following Protacio, Jr.s renunciation, the property became conjugal property; and
that the sale of the property to Servacio without the priorliquidation of the community
property between Protacio, Sr. and Marta was null and void pursuant to Article 130 of
the Family Code. Servacio and Rito countered that Article 130 of the Family Code was

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inapplicable; that the want of the liquidationprior to the sale did not render the
sale invalid, because the sale was valid to the extent of the portion that was finally
allotted to the vendors as his share; and thatthe sale did not also prejudice any rights of
the petitioners as heirs, considering that what the sale disposed of was within the
aliquot portion of the property that the vendors were entitled to as heirs.
The RTC declared that the property was the conjugal property of Protacio, Sr. and
Marta, not the exclusive property of Protacio, Sr. Nonetheless, the RTC affirmed the
validity of the sale of the property. Aggrieved, the petitioners went all the way up to
the Supreme Court.
ISSUE:
Whether Article 130 of the Family Code was applicable.
HELD:
The appeal lacks merit.
Under Article 130 in relation to Article 105 of the Family Code,any disposition of the
conjugal property after the dissolution of the conjugal partnership must be made
only after the liquidation; otherwise, the disposition is void. Upon Martas death in 1987,
the conjugal partnership was dissolved, pursuant to Article 175 (1) of the Civil Code,
and an implied ordinary co-ownership ensued among Protacio, Sr. and the other heirs of
Marta with respect to her share in the assets of the conjugal partnership pending
a liquidation following its liquidation.
Protacio, Sr., although becoming a co-owner with his children in respect of Martas
share in the conjugal partnership, could not yet assert or claim title to any specific
portion of Martas share without an actual partition of the property being first done either
by agreement or by judicial decree. Until then, all that he had was an ideal or abstract
quota in Martas share. Nonetheless, a co-owner could sell his undivided share; hence,
Protacio, Sr. had the right to freely sell and dispose of his undivided interest, but not the
interest of his co-owners. Consequently, the sale by Protacio, Sr. and Rito as co-owners
without the consent of the other co-owners was not necessarily void, for the rights of the
selling co-owners were thereby effectively transferred, making the buyer (Servacio) a
co-owner of Martas share. Article 105 of the Family Code, supra, expressly provides

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that the applicability of the rules on dissolution of the conjugal partnership

is without prejudice to vested rights already acquired in accordance with the
Civil Code or other laws.
The proper action in cases like this is not for the nullification of the sale or for the
recovery of possession of the thing owned in common from the third person who
substituted the co-owner or co-owners who alienated their shares, but the DIVISION of
the common property as if it continued to remain in the possession of the co-owners
who possessed and administered it [Mainit v. Bandoy, supra] In the meanwhile,
Servacio would be a trustee for the benefit of the co-heirs of her vendors in respect of
any portion that might not be validly sold to her.

PERT/CPM MANPOWER EXPONENT CO., INC., v. VINUYA

G. R. No. 197528, September 5, 2012.
FACTS:
On March 5, 2008, respondent Vinuya et al. filed a complaint for illegal dismissal
against the petitioner Pert/CPM and its President with labor arbiter alleging among
others that the agency deployed them to work as aluminium fabricator/installer for the
agencys principal, Modern Metal in Dubai, United Arab Emirates for a two-year
employment whose contracts were approved by the POEA providing for nine-hours
working day, salary of 1,350 AED with overtime pay, food allowance, free and suitable
housing (four to a room), free transportation, free laundry and free medical and dental
services. However, on April 2, 2007, Modern Metal gave respondents, except Era,
appointment letters different from that of originally signed, increasing their employment
terms and reducing their salaries and allowances and removing certain benefits.
Further, the working conditions were not as promised and they repeatedly complained
with their agency about their predicament but to no avail. Respondents resigned from
their job citing personal/family problems for their resignation except for Era who

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mentioned the real reason which is due to the company policy. After several
weeks, petitioner repatriated the respondent to the Philippines who shouldered
their own airfare except for Ordovez and Enjambre. The agency countered that the
respondents were not illegally dismissed alleging that the respondents voluntarily
resigned from their employment to seek a better paying job. The agency furthered
alleged that the respondents even voluntarily signed affidavits of quitclaim and release.
ISSUE:
Whether or not there was breach of contract on the part of the Agency?
HELD:
Yes.
The agency and Modern Metal committed breach of contract. Aggravating the
contract substitution imposed upon them by their employer, the respondents were made
to suffer substandard (shocking, as they put it) working and living arrangements. Both
the original contracts the respondents signed in the Philippines and the appointment
letters issued to them by Modern Metal in Dubai provided for free housing and
transportation to and from the jobsite. The original contract mentioned free and suitable
housing.36Although no description of the housing was made in the letters of
appointment except: Accommodation: Provided by the company, it is but reasonable to
think that the housing or accommodation would be suitable. As earlier pointed out, the
respondents were made to work from 6:30 a.m. to 6:30 p.m., with a meal break of one
to one and a half hours, and their overtime work was mostly not paid or underpaid.
Their living quarters were cramped as they shared them with 27 other workers. The
lodging house was in Sharjah, far from the jobsite in Dubai, leaving them only three to
four hours of sleep every workday because of the long hours.
With their original contracts substituted and their oppressive working and living
conditions unmitigated or unresolved, the respondents decision to resign is not
surprising. They were compelled by the dismal state of their employment to give up
their jobs; effectively, they were constructively dismissed. A constructive dismissal or
discharge is a quitting because continued employment is rendered impossible,
unreasonable or unlikely, as, an offer involving a demotion in rank and a diminution in
pay. Without doubt, the respondents continued employment with Modern Metal had
become unreasonable. A reasonable mind would not approve of a substituted contract
that pays a diminished salary from 1350 AED a month in the original contract to
1,000 AED to 1,200 AED in the appointment letters, a difference of 150 AED to 250 AED
(not just 50 AED as the agency claimed) or an extended employment (from 2 to 3 years)
at such inferior terms, or a free and suitable housing which is hours away from the job
site, cramped and crowded, without potable water and exposed to air pollution.

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FONTANA RESORT & COUNTRY CLUB, INC., v. TAN

G.R. No. 154670, January 30, 2012.
FACTS:
Sometime in March 1997, respondent spouses Roy S. Tan and Susana C. Tan
bought from petitioner RN Development Corporation (RNDC) two class D shares of
stock in petitioner Fontana Resort and Country Club, Inc. (FRCCI), worth P387,300.00,
enticed by the promises of petitioners sales agents that petitioner FRCCI would
construct a park with first-class leisure facilities in Clark Field, Pampanga, to be called
Fontana Leisure Park (FLP); that FLP would be fully developed and operational by the
first quarter of 1998; and that FRCCI class D shareholders would be admitted to one
membership in the country club, which entitled them to use park facilities and stay at a
two-bedroom villa for five (5) ordinary weekdays and two (2) weekends every year for
free.
Two years later, in March 1999, respondents filed before the SEC a Complaintfor
refund of the P387,300.00 they spent to purchase FRCCI shares of stock from
petitioners. Respondents alleged that they had been deceived into buying FRCCI

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shares because of petitioners fraudulent misrepresentations. Construction of FLP

turned out to be still unfinished and the policies, rules, and regulations of the country
club were obscure.
Respondents narrated that they were able to book and avail themselves of free
accommodations at an FLP villa on September 5, 1998, a Saturday. They requested
that an FLP villa again be reserved for their free use on October 17, 1998, another
Saturday, for the celebration of their daughters 18 th birthday, but were refused by
petitioners. Petitioners clarified that respondents were only entitled to free
accommodations at FLP for one week annually consisting of five (5) ordinary days, one
(1) Saturday and one (1) Sunday[,] and that respondents had already exhausted their
free Saturday pass for the year. According to respondents, they were not informed of
said rule regarding their free accommodations at FLP, and had they known about it, they
would not have availed themselves of the free accommodations on September 5,
1998. In January 1999, respondents attempted once more to book and reserve an FLP
villa for their free use on April 1, 1999, a Thursday. Their reservation was confirmed by
a certain Murphy Magtoto. However, on March 3, 1999, another country club employee
named Shaye called respondents to say that their reservation for April 1, 1999 was
cancelled because the FLP was already fully booked.
ISSUE:
Whether or not petitioners committed fraud or defaulted on their promises as
would justify the annulment or rescission of their contract of sale with respondents?
HELD:
No.
The general rule is that he who alleges fraud or mistake in a transaction must
substantiate his allegation as the presumption is that a person takes ordinary care for
his concerns and that private dealings have been entered into fairly and regularly.
One who alleges defect or lack of valid consent to a contract by reason of fraud or
undue influence must establish by full, clear and convincing evidence such specific acts
that vitiated a partys consent, otherwise, the latters presumed consent to the contract
prevails. There is fraud when one party is induced by the other to enter into a contract,
through and solely because of the latters insidious words or machinations. But not all
forms of fraud can vitiate consent. Under Article 1330, fraud refers to dolo causante or
causal fraud, in which, prior to or simultaneous with the execution of a contract, one
party secures the consent of the other by using deception, without which such consent
would not have been given. Simply stated, the fraud must be the determining cause of
the contract, or must have caused the consent to be given.

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In this case, respondents have miserably failed to prove how petitioners

employed fraud to induce respondents to buy FRCCI shares. It can only be expected
that petitioners presented the FLP and the country club in the most positive light in order
to attract investor-members. There is no showing that in their sales talk to respondents,
petitioners actually used insidious words or machinations, without which, respondents
would not have bought the FRCCI shares. Respondents appear to be literate and of
above-average means, who may not be so easily deceived into parting with a
substantial amount of money. What is apparent to us is that respondents knowingly and
willingly consented to buying FRCCI shares, but were later on disappointed with the
actual FLP facilities and club membership benefits.
The right to rescind a contract arises once the other party defaults in the
performance of his obligation. Rescission of a contract will not be permitted for a
slight or casual breach, but only such substantial and fundamental breach as would
defeat the very object of the parties in making the agreement. In the same case as
fraud, the burden of establishing the default of petitioners lies upon respondents, but
respondents once more failed to discharge the same.

VILORIA V. CONTINENTAL AIRLINES.

G.R. No. 188288, January 16, 2012
FACTS:
On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC)
rendered a Decision, giving due course to the complaint for sum of money and
damages filed by petitioners Fernando Viloria (Fernando) and Lourdes Viloria (Lourdes),
collectively called Spouses Viloria, against respondent Continental Airlines, Inc. (CAI).
As culled from the records, below are the facts giving rise to such complaint.
On or about July 21, 1997 and while in the United States, Fernando purchased
for himself and his wife, Lourdes, two (2) round trip airline tickets from San Diego,
California to Newark, New Jersey on board Continental Airlines. Fernando purchased
the tickets at US$400.00 each from a travel agency called Holiday Travel and was
attended to by a certain Margaret Mager (Mager). According to Spouses Viloria,

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Fernando agreed to buy the said tickets after Mager informed them that there were no
available seats at Amtrak, an intercity passenger train service provider in the United
States. Per the tickets, Spouses Viloria were scheduled to leave for Newark on August
13, 1997 and return to San Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to Newark to
an earlier date or August 6, 1997. Mager informed him that flights to Newark via
Continental Airlines were already fully booked and offered the alternative of a round trip
flight via Frontier Air. Since flying with Frontier Air called for a higher fare of US$526.00
per passenger and would mean traveling by night, Fernando opted to request for a
refund. Mager, however, denied his request as the subject tickets are non-refundable
and the only option that Continental Airlines can offer is the re-issuance of new tickets
within one (1) year from the date the subject tickets were issued. Fernando decided to
reserve two (2) seats with Frontier Air.
As he was having second thoughts on traveling via Frontier Air, Fernando went to
the Greyhound Station where he saw an Amtrak station nearby. Fernando made
inquiries and was told that there are seats available and he can travel on Amtrak
anytime and any day he pleased. Fernando then purchased two (2) tickets for
Washington, D.C. From Amtrak, Fernando went to Holiday Travel and confronted Mager
with the Amtrak tickets, telling her that she had misled them into buying the Continental
Airlines tickets by misrepresenting that Amtrak was already fully booked. Fernando
reiterated his demand for a refund but Mager was firm in her position that the subject
tickets are non-refundable.
ISSUE:
Assuming that Continental Airlines, Inc. is bound by the acts of Holiday Travels
agents and employees, can the representation of Mager as to unavailability of seats at
Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloria in the
purchase of the subject tickets?

HELD:
No.
Even on the assumption that Continental Airlines, Inc., may be held liable for the
acts of Mager, still, Spouses Viloria are not entitled to a refund. Magers statement
cannot be considered a causal fraud that would justify the annulment of the subject

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contracts that would oblige Continental Airlines, Inc., to indemnify Spouses Viloria and
return the money they paid for the subject tickets.
Article 1390, in relation to Article 1391 of the Civil Code, provides that if the
consent of the contracting parties was obtained through fraud, the contract is
considered voidable and may be annulled within four (4) years from the time of the
discovery of the fraud. Once a contract is annulled, the parties are obliged under Article
1398 of the same Code to restore to each other the things subject matter of the
contract, including their fruits and interest. Under Article 1338 of the Civil Code, there is
fraud when, through insidious words or machinations of one of the contracting parties,
the other is induced to enter into a contract which, without them, he would not have
agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante),
not merely the incidental (dolo incidente), inducement to the making of the contract.
After meticulously poring over the records, this Court finds that the fraud alleged
by Spouses Viloria has not been satisfactorily established as causal in nature to warrant
the annulment of the subject contracts. In fact, Spouses Viloria failed to prove by clear
and convincing evidence that Magers statement was fraudulent. Specifically, Spouses
Viloria failed to prove that (a) there were indeed available seats at Amtrak for a trip to
New Jersey on August 13, 1997 at the time they spoke with Mager on July 21, 1997; (b)
Mager knew about this; and (c) that she purposely informed them otherwise.
This Court finds the only proof of Magers alleged fraud, which is Fernandos
testimony that an Amtrak had assured him of the perennial availability of seats at
Amtrak, to be wanting. As CAI correctly pointed out and as Fernando admitted, it was
possible that during the intervening period of three (3) weeks from the time Fernando
purchased the subject tickets to the time he talked to said Amtrak employee; other
passengers may have cancelled their bookings and reservations with Amtrak, making it
possible for Amtrak to accommodate them. Indeed, the existence of fraud cannot be
proved by mere speculations and conjectures. Fraud is never lightly inferred; it is good
faith that is. Under the Rules of Court, it is presumed that "a person is innocent of crime
or wrong" and that "private transactions have been fair and regular." Spouses Viloria
failed to overcome this presumption.

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VILLACERAN v. DE GUZMAN
G. R. No. 169055, February 22, 2012.
FACTS:
Josephine De Guzman filed a Complaint with the RTC of Echague, Isabela
against the spouses Jose and Milagros Villaceran and Far East Bank & Trust Company
(FEBTC), Santiago City Branch, for declaration of nullity of sale, reconveyance,
redemption of mortgage and damages with preliminary injunction. The complaint was
later amended to include annulment of foreclosure and Sheriffs Certificate of Sale. In
her Amended Complaint, De Guzman alleged that she is the registered owner of a
parcel of land covered by Transfer Certificate of Title (TCT) No. T-236168, located in
Echague, Isabela, having an area of 971 square meters and described as Lot 8412-B of
the Subdivision Plan Psd-93948. On April 17, 1995, she mortgaged the lot to the
Philippine National Bank (PNB) of Santiago City to secure a loan of P600, 000. In order

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to secure a bigger loan to finance a business venture, De Guzman asked Milagros

Villaceran to obtain an additional loan on her behalf. She executed a Special Power of
Attorney in favor of Milagros. Considering De Guzmans unsatisfactory loan record with
the PNB, Milagros suggested that the title of the property be transferred to her and Jose
Villaceran and they would obtain a bigger loan as they have a credit line of up to P5,
000, 000 with the bank.
On June 19, 1996, De Guzman executed a simulated Deed of Absolute Sale in
favor of the spouses Villaceran. On the same day, they went to the PNB and paid the
amount of P721, 891.67 using the money of the spouses Villaceran. The spouses
Villaceran registered the Deed of Sale and secured TCT No. T-257416 in their
names. Thereafter, they mortgaged the property with FEBTC Santiago City to secure a
loan of P1, 485, 000. However, the spouses Villaceran concealed the loan release from
De Guzman. Later, when De Guzman learned of the loan release, she asked for the
loan proceeds less the amount advanced by the spouses Villaceran to pay the PNB
loan. However, the spouses Villaceran refused to give the money stating that they are
already the registered owners of the property and that they would reconvey the property
to De Guzman once she returns the P721, 891.67 they paid to PNB.
De Guzman offered to pay P350, 000 provided that the spouses Villaceran would
execute a deed of reconveyance of the property.
The spouses Villaceran denied having executed a deed of conveyance in favor of
De Guzman relative to the subject property and asserted that the signatures appearing
on the September 6, 1996 Deed of Sale, which purported to sell the subject property
back to De Guzman, are not genuine but mere forgeries.
ISSUE:
Is the Deed of Sale dated June 19, 1996 a relative simulation of contract?
HELD:
Yes.
In the case at bar, there is a relative simulation of contract as the Deed of
Absolute Sale dated June 19, 1996 executed by De Guzman in favor of petitioners did
not reflect the true intention of the parties. The primary consideration in determining the
true nature of a contract is the intention of the parties. If the words of a contract appear
to contravene the evident intention of the parties, the latter shall prevail. Such intention
is determined not only from the express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties.

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Article 1345 of the Civil Code provides that the simulation of a contract may
either be absolute or relative. In absolute simulation, there is a colorable contract but it
has no substance as the parties have no intention to be bound by it. The main
characteristic of an absolute simulation is that the apparent contract is not really desired
or intended to produce legal effect or in any way alter the juridical situation of the
parties. As a result, an absolutely simulated or fictitious contract is void, and the parties
may recover from each other what they may have given under the contract. However, if
the parties state a false cause in the contract to conceal their real agreement, the
contract is only relatively simulated and the parties are still bound by their real
agreement. Hence, where the essential requisites of a contract are present and the
simulation refers only to the content or terms of the contract, the agreement is
absolutely binding and enforceable between the parties and their successors in interest.
It is worthy to note that both the RTC and the CA found that the evidence
established that the aforesaid document of sale was executed only to enable petitioners
to use the property as collateral for a bigger loan, by way of accommodating De
Guzman. Thus, the parties have agreed to transfer title over the property in the name of
petitioners who had a good credit line with the bank. The CA found it inconceivable for
De Guzman to sell the property for P75,000 as stated in the June 19, 1996 Deed of
Sale
when
petitioners
were
able
to
mortgage
the
property
with
FEBTC for P1,485,000. Another indication of the lack of intention to sell the property is
when a few months later, on September 6, 1996, the same property, this time already
registered in the name of petitioners, was reconveyed to De Guzman allegedly
for P350, 000.

DAVID v. MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC.

G. R. No. 194785, July 11, 2012.
FACTS:
Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric
Sales, a company engaged in the business of supplying electrical hardware including
transformers for rural electric cooperatives like respondent Misamis Occidental II
Electric Cooperative, Inc. (MOELCI), with principal office located in Ozamis City. To
solve its problem of power shortage affecting some areas within its coverage, MOELCI
expressed its intention to purchase a 10 MVA power transformer from David. For this
reason, its General Manager, Engr. Reynaldo Rada (Engr. Rada), went to meet David in
the latters office in Quezon City. David agreed to supply the power transformer
provided that MOELCI would secure a board resolution because the item would still
have to be imported.

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As stated in the proposal, the subject transformer, together with the basic
accessories, was valued at 5,200,000.00. It was also stipulated therein that 50% of the
purchase price should be paid as down payment and the remaining balance to be paid
upon delivery. Freight handling, insurance, customs duties, and incidental expenses
were for the account of the buyer.
When nothing was heard from MOELCI for sometime after the shipment,
Emanuel Medina (Medina), Davids Marketing Manager, went to Ozamiz City to check
on the shipment. Medina was able to confer with Engr. Rada who told him that the loan
was not yet released and asked if it was possible to withdraw the shipped items. Medina
agreed. When no payment was made after several months, Medina was constrained to
send a demand letter, dated September 15, 1993, which MOELCI duly received. Engr.
Rada replied in writing that the goods were still in the warehouse of William Lines again
reiterating that the loan had not been approved by NEA. This prompted Medina to head
back to Ozamiz City where he found out that the goods had already been released to
MOELCI evidenced by the shipping companys copy of the Bill of Lading which was
stamped Released, and with the notation that the arrastre charges in the amount of
5,095.60 had been paid. This was supported by a receipt of payment with the
corresponding cargo delivery receipt issued by the Integrated Port Services of Ozamiz,
Inc.
Demand letters were sent to MOELCI demanding the payment of the whole
amount plus the balance of previous purchases of other electrical hardware. Also, David
added that several statements of accounts were regularly sent through the mails by the
company which were never disputed by MOELCI.
ISSUES:
1. Whether or not there was a perfected contract of sale?
2. Whether or not there was a delivery that consummated the contract?
HELD:
1. Yes.
First, there was meeting of minds as to the transfer of ownership of the
subject matter. The letter (Exhibit A), though appearing to be a mere price
quotation/proposal, was not what it seemed. It contained terms and conditions,
so that, by the fact that Jimenez, Chairman of the Committee on Management,
and Engr. Rada, General Manager of MOELCI, had signed their names under the
word CONFORME, they, in effect, agreed with the terms and conditions with
respect to the purchase of the subject 10 MVA Power Transformer. As correctly

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argued by David, if their purpose was merely to acknowledge the receipt of the
proposal, they would not have signed their name under the word CONFORME.
Besides, the uncontroverted attending circumstances bolster the fact that
there was consent or meeting of minds in the transfer of ownership. To begin
with, a board resolution was issued authorizing the purchase of the subject
power transformer. Next, armed with the said resolution, top officials of MOELCI
visited Davids office in Quezon City three times to discuss the terms of the
purchase. Then, when the loan that MOELCI was relying upon to finance the
purchase was not forthcoming, MOELCI, through Engr. Rada, convinced David to
do away with the 50% downpayment and deliver the unit so that it could already
address its acute power shortage predicament, to which David acceded when it
made the delivery, through the carrier William Lines, as evidenced by a bill of
lading.
Second, the document specified a determinate subject matter which was
one (1) Unit of 10 MVA Power Transformer with corresponding KV Line
Accessories. And third, the document stated categorically the price certain in
money which was 5,200,000.00 for one (1) unit of 10 MVA Power Transformer
and 2,169,500.00 for the KV Line Accessories. In sum, since there was a
meeting of the minds, there was consent on the part of David to transfer
ownership of the power transformer to MOELCI in exchange for the price,
thereby complying with the first element. Thus, the said document cannot just be
considered a contract to sell but rather a perfected contract of sale.
2. Yes.
To begin with, among the terms and conditions of the proposal to which
MOELCI agreed stated:
2. Delivery Ninety (90) working days upon receipt of your purchase
order and down payment.
C&F Manila, freight, handling, insurance, custom duties and
incidental expenses shall be for the account of MOELCI II.
On this score, it is clear that MOELCI agreed that the power
transformer would be delivered and that the freight, handling, insurance,
custom duties, and incidental expenses shall be shouldered by it.
On the basis of this express agreement, Article 1523 of the Civil
Code becomes applicable. It provides:
Where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer delivery of

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the goods to a carrier, whether named by the buyer or not, for the
purpose of transmission to the buyer is deemed to be a delivery of
the goods to the buyer, except in the cases provided for in Article
1503, first, second and third paragraphs, or unless a contrary intent
appears.
Thus, the delivery made by David to William Lines, Inc., as
evidenced by the Bill of Lading, was deemed to be a delivery to
MOELCI. David was authorized to send the power transformer to
the buyer pursuant to their agreement. When David sent the item
through the carrier, it amounted to a delivery to MOELCI.

GOLDLOOP PROPERTIES INC., v. GSIS

G.R. No. 171076 August 1, 2012
FACTS:
The Government Service Insurance System (GSIS) owns a 2,411-square meter
(sq. m.) parcel of land located in ADB Avenue cor. Sapphire St., Ortigas Center, Pasig
City as well as the Philcomcen Building standing on a portion thereof. On June 16,
1995, GSIS and Goldloop executed a Memorandum of Agreement (MOA) whereby
Goldloop, at its own expense and account, would renovate the faade of the
Philcomcen Building as well as construct a condominium building on the 1,195 sq. m.
portion of said land. Goldloop also undertook to pay GSIS the amount of P
140,890,000.00 for the portion of the land on which the condominium building shall
stand to be remitted in eight installments within the four-year period following the
execution of the MOA. Said amount is apart from the guaranteed revenue of P 1,428.28
million that the parties would share when the project is already completed and the
condominium units sold. It was further agreed that should the gross sales of the

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condominium project exceed the said guaranteed revenue, GSIS would be entitled to
9.86% of the amount in excess of P 1,428.28 million and Goldloop, to the balance of
90.14%.
On June 18, 1996, the parties executed an Addendum to the Memorandum of
Agreement (Addendum) to include in the project the relocation of an existing
powerhouse and cistern tank within the site of the proposed condominium building. And
since by then Goldloop had yet to remit to GSIS the first and second installment
payments of the guaranteed amount, the Addendum also contained stipulations relative
thereto, to wit:
2. The parties agree that the expense items identified in Annex "C" 8 as A.1,
A.2.1, A.2.2., A.2.3., A.3.1., B.1 and B.2 are for the account of GSIS; while
expense items A.3.2. and B.3 are for the account of GOLDLOOP.
3. As a gesture of goodwill and in consideration for the waiver by GSIS of the
interest due from GOLDLOOP by reason of late payment of the first guaranteed
amount under Section 1.1. of the MOA, GOLDLOOP hereby agrees to absorb
expense Item C of Annex "C" hereof;
4. GOLDLOOP shall advance the payments of all the expense items due from
GSIS which shall, however be credited as full payment of its first guaranteed
installment and partial payment of the second guaranteed installment under
Section 1.1. of the MOA;
5. As further gesture of goodwill and as additional consideration for the waiver by
GSIS of the interest due from GOLDLOOP by reason of late payment of the first
guaranteed amount under Section 1.1 of the MOA, GOLDLOOP hereby agrees
not to charge the GSIS any interest for the amounts to be advanced by
GOLDLOOP in excess of the amount due as its first guaranteed installment;
6. In consideration of the undertakings of GOLDLOOP under Sections 3 and 5
hereof, the GSIS hereby waives in favor of GOLDLOOP the interest due from the
latter by reason of its late payment of the first guaranteed amount under Section
1.1 of the MOA.
Goldloop then performed the necessary preparatory works. It also formally
launched the project and conducted the pre-selling of the condominium units.
Unfortunately, construction could not proceed because Mayor Vicente P. Eusebio of
Pasig City refused to act on the applications for building permits filed in November 1996
and July 1997, claiming that GSIS owed Pasig City P54 million in unpaid real estate
taxes. The GSIS, for its part, through its then President and General Manager, Mr.
Cesar Sarino, claimed that GSIS is exempt from payment thereof by virtue of Republic

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Act (R.A.) No. 8291. Because of this impasse, Mayor Eusebio opted to hold in
abeyance any action on the applications for building permit until the issue on the tax
exemption provisions of R.A. No. 8291 shall have been settled by the court through a
petition for declaratory relief that Pasig City intended to file.
When Mr. Federico C. Pascual (Pascual) was subsequently appointed as the
new President and General Manager of GSIS, Goldloops President, Mr. Emmanuel R.
Zapanta (Zapanta), apprised him of the situation. Later, however, Goldloop received
from GSIS a letter dated November 23, 1998 informing it of a recommendation to
rescind the MOA. Zapanta thus wrote GSIS on December 2, 1998 and reiterated that
the work stoppage due to non-issuance of permit was not Goldloops fault. Assuring
GSIS that it would commence the project as soon as the issue on building permits is
resolved, Zapanta urged GSIS to reconsider its position. Despite this, GSIS still sent
Goldloop a notice of rescission dated February 23, 2000 stating that 30 days from the
latters receipt thereof, the MOA shall be deemed rescinded for Goldloops breach of its
obligations and commitments thereunder, specifically for failure to pay the guaranteed
amount of P 140,890,000.00 under Section 1.1 and pursuant to Sections 1.3 and 2.4 of
the MOA, viz:
Subsequently, GSIS sent Goldloop a letter dated April 27, 2000 informing it that
the MOA was already officially rescinded. It thus ordered Goldloop to vacate the
premises and clear the same of all debris, machineries and equipment within five days
from receipt thereof. Failing which, GSIS warned that it would undertake the same on
Goldloops account without responsibility on its part for any resulting loss or damage.
Because of this, Goldloop filed on May 17, 2000 a Complaint for Specific Performance
with Damages before the RTC of Pasay City against GSIS.
In its complaint, Goldloop belied GSISs claim that it has not paid the guaranteed
amount. Goldloop asserted it already shelled out the amount of P 68,890,593.70.
Goldloop also averred that it was ready, willing and able to perform all of its obligations
under the MOA as shown by the preparatory works it had undertaken. However,
because of the non-issuance of building permits by Mayor Eusebio, the project could
not push thru. Goldloop further alleged that GSIS made assurances that it would secure
the necessary permits but GSIS still failed to obtain the same. Goldloop also alleged
that GSIS delayed the issuance of notice to proceed despite repeated reminders from
Goldloop. Hence, Goldloop asserted that the rescission was without basis and clearly
made in bad faith. It therefore asked the RTC to declare the same as null and void, to
direct GSIS to comply with the provisions of the MOA and the Addendum, and to secure
all the necessary permits from Pasig City. It also prayed for actual damages of still
undetermined amount due to its alleged continuing character, exemplary damages of P
10 million, attorneys fees of P 500,000.00 and costs of suit.

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Flow:
RTC = Found Rescission without basis and damages as proper (Against GSIS)
CA = Reversed the ruling on the ground of use of the property free of charge by
Goldloop (Amounts to Unjust Enrichment)

ISSUE:
Goldloop faults the CA in rescinding the MOA and the Addendum, in extinguishing the
obligations of the parties relative thereto, in declaring that each party should bear its
own damage and, in discarding the findings of facts and conclusions of the RTC.

HELD:
Reciprocal obligations of the parties under the MOA. "Reciprocal obligations are those
which arise from the same cause, and which each party is a debtor and a creditor of the
other, such that the obligation of one is dependent upon the obligation of the other."
Here, the parties reciprocal obligations are embodied in Article I of the MOA. Clearly,
Goldloops obligation is to pay for the portion of the property on which the second tower
shall stand and to construct and develop thereon a condominium building. On the other
hand, GSIS is obliged to deliver to Goldloop the property free from all liens and
encumbrances and to execute a deed of absolute sale in Goldloops favor. However,
Goldloop failed to complete its payment of the guaranteed amount in the manner
prescribed in the contract.
The RTC ratiocinated that Goldloops failure to comply with the said obligation
was due to the non-issuance of permits. According to it, Goldloop experienced financial
difficulty when the construction did not push thru since it had to return the deposits,
some with interest, of would-be buyers and had already paid the commission of brokers
and agents of the condominium units, and these amounted to millions of pesos. Hence,
its failure to pay was justified.
While the Court is inclined to agree with the RTC that the non-issuance of
permits indeed affected Goldloops ability to pay, it cannot, however, ignore the fact that
Goldloop itself failed to avail of the protection granted to it by the MOA in case of failure
to obtain the necessary permits and licenses. Under the circumstances, Goldloop could
have applied for an extension within which to pay the installments of the guaranteed
amount as clearly provided for under the second and third paragraphs of said Sec. 1.1.
Yet again, the records are bereft of any showing that it ever availed of such extension.

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GSIS rescinded the contract pursuant to its right to rescind under the relevant
provisions of the MOA. However, GSIS likewise failed in its obligation to deliver the
property free from burden. GSIS is not entirely faultless. It also failed to comply with its
obligation, although it cannot be conclusively determined when it actually begun as the
same only became apparent to Goldloop after the execution of the MOA and the
Addendum. This was when the City of Pasig formally notified GSIS that it was holding in
abeyance any action on the latters application for building permits due to its
outstanding real estate taxes in the amount of P54 million. The fact that GSIS disputes
such tax liability because of its firm stand that it was tax exempt is beside the point.
What is plain is that the property was by then not free from burden since real estate
taxes were imposed upon it and these taxes remained unpaid. There was, therefore, on
the part of GSIS, a failure to comply with its obligation to deliver the property free from
burden.
In view of the rescission, mutual restitution is required. As correctly observed by
the RTC, the rescissory action taken by GSIS is pursuant to Article 1191 of the Civil
Code. In cases involving rescission under the said provision, mutual restitution is
required.The parties should be brought back to their original position prior to the
inception of the contract. "Accordingly, when a decree of rescission is handed down, it is
the duty of the court to require both parties to surrender that which they have
respectively received and to place each other as far as practicable in [their] original
situation."Pursuant to this, Goldloop should return to GSIS the possession and control
of the property subject of their agreements while GSIS should reimburse Goldloop
whatever amount it had received from the latter by reason of the MOA and the
Addendum.

LILIA B. ADA, LUZ B. ADANZA, FLORA C. BAYLON, REMO BAYLON, JOSE

BAYLON, ERIC BAYLON, FLORENTINO BAYLON, and MA. RUBY BAYLON, v.
FLORANTE BAYLON,
G.R. No. 182435 August 13, 2012
FACTS:
This case involves the estate of spouses Florentino Baylon and Maximina Elnas
Baylon (Spouses Baylon) who died on November 7, 1961 and May 5, 1974,
respectively. At the time of their death, Spouses Baylon were survived by their legitimate
children, namely, Rita Baylon (Rita), Victoria Baylon (Victoria), Dolores Baylon
(Dolores), Panfila Gomez (Panfila), Ramon Baylon (Ramon) and herein petitioner Lilia
B. Ada (Lilia).

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Dolores died intestate and without issue on August 4, 1976. Victoria died on
November 11, 1981 and was survived by her daughter, herein petitioner Luz B. Adanza.
Ramon died intestate on July 8, 1989 and was survived by herein respondent Florante
Baylon (Florante), his child from his first marriage, as well as by petitioner Flora Baylon,
his second wife, and their legitimate children, namely, Ramon, Jr. and herein petitioners
Remo, Jose, Eric, Florentino and Ma. Ruby, all surnamed Baylon.
On July 3, 1996, the petitioners filed with the RTC a Complaint for partition,
accounting and damages against Florante, Rita and Panfila. They alleged therein that
Spouses Baylon, during their lifetime, owned 43 parcels of land all situated in Negros
Oriental. After the death of Spouses Baylon, they claimed that Rita took possession of
the said parcels of land and appropriated for herself the income from the same. Using
the income produced by the said parcels of land, Rita allegedly purchased two parcels
of land, Lot No. 47096 and half of Lot No. 4706,7 situated in Canda-uay, Dumaguete
City. The petitioners averred that Rita refused to effect a partition of the said parcels of
land.
In their Answer, Florante, Rita and Panfila asserted that they and the petitioners
co-owned 229 out of the 43 parcels of land mentioned in the latters complaint, whereas
Rita actually owned 10 parcels of land 10 out of the 43 parcels which the petitioners
sought to partition, while the remaining 11 parcels of land are separately owned by
Petra Cafino Adanza,11 Florante,12 Meliton Adalia,13 Consorcia Adanza,14 Lilia15 and
Santiago Mendez.16 Further, they claimed that Lot No. 4709 and half of Lot No. 4706
were acquired by Rita using her own money. They denied that Rita appropriated solely
for herself the income of the estate of Spouses Baylon, and expressed no objection to
the partition of the estate of Spouses Baylon, but only with respect to the co-owned
parcels of land.
During the pendency of the case, Rita, through a Deed of Donation dated July 6,
1997, conveyed Lot No. 4709 and half of Lot No. 4706 to Florante. On July 16, 2000,
Rita died intestate and without any issue. Thereafter, learning of the said donation inter
vivos in favor of Florante, the petitioners filed a Supplemental Pleading dated February
6, 2002, praying that the said donation in favor of the respondent be rescinded in
accordance with Article 1381(4) of the Civil Code. They further alleged that Rita was
already sick and very weak when the said Deed of Donation was supposedly executed
and, thus, could not have validly given her consent thereto.
Florante and Panfila opposed the rescission of the said donation, asserting that
Article 1381(4) of the Civil Code applies only when there is already a prior judicial
decree on who between the contending parties actually owned the properties under
litigation.18

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ISSUE:
Whether or not the CA erred in ruling that the donation inter vivos of Lot No. 4709 and
half of Lot No. 4706 in favor of Florante may only be rescinded if there is already a
judicial determination that the same actually belonged to the estate of Spouses Baylon
HELD:
Although the gratuitous conveyance of the said parcels of land in favor of Florante was
valid, the donation inter vivos of the same being merely an exercise of ownership, Ritas
failure to inform and seek the approval of the petitioners or the RTC regarding the
conveyance gave the petitioners the right to have the said donation rescinded pursuant
to Article 1381(4) of the Civil Code. Rescission under Article 1381(4) of the Civil Code is
not preconditioned upon the judicial determination as to the ownership of the thing
subject of litigation. The petitioners right to institute the action for rescission pursuant to
Article 1381(4) of the Civil Code is not preconditioned upon the RTCs determination as
to the ownership of the said parcels of land.
It bears stressing that the right to ask for the rescission of a contract under Article
1381(4) of the Civil Code is not contingent upon the final determination of the ownership
of the thing subject of litigation. The primordial purpose of Article 1381(4) of the Civil
Code is to secure the possible effectivity of the impending judgment by a court with
respect to the thing subject of litigation. It seeks to protect the binding effect of a courts
impending adjudication vis--vis the thing subject of litigation regardless of which
among the contending claims therein would subsequently be upheld. Accordingly, a
definitive judicial determination with respect to the thing subject of litigation is not a
condition sine qua non before the rescissory action contemplated under Article 1381(4)
of the Civil Code may be instituted.
However, the need to determine ownership of the subject lands are necessary
since only the properties belonging to the Spouses Baylon may be subject to the RTCs
adjudication for partition.
SPS. FERNANDO and LOURDES VILORIA, v. CONTINENTAL AIRLINES, INC.
G.R. No. 188288 January 16, 2012
FACTS:
On or about July 21, 1997 and while in the United States, Fernando purchased
for himself and his wife, Lourdes, two (2) round trip airline tickets from San Diego,
California to Newark, New Jersey on board Continental Airlines. Fernando purchased
the tickets at US$400.00 each from a travel agency called "Holiday Travel" and was
attended to by a certain Margaret Mager (Mager). According to Spouses Viloria,

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Fernando agreed to buy the said tickets after Mager informed them that there were no
available seats at Amtrak, an intercity passenger train service provider in the United
States. Per the tickets, Spouses Viloria were scheduled to leave for Newark on August
13, 1997 and return to San Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to Newark to
an earlier date or August 6, 1997. Mager informed him that flights to Newark via
Continental Airlines were already fully booked and offered the alternative of a round trip
flight via Frontier Air. Since flying with Frontier Air called for a higher fare of US$526.00
per passenger and would mean traveling by night, Fernando opted to request for a
refund. Mager, however, denied his request as the subject tickets are non-refundable
and the only option that Continental Airlines can offer is the re-issuance of new tickets
within one (1) year from the date the subject tickets were issued. Fernando decided to
reserve two (2) seats with Frontier Air.
As he was having second thoughts on traveling via Frontier Air, Fernando went to
the Greyhound Station where he saw an Amtrak station nearby. Fernando made
inquiries and was told that there are seats available and he can travel on Amtrak
anytime and any day he pleased. Fernando then purchased two (2) tickets for
Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and confronted Mager with the
Amtrak tickets, telling her that she had misled them into buying the Continental Airlines
tickets by misrepresenting that Amtrak was already fully booked. Fernando reiterated
his demand for a refund but Mager was firm in her position that the subject tickets are
non-refundable.
Upon returning to the Philippines, Fernando sent a letter to CAI on February 11,
1998, demanding a refund and alleging that Mager had deluded them into purchasing
the subject tickets.

In a letter dated February 24, 1998, Continental Micronesia informed Fernando that his
complaint had been referred to the Customer Refund Services of Continental Airlines at
Houston, Texas. In a letter dated March 24, 1998, Continental Micronesia denied
Fernandos request for a refund and advised him that he may take the subject tickets to
any Continental ticketing location for the re-issuance of new tickets within two (2) years
from the date they were issued. Continental Micronesia informed Fernando that the
subject tickets may be used as a form of payment for the purchase of another
Continental ticket, albeit with a re-issuance fee.

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On June 17, 1999, Fernando went to Continentals ticketing office at Ayala

Avenue, Makati City to have the subject tickets replaced by a single round trip ticket to
Los Angeles, California under his name. Therein, Fernando was informed that Lourdes
ticket was non-transferable, thus, cannot be used for the purchase of a ticket in his
favor. He was also informed that a round trip ticket to Los Angeles was US$1,867.40 so
he would have to pay what will not be covered by the value of his San Diego to Newark
round trip ticket.
In a letter dated June 21, 1999, Fernando demanded for the refund of the subject
tickets as he no longer wished to have them replaced. In addition to the dubious
circumstances under which the subject tickets were issued, Fernando claimed that
CAIs act of charging him with US$1,867.40 for a round trip ticket to Los Angeles, which
other airlines priced at US$856.00, and refusal to allow him to use Lourdes ticket,
breached its undertaking under its March 24, 1998 letter.6
On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying
that CAI be ordered to refund the money they used in the purchase of the subject tickets
with legal interest from July 21, 1997 and to pay P1,000,000.00 as moral damages,
P500,000.00 as exemplary damages and P250,000.00 as attorneys fees.
CAI interposed the following defenses: (a) Spouses Viloria have no right to ask
for a refund as the subject tickets are non-refundable; (b) Fernando cannot insist on
using the ticket in Lourdes name for the purchase of a round trip ticket to Los Angeles
since the same is non-transferable; (c) as Mager is not a CAI employee, CAI is not
liable for any of her acts; (d) CAI, its employees and agents did not act in bad faith as to
entitle Spouses Viloria to moral and exemplary damages and attorneys fees. CAI also
invoked the following clause printed on the subject tickets:
3. To the extent not in conflict with the foregoing carriage and other services performed
by each carrier are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs,
(iii) carriers conditions of carriage and related regulations which are made part hereof
(and are available on application at the offices of carrier), except in transportation
between a place in the United States or Canada and any place outside thereof to which
tariffs in force in those countries apply.
According to CAI, one of the conditions attached to their contract of carriage is the nontransferability and non-refundability of the subject tickets.
Flow:
RTC = Spouses are entitled to refund plus damages on the ground of vitiated
consent in purchasing the ticket.

Contracts

CA = Reversed the decision stating that CAI and Mager was not established in
evidence to have principal-agent relationship.

ISSUES:
1. Does a principal-agent relationship exist between CAI and Holiday Travel?
2. Assuming that an agency relationship exists between CAI and Holiday Travel, is CAI
bound by the acts of Holiday Travels agents and employees such as Mager?
3. Assuming that CAI is bound by the acts of Holiday Travels agents and employees,
can the representation of Mager as to unavailability of seats at Amtrak be considered
fraudulent as to vitiate the consent of Spouse Viloria in the purchase of the subject
tickets?
4. Is CAI justified in insisting that the subject tickets are non-transferable and nonrefundable?

5. Is CAI justified in pegging a different price for the round trip ticket to Los Angeles
requested by Fernando?
6. Alternatively, did CAI act in bad faith or renege its obligation to Spouses Viloria to
apply the value of the subject tickets in the purchase of new ones when it refused to
allow Fernando to use Lourdes ticket and in charging a higher price for a round trip
ticket to Los Angeles?

HELD:
As to the First and Second: Out of the above given principles, sprung the creation and
acceptance of the relationship of agency whereby one party, called the principal
(mandante), authorizes another, called the agent (mandatario), to act for and in his
behalf in transactions with third persons. The essential elements of agency are: (1)
there is consent, express or implied of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agent acts as
a representative and not for himself, and (4) the agent acts within the scope of his
authority.

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Agency is basically personal, representative, and derivative in nature. The

authority of the agent to act emanates from the powers granted to him by his principal;
his act is the act of the principal if done within the scope of the authority. Qui facit per
alium facit se. "He who acts through another acts himself."
Contrary to the findings of the CA, all the elements of an agency exist in this
case. The first and second elements are present as CAI does not deny that it concluded
an agreement with Holiday Travel, whereby Holiday Travel would enter into contracts of
carriage with third persons on CAIs behalf. The third element is also present as it is
undisputed that Holiday Travel merely acted in a representative capacity and it is CAI
and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday
Travel on its behalf. The fourth element is also present considering that CAI has not
made any allegation that Holiday Travel exceeded the authority that was granted to it. In
fact, CAI consistently maintains the validity of the contracts of carriage that Holiday
Travel executed with Spouses Viloria and that Mager was not guilty of any fraudulent
misrepresentation. That CAI admits the authority of Holiday Travel to enter into
contracts of carriage on its behalf is easily discernible from its February 24, 1998 and
March 24, 1998 letters, where it impliedly recognized the validity of the contracts
entered into by Holiday Travel with Spouses Viloria. When Fernando informed CAI that
it was Holiday Travel who issued to them the subject tickets, CAI did not deny that
Holiday Travel is its authorized agent. However, the spouses failed to substantiate their
claim of principal-agent.

As to the Third: Article 1338 of the Civil Code provides that there is fraud when,
through insidious words or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not have agreed to. In
order that fraud may vitiate consent, it must be the causal (dolo causante), not merely
the incidental (dolo incidente), inducement to the making of the contract. The spouses
herein failed to establish through evidence the allegation of fraud by Mager.

As to Fourth, Fifth and Sixth: According to Spouses Viloria, CAI acted in bad faith
and breached the subject contracts when it refused to apply the value of Lourdes ticket
for Fernandos purchase of a round trip ticket to Los Angeles and in requiring him to pay
an amount higher than the price fixed by other airline companies.
In its March 24, 1998 letter, CAI stated that "non-refundable tickets may be used
as a form of payment toward the purchase of another Continental ticket for $75.00, per
ticket, reissue fee ($50.00, per ticket, for tickets purchased prior to October 30, 1997)."

Contracts

Clearly, there is nothing in the above-quoted section of CAIs letter from which
the restriction on the non-transferability of the subject tickets can be inferred. In fact, the
words used by CAI in its letter supports the position of Spouses Viloria, that each of
them can use the ticket under their name for the purchase of new tickets whether for
themselves or for some other person.
Moreover, as CAI admitted, it was only when Fernando had expressed his
interest to use the subject tickets for the purchase of a round trip ticket between Manila
and Los Angeles that he was informed that he cannot use the ticket in Lourdes name as
payment.
Contrary to CAIs claim, that the subject tickets are non-transferable cannot be
implied from a plain reading of the provision printed on the subject tickets stating that
"[t]o the extent not in conflict with the foregoing carriage and other services performed
by each carrier are subject to: (a) provisions contained in this ticket, x x x (iii) carriers
conditions of carriage and related regulations which are made part hereof (and are
available on application at the offices of carrier) x x x." As a common carrier whose
business is imbued with public interest, the exercise of extraordinary diligence requires
CAI to inform Spouses Viloria, or all of its passengers for that matter, of all the terms
and conditions governing their contract of carriage. CAI is proscribed from taking
advantage of any ambiguity in the contract of carriage to impute knowledge on its
passengers of and demand compliance with a certain condition or undertaking that is
not clearly stipulated. Since the prohibition on transferability is not written on the face of
the subject tickets and CAI failed to inform Spouses Viloria thereof, CAI cannot refuse to
apply the value of Lourdes ticket as payment for Fernandos purchase of a new ticket.
CAIs refusal to accept Lourdes ticket for the purchase of a new ticket for
Fernando is only a casual breach. Nonetheless, the right to rescind a contract for nonperformance of its stipulations is not absolute. The general rule is that rescission of a
contract will not be permitted for a slight or casual breach, but only for such substantial
and fundamental violations as would defeat the very object of the parties in making the
agreement. Whether a breach is substantial is largely determined by the attendant
circumstances.
Article 1192 of the Civil Code provides that in case both parties have committed a
breach of their reciprocal obligations, the liability of the first infractor shall be equitably
tempered by the courts.
However, the spouses failed to substantiate their claim of principal-agent. Thus,
the petition is denied.

Contracts

THE ROMAN CATHOLIC CHURCH v. REGINO PANT

G.R. No. 174118 April 11, 2012

FACTS:

Contracts

The Church, represented by the Archbishop of Caceres, owned a 32-square meter lot
that measured 2x16 meters located in Barangay Dinaga, Canaman, Camarines Sur. On
September 25, 1992, the Church contracted with respondent Regino Pante for the sale
of the lot (thru a Contract to Sell and to Buy) on the belief that the latter was an actual
occupant of the lot. The contract between them fixed the purchase price at P11,200.00,
with the initial P1,120.00 payable as down payment, and the remaining balance payable
in three years or until September 25, 1995.

On June 28, 1994, the Church sold in favor of the spouses Nestor and Fidela Rubi
(spouses Rubi) a 215-square meter lot that included the lot previously sold to Pante.
The spouses Rubi asserted their ownership by erecting a concrete fence over the lot
sold to Pante, effectively blocking Pante and his familys access from their family home
to the municipal road. As no settlement could be reached between the parties, Pante
instituted with the RTC an action to annul the sale between the Church and the spouses
Rubi, insofar as it included the lot previously sold to him.

The Church filed its answer with a counterclaim, seeking the annulment of its contract
with Pante. The Church alleged that its consent to the contract was obtained by fraud
when Pante, in bad faith, misrepresented that he had been an actual occupant of the lot
sold to him, when in truth, he was merely using the 32-square meter lot as a
passageway from his house to the town proper. It contended that it was its policy to sell
its lots only to actual occupants. Since the spouses Rubi and their predecessors-ininterest have long been occupying the 215-square meter lot that included the 32-square
meter lot sold to Pante, the Church claimed that the spouses Rubi were the rightful
buyers.

Flow:
RTC = Consent of Church was vitiated on account of Pantes misrepresentation
CA = Reversed the RTC decision
ISSUE:
Whether or not the sellers consent was vitiated by Pantes misrepresentation

HELD:

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No misrepresentation existed vitiating the sellers consent and invalidating the contract
Article 1331. In order that mistake may invalidate consent, it should refer to the
substance of the thing which is the object of the contract, or to those conditions which
have principally moved one or both parties to enter into the contract.
Mistake as to the identity or qualifications of one of the parties will vitiate consent only
when such identity or qualifications have been the principal cause of the contract.
A simple mistake of account shall give rise to its correction.

For mistake as to the qualification of one of the parties to vitiate consent, two requisites
must concur:
1. The mistake must be either with regard to the identity or with regard to the
qualification of one of the contracting parties; and
2. The identity or qualification must have been the principal consideration for the
celebration of the contract.16

In the present case, the Church contends that its consent to sell the lot was given
on the mistaken impression arising from Pantes fraudulent misrepresentation that he
had been the actual occupant of the lot. Willful misrepresentation existed because of its
policy to sell its lands only to their actual occupants or residents. Thus, it considers the
buyers actual occupancy or residence over the subject lot a qualification necessary to
induce it to sell the lot.
Contrary to the Churchs contention, the actual occupancy or residency of a
buyer over the land does not appear to be a necessary qualification that the Church
requires before it could sell its land. Had this been indeed its policy, then neither Pante
nor the spouses Rubi would qualify as buyers of the 32-square meter lot, as none of
them actually occupied or resided on the lot. We note in this regard that the lot was only
a 2x16-meter strip of rural land used as a passageway from Pantes house to the
municipal road.
We find it unlikely that Pante could successfully misrepresent himself as the
actual occupant of the lot; this was a fact that the Church (which has a parish chapel in
the same barangay where the lot was located) could easily verify had it conducted an
ocular inspection of its own property. The surrounding circumstances actually indicate
that the Church was aware that Pante was using the lot merely as a passageway.

Contracts

The records further reveal that the sales of the Churchs lots were made after a
series of conferences with the occupants of the lots. The then parish priest of Canaman,
Fr. Marcaida, was apparently aware that Pante was not an actual occupant, but
nonetheless, he allowed the sale of the lot to Pante, subject to the approval of the
Archdioceses Oeconomous. Relying on Fr. Marcaidas recommendation and finding
nothing objectionable, Fr. Ragay (the Archdioceses Oeconomous) approved the sale to
Pante.
The above facts, in our view, establish that there could not have been a
deliberate, willful, or fraudulent act committed by Pante that misled the Church into
giving its consent to the sale of the subject lot in his favor. That Pante was not an actual
occupant of the lot he purchased was a fact that the Church either ignored or waived as
a requirement. In any case, the Church was by no means led to believe or do so by
Pantes act; there had been no vitiation of the Churchs consent to the sale of the lot to
Pante.
The Rule on Double Sale (Article 1544 of the New Civil Code) now applies to
resolve the conflict between Spouses Rubi and Pante.

VIRGILIO S. DAVID v. MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE, INC.

G.R. No. 194785 July 11, 2012

Contracts

FACTS:
Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric
Sales, a company engaged in the business of supplying electrical hardware including
transformers for rural electric cooperatives like respondent Misamis Occidental II
Electric Cooperative, Inc. (MOELCI), with principal office located in Ozamis City.
To solve its problem of power shortage affecting some areas within its coverage,
MOELCI expressed its intention to purchase a 10 MVA power transformer from David.
For this reason, its General Manager, Engr. Reynaldo Rada (Engr. Rada), went to meet
David in the latters office in Quezon City. David agreed to supply the power transformer
provided that MOELCI would secure a board resolution because the item would still
have to be imported.
On June 8, 1992, Engr. Rada and Director Jose Jimenez (Jimenez), who was incharge of procurement, returned to Manila and presented to David the requested board
resolution which authorized the purchase of one 10 MVA power transformer. In turn,
David presented his proposal for the acquisition of said transformer. This proposal was
the same proposal that he would usually give to his clients.
After the reading of the proposal and the discussion of terms, David instructed
his then secretary and bookkeeper, Ellen M. Wong, to type the names of Engr. Rada
and Jimenez at the end of the proposal. Both signed the document under the word
"conforme." The board resolution was thereafter attached to the proposal.
As stated in the proposal, the subject transformer, together with the basic
accessories, was valued at P5,200,000.00. It was also stipulated therein that 50% of the
purchase price should be paid as downpayment and the remaining balance to be paid
upon delivery. Freight handling, insurance, customs duties, and incidental expenses
were for the account of the buyer.
The Board Resolution, on the other hand, stated that the purchase of the said
transformer was to be financed through a loan from the National Electrification
Administration (NEA). As there was no immediate action on the loan application, Engr.
Rada returned to Manila in early December 1992 and requested David to deliver the
transformer to them even without the required downpayment. David granted the request
provided that MOELCI would pay interest at 24% per annum. Engr. Rada acquiesced to
the condition. On December 17, 1992, the goods were shipped to Ozamiz City via
William Lines. In the Bill of Lading, a sales invoice was included which stated the
agreed interest rate of 24% per annum.
When nothing was heard from MOELCI for sometime after the shipment,
Emanuel Medina (Medina), Davids Marketing Manager, went to Ozamiz City to check

Contracts

on the shipment. Medina was able to confer with Engr. Rada who told him that the loan
was not yet released and asked if it was possible to withdraw the shipped items. Medina
agreed.
When no payment was made after several months, Medina was constrained to
send a demand letter, dated September 15, 1993, which MOELCI duly received. Engr.
Rada replied in writing that the goods were still in the warehouse of William Lines again
reiterating that the loan had not been approved by NEA. This prompted Medina to head
back to Ozamiz City where he found out that the goods had already been released to
MOELCI evidenced by the shipping companys copy of the Bill of Lading which was
stamped "Released," and with the notation that the arrastre charges in the amount of
P5,095.60 had been paid. This was supported by a receipt of payment with the
corresponding cargo delivery receipt issued by the Integrated Port Services of Ozamiz,
Inc.
Subsequently, demand letters were sent to MOELCI demanding the payment of
the whole amount plus the balance of previous purchases of other electrical hardware.
Aside from the formal demand letters, David added that several statements of accounts
were regularly sent through the mails by the company and these were never disputed
by MOELCI.
On February 17, 1994, David filed a complaint for specific performance with
damages with the RTC

ISSUES:
1. Whether or not there was a perfected contract of sale
2. Whether or not there was a delivery that consummated the contract

HELD:
As to the First: An examination of the alleged contract to sell, "Exhibit A," despite its
unconventional form, would show that said document, with all the stipulations therein
and with the attendant circumstances surrounding it, was actually a Contract of Sale.
The rule is that it is not the title of the contract, but its express terms or stipulations that
determine the kind of contract entered into by the parties.12 First, there was meeting of
minds as to the transfer of ownership of the subject matter. The letter (Exhibit A), though
appearing to be a mere price quotation/proposal, was not what it seemed. It contained
terms and conditions, so that, by the fact that Jimenez, Chairman of the Committee on

Contracts

Management, and Engr. Rada, General Manager of MOELCI, had signed their names
under the word "CONFORME," they, in effect, agreed with the terms and conditions with
respect to the purchase of the subject 10 MVA Power Transformer. As correctly argued
by David, if their purpose was merely to acknowledge the receipt of the proposal, they
would not have signed their name under the word "CONFORME."
Besides, the uncontroverted attending circumstances bolster the fact that there
was consent or meeting of minds in the transfer of ownership. To begin with, a board
resolution was issued authorizing the purchase of the subject power transformer. Next,
armed with the said resolution, top officials of MOELCI visited Davids office in Quezon
City three times to discuss the terms of the purchase. Then, when the loan that MOELCI
was relying upon to finance the purchase was not forthcoming, MOELCI, through Engr.
Rada, convinced David to do away with the 50% downpayment and deliver the unit so
that it could already address its acute power shortage predicament, to which David
acceded when it made the delivery, through the carrier William Lines, as evidenced by a
bill of lading.
Second, the document specified a determinate subject matter which was one (1)
Unit of 10 MVA Power Transformer with corresponding KV Line Accessories. And third,
the document stated categorically the price certain in money which was P5,200,000.00
for one (1) unit of 10 MVA Power Transformer and P2,169,500.00 for the KV Line
Accessories.
In sum, since there was a meeting of the minds, there was consent on the part of David
to transfer ownership of the power transformer to MOELCI in exchange for the price,
thereby complying

SEVERINO M. MANOTOK IV et al. v. HEIRS OF HOMER L. BARQUE,

rep. by TERESITA BARQUE HERNANDEZ

Contracts

G.R. Nos. 162335 & 162605

March 6, 2012

FACTS:
Covered by Lot 823, the Piedad estate is a friar land nestled in the barrios of
Capitol Hills, Old Balara, Culiat and the posh Ayala Heights in Quezon City, with a
market value pegged at P4 billion. Claiming ownership of the land were the heirs of
Severino Manotok IV and those of Homer Barque and Felicitas Manahan.
The Barques filed a petition for administrative reconstitution of TCT No. 210177
issued in the name of their predecessor, Homer L. Barque, which was allegedly
destroyed in the fire that gutted the Quezon City Hall, including the Office of the
Register of Deeds of Quezon City, sometime in 1988.
The Manotoks filed their opposition to the Barques petition, claiming that the lot
covered by the title sought to be reconstituted by the latter forms part of the land
covered by the formers own reconstituted title, TCT No. RT-22481, and alleging that
TCT No. 210177 in the name of Homer L. Barque is spurious.
On June 30, 1997, the reconstituting officer denied the reconstitution of TCT No.
210177 on grounds that the two lots covered by the Barques title appear to duplicate
the lot covered by the Manotoks own reconstituted title; and that the Barques plan, Fls3168-D, is a spurious document.
On appeal by the Barques, the LRA reversed the reconstituting officer and
ordered that reconstitution of the Barques title be given due course, but only after the
Manotoks own title has been cancelled upon order of a court of competent jurisdiction.
The parties separately appealed to the CA. The two divisions of the CA where
the cases landed similarly modified the LRA decision, ordering the Register of Deeds of
Quezon City to cancel the Manotoks title without a direct proceeding with the RTC, and
directing the LRA to reconstitute the Barques' title.

ISSUE:
Who is the real owner of the subject parcels of land?

HELD:

Contracts

In a 32-page resolution penned by Associate Justice Martin Villarama Jr., the

Court en banc junked the separate motions for reconsideration filed by claimants,
putting an end to the 20 years of legal battle over the parcels of land.
The majority ruling upheld the recommendations made by the Court of Appeals
(CA) that declared the Manotok's title as null and void, while the subject property is still
part of the property of the government. On the other hand, the SC ruled that the
Barque's claim of ownership was anchored on fake and spurious documents.
The CA earlier said that none of the parties were able to prove a valid acquisition
of Lot 823 of the Piedad estate from the government in accordance with the provisions
of Act 1120, or the "Friar Lands Act."
Due to the "serious flaws" in the title produced by Severino Manotok that were
brought to light during the reconstitution proceedings, the CA deemed it proper to give
all the parties full opportunity to present more evidence, and in particular, for the
Manotoks to prove their presumed just title over the property, which is also claimed by
the Barques and the Manahans.
"As it turned out, none of the parties were able to establish by clear and
convincing evidence a valid alienation from the government of the subject friar land. The
declaration of ownership in favor of the government was but the logical consequence of
such finding," the SC ruled.
The High Court further noted that the Manotoks failed to prove the existence of
sale certificate in the records of the Department of Environment and Natural ResourcesLand Management Bureau (DENR LMB).
Likewise, the SC noted that the approval of the then Secretary of Agriculture and
Commerce as required by Section 18 of the Act 112 is lacking in the deed of
conveyances of the Manotoks. This provision states that: "No lease or sale made by the
Chief of the Bureau of Public Lands under the provisions of this Act shall be valid until
approved by the Secretary of the Interior."
"We, thus held that no legal right over the subject friar land can be recognized in
favor of the Manotoks... in the absence of the certificate of sale duly signed by the
Director of Lands and approved by the Secretary of Agriculture and Natural Resources,"
the Court ruled.

P.L. UY REALTY CORPORATION vs. ALS MANAGEMENT AND DEVELOPMENT

CORPORATION and ANTONIO S. LITONJUA

Contracts

G.R. No. 166462

October 24, 2012

FACTS:
On September 3, 1980, PLU, as vendor, and ALS, as vendee, executed a Deed
of Absolute Sale with Mortgage6covering a parcel of land, registered under Transfer
Certificate of Title (TCT) No. 16721, in the name of petitioner and located at F.
Blumentritt Street, Mandaluyong, Metro Manila. The purchase price for the land was set
at PhP 8,166,705 payable in instalment basis. Notably, the parties stipulated in
paragraph 4.a of the Deed of Absolute Sale with Mortgage on the eviction of informal
settlers by the Vendor and that the Vendee is authorized to withhold payment of the 1st
24% installment unless the above-undertaking is done and completed to the satisfaction
of the vendee.
On January 26, 1981, TCT No. 16721 was canceled and a new one, TCT No.
26048, issued in the name of ALS. Subsequently, the parties executed a Partial Release
of Mortgage dated April 3, 1981 14 attesting to the payment by ALS of the first installment
indicated in the underlying deed. ALS, however, failed to pay the 2nd payment despite
demands.
Thus, on August 25, 1982, PLU filed a Complaint 16 against ALS for Foreclosure of
Mortgage and Annulment of Documents. the Makati RTC rendered a Decision 21 ruling
that because informal settlers still occupied 28% of the property, the condition, as to
their eviction, had not yet been complied with. 23 For this reason, the Makati RTC found
the obligation of ALS to pay the balance of the purchase price has not yet fallen due and
demandable; thus, it dismissed the case for being premature. An appeal was made to
the CA which eventually affirmed the decision of the RTC. Sometime thereafter, PLU
again filed a Complaint dated November 12, 1990 29 against ALS for Judicial Foreclosure
of Real Estate Mortgage under Rule 68, before the RTC, Branch 156 in Pasig City
(Pasig RTC). Just like the Makati RTC in Civil Case No. 47438, the Pasig RTC found
that the payment of the installments has not yet become due and demandable as the
suspensive condition, the ejection of the informal settlers on the property, has not yet
occurred.
ISSUE:
Whether or not the fulfillment of the conditional obligation to pay the subsequent
installment depends upon the sole will or exclusive will of the defendant-buyer.
HELD:
Art. 1306 of the Civil Code guarantees the freedom of parties to stipulate the
terms of their contract provided that they are not contrary to law, morals, good customs,
public order, or public policy. Here, both parties knew for a fact that the property subject
of their contract was occupied by informal settlers, whose eviction would entail court

Contracts

actions that in turn, would require some amount of time. They also knew that the length
of time that would take to conclude such court actions was not within their power to
determine. Despite such knowledge, both parties still agreed to the stipulation that the
payment of the balance of the purchase price will be deferred until the informal settlers
are ejected. Thus, PLU cannot be allowed to renege on its agreement. The parties
intended the performance of the obligation until the squatters are duly evicted.

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HEIRS OF DR. MARIO S. INTAC and ANGELINA MENDOZA-INTAC v. COURT OF

APPEALS and SPOUSES MARCELO ROY, JR. and JOSEFINA MENDOZA-ROY and
SPOUSES DOMINADOR LOZADA and MARTINA MENDOZA-LOZADA
G.R. No. 173211

October 11, 2012

FACTS:
Ireneo Mendoza (Ireneo), married to Salvacion Fermin (Salvacion), was the
owner of the subject property. When he was still alive, Ireneo, also took care of his
niece, Angelina, since she was three years old until she got married. The property was
then covered by TCT No. 106530 of the Registry of Deeds of Quezon City.
When Ireneo was still alive, Spouses Intac borrowed the title of the property (TCT
No. 106530) from him to be used as collateral for a loan from a financing institution; that
when Ireneo informed respondents about the request of Spouses Intac, the children of
Ireneo objected because the title would be placed in the names of said spouses and it
would then appear that the couple owned the property; that Ireneo, however, tried to
appease them, telling them not to worry because Angelina would not take advantage of
the situation considering that he took care of her for a very long time; that during his
lifetime, he informed them that the subject property would be equally divided among
them after his death; and that respondents were the ones paying the real estate taxes
over said property.
Despite the sale, Ireneo and his family, including the respondents, continued
staying in the premises and paying the realty taxes. After Ireneo died intestate in 1982,
his widow and the respondents remained in the premises. 3 After Salvacion died,
respondents still maintained their residence there. Up to the present, they are in the
premises, paying the real estate taxes thereon, leasing out portions of the property, and
collecting the rentals.4
The controversy arose when respondents sought the cancellation of TCT No.
242655, claiming that the sale was only simulated and, therefore, void. Spouses Intac
resisted, claiming that it was a valid sale for a consideration.
ISSUE:
Whether or not the sale is simulated.
HELD:
In a contract of sale, its perfection is consummated at the moment there is a
meeting of the minds upon the thing that is the object of the contract and upon the price.
If the parties state a false cause in the contract to conceal their real agreement, the

Contracts

contract is only relatively simulated and the parties are still bound by their real
agreement. In absolute simulation, there is a colorable contract but it has no substance
as the parties have no intention to be bound by it. The main characteristic of an
absolute simulation is that the apparent contract is not really desired or intended to
produce legal effect or in any way alter the juridical situation of the parties. As a result,
an absolutely simulated or fictitious contract is void, and the parties may recover from
each other what they may have given under the contract.
In the case at bench, no valid sale of the subject property actually took place
between the alleged vendors, Ireneo and Salvacion; and the alleged vendees, Spouses
Intac. There was simply no consideration and no intent to sell it. Marietto, a witness to
the execution of the absolute deed of sale, testified that Ireneo personally told him that
he was going to execute a document of sale because Spouses Intac needed to borrow
the title to the property and use it as collateral for their loan application. Aside from the
plain denial, petitioners could not show any tangible evidence of any payment therefor.
Their failure to prove their payment only strengthened Mariettos story that there was no
payment made because Ireneo had no intention to sell.

Contracts

EDUARDO M. COJUANGCO, JR. v. REPUBLIC OF THE PHILIPPINES

G.R. No. 180705

November 27, 2012

FACTS:
The instant recourse seeks to reverse the Partial Summary Judgment of the antigraft court dated July 11, 2003, as reiterated in a Resolution of December 28, 2004.
Relevant to this petition are two deeds. The first one was simply denominated as
Agreement, dated May 1975, entered into by and between Cojuangco for and in his
behalf and in behalf of "certain other buyers", and Pedro Cojuangco in which the former
was purportedly accorded the option to buy 72.2% of FUBs outstanding capital stock.
The second but related contract, dated May 25, 1975, was denominated as Agreement
for the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the
Philippines. It had PCA, for itself and for the benefit of the coconut farmers, purchase
from Cojuangco the shares of stock subject of the First Agreement for PhP200.00 per
share.
On July 11, 2003 the Sandiganayan rendered a Partial Summary Judgment and
among the declarations therein is the finding that the questioned transfer of the shares
of stock of FUB (later UCPB) by PCA to defendant Cojuangco or the so-called
"Cojuangco UCPB shares" which cost the PCA more than Ten Million Pesos in CCSF in
1975, we declare, that the transfer of the following FUB/UCPB shares to defendant
Eduardo M. Cojuangco, Jr. was not supported by valuable consideration, and therefore
null and void. That the mentioned shares of stock of the FUB/UCPB transferred to
defendant Cojuangco are declared conclusively owned by the plaintiff Republic of the
Philippines.
ISSUE:
Whether or not the pca-cojuangco agreement is a valid contract for having the
requisite consideration.
HELD:
Yes.
After a circumspect study, the Court finds as inconclusive the evidence relied
upon by Sandiganbayan to support its ruling that the PCA-Cojuangco Agreement is
devoid of sufficient consideration.
Under Section 3, Rule 131 of the Rules of Court, the following are disputable
presumptions: (1) private transactions have been fair and regular; (2) the ordinary
course of business has been followed; and (3) there was sufficient consideration for a
contract. A presumption may operate against an adversary who has not introduced
proof to rebut it. The effect of a legal presumption upon a burden of proof is to create
the necessity of presenting evidence to meet the legal presumption or the prima facie

Contracts

case created thereby, and which if no proof to the contrary is presented and offered, will
prevail. The burden of proof remains where it is, but by the presumption, the one who
has that burden is relieved for the time being from introducing evidence in support of the
averment, because the presumption stands in the place of evidence unless rebutted.
The presumption that a contract has sufficient consideration cannot be
overthrown by the bare uncorroborated and self-serving assertion of petitioners that it
has no consideration. To overcome the presumption of consideration, the alleged lack of
consideration must be shown by preponderance of evidence.
The assumption that ample consideration is present in a contract is further
elucidated in Pentacapital Investment Corporation v. Mahinay:
Under Article 1354 of the Civil Code, it is presumed that consideration exists and
is lawful unless the debtor proves the contrary. Moreover, under Section 3, Rule 131 of
the Rules of Court, the following are disputable presumptions: (1) private transactions
have been fair and regular; (2) the ordinary course of business has been followed; and
(3) there was sufficient consideration for a contract. A presumption may operate against
an adversary who has not introduced proof to rebut it. The effect of a legal presumption
upon a burden of proof is to create the necessity of presenting evidence to meet the
legal presumption or the prima facie case created thereby, and which, if no proof to the
contrary is presented and offered, will prevail. The burden of proof remains where it is,
but by the presumption, the one who has that burden is relieved for the time being from
introducing evidence in support of the averment, because the presumption stands in the
place of evidence unless rebutted.
The Sandiganbayan, however, pointed to the perceived "lack of any pecuniary
value or advantage to the government of the said option, which could compensate for
the generous payment to him by PCA of valuable shares of stock, as stipulated in the
May 25, 1975 Agreement between him and the PCA."
Inadequacy of the consideration, however, does not render a contract void under
Article 1355 of the Civil Code:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall
not invalidate a contract, unless there has been fraud, mistake or undue influence.

WILLEM BEUMER, vs. AVELINA AMORES

G.R. No. 195670
December 3, 2012

Contracts

FACTS:
Petitioner, a Dutch National, and respondent, a Filipina, married in March 29, 1980.
After several years, their marriage was declared a nullity on the basis of the formers
psychological incapacity under Article 36 of the Family Code. Consequently, petitioner
filed a Petition for Dissolution of Conjugal Partnership dated December 14, 2000
praying for the distribution of properties claimed to have been acquired during the
subsistence of their marriage, by purchase and by inheritance.
In defense, respondent averred that, with the exception of their two (2) residential
houses on Lots 1 and 2142, she and petitioner did not acquire any conjugal properties
during their marriage, the truth being that she used her own personal money to
purchase Lots 1, 2142, 5845 and 4 out of her personal funds and Lots 2055-A and
2055-I by way of inheritance.

ISSUE:
Whether or not petitioner is entitled to reimbursement for the purchase of the lots during
his marriage with respondent.

HELD:
The petition lacks merit.
The issue to be resolved is not of first impression. In In Re: Petition For Separation of
Property-Elena Buenaventura Muller v. Helmut Muller the Court had already denied a
claim for reimbursement of the value of purchased parcels of Philippine land instituted
by a foreigner Helmut Muller, against his former Filipina spouse, Elena Buenaventura
Muller. It held that Helmut Muller cannot seek reimbursement on the ground of equity
where it is clear that he willingly and knowingly bought the property despite the
prohibition against foreign ownership of Philippine land enshrined under Section 7,
Article XII of the 1987 Philippine Constitution which reads:
Section 7. Save in cases of hereditary succession, no private lands shall be transferred
or conveyed except to individuals, corporations, or associations qualified to acquire or
hold lands of the public domain.
Undeniably, petitioner openly admitted that he "is well aware of the above-cited
constitutional prohibition" and even asseverated that, because of such prohibition, he

Contracts

and respondent registered the subject properties in the latters name. Clearly,
petitioners actuations showed his palpable intent to skirt the constitutional prohibition.
On the basis of such admission, the Court finds no reason why it should not apply the
Muller ruling and accordingly, deny petitioners claim for reimbursement.
In any event, the Court cannot, even on the grounds of equity, grant reimbursement to
petitioner given that he acquired no right whatsoever over the subject properties by
virtue of its unconstitutional purchase. It is well-established that equity as a rule will
follow the law and will not permit that to be done indirectly which, because of public
policy, cannot be done directly. Surely, a contract that violates the Constitution and the
law is null and void, vests no rights, creates no obligations and produces no legal effect
at all. Corollary thereto, under Article 1412 of the Civil Code, petitioner cannot have the
subject properties deeded to him or allow him to recover the money he had spent for the
purchase thereof. The law will not aid either party to an illegal contract or agreement; it
leaves the parties where it finds them. Indeed, one cannot salvage any rights from an
unconstitutional transaction knowingly entered into.
Neither can the Court grant petitioners claim for reimbursement on the basis of unjust
enrichment. As held in Frenzel v. Catito, a case also involving a foreigner seeking
monetary reimbursement for money spent on purchase of Philippine land, the provision
on unjust enrichment does not apply if the action is proscribed by the Constitution, to
wit:
Futile, too, is petitioner's reliance on Article 22 of the New Civil Code which reads:
Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him.1wphi1
The provision is expressed in the maxim: "MEMO CUM ALTERIUS DETER
DETREMENTO PROTEST" (No person should unjustly enrich himself at the expense of
another). An action for recovery of what has been paid without just cause has been
designated as an accion in rem verso. This provision does not apply if, as in this case,
the action is proscribed by the Constitution or by the application of the pari delicto
doctrine. It may be unfair and unjust to bar the petitioner from filing an accion in rem
verso over the subject properties, or from recovering the money he paid for the said
properties, but, as Lord Mansfield stated in the early case of Holman v. Johnson: "The
objection that a contract is immoral or illegal as between the plaintiff and the defendant,
sounds at all times very ill in the mouth of the defendant. It is not for his sake, however,
that the objection is ever allowed; but it is founded in general principles of policy, which
the defendant has the advantage of, contrary to the real justice, as between him and the
plaintiff." (Citations omitted)

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ROBERN DEVELOPMENT CORPORATION and RODOLFO M. BERNARDO, JR.,

v. PEOPLE'S LANDLESS ASSOCIATION represented by FLORIDA RAMOS and
NARDO LABORA
G.R. No. 173622

March 11, 2013

FACTS:
Al-Amanah owned a 2000-square meter lot. On December 12, 1992, Al-Amanah Davao
Branch, thru its officer-in-charge Febe O. Dalig (OIC Dalig), asked some of the
members of PELA to desist from building their houses on the lot and to vacate the
same, unless they are interested to buy it. The informal settlers thus expressed their
interest to buy the lot at P100.00 per square meter, which Al-Amanah turned down for
being far below its asking price. Consequently, Al-Amanah reiterated its demand to the
informal settlers to vacate the lot.
In a letter dated March 18, 1993, the informal settlers together with other members
comprising PELA offered to purchase the lot for P300,000.00, half of which shall be paid
as down payment and the remaining half to be paid within one year. In the lower portion
of the said letter, Al-Amanah made the following annotation:
Note:
Subject offer has been acknowledged/received but processing to take effect upon
putting up of the partial amt. of P150,000.00 on or before April 15, 1993.
By May 3, 1993, PELA had deposited P150,000.00 as evidenced by four bank
receipts. For the first three receipts, the bank labelled the payments as "Partial deposit
on sale of TCT No. 138914", while it noted the 4th receipt as "Partial/Full payment on
deposit on sale of A/asset TCT No. 138914."
In the meantime, the PELA members remained in the property and introduced further
improvements. On November 29, 1993, Al-Amanah, thru Davao Branch Manager
Abraham D. Ututalum-Al Haj, wrote then PELA President Bonifacio Cuizon, Sr.
informing him of the Head Offices disapproval of PELAs offer to buy the said 2,000square meter lot. On the other hand, PELA members claimed there was already a sale
based on the banks offer.

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ISSUE:
Whether or not there was a perfected contract of sale.

HELD:
There was no perfected sale between Al- Amanah and PELA.
In sale, "When there is merely an offer by one party without acceptance of the other,
there is no contract." The decision to accept a bidders proposal must be communicated
to the bidder. However, a binding contract may exist between the parties whose minds
have met, although they did not affix their signatures to any written document, as
acceptance may be expressed or implied. It "can be inferred from the contemporaneous
and subsequent acts of the contracting parties."
It is thus undisputed, and PELA even acknowledges, that OIC Dalig made it clear that
the acceptance of the offer, notwithstanding the deposit, is subject to the approval of the
Head Office. Recognizing the corporate nature of the bank and that the power to sell its
real properties is lodged in the higher authorities, 65 she never falsely represented to the
bidders that she has authority to sell the banks property. And regardless of PELAs
insistence that she execute a written agreement of the sale, she refused and told PELA
to wait for the decision of the Head Office, making it clear that she has no authority to
execute any deed of sale.
Contracts undergo three stages: "a) negotiation which begins from the time the
prospective contracting parties indicate interest in the contract and ends at the moment
of their agreement[; b) perfection or birth, x x x which takes place when the parties
agree upon all the essential elements of the contract x x x; and c) consummation, which
occurs when the parties fulfill or perform the terms agreed upon, culminating in the
extinguishment thereof."
In the case at bench, the transaction between Al-Amanah and PELA remained in the
negotiation stage. The offer never materialized into a perfected sale, for no oral or
documentary evidence categorically proves that Al-Amanah expressed amenability to
the offered P300,000.00 purchase price. Before the lapse of the 1-year period PELA
had set to pay the remaining balance, Al-Amanah expressly rejected its offered
purchase price, although it took the latter around seven months to inform the former and
this entitled PELA to award of damages. Al-Amanahs act of selling the lot to another

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buyer is the final nail in the coffin of the negotiation with PELA. Clearly, there is no
double sale, thus, we find no reason to disturb the consummated sale between AlAmanah and Robern.

SPOUSES JESUS L. CABAHUG AND CORONACION M. CABAHUG, v. NATIONAL

POWER CORPORATION
G.R. No. 186069 January 30, 2013
FACTS:
The Spouses Cabahug are the owners of two parcels of land situated in Barangay
Capokpok, Tabango, Leyte, registered in their names and they were among the
defendants in a suit for expropriation earlier filed by NPC before the RTC, in connection
with its Leyte-Cebu Interconnection Project. The suit was later dismissed when NPC
opted to settle with the landowners by paying an easement fee equivalent to 10% of
value of their property in accordance with Section 3-A of Republic Act (RA) No. 6395. ?
On 9 November 1996, Jesus Cabahug executed two documents denominated as Right
of Way Grant in favor of NPC. For and in consideration of the easement fees Cabahug
granted NPC a continuous easement of right of way for the latters transmissions lines
and their appurtenances over 24,939 and 4,750 square meters of the parcels of land
covered by TCT Nos. T-9813 and T-1599, respectively. By said grant, Jesus Cabahug
agreed not to construct any building or structure whatsoever, nor plant in any area
within the Right of Way that will adversely affect or obstruct the transmission line of
NPC, except agricultural crops, the growth of which will not exceed three meters high.
Under paragraph 4 of the grant, however, Jesus Cabahug reserved the option to seek
additional compensation for easement fee.l1
On 21 September 1998, the Spouses Cabahug filed the complaint for the payment of
just compensation, damages and attorneys fees against NPC claiming to have been
totally deprived of the use of the portions of land covered by TCT Nos. T-9813 and T-

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1599. On the other hand, NPC averred that it already paid the full easement fee
mandated under Section 3-A of RA 6395 and that the reservation in the grant referred to
additional compensation for easement fee, not the full just compensation sought by the
Spouses Cabahug.?r?l1
ISSUE:
Whether or not the spouses are still entitled to collect compensation based on the
contract of the right of way.
HELD:
Yes.
As correctly pointed out by the Spouses Cabahug, the fourth paragraph of the Grant
executed by Jesus Cabahug which expressly states as follows:cralawlibrary
That I hereby reserve the option to seek additional compensation for Easement Fee,
based on the Supreme Court Decision in G.R. No. 60077, promulgated on January 18,
1991, which jurisprudence is designated as "NPC v. Gutierrez" case.?r?l1
From the foregoing reservation, it is evident that the Spouses Cabahugs receipt of the
easement fee did not bar them from seeking further compensation from NPC. Courts
cannot supply material stipulations, read into the contract words it does not contain or,
for that matter, read into it any other intention that would contradict its plain import.
Neither can they rewrite contracts because they operate harshly or inequitably as to one
of the parties, or alter them for the benefit of one party and to the detriment of the other,
or by construction, relieve one of the parties from the terms which he voluntarily
consented to, or impose on him those which he did not.r?
Even without the reservation made by Jesus Cabahug in the Grant of Right of Way, the
application of Gutierrez to this case is not improper as NPC represents it to be. Where
the right of way easement, as in this case, similarly involves transmission lines which
not only endangers life and limb but restricts as well the owner's use of the land
traversed thereby, the ruling in Gutierrez remains doctrinal and should be applied. It has
been ruled that the owner should be compensated for the monetary equivalent of the
land if, as here, the easement is intended to perpetually or indefinitely deprive the owner
of his proprietary rights through the imposition of conditions that affect the ordinary use,
free enjoyment and disposal of the property or through restrictions and limitations that
are inconsistent with the exercise of the attributes of ownership, or when the
introduction of structures or objects which, by their nature, create or increase the

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probability of injury, death upon or destruction of life and property found on the land is
necessary. Measured not by the takers gain but the owners loss, just compensation is
defined as the full and fair equivalent of the property taken from its owner by the
expropriator. l1
Too, the CA reversibly erred in sustaining NPCs reliance on Section 3-A of RA 6395
which states that only 10% of the market value of the property is due to the owner of the
property subject to an easement of right of way. Since said easement falls within the
purview of the power of eminent domain, NPCs utilization of said provision has been
repeatedly struck down by this Court in a number of cases. The determination of just
compensation in eminent domain proceedings is a judicial function and no statute,
decree, or executive order can mandate that its own determination shall prevail over the
court's findings. Any valuation for just compensation laid down in the statutes may serve
only as a guiding principle or one of the factors in determining just compensation, but it
may not substitute the court's own judgment as to what amount should be awarded and
how to arrive at such amount. 3Hence, Section 3A of R.A. No. 6395, as amended, is not
binding upon this Court.?r?l1

HEIRS OF FAUSTO C. IGNACIO, namely MARFEL D. IGNACIO MANALO, MILFA D.

IGNACIO MANALO AND FAUSTINO D. IGNACIO, v. HOME BANKERS SAVINGS
AND TRUST COMPANY, SPOUSES PHILLIP AND THELMA RODRIGUEZ,
CATHERINE, REYNOLD & JEANETTE, ALL SURNAMED ZUNIGA
G.R. No. 177783, January 23, 2013
FACTS:
In August 1981, petitioner Fausto C. Ignacio mortgaged two parcels of land to Home
Savings Bank and Trust Company, the predecessor of respondent Home Bankers
Savings and Trust Company, as security for the P500,000.00 loan extended to him by
said bank.
When petitioner defaulted in the payment of his loan obligation, respondent bank
proceeded to foreclose the real estate mortgage. At the foreclosure sale held on
January 26, 1983, respondent bank was the highest bidder for the sum of P764,984.67.
On February 8, 1983, the Certificate of Sale issued to respondent bank was registered
with the Registry of Deeds of Calamba, Laguna. With the failure of petitioner to redeem
the foreclosed properties within one year from such registration, title to the properties

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were consolidated in favor of respondent bank. Consequently, new TCTs were issued in
the name of respondent bank.
Despite the lapse of the redemption period and consolidation of title in respondent bank,
petitioner offered to repurchase the properties. While the respondent bank considered
petitioner's offer to repurchase, there was no repurchase contract executed. The
present controversy was fuelled by petitioner's stance that a verbal
repurchase/compromise agreement was actually reached and implemented by the
parties.cralawlibrary
ISSUE:
Whether a contract for the repurchase of the foreclosed properties was perfected
between petitioner and respondent bank.
HELD:
There was no perfected contract.
First, the counter-proposal was not mutually agreed upon by both the plaintiff-appellee
and defendant-appellant, as there was not a single signature of the representative of
the defendant-appellant was affixed thereto.
Second, it is inconceivable that an agreement of such great importance, involving two
personalities who are both aware and familiar of the practical and legal necessity of
reducing agreements into writing, the plaintiff-appellee, being a lawyer and the
defendant-appellant, a banking institution, not to formalize their repurchase agreement.
Third, it is quite absurd and unusual that the defendant-appellant could have acceded to
the condition that the balance of the payment of the repurchase price would depend
upon the financial position of the plaintiff-appellee. Such open-ended and indefinite
period for payment is hardly acceptable to a banking institution like the defendantappellant whose core existence fundamentally depends upon its financial arrangements
and transactions which, most, if not all the times are intended to bear favorable outcome
to its business.
Last, had there been a repurchase agreement, then, there should have been titles or
deeds of conveyance issued in favor of the plaintiff-appellee. But as it turned out, the
plaintiff-appellee never had any land deeded or titled in his name as a result of the
alleged repurchase agreement. All these, reinforce the conclusion that the counterproposal was unilaterally made and inserted by the plaintiff-appellee in Exhibit "I" and
could not have been accepted by the defendant-appellant, and that a different
agreement other than a repurchase agreement was perfected between them.rl1

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RODOLFO G. CRUZ and ESPERANZA IBIAS, v. ATTY. DELFIN GRUSPE

G.R. NO. 191431 : March 13, 2013

FACTS:
The claim arose from an accident when the mini bus owned and operated by Cruz and
driven by one Arturo Davin collided with the Toyota Corolla car of Gruspe; Gruspe's car
was a total wreck. The next day, Cruz, along with Leonardo Q. Ibias went to Gruspe's
office, apologized for the incident, and executed a Joint Affidavit of Undertaking
promising jointly and severally to replace the Gruspe's damaged car in 20 days of the
same model and of at least the same quality; or, alternatively, they would pay the cost of
Gruspe's car amounting to P350,000.00, with interest at 12% per month for any delayed
payment after November 15, 1999, until fully paid. When Cruz and Leonardo failed to
comply with their undertaking, Gruspe filed a complaint for collection of sum of money
against them.

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Cruz and Leonardo denied Gruspe's allegation, claiming that Gruspe, a lawyer,
prepared the Joint Affidavit of Undertaking and forced them to affix their signatures
thereon, without explaining and informing them of its contents; Cruz affixed his
signature so that his mini bus could be released as it was his only means of income;
Leonardo, a barangay official, accompanied Cruz to Gruspe's office for the release of
the mini bus, but was also deceived into signing the Joint Affidavit of Undertaking.
Leonardo died during the pendency of the case and was substituted by his widow,
Esperanza. Meanwhile, Gruspe sold the wrecked car for P130,000.00.
ISSUE:
Whether or not the Joint Affidavit of Undertaking is a contract and thus a source of an
obligation.
HELD:
Contracts are obligatory no matter what their forms may be, whenever the essential
requisites for their validity are present. In determining whether a document is an affidavit
or a contract, the Court looks beyond the title of the document, since the denomination
or title given by the parties in their document is not conclusive of the nature of its
contents. In the construction or interpretation of an instrument, the intention of the
parties is primordial and is to be pursued. If the terms of the document are clear and
leave no doubt on the intention of the contracting parties, the literal meaning of its
stipulations shall control. If the words appear to be contrary to the parties' evident
intention, the latter shall prevail over the former.
A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses that
it contains stipulations characteristic of a contract. It contained a stipulation where Cruz
and Leonardo promised to replace the damaged car of Gruspe, 20 days from October
25, 1999 or up to November 15, 1999, of the same model and of at least the same
quality. In the event that they cannot replace the car within the same period, they would
pay the cost of Gruspe's car in the total amount of P350,000.00, with interest at 12% per
month for any delayed payment after November 15, 1999, until fully paid. These, as
read by the CA, are very simple terms that both Cruz and Leonardo could easily
understand.
There is also no merit to the argument of vitiated consent. An allegation of vitiated
consent must be proven by preponderance of evidence; Cruz and Leonardo failed to
support their allegation.

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Although the undertaking in the affidavit appears to be onerous and lopsided, this does
not necessarily prove the alleged vitiation of consent. They, in fact, admitted the
genuineness and due execution of the Joint Affidavit and Undertaking when they said
that they signed the same to secure possession of their vehicle. If they truly believed
that the vehicle had been illegally impounded, they could have refused to sign the Joint
Affidavit of Undertaking and filed a complaint, but they did not. That the release of their
mini bus was conditioned on their signing the Joint Affidavit of Undertaking does not, by
itself, indicate that their consent was forced they may have given it grudgingly, but it is
not indicative of a vitiated consent that is a ground for the annulment of a contract.

J PLUS ASIA DEVELOPMENT CORPORATION v. UTILITY ASSURANCE

CORPORATION
G.R. NO. 199650, JUNE 26, 2013.
FACTS:
On December 24, 2007, petitioner and Martin E. Mabunay, doing business under
the name and style of Seven Shades of Blue Trading and Services, entered into a
Construction Agreement to build the formers 72-room condominium/hotel (Condotel
Building 25). The project, costing P42,000,000.00, was to be completed within one year
or 365 days reckoned from the first calendar day after signing of the Notice of Award
and Notice to Proceed and receipt of down payment (20% of contract price). The
P8,400,000.00 down payment was fully paid on January 14, 2008. Payment of the
balance of the contract price will be based on actual work finished within 15 days from
receipt of the monthly progress billings. Per the agreed work schedule, the completion
date of the project was December 2008. Mabunay also submitted the required

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Performance Bond issued by respondent Utility Assurance Corporation (UTASSCO) in

the amount equivalent to 20% down payment or P8.4 million.
The Construction Agreement provides for liquidated damages, as follows:
ARTICLE 12 LIQUIDATED DAMAGES:
12.01 Time is of the essence in this Agreement. Should the CONTRACTOR fail to
complete the PROJECT within the period stipulated herein or within the period of
extension granted by the OWNER, plus One (1) Week grace period, without any
justifiable reason, the CONTRACTOR hereby agrees
a. The CONTRACTOR shall pay the OWNER liquidated damages equivalent to One
Tenth of One Percent (1/10 of 1%) of the Contract Amount for each day of delay after
any and all extensions and the One (1) week Grace Period until completed by the
CONTRACTOR.
b. The CONTRACTOR, even after paying for the liquidated damages due to
unexecuted works and/or delays shall not relieve it of the obligation to complete and
finish the construction.
Any sum which may be payable to the OWNER for such loss may be deducted from
the amounts retained under Article 9 or retained by the OWNER when the works called
for under this Agreement have been finished and completed.
Liquidated Damage[s] payable to the OWNER shall be automatically deducted from
the contractors collectibles without prior consent and concurrence by the
CONTRACTOR.
12.02 To give full force and effect to the foregoing, the CONTRACTOR hereby,
without necessity of any further act and deed, authorizes the OWNER to deduct any
amount that may be due under Item (a) above, from any and all money or amounts due
or which will become due to the CONTRACTOR by virtue of this Agreement and/or to
collect such amounts from the Performance Bond filed by the CONTRACTOR in this
Agreement.
Mabunay commenced work at the project site on January 7, 2008. On November
14, 2008, after conducting a joint inspection and evaluation, the project was only thirty
one point thirty nine percent (31.39 %)complete.
On November 19, 2008, petitioner terminated the contract and sent demand
letters to Mabunay and respondent surety. As its demands went unheeded, petitioner
filed a Request for Arbitration before the Construction Industry Arbitration Commission
(CIAC). Petitioner prayed that Mabunay and respondent be ordered to pay the sums of
P8,980,575.89 as liquidated damages and P2,379,441.53 corresponding to the
unrecouped down payment or overpayment petitioner made to Mabunay.
In his Answer, Mabunay claimed that the delay was caused by retrofitting and
other revision works ordered by Joo Han Lee. He asserted that he actually had until

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April 30, 2009 to finish the project since the 365 days period of completion started only
on May 2, 2008 after clearing the retrofitted old structure. Hence, the termination of the
contract by petitioner was premature and the filing of the complaint against him was
baseless, malicious and in bad faith.
ISSUE:
Whether or not Mabunay had incurred delay in the performance of his obligations
under the Construction Agreement and is therefore liable.
HELD:
Indeed, resolution of the issue of delay was crucial upon which depends
petitioners right to the liquidated damages pursuant to the Construction Agreement.
Default or mora on the part of the debtor is the delay in the fulfillment of the
prestation by reason of a cause imputable to the former. It is the non-fulfillment of an
obligation with respect to time.
Article 1169 of the Civil Code provides:
ART. 1169. Those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.
It is a general rule that one who contracts to complete certain work within a
certain time is liable for the damage for not completing it within such time, unless the
delay is excused or waived. The Construction Agreement provides in Article 10 thereof
the following conditions as to completion time for the project
The CONTRACTOR shall complete the works called for under this Agreement
within ONE (1) YEAR or 365 Days reckoned from the 1st calendar day after signing of
the Notice of Award and Notice to Proceed and receipt of down payment.
In this regard the CONTRACTOR shall submit a detailed work schedule for
approval by OWNER within Seven (7) days after signing of this Agreement and full
payment of 20% of the agreed contract price. Said detailed work schedule shall follow
the general schedule of activities and shall serve as basis for the evaluation of the
progress of work by CONTRACTOR.
In this jurisdiction, the following requisites must be present in order that the
debtor may be in default: (1) that the obligation be demandable and already liquidated;
(2) that the debtor delays performance; and (3) that the creditor requires the
performance judicially or extrajudicially.
In holding that Mabunay has not at all incurred delay, the CA pointed out that the
obligation to perform or complete the project was not yet demandable as of November
19, 2008 when petitioner terminated the contract, because the agreed completion date

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was still more than one month away (December 24, 2008). Since the parties
contemplated delay in the completion of the entire project, the CA concluded that the
failure of the contractor to catch up with schedule of work activities did not constitute
delay giving rise to the contractors liability for damages.
Records showed that as early as April 2008, or within four months after Mabunay
commenced work activities, the project was already behind schedule for reasons not
attributable to petitioner. In the succeeding months, Mabunay was still unable to catch
up with his accomplishment even as petitioner constantly advised him of the
delays,xxx .
Liability for liquidated damages is governed by Articles 2226 to 2228 of the Civil
Code, which provide:
ART. 2226. Liquidated damages are those agreed upon by the parties to a contract,
to be paid in case of breach thereof.
ART. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall
be equitably reduced if they are iniquitous or unconscionable.
ART. 2228. When the breach of the contract committed by the defendant is not
the one contemplated by the parties in agreeing upon the liquidated damages, the law
shall determine the measure of damages, and not the stipulation.
A stipulation for liquidated damages is attached to an obligation in order to ensure
performance and has a double function: (1) to provide for liquidated damages, and (2)
to strengthen the coercive force of the obligation by the threat of greater responsibility in
the event of breach. The amount agreed upon answers for damages suffered by the
owner due to delays in the completion of the project. As a precondition to such award,
however, there must be proof of the fact of delay in the performance of the obligation.
As already demonstrated, the contractors default in this case pertains to his
failure to substantially perform the work on account of tremendous delays in executing
the scheduled work activities. Where a party to a building construction contract fails to
comply with the duty imposed by the terms of the contract, a breach results for which an
action may be maintained to recover the damages sustained thereby, and of course, a
breach occurs where the contractor inexcusably fails to perform substantially in
accordance with the terms of the contract.

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FIL-ESTATE GOLF AND DEVELOPMENT, INC. AND FIL-ESTATE LAND, INC. V.

VERTEX SALES AND TRADING, INC.
G.R. NO. 202079. JUNE 10, 2013.
FACTS:
Sometime in August 1997, FEGDI sold, on installment, to RS Asuncion
Construction Corporation (RSACC) one Class C Common Share of Forest Hills for
P1,100,000.00. Prior to the full payment of the purchase price, RSACC sold, on
February 11, 1999, the Class C Common Share to respondent Vertex Sales and
Trading, Inc. (Vertex). RSACC advised FEGDI of the sale to Vertex and FEGDI, in turn,
instructed Forest Hills to recognize Vertex as a shareholder. For this reason, Vertex
enjoyed membership privileges in Forest Hills.
Despite Vertexs full payment, the share remained in the name of FEGDI.
Seventeen (17) months after the sale (or on July 28, 2000), Vertex wrote FEGDI a letter
demanding the issuance of a stock certificate in its name. FELI replied, initially
requested Vertex to first pay the necessary fees for the transfer. Although Vertex
complied with the request, no certificate was issued. This prompted Vertex to make a
final demand on March 17,2001. As the demand went unheeded, Vertex filed on

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January 7, 2002 a complaint for rescission with damages and attachment against
FEGDI, FELI and Forest Hill. It averred that petitioners defaulted in their obligation as
sellers when they failed and refused to issue the stock certificate covering the subject
share despite repeated demands. On the basis of its rights under Article 1191 of the civil
code, vertex prayed for the rescission of the sale and demanded the reimbursement of
the amount it paid plus interest. During the pendency of the rescission action or on
January 23, 2002, a certificate of stock was issued in vertexs name, but vertex refused
to accept it.
The RTC dismissed the complaint for insufficiency of evidence. It ruled that delay
in the issuance of stock certificates does not warrant rescission of the contract as this
constituted a mere casual or slight breach. It also observed that notwithstanding the
delay in the issuance of the stock certificate, the sale had already been consummated;
the issuance of the stock certificate is just a collateral matter to the sale and the stock
certificate is not essential to the relation of shareholder.
Vertex appealed the dismissal of its complaint. In its decision, the CA reversed
the RTC and rescinded the sale of the share. Citing Section 63 of the corporation code,
the CA held that there can be no valid transfer of shares where there is no delivery of
the stock certificate. It considered the prolonged issuance of the stock certificate a
substantial breach that served as basis for Vertex to rescind the sale. The CA ordered
the petitioners to return the amounts paid by Vertex by reason of the sale.

ISSUE:
Whether the delay in the issuance of a stock certificate can be considered a
substantial breach as to warrant rescission of the contract of sale.
HELD:
The factual backdrop of this case is similar to that of Raquel-Santos v. Court of
Appeals, where the Court held that in a sale of shares of stock, physical delivery of a
stock certificate is one of the essential requisites for the transfer of ownership of the
stocks purchased.
Section 63 of the Corporation Code provides:
Sec. 63. Certificate of stock and transfer of shares.- x xx Shares of stock so
issued are personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact or other person legally
authorized to make the transfer. No transfer, however, shall be valid, except as between
the parties, until the transfer is recorded in the books of the corporation showing the
names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred.

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In this case, Vertex fully paid the purchase price by February 11, 1999 but the
stock certificate was only delivered on January 23, 2002 after Vertex filed an action for
rescission against FEGDI.
Under these facts, considered in relation to the governing law, FEGDI clearly
failed to deliver the stock certificates, representing the shares of stock purchased by
Vertex, within a reasonable time from the point the shares should have been delivered.
This was a substantial breach of their contract that entitles Vertex the right to rescind
the sale under Article 1191 of the civil code. It is not entirely correct to say that a sale
had already been consummated as Vertex already enjoyed the rights a shareholder can
exercise. The enjoyment of these rights cannot suffice where the law, by its express
terms, requires a specific form to transfer ownership.
Mutual restitution is required in cases involving rescission under Article 1191 of
the Civil Code; such restitution is necessary to bring back the parties to their original
situation prior to the inception of the contract. Accordingly, the amount paid to FEGDI by
reason of the sale should be returned to Vertex. On the amount of damages, the CA is
correct in not awarding damages since Vertex failed to prove by sufficient evidence that
it suffered actual damage due to the delay in the issuance of the certificate of stock.
Regarding the involvement of FELI in this case, no privity of contract exist
between Vertex and FELI. As a general rule, a contract is a meeting of minds between
two persons. The civil code upholds the spirit over the form; thus, it deems an
agreement to exist, provided the essential requisites are present. A contract is upheld as
long as there is proof of consent, subject matter and cause. Moreover, it is generally
obligatory in whatever form it may have been entered into. From the moment there is a
meeting of minds between the parties, the contract is perfected.
In the sale of class c common share, the parties are only FEGDI, as seller and
Vertex, as buyer. As can be seen from the records, FELI was only dragged into the
action when its staff used the wrong letterhead in replying to Vertex and issued the
wrong receipt for the payment of transfer taxes. Thus FELI should be absolved from any
liability.

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BORROMEO v. JUAN T. MINA

GR. No. 193747, June 5, 2013
FACTS:
This is a case praying for the exemption of his landholding from the coverage of
the governments Operation Land Transfer (OLT) program as well as the cancellation of
respondent Juan T. Minas title over the property subject of the said landholding. The
respondents transfer certificate of title (TCT) No. EP-43526 over the subject property is
based on Emancipation Patent No. 393178 issued by the Department of Agrarian
Reform (DAR) on May 2, 1990.
Petitioner alleged that he purchased the land to Serafin M. Garcia as evidenced
by a deed of sale notarized on February 19, 1982. He was not able to effect the
transfer of title in his name. Subsequently, the emancipation patent was issued in
respondents favor without any notice to him.
Also, his landholdings was only 3.3635 hectares and thus, within the landowners
retention limits under both PD 27 and RA 6647 ( Comprehensive Agrarian Reform Law
of 1988). Hence, the petition for excluding the land from coverage of the governments
OLT program. Another petitioner containing the same allegations was filed.

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After due investigation, the Municipal Agrarian Reform Officer (MARO) Joey
Rolando M. Unblas finds that the subject property was erroneously identified by the
same office as the property of petitioners father, the late CiprianoBorromeo. In actuality,
the property was never owned by CiprianoBorromeo as its true owner was Garcianotably, a perennial PD 27 landowner- who later sold the same to petitioner.
In April 30, 2010, the CA doubted petitioners claim of ownership due to
inconsistencies regarding the dates of its notarization as stated in the two PARO
petitions and the fact that a copy of the deed of sale was not attached to the records of
the case for its examination. The CA found the sale to be null and void for being a
prohibited transaction under PD 27 which forbids the transfers or alienation of covered
agricultural lands after October 21, 1972 except to the tenant-beneficiaries thereof, of
which petitioner was not. Petitioner cannot mount any collateral attack against
respondents title to the subject property as the same is prohibited under Section 48 of
PD 1529 (Property Registration Decree).
On appeal, Petitioner contends that the CA erred in declaring the sale between
him and Garcia as null and void. He avers that there was an oral sale entered into by
him and Garcia (through his son Lorenzo Garcia) in 1976. The said oral sale was
consummated on the same year as petitioner had already occupied and tilled the
subject property and started paying real estate taxes thereon. He further alleges that he
allowed respondent to cultivate and possess the subject property in 1976 only out of
mercy and compassion since the latter begged him for work. The existing sale
agreement had been merely formalized by virtue of the 1982 deed of sale which
expressly provided the subject property was not tenanted and that the provisions of law
on pre-emption had been complied with. In this regard, petitioner claims that respondent
cannot be considered as a tenant and as such, the issuance of an emancipation patent
in his favor was erroneous. Likewise, the issuance of emancipation patent to
respondent without any notice on his part is a violation of his right to due process.
In his comment, respondent counters that the deed of sale was not registered
and does not bind him. The sale was null and void. The PAROs petitions is a collateral
attacks to his title which is prohibited in PD 1529.
ISSUE:
Whether or not the sale of the subject property to petitioner is valid.
HELD:
PD 27 prohibits the transfer of ownership over tenanted rice and/or corn lands
after October 21, 1972 except only in favor of the actual tenant-tillers thereon. The
records reveal that the subject landholding fell under PD 27 on October 21, 1972 and as
such, could have been subsequently sold only to the tenant thereof, i.e., the
respondent. Notably, the status of respondent as tenant is now beyond dispute

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considering petitioners admission of such fact. Likewise, as earlier discussed, petitioner

is tied down to his initial theory that his claim of ownership over the subject property was
based on the 1982 deed of sale. Therefore, as Garcia sold the property in 1982 to the
petitioner who is evidently not the tenant-beneficiary of the same, the said transaction is
null and void for being contrary to law.
In consequence, petitioner cannot assert any right over the subject landholding,
such as his present claim for landholding exemption, because his title springs from a
null and void source. A void contract is equivalent to nothing; it produces no civil effect;
and it does not create, modify or extinguish a juridical relation. Hence, notwithstanding
the erroneous identification of the subject landholding by the MARO as owned by
CiprianoBorromeo, the fact remains that petitioner had no right to file a petition for
landholding exemption since the sale of the property to him by Garcia in 1982 is null
and void. Proceeding from this, the finding that petitioners total agricultural landholdings
is way below the retention limits set forth by law thus, becomes irrelevant to his claim for
landholding exemption precisely because he has no right over the aforementioned
landholding.
X xx the Court sees no reason to delve on the issue regarding the cancellation of
respondents emancipation patent, without prejudice to petitioners right to raise his
other claims and objections thereto through the appropriate action filed before the
proper forum.
SANDOVAL SHIPYARDS, INC. v.. PHILIPPINE MERCHANT MARINE ACADEMY
(PMMA)
G.R. NO. 188633, APRIL 10, 2013
FACTS:
Philippine Merchant Marine Academy (PMMA) entered into a Ship Building
Contract with Sandoval Shipyards, Inc. through the latters agent, Rimport Industries,
Inc. on December 19, 1994. The contract is to construct two units of 9.10-meter
lifeboats which should have 45-HP Gray Marine diesel engines and should be delivered
within 45 working days from the date of the contract-signing and payment of the
mobilization/organization fund. PMMA would pay petitioners P1,685,200 in installments
based on the progress accomplishment of the work as stated in the contract.
On August 10, 1995, Angel Rosario, a faculty member of respondent who
claimed to have been verbally authorized by its president, allegedly received the
lifeboats in good order and condition.
The boats were inspected. The team found that petitioners had installed surplus
Japan-made Isuzu C-240 diesel engines with plates marked Isuzu Marine diesel
engine glued to the top of the cylinder heads instead of the agreed upon 45-HP Gray

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Marine diesel engines, that for the electric starting systems of the engines, there was no
manual which was necessary in case the systems failed, and that the construction of
the engine compartment was not in conformity with the approved plan.
With that a recommendation for the rectification was submitted by the respondents
dean.
Despite repeated demands, petitioners refused to deliver the lifeboats that would
comply with the agreed plans and specifications. Thus, respondent filed a complaint for
rescission of contract with damages.
ISSUE:
Whether the case is for rescission and not damages/ breach of contract.
HELD:
The RTC did not substitute the cause of action. A cause of action is an act or
omission which violates the rights of another. In the complaint before the RTC, the
respondent alleged that petitioners failed to comply with their obligation under the Ship
Building Contract. Such failure or breach of respondents contractual rights is the cause
of action. Rescission or damages are part of the reliefs. Hence, it was but proper for the
RTC to first make a determination of whether there was indeed a breach of contract on
the part of petitioners; second, if there was a breach, whether it would warrant
rescission and /or damages.
Both the RTC and the CA found that petitioners violated the terms of the contract
by installing surplus diesel engines, contrary to the agreed plans and specifications, and
by failing to deliver the lifeboats within the agreed time. The breach was found to be
substantial and sufficient to warrant a rescission of the contract. Rescission entails a
mutual restitution of benefits received. An injured party who has chosen rescission is
also entitled to the payment of damages. The factual circumstances, however, rendered
mutual restitution impossible. Both the RTC and the CA found that petitioners delivered
the lifeboats to Rosario. Although he was an engineer of respondent, it never authorized
him to receive the lifeboats from petitioners. Hence, as the delivery to Rosario was
invalid, it was as if respondent never received the lifeboats. As it never received the
object of the contract, it cannot return the object. Unfortunately, the same thing cannot
be said of petitioners. They admit that they received a total amount of P1,516,680 from
respondent as payment for the construction of the lifeboats. For this reason, they should
return the same amount to respondent.

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ALLAN C. GO, doing business under the name and style "ACG Express Liner," v.
MORTIMER F. CORDERO,
G.R. No. 164703
May 4, 2010
FACTS:
Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing
Corporation (Pamana), ventured into the business of marketing inter-island passenger
vessels. After contacting various overseas fast ferry manufacturers from all over the
world, he came to meet Tony Robinson, an Australian national based in Brisbane,
Australia, who is the Managing Director of Aluminium Fast Ferries Australia (AFFA).
Between June and August 1997, Robinson signed documents appointing
Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels in
the Philippines. As such exclusive distributor, Cordero offered for sale to prospective
buyers the 25-meter Aluminium Passenger catamaran known as the SEACAT 25.
After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C.
Go who is the owner/operator of ACG Express Liner of Cebu City, a single
proprietorship, Cordero was able to close a deal for the purchase of two (2) SEACAT
25. Accordingly, the parties executed Shipbuilding Contract No. 7825 for one (1) highspeed catamaran (SEACAT 25) for the price of US$1,465,512.00. Per agreement
between Robinson and Cordero, the latter shall receive commissions totalling
US$328,742.00, or 22.43% of the purchase price, from the sale of each vessel.
Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on
one (1) occasion even accompanied Go and his family and Landicho, to monitor the
progress of the building of the vessel. He shouldered all the expenses for airfare, food,
hotel accommodations, transportation and entertainment during these trips. He also
spent for long distance telephone calls to communicate regularly with Robinson, Go,
Tecson and Landicho.
However, Cordero later discovered that Go was dealing directly with Robinson
when he was informed by Dennis Padua of Wartsila Philippines that Go was canvassing
for a second catamaran engine from their company which provided the ship engine for
the first SEACAT 25. Padua told Cordero that Go instructed him to fax the requested
quotation of the second engine to the Park Royal Hotel in Brisbane where Go was then
staying. Cordero tried to contact Go and Landicho to confirm the matter but they were
nowhere to be found, while Robinson refused to answer his calls. Cordero immediately
flew to Brisbane to clarify matters with Robinson, only to find out that Go and Landicho
were already there in Brisbane negotiating for the sale of the second SEACAT 25.
Despite repeated follow-up calls, no explanation was given by Robinson, Go, Landicho
and Tecson who even made Cordero believe there would be no further sale between
AFFA and ACG Express Liner.

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In a handwritten letter, Cordero informed Go that such act of dealing directly with
Robinson violated his exclusive distributorship and demanded that they respect the
same, without prejudice to legal action against him and Robinson should they fail to
heed the same. Corderos lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also
wrote ACG Express Liner assailing the fraudulent actuations and misrepresentations
committed by Go in connivance with his lawyers (Landicho and Tecson) in breach of
Corderos exclusive distributorship appointment.
Having been apprised of Corderos demand letter, Thyne & Macartney, the
lawyer of AFFA and Robinson, faxed a letter to ACCRA law firm asserting that the
appointment of Cordero as AFFAs distributor was for the purpose of one (1) transaction
only, that is, the purchase of a high-speed catamaran vessel by ACG Express Liner in
August 1997. The letter further stated that Cordero was offered the exclusive
distributorship, the terms of which were contained in a draft agreement which Cordero
allegedly failed to return to AFFA within a reasonable time, and which offer is already
being revoked by AFFA.
On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold
Robinson, Go, Tecson and Landicho liable jointly and solidarily for conniving and
conspiring together in violating his exclusive distributorship in bad faith and wanton
disregard of his rights, thus depriving him of his due commissions (balance of unpaid
commission from the sale of the first vessel in the amount of US$31,522.01 and unpaid
commission for the sale of the second vessel in the amount of US$328,742.00) and
causing him actual, moral and exemplary damages, including P800,000.00 representing
expenses for airplane travel to Australia, telecommunications bills and entertainment, on
account of AFFAs untimely cancellation of the exclusive distributorship agreement.
Cordero also prayed for the award of moral and exemplary damages, as well as
attorneys fees and litigation expenses.
ISSUE:
Whether or not the respondents may be held liable for damages to Cordero for
his unpaid commissions and termination of his exclusive distributorship appointment by
the principal, AFFA.
HELD:
Article 1314 of the Civil Code provides:
Art. 1314. Any third person who induces another to violate his contract shall be
liable for damages to the other contracting party.
The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of a contract; and (3)
interference of the third person is without legal justification.

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The presence of the first and second elements is not disputed. Through the
letters issued by Robinson attesting that Cordero is the exclusive distributor of AFFA in
the Philippines, respondents were clearly aware of the contract between Cordero and
AFFA represented by Robinson. In fact, evidence on record showed that respondents
initially dealt with and recognized Cordero as such exclusive dealer of AFFA high-speed
catamaran vessels in the Philippines. In that capacity as exclusive distributor, petitioner
Go entered into the Memorandum of Agreement and Shipbuilding Contract No. 7825
with Cordero in behalf of AFFA.
As to the third element, our ruling in the case of So Ping Bun v. Court of
Appeals is instructive, to wit:
A duty which the law of torts is concerned with is respect for the property of
others, and a cause of action ex delicto may be predicated upon an unlawful
interference 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 renege on or violate
his undertaking under a contract. In the case before us, petitioners Trendsetter
Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner
deprived respondent corporation of the latters property right. Clearly, and as correctly
viewed by the appellate court, the three elements of tort interference above-mentioned
are present in the instant case.
Authorities debate on whether interference may be justified where the defendant
acts for the sole purpose of furthering his own financial or economic interest. One view
is that, as a general rule, justification for interfering with the business relations of
another exists where the actors motive is to benefit himself. Such justification does not
exist where his sole motive is to cause harm to the other. Added to this, some
authorities believe that it is not necessary that the interferers interest outweigh that of
the party whose rights are invaded, and that an individual acts under an economic
interest that is substantial, not merely de minimis, such that wrongful and malicious
motives are negatived, for he acts in self-protection. Moreover, justification for protecting
ones financial position should not be made to depend on a comparison of his economic
interest in the subject matter with that of others. It is sufficient if the impetus of his
conduct lies in a proper business interest rather than in wrongful motives.
As early as Gilchrist vs. Cuddy, we held that where there was no malice in the
interference of a contract, and the impulse behind ones conduct lies in a proper
business interest rather than in wrongful motives, a party cannot be a malicious
interferer. Where the alleged interferer is financially interested, and such interest
motivates his conduct, it cannot be said that he is an officious or malicious intermeddler.
In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI
to lease the warehouse to his enterprise at the expense of respondent corporation.
Though petitioner took interest in the property of respondent corporation and benefited
from it, nothing on record imputes deliberate wrongful motives or malice in him.

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

intrude into existing contracts at the expense of others, however, we find that the
conduct herein complained of did not transcend the limits forbidding an obligatory award
for damages in the absence of any malice. The business desire is there to make some
gain to the detriment of the contracting parties. Lack of malice, however, precludes
damages. But it does not relieve petitioner of the legal liability for entering into contracts
and causing breach of existing ones. The respondent appellate court correctly
confirmed the permanent injunction and nullification of the lease contracts between
DCCSI and Trendsetter Marketing, without awarding damages. The injunction saved the
respondents from further damage or injury caused by petitioners interference.
Malice connotes ill will or spite, and speaks not in response to duty. It implies an
intention to do ulterior and unjustifiable harm. Malice is bad faith or bad motive. In the
case of Lagon v. Court of Appeals, we held that to sustain a case for tortuous
interference, the defendant must have acted with malice or must have been driven by
purely impure reasons to injure the plaintiff; in other words, his act of interference
cannot be justified. We further explained that the word "induce" refers to situations
where a person causes another to choose one course of conduct by persuasion or
intimidation. As to the allegation of private respondent in said case that petitioner
induced the heirs of the late Bai Tonina Sepi to sell the property to petitioner despite an
alleged renewal of the original lease contract with the deceased landowner, we ruled as
follows:
Assuming ex gratia argumenti that petitioner knew of the contract, such
knowledge alone was not sufficient to make him liable for tortuous interference.
Furthermore, the records do not support the allegation of private respondent that
petitioner induced the heirs of Bai Tonina Sepi to sell the property to him. The word
"induce" refers to situations where a person causes another to choose one course of
conduct by persuasion or intimidation. The records show that the decision of the heirs of
the late Bai Tonina Sepi to sell the property was completely of their own volition and that
petitioner did absolutely nothing to influence their judgment. Private respondent himself
did not proffer any evidence to support his claim. In short, even assuming that private
respondent was able to prove the renewal of his lease contract with Bai Tonina Sepi, the
fact was that he was unable to prove malice or bad faith on the part of petitioner in
purchasing the property. Therefore, the claim of tortuous interference was never
established.57

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ANTHONY ORDUA, et.al, v. EDUARDO J. FUENTEBELLA, et.al.

G.R. No. 176841
June 29, 2010
FACTS:
Sometime in 1996, Gabriel Sr. sold the subject lot to petitioner Antonita Ordua
(Antonita), but no formal deed was executed to document the sale. The contract price
was apparently payable in installments as Antonita remitted from time to time and
Gabriel Sr. accepted partial payments. One of the Orduas would later testify that
Gabriel Sr. agreed to execute a final deed of sale upon full payment of the purchase
price.
As early as 1979, however, Antonita and her sons, Dennis and Anthony Ordua,
were already occupying the subject lot on the basis of some arrangement undisclosed
in the records and even constructed their house thereon. They also paid real property
taxes for the house and declared it for tax purposes.
After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr.,
secured TCT No. T-71499 over the subject lot and continued accepting payments from

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the petitioners. On December 12, 1996, Gabriel Jr. wrote Antonita authorizing her to
fence off the said lot and to construct a road in the adjacent lot. Gabriel Jr.
acknowledged receipt of a PhP 40,000 payment from petitioners. Through a letter ,
Gabriel Jr. acknowledged that petitioner had so far made an aggregate payment of PhP
65,000, leaving an outstanding balance of PhP 60,000. A receipt Gabriel Jr. issued
reflected a PhP 10,000 payment.
Badly in need of money, Gabriel Jr. borrowed from Bernard the amount of PhP
50,000, payable in two weeks at a fixed interest rate, with the further condition that the
subject lot would answer for the loan in case of default. Gabriel Jr. failed to pay the loan
and this led to the execution of a Deed of Sale and the issuance later of TCT No. T72782 for subject lot in the name of Bernard upon cancellation of TCT No. 71499 in the
name of Gabriel, Jr. As the RTC decision indicated, the reluctant Bernard agreed to
acquire the lot, since he had by then ready buyers in respondents Marcos Cid and
Benjamin F. Cid (Marcos and Benjamin or the Cids).
Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed
with a Deed of Absolute Sale of a Registered Land , the Cids were able to cancel TCT
No. T-72782 and secure TCT No. 72783 covering the subject lot. Just like in the
immediately preceding transaction, the deed of sale between Bernard and the Cids had
respondent Eduardo J. Fuentebella (Eduardo) as one of the instrumental witnesses.
Marcos and Benjamin, in turn, ceded the subject lot to Eduardo through a Deed
of Absolute Sale dated May 11, 2000. Thus, the consequent cancellation of TCT No. T72782 and issuance on May 16, 2000 of TCT No. T-3276 over subject lot in the name of
Eduardo.
As successive buyers of the subject lot, Bernard, then Marcos and Benjamin, and
finally Eduardo, checked, so each claimed, the title of their respective predecessors-ininterest with the Baguio Registry and discovered said title to be free and unencumbered
at the time each purchased the property. Furthermore, respondent Eduardo, before
buying the property, was said to have inspected the same and found it unoccupied by
the Orduas.
Sometime in May 2000, or shortly after his purchase of the subject lot, Eduardo,
through his lawyer, sent a letter addressed to the residence of Gabriel Jr. demanding
that all persons residing on or physically occupying the subject lot vacate the premises
or face the prospect of being ejected.
Learning of Eduardos threat, petitioners went to the residence of Gabriel Jr. at
No. 34 Dominican Hill, Baguio City. There, they met Gabriel Jr.s estranged wife,
Teresita, who informed them about her having filed an affidavit-complaint against her
husband and the Cids for falsification of public documents on March 30, 2000.
According to Teresita, her signature on the June 30, 1999 Gabriel Jr.Bernard deed of
sale was a forgery. Teresita further informed the petitioners of her intent to honor the

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aforementioned 1996 verbal agreement between Gabriel Sr. and Antonita and the
partial payments they gave her father-in-law and her husband for the subject lot.
On July 3, 2001, petitioners, joined by Teresita, filed a Complaint for Annulment
of Title, Reconveyance with Damages against the respondents before the RTC,
specifically praying that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be
annulled. Corollary to this prayer, petitioners pleaded that Gabriel Jr.s title to the lot be
reinstated and that petitioners be declared as entitled to acquire ownership of the same
upon payment of the remaining balance of the purchase price therefor agreed upon by
Gabriel Sr. and Antonita.
The CA, just as the RTC, ruled that the contract is unenforceable for noncompliance with the Statute of Frauds.
ISSU E:
Whether or not the Statute of Frauds bars the enforcement of the verbal sale
contract between Gabriel Sr. and Antonita
HELD:
No.
The Statute of Frauds expressed in Article 1403, par. (2), of the Civil Code
applies only to executory contracts, i.e., those where no performance has yet been
made. Stated a bit differently, the legal consequence of non-compliance with the Statute
does not come into play where the contract in question is completed, executed,
or partially consummated.
The Statute of Frauds, in context, provides that a contract for the sale of real
property or of an interest therein shall be unenforceable unless the sale or some note or
memorandum thereof is in writing and subscribed by the party or his agent. However,
where the verbal contract of sale has been partially executed through the partial
payments made by one party duly received by the vendor, as in the present case, the
contract is taken out of the scope of the Statute.
The purpose of the Statute is to prevent fraud and perjury in the enforcement of
obligations depending for their evidence on the unassisted memory of witnesses, by
requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged. The Statute requires certain contracts to be
evidenced by some note or memorandum in order to be enforceable. The term
"Statute of Frauds" is descriptive of statutes that require certain classes of contracts to
be in writing. The Statute does not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulates the formalities of the
contract necessary to render it enforceable.

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Since contracts are generally obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present, the
Statute simply provides the method by which the contracts enumerated in Art. 1403 (2)
may be proved but does not declare them invalid because they are not reduced to
writing. In fine, the form required under the Statute is for convenience or evidentiary
purposes only.
There can be no serious argument about the partial execution of the sale in
question. The records show that petitioners had, on separate occasions, given Gabriel
Sr. and Gabriel Jr. sums of money as partial payments of the purchase price. These
payments were duly receipted by Gabriel Jr. To recall, in his letter of May 1, 1997,
Gabriel, Jr. acknowledged having received the aggregate payment of PhP 65,000 from
petitioners with the balance of PhP 60,000 still remaining unpaid. But on top of the
partial payments thus made, possession of the subject of the sale had been transferred
to Antonita as buyer. Owing thus to its partial execution, the subject sale is no longer
within the purview of the Statute of Frauds.
Lest it be overlooked, a contract that infringes the Statute of Frauds is ratified by
the acceptance of benefits under the contract. Evidently, Gabriel, Jr., as his father
earlier, had benefited from the partial payments made by the petitioners. Thus, neither
Gabriel Jr. nor the other respondentssuccessive purchasers of subject lotscould
plausibly set up the Statute of Frauds to thwart petitioners efforts towards establishing
their lawful right over the subject lot and removing any cloud in their title. As it were,
petitioners need only to pay the outstanding balance of the purchase price and that
would complete the execution of the oral sale.