FLORENTINO VS.

ENCARNACION
FACTS:
On May 22, 1964, the petitioners-appellants and the petitioners-appellee filed with CFI an
application for the registration under Act 496 of a parcel of agricultural land located at
Cabugao, Ilocos Sur. The application alleged among other things that the applicants are
the common and pro-in divisor owners in fee simple of the said land with the
improvements existing thereon; that to the best of the knowledge and belief, there is no
mortgage, hen or encumbrance of any kind whatsoever affecting said land, nor any other
person having any estate or interest thereon, legal or equitable, remainder, reservation at
in expectancy; that said applicants had acquired the aforesaid land thru and by
inheritance from their predecessors in interest, their aunt, Doa Encarnacion Florentino,
and Angel Encarnacion acquired their respective shares of the land thru purchase from the
original heirs, Jesus, Caridad, Lourdes and Dolores, all surnamed Singson, on one hand and
from Asuncion Florentino on the other. After due notice and publication, the Court set the
application for hearing. Only the Director of Lands filed an opposition but was later
withdrawn so an order of general default was issued. Upon application of the applicants,
the Clerk of Court was commissioned and authorized to receive the evidence of the
applicants and ordered to submit the same for the Court's proper resolution.-Exhibit O-1
embodied in the deed of extrajudicial partition (Exhibit O),which states that with respect to
the land situated in Barrio Lubong, Dacquel, Cabugao, Ilocos Sur, the fruits thereof shall
serve to defray the religious expenses, was the source of contention in this case (Spanish
text).Florentino wanted to include ExhibitO-1 on the title but the Encarnacions opposed
and subsequently withdrawn their application on their shares, which was opposed by the
former.-The Court after hearing the motion for withdrawal and the opposition issued an
order and for the purpose of ascertaining and implifying that the products of the land
made subject matter of this land registration case had been used in answering for the
payment of expenses for the religious functions specified in the Deed of Extrajudicial
Partition which was not registered in the office of the Register of Deeds from time
immemorial; and that the applicants knew of this arrangement and the Deed
of Extrajudicial Partition of August 24,1947, was not signed by Angel Encarnacion or
Salvador Encarnacion, Jr.-CFI: The self-imposed arrangement in favor of the Church is a
simple donation, but is void since the donee has not accepted the donation and Salvador
Encarnacion, Jr. and Angel Encarnacion had not made any oral or written grant at all so the
court allowed the religious expenses to be made and entered on the undivided shares,
interests and participations of all the applicants in this case, except that of Salvador
Encarnacion, Sr., Salvador Encarnacion, Jr. and Angel Encarnacion."-the petitionersappellants filed their Reply to the Opposition reiterating their previous arguments, and
also attacking the jurisdiction of the registration court to pass upon the validity or
invalidity of the agreement Exhibit O-1, alleging that such is litigable only in an ordinary
action and not proper in a land registration proceeding.-The Motion for Reconsideration
and of New Trial was denied for lack of merit, but the court modified in highlighting that
the donee Church has not showed its clear acceptance of the donation, and is the real
party of this case, not the petitioners-appellants.
ISSUES:
WON the lower own erred in concluding that the stipulation embodied in Exhibit O on
religious expenses is just an arrangement stipulation, or grant revocable at the unilateral
option of the co-owners1.1 WON the lower court erred in finding and concluding that the
encumbrance or religious expenses embodied in Exhibit O, the extrajudicial partition

between the co-heirs, is binding only on the applicants Miguel Florentino, Rosario
Encarnacion de Florentino, Manuel Arce, Jose Florentino, Antonio Florentino, Victorino
Florentino, Remedios Encarnacion and Severina Encarnacion2. WON the lower court erred
in holding that rule that the petitioners-appellants are not the real parties in interest, but
the Church3. WON the lower court as a registration court erred in passing upon the merits
of the encumbrance (Exhibit O-1) as the same was never put to issue and as the question
involved is an adjudication of rights of the parties.
HELD:
YES, the court erred in concluding that the stipulation is just an arrangement stipulation. It
cannot be revoked unilaterally.
The contract must bind both parties, based on the principles (1)that obligation wising
from contracts have the force of law between the contracting parties; and (2) that them
must be mutuality between the parties band on their essential equality, to which is
repugnant to have one party bound by the contract leaving the other free therefrom.
The stipulation is part of an extrajudicial partition duly agreed and signed by the parties,
hence the same must bind the contracting parties thereto and its validity or compliance
cannot be left to the will of one of them- The said stipulation is a Stipulation pourautrui.
A stipulation pourautrui is a stipulation in favor of a third person conferring a clear and
deliberate favor upon him, and which stipulation is merely a part of a contract entered into
by the parties, neither of whom acted as agent of the third person, and such third person
may demand its fulfillment provided that he communicates his acceptance to the obligor
before it is revoked.Requisites
(1) that the stipulation in favor of a third person should be apart, not the whole, of the
contract,(2) that the favorable stipulation should not be conditioned or compensated by
any kind of obligation whatever; and (3) neither of the contracting parties bears the legal
representation or authorization of third party.Valid stipulation pourautrui
it must be the purpose and intent of the stipulating parties to benefit the third person, and
it is not sufficient that the third person may be incidentally benefited by the stipulation.
The intention of the parties may be disclosed by their contract. It matters not whether the
stipulation is in the nature of a gift or whether there is an obligation owing from the
promise to the third person. That no such obligation exists may in some degree assist in
determining whether the parties intended to benefit a third person.-The evidence on
record shows that the true intent of the parties is to confer a direct and material benefit
upon the Church- While a stipulation in favor of a third person has no binding effect in
itself before its acceptance by the party favored, the law does not provide when the third
person must make his acceptance. As a rule, there is no time limit; such third person has
all the time until the stipulation is revoked. Here, we find that the Church accepted
(implicitly) the stipulation in its favor before it is sought to be revoked by some of the coowners.
1.1 YES, the court should have found the other co-owners to be bound by the extrajudicial
partition.
Ratio
Being subsequent purchasers, they are privies or successors in interest; it is axiomatic that
contracts
are enforceable against the parties and their privies.

Reasoning
The co-owners are shown to have given their conformity to such agreement when they
kept their peace in 1962 and 1963, having already bought their respective shares of the
subject land but did not question the enforcement of the agreement as against them. They
are also shown to have knowledge of Exhibit O-1 as they had admitted in a Deed of Real
Mortgage executed by them.
2. YES
Ratio
That one of the parties to a contract pourautrui is entitled to bring an action for its
enforcement or to prevent its breach is too clear to need any extensive discussion. Upon
the other hand, that the contract involved contained a stipulation pourautrui amplifies this
settled rule only in the sense that the third person for whose benefit the contract was
entered into may also demand its fulfillment provided he had communicated his
acceptance thereof to the obligor before the stipulation in his favor is revoked.
Reasoning
The annotation of ExhibitO-1 on the face of the title to be issued in this case is merely a
guarantee of the continued enforcement and fulfillment of the beneficial stipulation.
3. NO
Ratio
The otherwise rigid rule that the jurisdiction of the Land Registration Court, being special
and limited in character and proceedings thereon summary in nature, does not extend to
cases involving issues properly litigable in other independent suits or ordinary civil actions.
Reasoning
The peculiarity of the exceptions is based not alone on the fact that Land Registration
Courts are likewise the same Courts of First Instance, but also the following premises: (1)
Mutual consent of the parties or their acquiescence in submitting the aforesaid issues for
determination by the court in the registration proceedings; (2) Full opportunity given to the
parties in the presentation of their respective sides of the issues and of the evidence in
support thereto; (3) Consideration by the court that the evidence already of record is
sufficient and adequate for rendering a decision upon these issues.-Also, the case has
been languishing in our courts for thirteen long years. To require that it be remanded to
the lower own for another proceeding under its general jurisdiction is not inconsonance
with our avowed policy of speedy justice.
Dispositive
IN VIEW OF THE FOREGOING, the decision of the Court of First Instance of Ilocos Sur in
Land Registration Case No. N-310 is affirmed but modified to allow the annotation of
Exhibit O-1 as an encumbrance on the face of the title to be finally issued in favor of all
the applicants (herein appellants and herein appellees) in the registration proceedings
below. No pronouncement as to costs. SO ORDERED.
COQUIA V. FIELDMENS INSURANCE
Facts:
On Dec. 1, 1961, Fieldmens Insurance co. Issued in favor of the Manila Yellow Taxicab a
common carrier insurance policy with a stipulation that the company shall indemnify the
insured of the sums which the latter may be held liable for with respect to death or bodily
injury to any fare-paying passenger including the driver and conductor. The policy also
stated that in the event of the death of the driver, the Company shall indemnify his
personal representatives and at the Companys option may make indemnity payable
directly to the claimants or heirs of the claimants. During the policys lifetime, a taxicab

of the insured driven by Coquia met an accident and Coquia died. When the company
refused to pay the only heirs of Coquia, his parents, they instituted this complaint. The
company contends that plaintiffs have no cause of action since the Coquias have no
contractual relationship with the company.
Issue:
Whether or not plaintiffs have the right to collect on the policy.
Held:
YES. Although, in general, only parties to a contract may bring an action based thereon,
this rule is subject to exceptions, one of which is found in the second paragraph of Article
1311 of the Civil Code of the Philippines, reading: "If a contract should contain some
stipulation in favor of a third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third person." This is but the restatement of a
well-known principle concerning contracts pour autrui, the enforcement of which may be
demanded by a third party for whose benefit it was made, although not a party to the
contract, before the stipulation in his favor has been revoked by the contracting parties.
In the case at bar, the policy under consideration is typical of contracts pour autrui this
character being made more manifest by the fact that the deceased driver paid fifty
percent (50%) of the corresponding premiums, which were deducted from his weekly
commissions. Under these conditions, it is clear that the Coquias who, admittedly, are
the sole heirs of the deceased have a direct cause of action against the Company, and,
since they could have maintained this action by themselves, without the assistance of the
insured it goes without saying that they could and did properly join the latter in filing the
complaint herein.
CONSTANTINO vs. ESPIRITU
Facts:
Pastor Constantino sold two parcels of land to Herminia Espiritu, on the condition that the
land will be held in trust for their already conceived but as yet unborn illegitimate son.
Espiritu took two mortgages on the land and then offered them for sale. Constantino asked
the court to: one, issue a temporary restraining order to stop the sale of the lands; and
two: compel Espiritu to execute a deed of absolute sale to Pastor Constantino Jr., then two
years old.
Espiritu moved to dismiss the case on two grounds: Pastor Jr. was not a party to the suit;
and the Statute on Frauds (which basically says that some contracts, including those
involving land, should be in writing; and signed by all parties bound by the contracts).
Constantino argued that what was involved was an implied trust under Art. 1453. The trial
court dismissed the complaint. Constantino then filed a motion for an amended complaint,
to have his son Pastor Jr. included in the suit. The trial court dismissed the motion, and the
case was appealed to the Supreme Court.
Issue:
May those who are not parties to a contract be benefited by said contract?
Held:

The court ruled that the contract appears to be a contract pour autrui, although couched
in the form of a deed of absolute sale, and appellants action was, in effect, one for
specific performance.
The court held that that the Statute of Frauds was not a strong defense as it was clear
upon the facts alleged in the amended complaint that the contract between the parties
had already been partially performed by the execution of the deed of sale, the action
brought below being only for the enforcement of another phase thereof, namely, the
execution by appellee of a deed of conveyance in favor of beneficiary there under.
Whether or not the properties were sold to be held in trust for their child was a matter of
fact that should be proved in court.
Case remanded to the lower court for further trial.
INTEGRATED PACKAGING CORP VS. CA
Petition to review the CA decision of April 20, 1994, reversing the judgment of the RTC in
an action for recovery of sum of money filed by private respondent against Petitioner.
FACTS:
On May 5, 1978 Petitioner and private respondent executed an order agreement:
Respondent bound itself to deliver 3,450 reams of printing paper (coated, 2 sides basis, 80
lbs, short grain) under the following schedule:
May and June 1978: 450 reams at P290/ream
August and September: 450 reams at P290/ream
January 1979: 575 reams at P307.20/ream
March: 575 reams at P307.20/ream
July: 575 reams at P307.20/ream
October: 575 at P307.20/ream
S.O.P. of parties: materials were to be paid w/in 30-90 days from delivery
- June 7, 1978: petitioner entered into contract with Philacor to print 3 volumes of books, 1
volume by November, 1978; another by November, 1979, and the last one by November,
1980.
- July 30, 1979: respondent had delivered to petitioner 1,097 reams out of the 3,450.
- Petitioner alleged it wrote private respondent that further delay in delivering the balance
would greatly prejudice petitioner.
- June, 1980 July, 1981: respondent delivered various quantities amounting to
P766,101.70.
- Petitioner had difficulties paying.
- Respondent made a formal demand for petitioner to settle the outstanding account.
- Petitioner made partial payments of P97,200.00 applied to its back accounts.
-Petitioner entered into additional printing contract with Philacor but unfortunately failed
to comply with its contract.
- Thus, Philacor demanded compensation from petitioner for the delay and damage
suffered.
- August 14, 1981: respondent filed with RTC a collection suit against petitioner for the
sum of P766,101.70, the unpaid purchase price of printing paper bought by petitioner on
credit.
- Petitioner denied the allegations of complaint. Counterclaim: that private respondent was
able to deliver only 1,097 reams, which was short of 2,875 reams, in total disregard of
their agreement; that private respondent failed to deliver despite demand therefore,

hence petitioner suffered damages and failed to realize expected profits; and that their
complaint was prematurely filed.
- respondent submitted a supplemental complaint, alleging that petitioner made additional
purchases of printing paper on credit amounting to P94,200; and that petitioner refused to
pay its outstanding obligation.
- July 5, 1990: Trial court:
1. petitioner should pay respondent P763,101.70.
2. petitioners claim meritorious: if not for the delay of private respondent to
deliver printing paper,
petitioner could have sold books to Philacor and realized a profit of P790,324.30 from the
sale.
3. petitioner suffered dislocation of contracts as a result of respondents failure:
awarded moral damages.
- CA reversed and set aside decision.
1. Ordered petitioner to pay respondent P763,101.70
2. deleted the P790,324.30 compensatory damages and moral damages
Petitioners' Claim
[i] the court of appeals erred in concluding that private respondent did not violate
the order agreement.
[ii] the court of appeals erred in concluding that respondent is not liable for
petitioners breach of contract with philacor.
[iii] the court of appeals erred in concluding that petitioner is not entitled to damages
against private
respondent.
ISSUES:
Substantive
1. WON private respondent violated the order agreement.
2. WON private respondent is liable for petitioners breach of contract with Philacor.
HELD:
1. NO. When there is a contract of sale of goods to be delivered by stated installments,
which are to be separately paid for, and the seller makes defective deliveries in respect of
one or more installments, or the buyer neglects or refuses without just cause to take
delivery of or pay for one or more installments, it depends in each case on the terms of
the contract and the circumstances of the case, whether the breach of contract is so
material as to justify the injured party in refusing to proceed further and suing for
damages for breach of the entire contract, or whether the breach is severable, giving rise
to a claim for compensation but not to a right to treat the whole contract as broken. (art.
1583)
Reasoning In this case, as found a quo petitioners evidence failed to establish that it had
paid for the printing paper covered by the delivery invoices on time. Consequently, private
respondent has the right to cease making further delivery, hence the private respondent
did not violate the order agreement. On the contrary, it was petitioner which breached the
agreement as it failed to pay on time the materials delivered by private respondent.
Respondent appellate court correctly ruled that private respondent did not violate the
order agreement.
2. NO. Aforesaid contracts could not affect third persons like private respondent because
of the basic civil law principle of relativity of contracts which provides that contracts can

only bind the parties who entered into it, and it cannot favor or prejudice a third person,
even if he is aware of such contract and has acted with
knowledge thereof.
The order agreement entered into by petitioner and private respondent has not been
shown as having a direct bearing on the contracts of petitioner with Philacor. The paper
specified in the order agreement between petitioner and private respondent are markedly
different from the paper involved in the contracts of petitioner with Philacor. The demand
made by Philacor upon petitioner for the latter to comply with its printing contract is dated
February 15, 1984, which is clearly made long after private respondent had filed its
complaint on August 14, 1981. This demand relates to contracts with Philacor dated April
12, 1983 and May 13, 1983, which were entered into by petitioner after private
respondent filed the instant case.
The instant petition is DENIED. The decision of the Court of Appeals is AFFIRMED. Costs
against petitioner.
DAYWALT VS. LA CORPORATION DE LOS PADRES AGUSTINOS RECOLETOS
Facts:
Teodorica Endencia obligated herself to sell a parcel of land to the plaintiff. It was agreed
that the final deed of sale will be executed when the land was registered in Endencias
name. Subsequently, the Torrens Title for the land was issued in her favor but in the
course of the proceedings for registration it was found that the land involved in the sale
contained a greater area than what Endencia originally thought and she became reluctant
to consummate the sale of the land to the plaintiff. This reluctance was due to the advice
of the defendant which exercised a great moral influence over her. However, in advising
Endencia that she was not bound by her contract with the plaintiff, the defendant was not
actuated with improper motives but did so in good faith believing that, under the
circumstances, Endencia was not really bound by her contract with the plaintiff.
In view of Endencias refusal to make the conveyance, the plaintiff instituted a complaint
for specific performance against her and, upon appeal, the Supreme Court held that she
was bound by the contract and she was ordered to make the conveyance of the land in
question to the plaintiff. The plaintiff then instituted an action against the defendant to
recover the following damages: (a) The amount of Pesos 24,000.00 for the use and
occupation of the land in question by reason of the pasturing of cattle therein during the
period that the land was not conveyed by Endencia to the plaintiff; (b) The amount of
Pesos 500,000.00 for plaintiffs failure to sell the land in question to a sugar growing and
milling enterprise, the successful launching of which depended on the ability of Daywalt to
get possession of the land and the Torrens Title. The lower court held that the defendant
was liable to the plaintiff for the use and occupation of the land in question and
condemned the defendant to pay the plaintiff Pesos 2,497.00 as damages. The Supreme
Court affirmed this adjudication of the lower court. With respect to the claim of Pesos
500,000.00 damages, the Supreme Court.
ISSUE:
Held: The most that can be said with reference to the conduct of Teodorica Endencia is
that she refused to carry out a contract for the sale of certain land and resisted to the last

an action for specific performance in court. The result was that the plaintiff was prevented
during a period of several years from exerting that control over the property which he was
entitled to exert and was meanwhile unable to dispose of the property advantageously.
The extent of the liability for the breach of a contract must be determined in the light of
the situation in existence at the time the contract is made; and the damages ordinarily
recoverable in all events limited to such as might be reasonably foreseen in the light of the
facts then known to the contracting parties. Where the purchaser desires to protect
himself, in the contingency of the failure of the vendor promptly to give possession, from
the possibility of incurring other damages than such as are incident to the normal value of
the use and occupation, he should cause to be inserted in the contract a clause providing
for stipulated amount to be paid upon failure of the vendor to give possession; and no
case has been called to our attention where, in the absence of such a stipulation, damages
have been held to be recoverable by the purchase in excess of the normal value of use
and occupation.
The damages recoverable in case of the breach of a contract are two sorts, namely, (1) the
ordinary, natural, and in a sense, necessary damage; and (2) special damages. Ordinary
damages is found in all breaches of contract where there are no special circumstances to
distinguish the case especially from other contracts. The consideration paid for an
unperformed promise is an instance of this sort of damage. In all such cases the damages
recoverable are such as naturally and generally would result from such a breach,
according to the usual course of things. In cases involving only ordinary damage, it is
conclusively presumed from the immediateness and inevitableness of the damage, and
the recovery of such damage follows as a necessary legal consequence of the breach.
Ordinary damage is assumed as a matter of law to be within the contemplation of the
parties. Special damage, on the other hand, is such as follows less directly from the
breach than ordinary damage. It is only found in cases where some external condition,
apart from the actual terms of the contract exists or intervenes, as it were, to give a turn
to affairs and to increase damage in a way that the promissor, without actual notice of the
external condition, could not reasonably be expected to foresee.
Plaintiffs right chiefly as against Teodorica Endencia; and what has been said suffices in
our opinion to demonstrate that the damages laid under the second cause of action in the
complaint could not be recovered from her, first, because the damages in question are
special damages which were not within contemplation of the parties when the contract
was made, and secondly, because said damages are too remote to be subject of recovery.
This conclusion is also necessarily fatal to the right of the plaintiff to recover such
damages from the defendant corporation for, as already suggested, by advising Teodorica
Endencia not to perform the contract, said corporation could in no event render itself more
extensively liable than the principal in the contract. Our conclusion is that the judgment
of the trial court should be affirmed, and it is so ordered, with costs against the appellant.
SO PING BUN V. CA
Facts:
In 1963, Tek Hua Trading Co. entered into lease agreements with lessor Dee C. Chuan and
Sons, Inc. involving four (4) premises in Binondo, which the former used to store textiles.
The agreements were for one (1) year, with provisions for month-to-month rental should
the lessee continue to occupy the properties after the term. In 1976, Tek Hua Trading Co.
was dissolved, and the former members formed Tek Hua Enterprises Corp., herein

respondent. So Pek Giok, managing partner of the defunct company, died in 1986.
Petitioner So Ping Bun, his grandson, occupied the warehouse for his own textile business,
Trendsetter Marketing. On March 1, 1991, private respondent Tiong sent a letter to
petitioner, demanding that the latter vacate the premises. Petitioner refused, and on
March 4, 1992, he requested formal contracts of lease with DCCSI. The contracts were
executed. Private respondents moved for the nullification of the contract and claimed
damages. The petition was granted by the trial court, and eventually by the Court of
Appeals.
Issue:
(1) Whether So Ping Bun is guilty of tortuous interference of contract
(2) Whether private respondents are entitled to attorneys fees
Held:
(1) Damage is the loss, hurt, or harm which results from injury, and damages are the
recompense or compensation awarded for the damage suffered. One becomes liable in an
action for damages for a non trespassory invasion of another's interest in the private use
and enjoyment of asset if (a) the other has property rights and privileges with respect to
the use or enjoyment interfered with, (b) the invasion is substantial, (c) the defendant's
conduct is a legal cause of the invasion, and (d) the invasion is either intentional and
unreasonable or unintentional and actionable under general negligence rules. The
elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the
part of the third person of the existence of contract; and (3) interference of the third
person is without legal justification or excuse. Petitioner's Trendsetter Marketing asked
DCCSI to execute lease contracts in its favor, and as a result petitioner deprived
respondent corporation of the latter's property right. Clearly, and as correctly viewed by
the appellate court, the three elements of tort interference above-mentioned are present
in the instant case.
Authorities debate on whether interference may be justified where the defendant acts for
the sole purpose of furthering his own financial or economic interest. One view is that, as a
general rule, justification for interfering with the business relations of another exists where
the actor's motive is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other. Added to this, some authorities believe that it is not
necessary that the interferer's interest outweigh that of the party whose rights are
invaded, and that an individual acts under an economic interest that is substantial, not
merely de minimis, such that wrongful and malicious motives are negative, for he acts in
self-protection. Moreover justification for protecting one's financial position should not be
made to depend on a comparison of his economic interest in the subject matter with that
of others. It is sufficient if the impetus of his conduct lies in a proper business interest
rather than in wrongful motives. Where there was no malice in the interference of a
contract, and the impulse behind one's conduct lies in a proper business interest rather
than in wrongful motives, a party cannot be a malicious interferer. Where the alleged
interferer is financially interested, and such interest motivates his conduct, it cannot be
said that he is an officious or malicious intermeddler.
In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the
warehouse to his enterprise at the expense of respondent corporation. Though petitioner
took interest in the property of respondent corporation and benefited from it, nothing on
record imputes deliberate wrongful motives or malice on him. Petitioner argues that

damage is an essential element of tort interference, and since the trial court and the
appellate court ruled that private respondents were not entitled to actual, moral or
exemplary damages, it follows that he ought to be absolved of any liability, including
attorney's fees.
While we do not encourage tort interferers seeking their economic interest to intrude into
existing contracts at the expense of others, however, we find that the conduct herein
complained of did not transcend the limits forbidding an obligatory award for damages in
the absence of any malice. The business desire is there to make some gain to the
detriment of the contracting parties. Lack of malice, however, precludes damages. But it
does not relieve petitioner of the legal liability for entering into contracts and causing
breach of existing ones. The respondent appellate court correctly confirmed the
permanent injunction and nullification of the lease contracts between DCCSI and
Trendsetter Marketing, without awarding damages. The injunction saved the respondents
from further damage or injury caused by petitioner's interference.
(2) Lastly, the recovery of attorney's fees in the concept of actual or compensatory
damages, is allowed under the circumstances provided for in Article 2208 of the Civil
Code. One such occasion is when the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect his interest. But we
have consistently held that the award of considerable damages should have clear factual
and legal bases. In connection with attorney's fees, the award should be commensurate to
the benefits that would have been derived from a favorable judgment. Settled is the rule
that fairness of the award of damages by the trial court calls for appellate review such that
the award if far too excessive can be reduced. This ruling applies with equal force on the
award of attorney's fees. In a long line of cases we said, "It is not sound policy to place in
penalty on the right to litigate. To compel the defeated party to pay the fees of counsel for
his successful opponent would throw wide open the door of temptation to the opposing
party and his counsel to swell the fees to undue proportions."
Considering that the respondent corporation's lease contract, at the time when the cause
of action accrued, ran only on a month-to-month basis whence before it was on a yearly
basis, we find even the reduced amount of attorney's fees ordered by the Court of Appeals
still exorbitant in the light of prevailing jurisprudence. Consequently, the amount of two
hundred thousand (P200,000.00) awarded by respondent appellate court should be
reduced to one hundred thousand (P100,000.00) pesos as the reasonable award or
attorney's fees in favor of private respondent corporation.
MANILA RAILROAD CO. VS. COMPANIA TRANSATLANTICA
FACTS:
SS/Alicante, belonging to Compania Transatlantica de Barcelona was transporting two
locomotive boilers for the Manila Railroad Company. The equipment of the ship for
discharging the heavy cargo was not strong enough to handle the boilers. Compania
Transatlantica contracted the services of Atlantic gulf and Pacific Co., which had the best
equipment to lift the boilers out of the ships hold. When Alicante arrived in Manila,
Atlantic company sent out its floating crane under the charge of one Leyden. When the
first boiler was being hoisted out of the ships hold, the boiler could not be brought out
because the sling was not properly placed and the head of the boiler was caught under the
edge of the hatch. The weight on the crane was increased by a strain estimated at 15
tons with the result that the cable of the sling broke and the boiler fell to the bottom of the

ships hold. The sling was again adjusted and the boiler was again lifted but as it was
being brought up the bolt at the end of the derrick broke and the boiler fell again. The
boiler was so badly damaged that it had to be shipped back to England to be rebuilt. The
damages suffered by Manila Railroad amounted to P23,343.29. Manila Railroad then filed
an action against the Streamship Company to recover said damages. The Steamship
Company caused Atlantic Company to be brought as co-defendant arguing that Atlantic
Company as an independent contractor, who had undertaken to discharge the boilers had
become responsible for the damage.
The Court of First Instance decided in favor of Manila Railroad, the plaintiff, against Atlantic
Company and absolved the Steamship Company. Manila Railroad appealed from the
decision because the Steamship Company was not held liable also. Atlantic Company also
appealed from the judgment against it.
ISSUES:
1.
Was the Steamship Company liable to Manila Railroad for delivering the boiler in a
damaged condition?
2.
Was Atlantic Company liable to the Steamship Company for the amount it may be
required to pay the
plaintiff?
a. Was Atlantic Company directly liable to plaintiff as held by the trial court?

RULING:
There was a contractual relation between the Steamship Company and Manila
Railroad. There was also a contractual relation between the Steamship Company
and Atlantic. But there was no contractual relation between the Railroad Company
and Atlantic Company.
There was no question that the Steamship Company was liable to Manila Railroad
as it had the obligation to transport the boiler in a proper manner safe and
securely under the circumstances required by law and customs. The Steamship
Company cannot escape liability simply because it employed a competent
independent contractor to discharge the boiler.
Atlantic Company claimed that it was not liable, because it had employed all the
diligence of a good father of a family and proper care in the selection of Leyden.
Said argument was not tenable, because said defense was not applicable to
negligence arising in the course of the performance of a contractual obligation.
The same can be said with respect to the liability of Atlantic Company upon its
contract with the Steamship Company. There was a distinction between
negligence in the performance of a contractual obligation (culpa contractual) and
negligence considered as an independent source of obligation (culpa aquiliana).
Atlantic Company is liable to the Steamship Company for the damage brought
upon the latter by the failure of Atlantic Company to use due care in discharging
the boiler, regardless of the fact that the damage was caused by the negligence of
an employee who was qualified for the work, duly chose with due care.

Since there was no contract between the Railroad Company and Atlantic Company,
Railroad Company can had no right of action to recover damages from Atlantic
Company for the wrongful act which constituted the violation of the contract. The
rights of Manila Railroad can only be made effective through the Steamship
Company with whom the contract of affreightment was made.
DKC HOLDINGS CORP. V CA
Petition for review on certiorari seeking reversal of December 5, 1994 Decision of the CA
entitled "DKC Holdings Corporation vs. Victor U. Bartolome, et al.", affirming in toto the
January 4, 1993 Decision of RTC Valenzuela which dismissed the civil case and ordered
petitioner to pay P30,000.00 as attorneys fees.
FACTS:
March 16, 1988 a 14,021 sq mtr. parcel of land in Malinta, Valenzuela originally owned by
Victor Bartolomes deceased mother, Encarnacion Bartolome, a lot in front of one of the
textile plants of DKC Holdings Corp. and a potential warehouse site, was subject to a
Contract of Lease with Option to Buy between DKC and
Encarnacion Bartolome which option must be exercised within a period of two years
counted from the signing of the Contract.
> DKC to pay P3,000.00 a month as consideration for the reservation of its option and
within the two-year period
> DKC shall serve formal written notice upon Encarnacion Bartolome of its desire to
exercise its option. > in case DKC chose to lease the property, it may take actual
possession of the premises
> the lease shall be for a period of six years, renewable for another six years, and the
monthly rental fee shall be P15,000.00 for the first six years and P18,000.00 for the next
six years, in case of renewal
- DKC regularly paid the monthly P3,000.00 provided for by the Contract to Encarnacion
until her death in January 1990 and thereafter, coursed its payment to Victor Bartolome,
being the sole heir of Encarnacion, however, he refused to accept these payments
- January 10, 1990 - Victor executed an Affidavit of Self-Adjudication over all the properties
of Encarnacion, including the subject lot.
- March 14, 1990 DKC served upon Victor, via registered mail, notice that it was
exercising its option to lease the property, tendering the amount of P15,000.00 as rent for
the month of March but Victor refused to accept the tendered rental fee and to surrender
possession of the property to DKC
- DKC thus opened a savings account with the China Banking Corporation, Cubao, in the
name of Victor Bartolome and deposited therein the P15,000.00 rental fee for March as
well as P6,000.00 reservation fees for February and March
- DKC also tried to register and annotate the Contract on the title of Victor to the property
but the Register of Deeds, only accepting the required fees, refused to register or annotate
or even enter it in the day book or primary register
- April 23, 1990 DKC filed complaint for specific performance and damages against Victor
and the Register of Deeds and prayed for?
> surrender and delivery of possession of the subject land in accordance with the Contract
terms
> surrender of title for registration and annotation thereon of the Contract

> payment of P500,000.00 as actual damages, P500,000.00 as moral damages,

P500,000.00 as exemplary damages and P300,000.00 as attorneys fees.
- May 8, 1990 - Andres Lanozo claimed that he is a tenant-tiller of the subject property,
which was agricultural riceland, for forty-five years and questioned the jurisdiction of the
lower court over the property and invoked the Comprehensive Agrarian Reform Law to
protect his rights that would be affected by the dispute
between the original parties to the case
- January 4, 1993 - RTC Valenzuela dismissed the complaint and ordered petitioner to pay
Victor P30,000.00 as attorneys fees
- CA affirmed the decision in toto
- Petitioners Claim
CA erred in Ruling that:
1. provision on the notice to exercise option was not transmissible
2. notice of option must be served by DKC upon Encarnacion Bartolome personally
3. contract was one-sided and onerous in favor of DKC
4. existence of a registered tenancy was fatal to the validity of the contract
5. Victor Bartolome was liable to DKC Holdings for attorneys fees
ISSUES:
1. WON Contract of Lease with Option to Buy entered into by the late Encarnacion
Bartolome with DKC Holdings was terminated upon her death
2. WON DKC Holdings had complied with its obligations under the contract and with the
requisites to exercise its option
HELD
1. NO, It binds her sole heir, Victor, even after her demise.
- A1311 CC provides
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 provision of law. The heir is not liable beyond the value of
the property he received from the decedent.
- General Rule: heirs are bound by contracts entered into by their predecessors-in-interest
Exception: when the rights and obligations arising therefrom are not transmissible by:
(1) their nature
(2) stipulation or
(3) provision of law
- there is neither contractual stipulation nor legal provision making the rights and
obligations under the contract intransmissible; moreover, the nature of the rights and
obligations are, by their nature, transmissible.
- Nature of Intransmissible Rights as explained by Arturo Tolentino
Among contracts which are intransmissible are those which are purely personal, either by
provision of law, such as in cases of partnerships and agency, or by the very nature of the
obligations arising therefrom, such as those requiring special personal qualifications of the
obligor. It may also be stated that contracts for the payment of money debts are not
transmitted to the heirs of a party, but constitute a charge against his estate. Thus, where
the client in a contract for professional services of a lawyer died, leaving minor heirs, and
the lawyer, instead of presenting his claim for professional services under the contract to
the probate court, substituted the minors as parties for his client, it was held that the
contract could not be enforced against the minors; the lawyer was limited to a recovery on
the basis of quantum meruit.
- In American jurisprudence

(W)here acts stipulated in a contract require the exercise of special knowledge, genius,
skill, taste, ability, experience, judgment, discretion, integrity, or other personal
qualification of one or both parties, the agreement is of a personal nature, and terminates
on the death of the party who is required to render such service
- Contracts to perform personal acts which cannot be as well performed by others are
discharged by the death of the promissor. Conversely, where the service or act is of such a
character that it may as well be performed by another, or where the contract, by its terms,
shows that performance by others was contemplated, death does not terminate the
contract or excuse nonperformance. Here, no personal act is required from the late
Encarnacion Bartolome and the obligation of Encarnacion in the contract to deliver
possession of the subject property to petitioner upon the exercise by the latter of its option
to lease the same may very well be performed by her heir Victor.
- heirs cannot escape the legal consequence of a transaction entered into by their
predecessor-in-interest because they have inherited the property subject to the liability
affecting their common ancestor.
> 1903, it was held that "(H)e who contracts does so for himself and his heirs."
> 1952, predecessor was duty-bound to reconvey land to another, and at his death the
reconveyance had not been made, the heirs can be compelled to execute the proper deed
for reconveyance
- In Paraaque Kings Enterprises vs. Court of Appeals where Raymundo alleged that he is
not privy to the lease contract, not being the lessor nor the lessee referred to therein, SC
ruled he is nevertheless a proper party because he stepped into the shoes of the ownerlessor of the land as, by virtue of his purchase. He assumed all the obligations of the lessor
under the lease contract. And he received benefits in the form of rental payments. Here
the subject matter is also a lease, which is a property right and death of a party does not
excuse nonperformance of a contract which involves a property right, and the rights and
obligations thereunder pass to
the personal representatives of the deceased.
2. YES, the payment by DKC of the reservation fees during the two-year period within
which it had the option to lease or purchase the property is not disputed and it was also
proper to address notice to exercise option to Victor as heir of Encarnacion.
- payment of such reservation fees, except those for February and March, 1990 were
admitted by Victor
- DKC followed the requirements by
> paying the P15,000.00 monthly rental fee on the subject property by depositing the
same in China Bank Savings Account in the name of Victor as the sole heir o Encarnacion
Bartolome, for the months of March to July 30, 1990, or a total of 5 months, despite the
refusal of Victor to turn over the subject property
> informed other party of its intention to exercise its option to lease through its letter
dated March 12, 1990, well within the two-year period for it to exercise its option.
Disposition Instant Petition for Review is GRANTED. The Decision of the Court of Appeals
and RTC Valenzuela are both SET ASIDE and a new one rendered ordering private
respondent Victor Bartolome to:
(a) surrender and deliver possession of that parcel of land by way of lease to petitioner
and to perform all obligations of his predecessor-in-interest, Encarnacion Bartolome, under
the subject Contract of Lease with Option to Buy;
(b) surrender and deliver his copy of Transfer Certificate of Title to Register of Deeds for
registration and annotation thereon of the subject Contract of Lease with Option to Buy;
(c) pay costs of suit.

Respondent Register of Deeds is ordered to register and annotate the subject Contract of
Lease with Option to Buy at the back of Transfer Certificate of Title upon submission by
DKC of a copy thereof to his office.
DAUDEN-HERNAEZ VS. DE LOS ANGELES
FACTS:
This is a petition for a writ of certiorari to set aside certain orders of the CFI of Quezon City
dismissing a complaint for breach of contract and damage, etc.
Marlene Dauden-Hernaez is a motion picture actress who has filed a complaint against
private respondent Hollywood Far East Productions Inc and its president Ramon Valuenzela
to recover P14, 700 representing a balance due to said actress for her services as leading
actress in two motion pictures produced by the company and to recover damages.
Her petition was dismissed by the lower court because it was defective because not
evidenced by any written document, either public or private considering that the claim is
more than P500 thereby violating Article 1356 and 1358 of the Civil Code.
Issue:
WON the court below abused its discretion in ruling that a contract for personal services
involving more than P500 was either invalid or unenforceable under the last part of 1358
of the Civil Code.
Held:
Yes. The court below abused its discretion. There was a misunderstanding of the role of the
written form in contracts, as ordained in the present CC.
The contractual system of our CC still follows that of the Spanish Code of 1889 and of the
Ordenamientode Alcala (ah so Leghis) of upholding the spirit and intent of the parties
over formalities, hence, in general, contracts are valid and binding from their perfection
regardless of the form, whether they be oral of written as provided by Art 1315 (Contracts
are perfected by mere consent xxx) and by 1356 (Contracts shall be obligatory in
whatever form they may have been entered into xxx).
The essential requisites are present in the contract-C-O-C.
The basis error in the courts decision lies in overlooking that in our contractual system it
is not enough that the law should require that the contract be in writing, as it does in Art.
1358. The law MUST further PRESCRIBE that without the writing, the contract is not valid
or enforceable by action.
Order set aside and case remanded to court of origin for further proceedings.
PAKISTAN INTL AIRLINES V OPLE (1990)
FACTS:

Pakistan International Airlines executed in Manila 2 separate contracts of employment

which provided that PIA reserves the right to terminate the agreement at anytime by
giving the EE notice in writing 1 month before the intended date of termination and that
the governing law shall be the laws of Pakistan and venue for actions is Karachi courts. PIA
terminated the employment of the 2 Filipinas who filed complaint for illegal dismissal.
Issue:
Whether or not the provisions of the contract superseded the general provisions of the
Labor Code.
Ruling:
No. The principle to freedom to contract. Civil Code Art. 1306 provides that stipulations by
the parties may be allowed provided they are not contrary to law, morals, good customs,
public policy and order. Thus the autonomy of the contracting parties must be
counterbalanced with the general rule that provisions of applicable law are deemed
written into the contract. In this case, the law relating to Labor and Employment is an area
which parties are not at liberty to insulate themselves and their relationships from by
simply contracting with each other.
CUI VS ARELLANO UNIVERSITY
FACTS:
Emetrio Cui took his preparatory law course at Arellano University. He then enrolled in its
College of Law from first year (SY1948-1949) until first semester of his 4th year. During
these years, he was awarded scholarship grants of the said university amounting to a total
of P1,033.87. He then transferred and took his last semester as a law student at Abad
Santos University. To secure permission to take the bar, he needed his transcript of records
from Arellano University. The defendant refused to issue the TOR until he had paid back
the P1,033.87 scholarship grant which Emetrio refunded as he could not take the bar
without Arellanos issuance of his TOR.
On August 16, 1949, the Director of Private Schools issued Memorandum No. 38
addressing all heads of private schools, colleges and universities. Part of the memorandum
states that the amount in tuition and other fees corresponding to these scholarships
should not be subsequently charged to the recipient students when they decide to quit
school or to transfer to another institution. Scholarships should not be offered merely to
attract and keep students in a school.
ISSUE:
Whether or not Emetrio Cui can refund the P1,033.97 payment for the scholarship grant
provided by Arellano University.
HELD:
The memorandum of the Director of Private Schools is not a law where the provision set
therein was advisory and not mandatory in nature. Moreover, the stipulation in question,
asking previous students to pay back the scholarship grant if they transfer before
graduation, is contrary to public policy, sound policy and good morals or tends clearly to
undermine the security of individual rights and hence, null and void.

The court sentenced the defendant to pay Cui the sum of P1,033.87 with interest thereon
at the legal rate from Sept.1, 1954, date of the institution of this case as well as the costs
and dismissing defendants counterclaim.
ARROYO V BERWIN
Facts:
That the defendant, as such procurador judicial, represented Marcela Juanesa in the justice
of the peace court of Iloilo in proceeding for theft prosecuted by the plaintiff Ignacio
Arroyo; that said cause was decided by the said justice of the peace against the accused,
and the latter appealed to the Court of First Instance of Iloilo. The plaintiff delivered to the
defendant for the signature of the said Marcela Juaneza a written agreement stating that
the defendant's said client recognized the plaintiff's ownership in the described land and
that she would not oppose the plaintiff's application for registration; and that up to the
present time, the defendant has not returned to the plaintiff the said written agreement,
notwithstanding the plaintiff's many demands.
Issue:
Whether or not the consideration of the contract is with legal consideration.
Ruling:
None. The case is dismissed on the ground of the illegality of the consideration of the
alleged contract. An agreement by the owner of stolen goods to stifle the prosecution of
the person charged with the theft, for a pecuniary or other valuable consideration, is
manifestly contrary to public policy and the due administration of justice.
Article 1255 of the Civil Code provides that the contracting parties may make the
agreement and establish the clauses and conditions which they may dream advisable,
provided they are not in contravention of law, morals, or public order. Article 1275
provides that contracts without consideration or with an illicit one have no effect
whatsoever. A consideration is illicit when it is contrary to law and good morals.
FILIPINAS COMPAIA DE SEGUROS VS. MANDANAS
Facts:
This is a special civil action for a declaratory relief Thirty-nine (39) non-life insurance
companies instituted it, in the Court of First Instance of Manila, to secure a declaration of
legality of Article 22 of the Constitution of the Philippine Rating Bureau, of which they are
members, inasmuch as respondent Insurance Commissioner assails its validity upon the
ground that it constitutes an illegal or undue restraint of trade. Court rendered judgment
declaring that the aforementioned Article 22 is neither contrary to law nor against public
policy. Hence this appeal by respondent Insurance Commissioner, who insists that the
Article in question constitutes an illegal or undue restraint of trade and, hence, null and
void.
Issue:
Whether or not the contract constitutes unlawful machination of trade.
Ruling:
No. this Court had had occasion to declare that the test on whether a given agreement
constitutes an unlawful machination or a combination in restraint of trade is, whether,

under the particular circumstances of the case and the nature of the particular contract
involved in it, the contract is, or is not, unreasonable. The test of validity is whether under
the particular circumstances of the case and considering the nature of the particular
contract involved, public interest and welfare are not involved and the restraint is not only
reasonably necessary for the protection of the contracting parties but will not affect the
public interest or service.
BUSTAMANTE VS. ROSEL
FACTS:
The petitioners herein borrowed a sum of money from the respondents through a loan
which stipulated, among others, that: a certain parcel of land of the petitioners will be
collateral; and that the lender (respondents) has the option to purchase the collateral lot
for P 200,000.00 , inclusive of the amount and interest therein. When the loan was about
to mature on March 1, 1989, respondents proposed to buy at the pre-set price of
P200,000.00, the seventy (70) square meters parcel of the land. This was refused by the
petitioners, together with the request of the petitioners to extend the period of payment.
The petitioners offered another land instead, with the consideration that the borrowed
amount as down payment. The lender refused to accept payment upon being offered by
the petitioners and insisted that the collateral be sold to them. The petitioners deposited
the amount to the trial court instead, showing their desire to pay.
The trial court denied the execution of the Deed of Sale and just ordered the payment of
the loan with interest. This was REVERSED by the Court of Appeals hence this petition.
ISSUE:
Whether or not the Deed of Sale can be executed considering the conditions stipulated in
the loan.
RULING:
No, it cannot be executed. The sale of the collateral is an obligation with a suspensive
condition. It is dependent upon the happening of an event, without which the obligation to
sell does not arise as provided in Article 1181 of the Civil Code. The event that is to be
based upon is the non-payment of the petitioners. This did not happen because the
petitioner tendered payment at the due date which respondents refused to accept,
insisting that petitioner sell to them the collateral of the loan. Upon such refusal, they
deposited the amount in the trial court showing their intention to pay. A scrutiny of the
stipulation of the parties reveals a subtle intention of the creditor to acquire the property
given as security for the loan. This stipulation is embraced in the concept of
pactum commissorium which is prohibited by law. Pactum commissorium occurs if there
was a creditor-debtor relationship between the parties; the property was used as security
for the loan; and there was automatic appropriation by the borrower.
BORROMEO VS. CA
[PETITION for review by certiorari of a decision of the Court of Appeals]
FACTS :
Before 1933, defendant [Jose A. Villamor] was a distributor of lumber belonging to Mr.
Miller who was the agent of the Insular Lumber Company in Cebu City. Defendant being a
friend and former classmate of plaintiff [Canuto O. Borromeo] used to borrow from the

latter certain amounts from time to time. On one occasion, defendant borrowed from
plaintiff a large sum of money for which he mortgaged his land and house in Cebu City to
pay some pressing obligation with Mr. Miller. Mr. Miller filed a civil action against the
defendant and attached his properties including those mortgaged to plaintiff, inasmuch as
the deed of mortgage in favor of plaintiff could not be registered because not properly
drawn up.
Plaintiff then pressed the defendant for settlement of his obligation, but defendant instead
offered to execute a document promising to pay his indebtedness even after the lapse of
ten years. Liquidation was made and defendant was found to be indebted to plaintiff in the
sum of P7,220.00, for which defendant signed a promissory note therefore on November
29, 1933 with interest at the rate of 12% per annum, agreeing to pay as soon as I have
money'. The note further stipulates that defendant 'hereby relinquish, renounce, or
otherwise waive my rights to the prescriptions established by our Code of Civil Procedure
for the collection or recovery of the above sum of P7,220.00 at any time even after the
lapse of ten years from the date of this instrument'.
After the execution of the document, plaintiff limited himself to verbally requesting
defendant to settle his indebtedness from time to time. Plaintiff did not file any complaint
against the defendant within ten years from the execution of the document as there was
no property registered in defendant's name, who furthermore assured him that he could
collect even after the lapse of ten years. After the last war, plaintiff made various oral
demands, but defendants failed to settle his account-CFI: Villamor ordered to pay
Borromeo (represented by his heirs) the sum of P7,220.00 within ninety days from the
date of the receipt of such decision with interest at the rate of 12% per annum from the
expiration of such ninety-day period. Court of Appeals reversed CFI ruling, hence this
petition for review.
ISSUE
1. WON the CA erred in reversing the ruling of the CFI in finding the lack of validity of the
stipulation amounting to a waiver in line with the principle "that a person cannot renounce
future prescription"
HELD:
1. YES. Between two possible interpretations, that which saves rather than destroys is to
be preferred.
It is a fundamental principle in the interpretation of contracts that while ordinarily the
literal sense of the words employed is to be followed, such is not the case where they
"appear to be contrary to the evident intention of the contracting parties," which"
intention shall prevail." The terms, clauses and conditions contrary to law, morals and
public order (in this case the contested stipulation) should be separated from the valid and
legal contract when such separation can be made because they are independent of the
valid contract which expresses the will of the contracting parties.
There is nothing implausible in the view that such language renouncing the debtor's right
to the prescription established by the Code of Civil Procedure should be given the
meaning, as noted in the preceding sentence of the decision of respondent Court, that the
debtor could be trusted to pay even after the termination of the ten-year prescriptive
period. Where an agreement founded on a legal consideration contains several promises,

or a promise to do several things, and a part only of the things to be done are illegal, the
promises which, can be separated, or the promise, so far as it can be separated, from the
illegality, may be valid. The rule is that a lawful promise made for a lawful consideration is
not invalid merely because an unlawful promise was made at the same time and for the
same consideration, and this rule applies, although the invalidity is due to violation of a
statutory provision, unless the statute expressly or by necessary implication declares the
entire contract void.- the first ten years after November 29, 1933 should not be counted in
determining when the action of creditor, now represented by petitioners, could be filed.
From the joint record on appeal, it is undoubted that the complaint was filed on January 7,
1953. If the first ten-year period was to be excluded, the creditor had until November 29,
1953 to start judicial proceedings. After deducting the first ten year period which expired
on November 29, 1943, there was the additional period of still another ten years.29 Nor
could there be any legal objection to the complaint by the creditor Borromeo of January 7,
1953embodying not merely the fixing of the period within which the debtor Villamor was
to pay but likewise the collection of the amount that until then was not paid.
Wherefore, the decision of respondent Court of Appeals of March 7, 1964 is reversed, thus
giving full force and effect to the decision of the lower court of November 15, 1956. With
costs against private respondents.
KASILAG VS. RODRIGUEZ
This is an appeal taken by the defendant-petitioner from the decision of the Court of
Appeals which modified that rendered by the court of First Instance of Bataan. The said
court held that the contract is entirely null and void and without effect; that the plaintiffsrespondents, then appellants, are the owners of the disputed land, with its improvements,
in common ownership with their brother Gavino Rodriguez, hence, they are entitled to the
possession thereof; that the defendant-petitioner should yield possession of the land in
their favor, with all the improvements thereon and free from any lien.
FACTS:
The parties entered into a contract of loan to which has an accompanying accessory
contract of mortgage. The executed accessory contract involved the improvements on a
piece land, the land having been acquired by means of homestead. Petitioner for his part
accepted the contract of mortgage. Believing that there are no violations to the
prohibitions in the alienation of lands Petioner, acting in good faith took possession of the
land. To wit, the P has no knowledge that the enjoyment of the fruits of the land is an
element of the credit transaction of Antichresis.
ISSUE:
Whether or not Petitioner is deemed to be a possessor in good faith of the land, based
upon Article 3 of the New Civil Code as states Ignorance of the law excuses no one from
compliance therewith.
HELD:
The accessory contract of mortgage of the improvements of on the land is valid. The
verbal contract of antichresis agreed upon is deemed null and void. REASONING: Sec 433
of the Civil Code of the Philippines provides Every person who is unaware of any flaw in
his title or in the manner of its acquisition by which it is invalidated shall be deemed a
possessor of good faith. And in this case, the petitioner acted in good faith. Good faith

maybe a basis of excusable ignorance of the law, the petitioner acted in good faith in his
enjoyment of the fruits of the land to which was done through his apparent acquisition
thereof.
RODRIGUEZ VS. RODRIGUEZ
Facts:
Concepcion Felix, widow of the late Don Felipe Calderon and with whom she had one living
child, Concepcion Calderon, contracted a second marriage on June 20, 1929, with Domingo
Rodriguez, widower with four children by a previous marriage, named Geronimo,
Esmeragdo, Jose and Mauricio, all surnamed Rodriguez. There was no issue in this second
marriage. Prior to her marriage to Rodriguez, Concepcion Felix was the registered owner of
2 fishponds located in the barrio of Babagad, municipality of Bulacan, Bulacan province.
with a total area of 557,711 square meters covered by OCT Nos. 605 and 807. Under date
of January 24, 1934, Concepcion Felix appeared to have executed a deed of sale
conveying ownership of the aforesaid properties to her daughter, Concepcion Calderon, for
the sum of P2,500.00, which the latter in turn appeared to have transferred to her mother
and stepfather by means of a document dated January 27, 1934. Both deeds, notarized by
Notary Public Jose D. Mendoza, were registered in the office of the Register of Deeds of
Bulacan on January 29, 1934, as a consequence of which, the original titles were cancelled
and TCT Nos. 13815 and 13816 were issued in the names of the spouses Domingo
Rodriguez and Concepcion Felix.On March 6, 1953, Domingo Rodriguez died intestate,
survived by the widow, Concepcion Felix, his children Geronimo Esmeragdo and Mauricio
and grandchildren Oscar, Juan and Ana, surnamed Rodriguez, children of a son, Jose, who
had predeceased him. On March 16, 1953, the above-named widow, children and
grandchildren of the deceased entered into an extra-judicial settlement of his (Domingo's)
estate, consisting of one-half of the properties allegedly belonging to the conjugal
partnership. he Rodriguez children executed another document granting unto the widow
lifetime usufruct over one-third of the fishpond which they received as hereditary share in
the estate of Domingo Rodriguez, which grant was accepted by Concepcion Felix Vda. de
Rodriguez.Then, in a contract dated December 15, 1961, the widow appeared to have
leased from the Rodriguez children and grandchildren the fishpond (covered by TCT No.
16660) for a period of 5 years commencing August 16, 1962, for an annual rental of
P7,161.37 (Exh. 5). At about this time, it seemed that the relationship between the widow
and her stepchildren had turned for the worse. The action to declare null and void the
deeds of transfer of plaintiff's properties to the conjugal partnership was based on the
alleged employment or exercise by plaintiff's deceased husband of force and pressure on
her; that the conveyances of the properties from plaintiff to her daughter and then to
the conjugal partnership of plaintiff and her husband are both without consideration;
that plaintiff participated in the extrajudicial settlement of estate (of the deceased
Domingo Rodriguez) and in other subsequent deeds or instruments involving the
properties in dispute, on the false assumption that the said properties had become
conjugal by reason of the execution of the deeds of transfer in 1934; that laboring under
the same false assumption, plaintiff delivered to defendants, as income of the properties
from 1956 to 1961, the total amount of P56,976.58
Issue:
Whether or not the conveyances were obtained through duress, and were inexistent, being
simulated and without consideration.

Ruling:
No. We agree with the trial Court that the evidence is not convincing that the contracts of
transfer from Concepcion Felix to her daughter, and from the latter to her mother and
stepfather were executed through violence or intimidation. What is more decisive is that
duress being merely a vice or defect of consent, an action based upon it must be brought
within four years after it has ceased;1 and the present action was instituted only in 1962,
twenty eight (28) years after the intimidation is claimed to have occurred, and no less than
nine (9) years after the supposed culprit died (1953). On top of it, appellant entered into a
series of subsequent transactions with appellees that confirmed the contracts that she
now tries to set aside. Therefore, this cause of action is clearly barred. The charge of
simulation is untenable, for the characteristic of simulation is the fact that the apparent
contract is not really desired or intended to produce legal effects or in way alter the
juridical situation of the parties. Thus, where a person, in order to place his property
beyond the reach of his
creditors, simulates a transfer of it to another, he does not really intend to divest himself
of his title and control of the property; hence, the deed of transfer is but a sham. But
appellant contends that the sale by her to her daughter, and the subsequent sale by the
latter to appellant and her husband, the late Domingo Rodriguez, were done for the
purpose of converting the property from paraphernal to conjugal, thereby vesting a half
interest in Rodriguez, and evading the prohibition against donations from one spouse to
another during coverture (Civil Code of 1889, Art. 1334). If this is true, then the appellant
and her daughter must have intended the two conveyance to be real and effective; for
appellant could not intend to keep the ownership of the fishponds and at the same time
vest half of them in her husband. The two contracts of sale then could not have been
simulated, but were real and intended to be fully operative, being the means to achieve
the result desired. What would invalidate the conveyances now under scrutiny is the fact
that they were resorted to in order to circumvent the legal prohibition against donations
between spouses contained in Article 1334, paragraph 1, of the Civil Code of 1889, then
prevailing. That illegal purpose tainted the contracts, for as held by the Spanish Tribunal
Supreme in its decision of 2 April 1941. it cannot be denied that plaintiff-appellant had
knowledge of the nullity of the contract for the transfer of her properties in 1934, because
she was even a party thereto. And yet, her present action was filed only on May 28, 1962
and after the breaking up of friendly relations between her and defendants-appellees.
Appellant's inaction to enforce her right, for 28 years, cannot be justified by the lame
excuse that she assumed that the transfer was valid. Knowledge of the effect of that
transaction would have been obtained by the exercise of diligence. Ignorance which is the
effect of inexcusable negligence, it has been said, is no excuse for laches.
SUNTAY VS. CA
Facts:
Respondent Federico Suntay was the registered 4 owner of a parcel of land with an area of
5,118 square meters, more or less, situated in Sto. Nio, Hagonoy, Bulacan. On the land
may be found: a rice mill, a warehouse, and other improvements. A rice miller, Federico, in
a letter, dated September 30, 1960, applied as a miller-contractor of the then National
Rice and Corn Corporation (NARIC). He informed the NARIC that he had a daily rice mill
output of 400 cavans of palay and warehouse storage capacity of 150,000 cavans of palay.
His application, although prepared by his nephew-lawyer, petitioner Rafael Suntay, 6 was
disapproved, 7 obviously because at that time he was tied up with several unpaid loans.

For purposes of circumvention, he had thought of allowing Rafael to make the application
for him. Rafael prepared 8 an absolute deed of sale 9 whereby Federico, for and in
consideration of P20,000.00 conveyed to Rafael said parcel of land with all its existing
structures. Said deed was notarized as Document No. 57 and recorded on Page 13 of Book
1, Series of 1962, of the Notarial Register of Atty. Herminio V. Flores. 10 Less than three
months after this conveyance, a counter sale 11 was prepared 12 and signed 13 by Rafael
who also caused its delivery 14 to Federico. Through this counter conveyance, the same
parcel of land with all its existing structures was sold by Rafael back to Federico for the
same consideration of P20,000.00. 15 Although on its face, this second deed appears to
have been notarized as Document No. 56 and recorded on Page 15 of Book 1, Series of
1962, 16 of the notarial register of Atty. Herminio V. Flores, an examination thereof will
show that, recorded as Document No. 56 on Page 13, is not the said deed of sale but a
certain "real estate mortgage on a parcel of land with TCT No. 16157 to secure a loan of
P3,500.00 in favor of the Hagonoy Rural Bank." Nowhere on page 13 of the same notarial
register could be found any entry pertaining to Rafael's deed of sale. 17 Testifying on this
irregularity, Atty. Flores admitted that he failed to submit to the Clerk of Court a copy of
the second deed. Neither was he able to enter the same in his notarial register. 18 Even
Federico himself alleged in his Complaint that, when Rafael delivered the second deed to
him, it was neither dated nor notarized. 19Even after the execution of the deed, Federico
remained in possession of the property sold in concept of owner. Significantly,
notwithstanding the fact that Rafael became the titled owner of said land and rice mill, he
never made any attempt to take possession thereof at any time, 20 while Federico
continued to exercise rights of absolute ownership over the property. 21In a letter, 22
dated August 14, 1969, Federico, through his new counsel, Agrava & Agrava, requested
that Rafael deliver his copy of TCT No. T-36714 so that Federico could have the counter
deed of sale in his favor registered in his name.
Issue:
Whether or not the deed of sale executed by Federico to Rafael was absolutely simulated
and fictitious.
Ruling:
Yes. the deed of sale executed by Federico in favor of his now deceased nephew, Rafael, is
absolutely simulated and fictitious and, hence, null and void, said parties having entered
into a sale transaction to which they did not intend to be legally bound. As no property
was validly conveyed under the deed, the second deed of sale executed by the late Rafael
in favor of his uncle, should be considered ineffective and unavailing. The history and
relationship of trust, interdependence and intimacy between the late Rafael and Federico
is an unmistakable token of simulation. It has been observed that fraud is generally
accompanied by trust. Indeed the most protuberant index of simulation is the complete
absence of an attempt in any manner on the part of the late Rafael to assert his rights of
ownership over the land and rice mill in question. After the sale, he should have entered
the land and occupied the premises thereof. He did not even attempt to. If he stood as
owner, he would have collected rentals from Federico for the use and occupation of the
land and its improvements. All that the late Rafael had was a title in his name. The failure
of the late Rafael to take exclusive possession of the property allegedly sold to him is a
clear badge of fraud.
KALALO VS. LUZ

FACTS:
Octavio Kalalo is an engineer whose services were contracted by Alfredo Luz, an architect
in 1961. Luz contracted Kalalo to work on ten projects across the country, one of which
was an in the International Rice Research Institute (IRRI) Research Center in Los Baos,
Laguna. Luz was to be paid $140,000.00 for the entire project. For Kalalos work, Luz
agreed to pay him 20% of what IRRI is going to pay or equivalent to $28,000.00.
ISSUE:
Whether or not Kalalo should be paid in US currency.
HELD:
No. The agreement was forged in 1961, years before the passage of Republic Act 529 in
1950. The said law requires that payment in a particular kind of coin or currency other
than the Philippine currency shall be discharged in Philippine currency measured at the
prevailing rate of exchange at the time the obligation was incurred. Nothing in the law
however provides which rate of exchange shall be used hence it is but logical to use the
rate of exchange at the time of payment.
NOTE: RA 529 has already been repealed by Republic Act 8183 which provides that every
monetary obligation must be paid in Philippine currency which is legal tender in the
Philippines. However, the parties may agree that the obligation or transaction shall be
settled in any other currency at the time of payment. (The Philippine Negotiable
Instruments Law, De Leon and De Leon Jr., p. 29)

ST. PAUL AND MARINE INSURANCE VS. MACONDRAY

Facts:
On June 29, 1960, Winthrop Products, Inc., of New York, New York, U.S.A., shipped aboard
the SS "Tai Ping", 218 cartons and drums of drugs and medicine, with the freight prepaid,
which were consigned to Winthrop-Stearns Inc., Manila, Philippines. Barber Steamship
Lines, Inc., agent of Wilhelm Wilhelmsen issued Bill of Lading No. 34, in the name of
Winthrop Products, Inc. as shipper, with arrival notice in Manila to consignee WinthropStearns, Inc., Manila, Philippines. The shipment was insured by the shipper against loss
and/or damage with herein plaintiff, St. Paul Fire & Marine Insurance Company.
One drum and several cartoons of medicines were received in bad condition. The
consignee filed a claim against the carrier but they refused to pay. The consignee filed its
claim with the insurer, St. Paul Fire & Marine insurance Co., and the insurance company,
on the basis of such claim, paid to the consignee the insured value of the lost and
damaged goods, including other expenses in connection therewith, in the total amount of
$1,134.46.
On August 5, 1961, St. Paul Fire & Marine Insurance Co., instituted with the Court of First
Instance of Manila the present action against the defendants for the recovery of said
amount of $1,134.46, plus costs. The defendants resisted the action.
On March 10, 1965 rendered judgment ordering defendants Macondray & Co., Inc., Barber
Steamship Lines, Inc. and Wilhelm Wilhelmsen to pay to the plaintiff, jointly and severally,
the sum of P300.00, with legal interest thereon from the filing of the complaint until fully
paid, and defendants Manila Railroad Company and Manila Port Service to pay to plaintiff,
jointly and severally, the sum of P809.67, with legal interest thereon from the filing of the

complaint until fully paid, the costs to be borne by all the said defendants. The defendants
appealed.
Issues:
whether or not, in case of loss or damage, the liability of the carrier to the consignee is
limited to the C.I.F. value of the goods which were lost or damaged, and
whether the insurer who has paid the claim in dollars to the consignee should be
reimbursed in its peso equivalent on the date of discharge of the cargo or on the date of
the decision
Held:
The purpose of the bill of lading is to provide for the rights and liabilities of the parties in
reference to the contract to carry. The stipulation in the bill of lading limiting the common
carrier's liability to the value of the goods appearing in the bill, unless the shipper or
owner declares a greater value, is valid and binding. This limitation of the carrier's liability
is sanctioned by the freedom of the contracting parties to establish such stipulations,
clauses, terms, or conditions, as they may deem convenient, provided they are not
contrary to law, morals, good customs and public policy. A stipulation fixing or limiting the
sum that may be recovered from the carrier on the loss or deterioration of the goods is
valid, provided it is (a) reasonable and just under the circumstances, and (b) has been
fairly and freely agreed upon. In the case at bar, the liabilities of the defendants- appellees
with respect to the lost or damaged shipments are expressly limited to the C.I.F. value of
the goods as per contract of sea carriage embodied in the bill of lading.
Equally untenable is the contention of the plaintiff-appellant that because of extraordinary
inflation, it should be reimbursed for its dollar payments at the rate of exchange on the
date of the judgment and not on the date of the loss or damage. The obligation of the
carrier to pay for the damage commenced on the date it failed to deliver the shipment in
good condition to the consignee. Therefore, the trial court committed no error in adopting
the aforesaid rate of exchange.

PAPA vs. VALENCIA

Facts:
Sometime in June 1982, A.U. Valencia and Co., Inc. and Felix Pearroyo, filed with the
Regional Trial Court of Pasig, Branch 151, a complaint for specific performance against
Myron C. Papa, in his capacity as administrator of the Testate Estate of one Angela M.
Butte. The complaint alleged that Papa, acting as attorney-in-fact of Angela M. Butte, sold
to Pearroyo, through Valencia, a parcel of land.
Prior to the alleged sale, the said property had been mortgaged by her to the Associated
Banking Corporation. After the alleged sale to Valencia and Penarroyo, but before the title
to the subject property had been released, Butte passed away. Despite representations
made by Valencia to the bank to release the title to the property sold to Pearroyo, the
bank refused to release it unless and until all the mortgaged properties of the late Butte
were also redeemed.
In order to protect his rights and interests over the property, Pearroyo caused the
annotation on the title of an adverse claim.

Sometime in April 1977, that Valencia and Pearroyo discovered that the mortgage rights
of the bank had been assigned to Tomas L. Parpana, as special administrator of the Estate
of Ramon Papa. Jr. Since then, Papa had been collecting monthly rentals in the amount of
P800.00 from the tenants of the property, knowing that said property had already been
sold to Valencia and Pearroyo. Despite repeated demands from said respondents, Papa
refused and failed to deliver the title to the property.
Valencia and Pearroyo prayed that Papa be ordered to deliver to Pearroyo the title to the
subject property
RTC rendered a decision, allowing Papa to redeem from the Reyes spouses, who bought
the land at a public auction because of tax delinquency and ordering Papa to execute a
Deed of Absolute Sale in favor of Pearroyo.
Papas defense: The sale was never consummated as he did not encash the check (in
the amount of P40,000.00) given by Valencia and Pearroyo in payment of the full
purchase price of the subject lot. He maintained that what Valencia and Pearroyo had
actually paid was only the amount of P5,000.00 (in cash) as earnest money.
Issue:
Was there valid payment although Papa failed to encash the check?
Held:
Yes. Valencia and Pearroyo had given Papa the amounts of P5,000.00 in cash on 24 May
1973, and P40,000.00 in check on 15 June 1973, in payment of the purchase price of the
subject lot. Papa himself admits having received said amounts, and having issued receipts
therefor. Papas assertion that he never encashed the aforesaid check is not substantiated
and is at odds with his statement in his answer that he can no longer recall the
transaction which is supposed to have happened 10 years ago.
After more than 10 years from the payment in part by cash and in part by check, the
presumption is that the check had been encashed. Granting that Papa had never encashed
the check, his failure to do so for more than 10 years undoubtedly resulted in the
impairment of the check through his unreasonable and unexplained delay.
Considering that Valencia and Pearroyo had fulfilled their part of the contract of sale by
delivering the payment of the purchase price, they, therefore, had the right to compel
Papa to deliver to them the owners duplicate of TCT 28993 of Angela M. Butte and the
peaceful possession and enjoyment of the lot in question.
BLANCO VS. QUASHA
Facts:
Petitioner J.R. Blanco, special administrator of the estate of Mary Ruth Elizalde, by letter
dated June 13, 1990, demanded from respondents, the individual stockholders and
directors of Parex, the reconveyance of the title to the property to the estate of Mary Ruth
Elizalde or, in the alternative, to assign all shares of Parex to said estate. Respondents
ignored petitioners demand. Petitioner alleged that the sale of the property by Elizalde
to Parex was absolutely simulated and fictitious and, therefore, null and void.
On December 20, 1994, the Regional Trial Court of Makati, Branch 147, rendered judgment
in favor of the plaintiff and against the defendants.

On appeal by respondents, the Court of Appeals, on February 18, 1998, set aside the
appealed judgment and dismissed petitioners action for reconveyance.
Issues:
Whether or not the sale-lease-back agreement is simulated.
Held:
By preponderance of evidence, therefore, the defendants were able to prove that the deed
of sale executed by Mary Ruth Elizalde in favor of Parex Realty Corporation is a valid and
binding contract which transferred ownership of the property to the said corporation. As a
consequence of this valid sale, the complaint instituted by the plaintiff must therefore fail,
and it goes without saying that the exemplary damages prayed for in this appeal must be
denied.

CARANTES V CA
Facts:
Mateo Carantes was the original owner of a certain parcel of land. When he died, he was
survived by his wife and six children. Subsequently, the parcel of land was subjected for
expropriation, and was later on indeed expropriated. A deed denominated as Assignment
of Right of Inheritance was executed by four of Mateos children assigning Maximo
Carantes their rights to inheritance over the lot. Maximo then sold the remaining lots to
the government and also registered on Mar. 16, 1940 the deed of Assignment of Right to
Inheritance. The still remaining lot was issued in the name of Maximo. A complaint was
filed against Maximo alleging that the deed be annulled on the ground of fraud. The trial
court rendered a decision stating that plaintiffs right of action has prescribed. The CA
reversed the decision.
Issue:
WON plaintiffs right of action has prescribed.
Held:
The present action, being one to annul the contract on the ground of fraud, its prescriptive
period is four years from the time of the discovery of the fraud.
The weight of authorities is to effect that the registration of an instrument in the Office of
the Register of Deeds constitutes constructive notice to the whole world, and therefore,
discovery of the fraud is deemed to have taken place at the time of the registration. In this
case the deed of assignment was registered on Mar. 16, 1940. The four year period within
which the private respondents could have filed the present action consequently
commenced on Mar. 16, 1940; and since they filed it only on Sept. 4, 1958, it follows that
the same is barred by the statute of limitations.

GARCIA VS. BISAYA

Facts:
On May 20, 1952, plaintiff filed a Complaint against the defendants in the Court of First
Instance of Oriental Mindoro, alleging that on November 12, 1938, defendants executed in
favor of plaintiff a deed of sale covering a parcel of land therein described; that the said
land "was erroneously designated by the parties in the deed of sale as an unregistered
land [not registered under Act 496, nor under the Spanish Mortgage Law] when in truth
and in fact said land is a portion of a big mass of land registered under Original Certificate
of Title No. 6579 in the Office of the Register of Deeds of Oriental Mindoro"; that despite
persistent demand from plaintiff to have the error corrected, defendants have refused to
do so. Plaintiff, therefore, prayed for judgment ordering defendants to make the aforesaid
correction in the deed of sale.
Answering the Complaint, defendants denied having executed the alleged deed of sale
and pleaded prescription as a defense. Traversing the plea of prescription, plaintiff alleged,
among other things, that he "was without knowledge of the error sought to be corrected at
the time the deed of sale was executed and for many years thereafter," having discovered
the said error "only recently".
Without trial on the merits and merely upon motion, the lower court dismissed the case on
the ground that plaintiff's action had already prescribed.
Issue:
Whether or not the lower court erred in dismissing the case
Held:
No. The appellant's Complaint states no cause of action, for it fails to allege that the
instrument to the reformed does not express the real agreement or intention of the
parties. Such allegation is essential since the object sought in an action for reformation is
to make an instrument conform to the real agreement or intention of the parties.
Appellant's complaint, however, does not ask for the annulment of the dee
d; neither does it contain allegations essential to an action for that purpose.
In view of the foregoing, the Order of dismissal must be as it is hereby affirmed, not
because appellant's action has already prescribed, but because his Complaint states no
cause of action.

PHILIPPINE AIRLINES, INC. v. COURT OF APPEALS

Facts:
Amelia Tan filed a complaint for damages against petitioner. The Lower Court ruled in her
favor. Upon appeal, the CA upheld the decision of the Lower Court with only minor
modifications as to the damages to be awarded to Amelia Tan. The corresponding writ of
execution was duly referred to Deputy Sheriff Emilio Z. Reyes for enforcement. Checks
were in the name of Sheriff Reyes.
Four months later, Amelia Tan moved for the issuance of an alias writ of execution stating
that the judgment rendered by the lower court, and affirmed with modification by the
Court of Appeals, remained unsatisfied.

Petitioner answered that it has already satisfied its obligation, as evidenced by check
vouchers signed and received by Sheriff Reyes. The Court has summoned the sheriff to
explain the delay but apparently he absconded or disappeared.

Issue:
Whether or not the payment made to the absconding sheriff by check in his name
operate to satisfy the judgment debt
Held:
No. In general, a payment, in order to be effective to discharge an obligation, must
be made to the proper person. Article 1240 of the Civil Code provides:
Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.
Under ordinary circumstances, payment by the judgment debtor to the sheriff
should be valid payment to extinguish the judgment debt. There are
circumstances, however, which compel a different conclusion such as when the
payment made by the petitioner to the absconding sheriff was not in cash or legal
tender but in checks.
Article 1249 of the Civil Code provides:
The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the
Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been cashed, or
when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in abeyance.

REPARATIONS COMMISSION V UNIVERSAL DEEP- SEA FISHING

CORPORATION

Facts:
The Reparations Commission awarded six (6) trawl boats to the Universal Deep-Sea
Fishing Corporation which were delivered two at a time, each delivery being covered by a
Contract of Conditional Purchase and Sale providing for identical schedules of payments
the first installment representing 10% of the total cost was to be paid 24 months after
delivery and the balance of the total cost to be paid in ten (10) equal installments, which,
in the schedule were
numbered as "1", "2", "3", etc., the first of which was due one year after the first
installment. When the Reparations Commission sued Universal and its surety to recover
various amounts of money due under the contracts, they claimed that the amounts were
not yet due and demandable. Universal alleged that there was an obscurity in the terms of
the contracts in question which was caused by the plaintiff as to the amounts and due
dates of the first installments which should have been first fixed before the creditor could
demand its payment from the debtor, specifically referring to the schedule of payments
which allegedly indicated two (2) due dates for the payment of the first installment.
Held:

The Supreme Court found the terms of the contracts clear and left no doubt as to the
intent of the contracting parties that the first installment due 24 months after delivery was
different from the the first ten (10) equal yearly installment of the balance of the purchase
price (which are not designated as "first", "second", "third", etc., installments).

PACULDO V REGALADO
FACTS
- Nereo Paculdo, petitioner, and Bonifacio Regalado, respondent, entered into a
lease contract over a 16,478 square meter property with a wet market building
located along Don Mariano Marcos Avenue, Fairview Park, Quezon City on
December 27, 1990. Lease period is for 25 years beginning January 1, 1991 up to
December 31 , 2015.
- On top of this lease contract, petitioner also leased from respondent eleven other
properties and purchased from the same respondent eight units of heavy
equipment and vehicles.
- The petitioner failed to pay rentals for the wet market property for May, June, and
July 1992. Respondent on July 6, wrote demand letter to petitioner for payment of
the due rent with advise that if payment is not received within fifteen days the
lease contract will be cancelled.
- Another letter was sent by the respondent on July 17, 1992 reiterating demand
for payment and for the petitioner to vacate the premises.
- Petitioner tried to pay on a daily basis the rental beginning August 25, 1992 but
the petitioner refused to accept the same.
- On August 20, 1992, petitioner filed an action for injunction and damages seeking
to enjoin respondent from disturbing his possession of the leased property. On the
same day the respondent filed an ejectment case against the petitioner. The
ejectment case was however withdrawn five days later on the ground that certain
details included therein had been omitted and must be re-computed.
- On April 22, 1993, the case for ejectment was re- filed with the MTC. On January
31, 1994, the MTC ruled in favor of Regalado and ordered the petitioner and all
persons claiming right under him to vacate the leased premises and to pay the
respondent the back rentals beginning July 1992. This order was appealed to the
RTC which subsequently affirmed the MTC decision en toto.
- Despite having completely turned over the leased property, petitioner
nevertheless filed a petition for review with the Court of Appeals alledging among
others that portions of his payments to respondents were applied to his other
obligations. The CA found for the respondent when it ruled that petitioner
consented to the respondents application of payment to the petitioners other
obligations.
ISSUE: WON the petitioner was truly in arrears in the payment of the rentals on
the subject property at the time of the filing of the complaint for ejectment.

HELD: NO, There was no clear assent from the petitioner to the change in the
manner of application of payment. The silence of the petitioner with regard the
request of the respondent with regard the application of the rental did not mean
that he consented thereto.
-

Assuming further that petitioner did not choose the obligation to be first satisfied,
giving the respondent the right to apply the payments to the other obligations of
the petitioner, the law provided that no payment shall be made to a debt not yet
due (Article 1252 of the Civil Code) and that payment must be first applied to the
debt most onerous to the debtor (Article 1254 of the Civil Code).
- The decision of the CA was a misappreciation of the facts and of the law.
DBP V CA
FACTS
- Plaintiff CUBA is a grantee of a Fishpond Lease Agreement from the Government;
- CUBA obtained from DBP three separate loans totalling P335,000, each of which
was covered by a promissory note and as security for said loans, CUBA executed
two Deeds of Assignment of her Leasehold Rights;
- Plaintiff failed to pay her loan on the scheduled dates in accordance with the
terms of the Promissory Notes;
- Without foreclosure proceedings, whether judicial or extra-judicial, defendant
DBP appropriated the leasehold Rights of plaintiff CUBA over the fishpond in
question; then executed a Deed of Conditional Sale of the Leasehold Rights in favor
of plaintiff CUBA over the same fishpond;
- In the negotiation for repurchase, plaintiff CUBA addressed two letters (offers to
repurchase the fishpond) to the Manager DBP, which DBP accepted;
- After the Deed of Conditional Sale was executed in favor of plaintiff CUBA, a new
Fishpond Lease Agreement was issued by the Ministry of Agriculture and Food in
favor of plaintiff CUBA but CUBA failed to pay the amortizations stipulated in the
Deed of Conditional Sale and entered with the DBP a temporary arrangement
whereby in consideration for the deferment of the Notarial Rescission of Deed of
Conditional Sale, plaintiff CUBA promised to make certain payments as stated in
temporary Arrangement;
- Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act which
CUBA received,a and thereafter, defendant DBP took possession of the Leasehold
Rights of the fishpond in question, advertised the public bidding to dispose of the
property; and thereafter executed a Deed of Conditional Sale in favor of defendant
Agripina Caperal; defendant Caperal was awarded Fishpond Lease Agreement by
the Ministry of Agriculture and Food.
- CUBA filed complaint against DBP and Caperal
paid by defendant Agripina Caperal to defendant Development Bank of the
Philippines under their Deed of Conditional Sale;
- CA: declared valid the ff:

(1) the act of DBP in appropriating Cuba's leasehold rights and interest under
Fishpond Lease Agreement No. 2083;
(2) the deeds of assignment executed by Cuba in favor of DBP;
(3) the deed of conditional sale between CUBA and DBP; and
(4) the deed of conditional sale between DBP and Caperal, the Fishpond Lease
Agreement in favor of Caperal, and the assignment of leasehold rights executed by
Caperal in favor of DBP. It then ordered DBP to turn over possession of the property
to Caperal as lawful holder of the leasehold rights and to pay CUBA the following
amounts: (a) P1,067,500 as actual damages;
P50,000 as moral damages; and P50,000 as attorney's fees.
ISSUES: WON condition no. 12 of the deed of assignment constituted pactum
commissionrum, as was held by the trial court
HELD: NO, To have a pactum commissiorum, the following elements must be
present:
there should be a property mortgaged by way of security for the payment of the
principal obligation, and (2) there should be a stipulation for automatic
appropriation by the creditor of the thing mortgaged in case of non- payment of
the principal obligation within the stipulated period.
Condition no. 12 merely provided for the appointment of DBP as attorney-in-fact
with authority, among other things, to sell or otherwise dispose of the said real
rights, in case of default by CUBA, and to apply the proceeds to the payment of the
loan.
-The provision is a standard condition in mortgage contracts and is in conformity
with Article 2087 of the Civil Code, which authorizes the mortgagee to foreclose
the mortgage and alienate the mortgaged property for the payment of the
principal obligation.

FILINVEST CREDIT CORP. V PHILIPPINE ACETYLENE CO, INC.

FACTS
- On October 30, 1971, the Philippine Acetylene Co., Inc. purchased from Alexander
Lim a 1969 Chevorlet for P55,247.80 with a down payment of P20,000.00 and the
balance of P35,247.80 payable, under the terms and conditions of the promissory
note, at a monthly installment of P1,036.70 for thirty-four months, due and
payable on the first day of each month starting December 1971 through and
inclusive
September 1, 1974 with 12 % interest per annum on each unpaid installment, and
attorney's fees in the amount equivalent to 25% of the total of the outstanding
unpaid amount. As security for the payment, the appellant executed a chattel

mortgage over vehicle in favor of Lim. On November 2, 1971, Alexander Lim

assigned to the Filinvest Finance Corporation all his rights, title, and interests in the
promissory note and chattel mortgage by virtue of a Deed of Assignment.
Thereafter, the Filinvest Finance Corporation, as a consequence of its merger with
the Credit and Development Corporation assigned to the new corporation, Filinvest
Credit Corporation, all its rights, title, and interests on the aforesaid promissory
note and chattel mortgage which, in effect, the payment of the unpaid balance
owed by Phil. Acetylene to Alexander Lim was financed by Filinvest such that Lim
became fully paid. Phil Acetylene had defaulted in the payment of nine successive
installments. Filinvest then sent a demand letter for the aforesaid amount in full in
addition to stipulated interest and charges or return the mortgaged property to be
remitted at Filinvests office within five days from date of the letter during office
hours. Appellant, thru its asst. general-manager advised Filinvest of its decision to
return the mortgaged property, which return shall be in full satisfaction of its
indebtedness pursuant to Article 1484 of the New Civil Code. The car was returned
to the Filinvest together with the document "Voluntary Surrender with Special
Power of Attorney To Sell" executed by appellant on March 12, 1973 and confirmed
to by Filinvest's vice-president. On April 4, 1973, Filinvest wrote a letter to
appellant informing the latter that Filinvest cannot sell the car as there were
unpaid taxes worth P70,122.00 on the car. Filinvest requested the appellant to
update its account by paying the installments in arrears and accruing interest in
the amount of
P4,232.21 on or before April 9, 1973. On May 8, 1973, Filinvest offered to deliver
back the motor vehicle to the appellant but the latter refused to accept it, so
Filinvest instituted an action for collection of a sum of money with damages in this
petition.
Respondents Comments
- Filinvest has no cause of action against it since its obligation towards Filinvest
was extinguished when in compliance with the demand letter, it returned the
mortgaged property. Assuming that the return of the property did not extinguish its
obligation, it was nonetheless justified in refusing payment since Filinvest is not
entitled to recover the same due to the breach of warranty committed by Lim.
ISSUES
WON the warranty for the unpaid taxes on the mortgaged motor vehicle may be
properly raised and imputed to or passed over to the appellee.
HELD: NO
Ratio The unpaid taxes on the vehicle
borne by the owner.
Reasoning There is a specific provision
the sale of the car to be free from
accepted the assignment of credit from

is a burden on the property and must be

in the Deed of Sale that the Lim warrants
liens and encumbrances. When Filinvest
the Lim, there is a specific agreement that

Lim continued to be bound by the warranties he had given to Filinvest and that if it
appears subsequently that "there are such counterclaims, offsets or defenses that
may be interposed by the debtor at the time of the assignment, such
counterclaims, offsets or defenses shall not prejudice the FILINVEST FINANCE
CORPORATION and I
(Alexander Lim) further warrant and hold the said corporation free and harmless
from any such claims, offsets, or defenses that may be availed of.". Since as earlier
shown, the ownership of the mortgaged property never left the mortgagor, the Phil
Acetylene Co., the burden of the unpaid taxes should be borne by him, who, in any
case, may not be said to be without remedy under the law, but definitely not
against appellee to whom were transferred only rights, title and interest, as such is
the essence of assignment of credit.

DE GUZMAN V COURT OF APPEALS

Facts:

Respondent Ernesto Cendana was engaged in buying up used bottles and scrap metal in
Pangasinan. After collection, respondent would bring such material to Manila for resale. He
utilized (2) two six-wheelers trucks which he owned for the purpose. Upon returning to
Pangasinan, he would load his vehicle with cargo belonging to different merchants for
delivery to different establishments in Pangasisnan for which respondent charged a freight
fee.
Sometime in November 1970, petitioner Pedro de Guzman, a merchant and dealer of
General Milk Company Inc. in Pangasinan contracted with respondent for hauling 750
cartons of milk. Unfortunately, only 150 cartons were delivered, as the other 600 cartons
were intercepted by hijackers along Marcos Highway. Hence, petitioner commenced an
action against private respondent.
In his defense, respondent argued that he cannot be held liable due to force majeure, and
that he is not a common carrier, hence not required to exercise extraordinary diligence.

Issues:
Whether or not respondent is a common carrier.
Held: Respondent is a common carrier. Article 1732 of the New Civil Code does not
distinguish between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity. It also avoids
a distinction between a person or enterprise offering transportation services on a regular
or scheduled basis and one offering such services on an occasional, episodic, and
unscheduled basis.

TLG INTERNATIONAL CONTINENTAL ENTERPRISING, INC. VS FLORES

FACTS
- In Oct. 5, 1971, Respondent judge granted petitioners Motion To Intervene, and
admitted its Complaint in Intervention in the case of Bearcon Trading Co., Inc. v.

Juan Fabella Et Al
- the case was an action for declaratory relief involving the rights of Bearcon as
lessee of the premises of the defendants in that case.
-

Petitioner intervened as sub-lessee of Bearcon over the property

- Purpose: 1. to protect its rights as such sub-lessee, 2. to make a consignation of
the monthly rentals as it didnt know who was lawfully entitled to receive
payments of the monthly rentals.
- Because of the admission of the Complaint In Intervention, petitioner deposited
P3,750 with the CFI, by way of rentals.
- Oct. 20, 1971: defendants in the case filed an Omnibus Motion, praying that the
complain, as well as the Complaint In Intervention be dismissed.
- the court a quo dismissed both the complaint and the complaint in intervention
- May, 1972: petitioner filed Motion to withdraw the sums it deposited, because the
order which dismissed the case without a resolution left the intervenor without
any recourse but to apply for authority to withdraw the amount and turn over the
same to the defendants in accordance with the understanding arrived at between
the parties hereto.
-

June 23 and July 15, 1972: respondent denied the motion and the motion for
consideration
ISSUE: WON Respondent could authorize the withdrawal of the deposits
considering that according to Respondent, the Court has not ordered the
intervenor to make any deposit in connection with the case
HELD: Yes. Respondent Judge had the authority to authorize the withdrawal of the
deposits.
Ratio A court shall have the authority to authorize the withdrawal of a deposit,
when the intervenor made the deposit as a consequence of the admission by the
Court of its Complaint In Intervention.
Reasoning - In general, Art. 1260: Before the creditor has accepted the
consignation, or before a judicial declaration that the consignation has been
properly made, the debtor may withdraw the thing or the sum deposited, allowing
the obligation to remain in force.
MCLAUGHLIN V COURT OF APPEALS
Facts: MAURICE McLaughlin is an Australian national who comes to the Philippines
for business. During his trips he stays in Tropicana, a hotel recommended to him by
Brunhilda Tan. McLaughlin deposited cash and jewelry to the safety deposit box of
the Hotel. The safety deposit box cannot be opened unless the key of the guest
and that of the management are present. Lainez and Payam are employees of
Tropicana who is charged with the custody of the keys. Thereafter, McLaughlin
found out that some of the money and jewelry he deposited were missing. Lainez
and Payam admitted that they assisted Tan to open his deposit box. Tan admitted

that she stole McLaughlins keys. Tan executed a promissory note to cover the
amount of the stolen money and jewelry. McLaughlin wanted to make the
management liable.
Issue: Whether or not a hotel may evade liability for the loss of items left with it
for safekeeping by its guests, by having these guests execute written waivers
holding the establishment or its employees free from blame for such loss in light of
Article 2003 of the Civil Code which voids such waivers.
Held: The issue of whether the Undertaking For The Use of Safety Deposit Box
executed by McLoughlin is tainted with nullity presents a legal question
appropriate for resolution in this petition. Notably, both the trial court and the
appellate court found the same to be null and void. We find no reason to reverse
their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest. Any
stipulation between the hotel-keeper and the guest whereby the responsibility of
the former as set forth in Articles 1998 to 2001 is suppressed or diminished shall
be void.
Article 2003 was incorporated in the New Civil Code as an expression of public
policy precisely to apply to situations such as that presented in this case. The hotel
business like the common carriers business is imbued with public interest.
Catering to the public, hotelkeepers are bound to provide not only lodging for hotel
guests and security to their persons and belongings. The twin duty constitutes the
essence of the business. The law in turn does not allow such duty to the public to
be negated or diluted by any contrary stipulation in so-called undertakings that
ordinarily appear in prepared forms imposed by hotel keepers on guests for their
signature.
SOCO vs MILITANTE
FACTS: The plaintiff-appellee-Soco (lessor) and the defendant-appellant-Francisco
(lessee) entered into a contract of lease on for commercial building and lot for a
monthly rental of P800.00 for a period of 10 years renewable for another 10 years
at the option of the lessee. One time, Francisco noticed that Soco did not anymore
send her collector for the payment of rentals and at times there were payments
made but no receipts were issued. Soon after Soco learned that Francisco subleased a portion of the building to NACIDA, at a monthly rental of more than
P3,000.00 which is definitely very much higher than what Francisco was paying to
Soco under the Contract of Lease, the latter felt that she was on the losing end of
the lease agreement so she tried to look for ways and means to terminate the
contract. Taking into account the factual background setting of this case, the Court
holds that there was in fact a tender of payment of the rentals made by Francisco
to Soco through Comtrust and since these payments were not accepted by Soco
evidently because of her intention to evict Francisco, by all means, Francisco was

impelled to deposit the rentals with the Clerk of Court of the City Court of Cebu,
Soco was notified of this deposit. She was further notified of these payments by
consignation. The City Court declared the payments of rentals valid and effective.
ISSUE: Whether or not the consignation was valid and effective.
HELD: In order that consignation may be effective, the debtor must first comply
with certain requirements prescribed by law. The debtor must show (1) that there
was a debt due; (2) that the consignation of the obligation had been made because
the creditor to whom tender payment was made refused to accept it, or because
he was absent or incapacitated, or because several persons claimed to be entitled
to receive the amount due (Art. 1176, Civil Code); (3) that previous notice of the
consignation had been given to the person interested in the performance of the
obligation (Art. 1177, Civil Code); (4) that the amount due was placed at the
disposal of the court (Art. 1178, Civil Code); and (5) that after the consignation had
been made the person interested was notified thereof (Art. 1178, Civil Code).
Failure in any of these requirements is enough ground to render a consignation
ineffective.
SC ruled that the essential requisites of a valid consignation must be complied with
fully and strictly in accordance with the law, as Articles 1256 to 1261, New Civil
Code say. Substantial compliance is not enough for that would render only a
directory construction to the law. The use of the words "shall" and "must" which
are imperative, operating to impose a duty which may be enforced, positively
indicate that all the essential requisites of a valid consignation must be complied
with. The Civil Code Articles expressly and explicitly direct what must be
essentially done in order that consignation shall be valid and effectual, as the law
provides in Art 1257, 1258, 1249. SC held that the respondent lessee has utterly
failed to prove the requisites of a valid consignation.
PHILIPPINE NATIONAL BANK vs. COURT OF APPEALS
Facts:
The defendant applied/appropriated the amounts of $2,627.11 and P34,340.38 from
remittances of the plaintiff's principals (sic) abroad. These were admitted by the
defendant, subject to the affirmative defenses of compensation for what is owing to it on
the principle of solution indebiti; The first remittance was made by the NCB of Jeddah for
the benefit of the plaintiff, to be credited to his account at Citibank, Greenhills Branch; the
second was from Libya, and was intended to be deposited at the plaintiff's account with
the defendant, No. 830-2410; The plaintiff made a written demand upon the defendant for
remittance of the equivalent of P2,627.11 by means of a letter dated December 4,
1986. This was answered by the defendant on December 22, 1986, inviting the plaintiff to
come for a conference; Defendant PNB made a demand upon the plaintiff for refund of the
double or duplicated credits erroneously made on plaintiff's account, by means of a letter
(Exh. 12) dated October 23, 1986 or 5 years and 11 months from November 1980, and 5
years and 9 months from January 1981. This plaintiff's letter was likewise replied to by the
defendant; The deduction of P34,340.38 was made by the defendant not without the

knowledge and consent of the plaintiff, who was issued a receipt No. 857576 dated
February 18, 1987 by the defendant.
There is no question that the two erroneous double payments made to plaintiff's accounts
in 1980 and 1981 created an extra-contractual obligation on the part of the plaintiff in
favor of the defendant, under the principle of solutio indebiti.
ISSUE:
whether the herein petitioner was legally justified in making the compensation or set-off
against the two remittances coursed through it in favor of private respondent to recover
on the double credits it erroneously made in 1980 and 1981, based on the principle
of solutio indebiti; whether or not petitioner's claim is barred by the statute of limitations.
HELD:
We note that in framing the issue in the manner aforecited, the petitioner implicitly
admits the correctness of the respondent Court's affirmance of the trial court's ruling
finding herein petitioner liable to private respondent for the sum of US$2,627.11 or its
peso equivalent.
WHEREFORE, the instant petition is herewith DENIED for being plainly unmeritorious, and
the assailed Decision is AFFIRMED in toto. Costs against petitioner.
MIRASOL vs. COURT OF APPEALS
FACTS:
Mirasols are sugarland owners and planters. They produced 70, 501.08 piculs of sugar,
25,662.36 of which were assigned for export. Private respondent PNB financed the
Mirasols sugar production venture for crop years 1973-1974 and 1974-1975 under a crop
loan financing scheme. Under the said scheme, the Mirasols signed Credit Agreements, a
Chattel Mortgage on the Standing Crops and a Real Estate Mortgage in favor of PNB. The
Chattel Mortgage empowered the PNB as the petitioners attorney-in-fact to negotiate and
to sell the latters sugar both in domestic and export markets and to apply the proceeds to
the payment of their obligation.
Under the martial law Pres. Marcos issued P.D. no. 579 authorized private respondent
PHILEX to purchase sugar allocated to export to the United States and their foreign
markets. The decree further authorized PNB to finance PHILEX purchases. Finally the
decree directed that whatever profit PHILEX might realize from sales of sugar abroad was
to be remitted to a special fund of the national government.
PNB continued to finance sugar production of the Mirasols for crop years 1975-1977. These
crop loans and similar obligations were secured by real estate over several properties of
Mirasols and chattel mortgage over standing crops. Believing that the proceeds of the
sugar sales to PNB, if properly accounted for were more than enough to pay their
obligations. Petitioners asked PNB for an accounting of the proceeds of the sale but the
PNB ignored the request. PNB asked the petitioners to settle their due and demandable
accounts. As a result of these demands for payment petitioners conveyed to PNB real
properties valued at P 1,410,466.00 by way of dacion en pago leaving an unpaid
overdrawn account of P1,513,347.78.

Despite demands Mirasols failed to settle said due and demandable accounts. PNB then
proceeded to extrajudicially foreclose the mortgaged properties. After applying the
proceeds of the auction sale of the mortgaged realities, PNB still had a deficiencyclaim of P
12,551,252.93.
Petitioners continued to ask PNB to account for the proceeds of the sale of their export
sugar for crop years insiting that said proceeds, if properly liquidated could offset their
outstanding obligations with the bank. MIrasols filed a suit for accounting specific
performance and damages against PNB.
ISSUE:
Whether the Court of Appeals committed manifest error in upholding the validity of
forclosure on petitoners property and in upholding the validity of dacion en pago.
HELD:
The Court held that in the present case, compensation cannot take place between the
parties because neither the parties are mutually creditors and debtors of each other.
Under PD no. 579, neither PNB nor PHILEX could retain any difference claimed by the
Mirasols in the price of sugar sold by the two firms. There was nothing with which PNB was
supposed to have offset Mirasols admitted indebtedness. Compensation cannot take place
where one claim as in the instant case is still the subject of litigation as the same cannot
be deemed liquidated. With respect to the duress allegedly employed by PNB which
impugned petitioners consent to the dacion en pago both the trial court and the Court of
Appeals found that there was no evidence to support the claim. Wherefore the court
declared dacion en pago and the foreclosure of the mortgaged properties valid.
MILLAR VS. COURT OF APPEALS
FACTS:
Eusebio Millar condemning Antonio Gabriel to pay him the sum of P 1,746.98 with interest
at 12% per annum from the date of the filing of the complaint the sum of P 400 as
attorneys fees and the cost of suit.
The lower court issued the writ of execution applied for the basis of which the sheriff of
Manila seized the respondents Willy Ford Jeep. Respondent pleaded with the petitioner to
release the jeep under an arrangement whereby the respondent, to secure the payment of
the judgment debt, agreed to mortgage the vehicle in favor of the petitioner. The
petitioner agreed to the arrangement thus the parties executed a chattel mortgage on the
jeep where payment will be in installments: 1st 850,000- march 31,1957; 2nd 850,000april 30,1957. Upon failure of the respondent to pay first installment due March 31,1957,
the petitioner obtained an alias writ of execution. Pursuant to the last writ the sheriff
levied on certain personal properties belonging to the respondent and then scheduled
them for execution of sale.
The respondent filed an urgent motion for suspension of the execution sale on the ground
of payment of the judgment obligation. The lower court ordered the suspension of the
execution sale to afford the respondent the opportunity to prove his allegation of payment
of the judgment debt.

The lower court ruled that novation had taken place and that the parties had executed the
chattel mortgage only to secure or get better security for the judgment. The respondent
appealed the order to the Court of Appeals, which set aside the order of execution in a
decision holding that the subsequent agreement of the parties impliedly novated the
judgment obligation.
The appellate court stated that the following circumstances sufficiently demonstrate the
incompatibility between the judgment debt and the obligation embodied in the deed of
chattel mortgage, warranting a conclusion of implied novation:
Whereas the judgment orders the respondent to pay the petitioner the sum of P
1,746.98 with interest at the 12% per annum from the filing of the complainant plus
amount of P400 and the cost of suit;
Whereas the judgment mentions no specific mode of payment of the amount due to
the petitioner, the deed of chattel mortgage stipulates payment of the sum P 1,700 in two
equal installments;
Whereas the judgment makes no mention of damages, the deed of chattel
mortgage obligates the respondent to pay liquidated damages in the amount of P 300 in
case of default on his part;
Whereas the judgment was unsecured, the chattel mortgage, which may be
foreclosed extrajudicially in case of default, secured the obligation.
ISSUE:
Whether or not the subsequent agreement of the parties as embodied in the deed of
chattel mortgage impliedly novated the judgment obligation.
HELD:
The court held that there was no substantial incompatibility between the mortgage
obligation and the judgment liability of the respondent sufficient to justify a conclusion of
implied novation. The stipulation for the payment of the obligation under terms of the
deed of chattel mortgages serves only to provide an express and specific method of
extinguishment- payment in two equal installments. The defense of implied novation
requires clear and convincing proof of complete incompatibility between the two
obligations. The law requires no specific form for an effective novation by implication. The
test is whether the two obligations can stand together if not incompatibility arises and the
second obligation novates the first. There is no substantial incompatibility between the
two obligations as to warrant a finding of implied novation.
DORMITORIO vs. FERNANDEZ
FACTS:
Serafin Lazalita bought from the Municipality of Victorias a house and lot payable in
installment at 1.00 per square meter and upon full payment by the plaintiff Lazalita of the
purchase of price of the land, a deed of definite sale. Plaintiff had in full possession of the
land and introduced permanent and valuable improvements. The spouses Dormitorio
purchased a land also from the defendant and have not taken actual possession of the
land. Spouses brought a suit against the plaintiff Lazalita for ejectment and the conflict
between them was made known to the office of the Municipal Mayor who tried and settle
the matter between the parties. A surveyor was hired for investigation and found out that

the lot sold by the Municipality of Victorias to the plaintiff was converted into a municipal
road known as Jover Street and that the lot presently occupied by him is supposed to be
the lot no.2 bought by the spouses. Ordering Lazalita to vacate the land and pay a
monthly rental of P20.00. The judgement is rendered in accordance of Agreed Stipulation
of Facts.
It was agreed by the defendant spouses Dormitorio who are the plaintiffs that the
defendant Serafin Lazalita should be reimbursed for his expenses in transferring his house
to another lot to be assigned by him by the Municipality of Victorias and that the civil case
shall not be enforced and executed anymore. That by means of fraud, misrepresentation,
and concealment of the true facts of the case, the plaintiffs were able to mislead the court
to issue by mistake an order for issuance of Writ of Execution by making the court believe
that it is still enforceable and executory.
As the result of a compromise between the same parties, evidenced by the agreed
stipulation of facts was clear proof of an animus novandi and thus superseded the
previous judgment which is a result of an ex parte motion was mistakenly ordered
executed.
ISSUE:
Whether the decision based on a compromise agreement has the effect of res juridicata.
HELD:
The case was a result of a compromise agreement and had an effect of res judicata. There
was an element of bad faith when petitioners did try to evade its terms. The compromise
agreement is a final and executory judgment of a trial court may be novated by
subsequent agreement of the parties.
MAGDALENA ESTATES VS. RODRIGUEZ
FACTS:
Appellants bought from the appellee a parcel of land. In view of an unpaid balance of P
5,000.00 on account of the purchase price of the lot, the appellants executed a promissory
note. On the same date appellants and the Luzon Surety Co., Inc. executed a bond in
favor of the appellee to comply with the obligation to pay the amount of P 5000
representing balance of the purchase price of a parcel of land.
When the obligation of the appellants became due and demandable the Luzon Surety Co.,
Inc. paid to the appelle the sum of P 5,000. The appelle demanded from the appellants the
payment of P655. 89 which was the interest on the principal of P 5,000. Due to the refusal
of the appellants to pay to the said interest, the appellee started the suit. The court
rendered a judgement in favor of the appellee against the appellant ordering the latter to
pay solidarily the appelle the sum of P 655.89 with interest at the legal rate.
The appellants appealed to the Court of First Instance. Appellants claim that the pleadings
do not show that there was a demand made by the appellee for the payment of the
accrued interest and what could be deduced therefrom was merely that the appelle
demanded from the Luzon Surety Co., Inc., in the capacity of the latter as surety, the
payment of the obligation of the appellants and the said appellee accepted unqualifiedly

the amount of P 5,000.00 as performance by the obligor and obligors of the obligation in
its favor.
ISSUE:
Whether or not the obligation extinguished by novation?
HELD:
The Court held that novation has never been favored. To be sustained it needs to be
established that the old and new contracts are incompatible in all points or that the will to
novate appears express agreement of the parties or in acts of similar import.
An obligation to pay a sum of money is not novated, in a new instrument wherein old is
ratified by changing only the terms of payment and adding other obligations not
incompatible with the old one. The mere fact that the creditor receives a guaranty or
accepts payments from a third person who has agreed to assume the obligation when
there is no agreement that the first debtor shall be released from responsibility does not
constitute a novation and the creditor can still enforce the obligation against the original
debtor. Wherefore the judgement affirmed with cost against appellants.
REYES vs. COURT OF APPEALS
FACTS:
Elsa Reyes is the President of Eurotrust Capital Corporation, a domestic corporation
engaged in credit financing. Graciela Eleazar, private respondent is the president of B.E.
Ritz Mansion International Corporation (BERMIC), a domestic enterprise in real estate
development. The other respondent, Armed Forces of the Mutual Benefit Asso., Inc. (AFPMBAI), is a corporation duly organized primarily to perform welfare services for the AFP.
Elsa Reyes entered into a loan agreement. Pursuant to the said contract, Eurotrust
extended to Bermic P 216,053,126.80 to finance the construction of the latters Ritz
Condominium and Gold Business Park. The loan was without collateral but with higher
interest rates than those allowed by the banks. In turn, Bermic issued 21 postdated checks
were presented for payment, the same were dishonored by the drawee bank, RCBC due to
stop payment order made by Eleazar. Despite Eurotrusts notices and repeated demands
to pay Eleazar failed to make good the dishonored checks, prompting Reyes to file against
her several criminal complaints for violation of B.P. 22 and estafa under Article 315 of the
RPC.
Eurotrust extended to Bermic several loan packages amounting to P 190,336,388.86. For
its part, Bermic issued several postdated checks to cover payments of the principal and
interest of evey loan packages involved. When Eleazar came to know that the funds
originally loaned by Eurotrust to Bermic belonged to AFP-MBAI, she requested a meeting
with Eurotrust. However, Eleazar later learned that Reyes continued to collect on the
postdated checks issued by her contrary to their agreement. Eleazar had the payment
stopped hence, her checks issued infavor of Eurotrust dishonored. The prosecutor issued a
resolution dismissing the complaints filed by Reyes against Eleazar on the ground that
when the latter assumed obligation of Reyes to AFP-MBAI it constituted novation,
extinguishing any criminal liability on the part of Eleazar.

ISSUE:
Whether the obligation was extinguished by novation.
HELD:
The Court held that there is no novation if no new contract was executed by the parties. It
is essentially an agreement between petitioner and respondent Eleazar only. There was no
mention of AFP-MBAIs consent to the new agreement between petitioner and respondent
Eleazar much less an indication of AFP-MBAIs intention to be the substitute creditor in the
loan contract. The rule is novation by substitution of creditor requires an agreement
among the three parties concerned the original creditor, debtor and the new creditor. It is
a new contractual relation based on the mutual agreement among all the necessary
parties.
COCHINGYAN, JR. vs. R&B SURETY AND INSURANCE CO,, INC.
FACTS:
Pacific Agricultural Suppliers Inc. (PAGRICO) applied for and was granted an increase in its line credit from P
400,000 to P 800,000 with the PNB. PAGRICO had to give a good and sufficient in its line of credit,for security. PAGRICO
submitted surety bond issued by respondent R & B. Under the terms and conditions specified that PAGRICO and R&B
bound themselves jointly and severally to comply with the terms of the advance credit line and PNB had the right under the
surety to proceed directly against R&B without the necessity of first extinguishing the assets of the principal obligor,
PAGRICO.
In consideration of R&B Suretys issuance of Surety Bond entered into indemnity agreements first with petitioner
Cochingyan and to Villanueva. PAGRICO failed to comply with its Principal Obligation to the PNB, the PNB demanded
payment from the R&B the full amount of the Principal Obligations. R&B made a series of payments to PNB. R&B sent a
demand letters to Cochingyan and Villanueva for reimbursement of payments made by it to the PNB and for discharge of
liability to the PNB under the Surety Bond. Petitioners failed to heed the demands, R&B brought suit against the petitioners.
ISSUE:
Whether the Trust Agreeement had extinguished by novation.
HELD:
The court held that the Trust Agreement does not expressly terminate the obligation of R&B under the Surety Bond.
The Trust Agreement expressly provides for the continuing subsistence of that obligation by stipulating that the trust
agreement shall not in any manner release R&B Surety from its obligation under the Surety Bond.
Novation extinguishes the obligation by substitution or change of the obligation by a subsequent one which
terminates it either by changing its object or principal conditions or by substituting a new debtor in place of the old one or by
subrogating a third person to the rights of the creditor.

Broadway Centrum Condominium Corporation vs. Tropical Hut Food Market Inc.
Facts:
Petitioner and respondent Tropical executed a contract of lease. Subsequently, Tropical insistently requested petitioner to

lower the rental cost provided for in the contract as it comprised more than half of the sales Tropical was making. Broadway
then, in a letter-agreement, granted Tropicals requests by lowering the rental costs accordingly among other things, on
certain terms and conditions, and stating that this agreement shall not be an amendment of the original lease contract. When
the street abovementioned was reopened, Broadway informed Tropical that it will gradually return the rental costs to the
prices stipulated in the lease contract. Tropical resisted, still contending that their sales have not improved, and that they will
not pay the original costs and still insists to be given lower costs until sales have picked up. Broadway informed that they will
nonetheless impose the original costs, and it will no longer be negotiable. Tropical filed suit against petitioner, contending
that the subsequent letter-agreement novated the lease contract.
Issue: Whether or not the letter-agreement novated the contract of lease.
Held:
It is entirely clear to the court that the letter-agreement did not extinguish or alter the obligations of respondent Tropical and
the rights of petitioner Broadway under their lease contract. The course of negotiations between Broadway and Tropical
before the execution of their letter-agreement quite clearly indicated that what they were negotiating was a temporary and
provisional reduction of rentals. Furthermore, the course of discussions between Broadway and Tropical, as disclosed in their
correspondence, after execution of the letter-agreement, shows that the reduction of rentals agreed upon in the letteragreement was not to persist, for the rest of the life of the Contract of Lease. That correspondence is bereft of any, sign of
mutual agreement or recognition that the reduced rentals had so permanently replaced the contract stipulations on rentals as
to have become immune to change save by common consent of Tropical and Broadway.

CALIFORNIA BUS LINE vs. STATEINVESTMENT

Facts:
Delta Motors Corporation applied for financial assistance from respondent State Investment House, Inc., a
domestic corporation engaged in the business of quasi-banking. SIHI agreed to extend a credit line to Delta which
eventually became indebted to SIHI. Meanwhile, petitioner purchased on installment basis several buses to Delta.
To secure the payment of the obligation petitioner executed promissory notes in favor of Delta. When petitioner
defaulted on the payments of the debts, it entered into an agreement with delta to cover its due obligations.
However, petitioner still had trouble meeting its obligations with delta. Pursuant to the memorandum of agreement
delta executed a deed of sale assigning to respondent, the promissory notes from petitioner. Respondent
subsequently sent a demand letter to petitioner requiring remitting payments due on the promissory notes.
Petitioner replied informing respondent of the fact that delta had taken over its management and operations.
Issue:
Whether the Restructuring Agreement dated October 7, 1981, between petitioner CBLI and Delta Motors, Corp.
novated the five promissory notes Delta Motors, Corp. assigned to respondent SIHI,
Held:
The attendant facts do not make out a case of novation. The restructuring agreement between Delta and CBLI
executed on October 7, 1981, shows that the parties did not expressly stipulate that the restructuring agreement
novated the promissory notes. Absent an unequivocal declaration of extinguishment of the pre-existing obligation,
only a showing of complete incompatibility between the old and the new obligation would sustain a finding of

novation by implication. 59 However, our review of its terms yields no incompatibility between the promissory
notes and the restructuring agreement.

GARCIA VS. LLAMAS

Facts:
A complaint for sum of money was filed by respondent Dionisio Llamas against Petitioner Romeo Garcia and
Eduardo de Jesus alleging that the two borrowed Php 400, 000 from him. They bound themselves jointly and
severally to pay the loan on or before January 23, 1997 with a 15% interest per month. The loan remained unpaid
despite repeated demands by respondent.
Petitioner resisted the complaint alleging that he signed the promissory note merely as an accommodation party
for de Jesus and the latter had already paid the loan by means of a check and that the issuance of the check and
acceptance thereof novated or superseded the note.
Issues: Whether or not there was novation of the obligation
Held:
The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the
acceptance of the check or that the check would take the place of the note. There is no incompatibility between the
promissory note and the check.
Neither could the payment of interests, which in petitioners view also constitutes novation, change the terms and
conditions of the obligation. Such payment was already provided for in the promissory note and, like the check,
was totally in accord with the terms thereof.
In a solidary obligation, the creditor is entitled to demand the satisfaction of the whole obligation from any or all
of the debtors. It is up to the former to determine against whom to enforce collection. Having made himself jointly
and severally liable with de Jesus, petitioner is therefore liable for the entire obligation.
.

Astro Electronics Corp vs Philippine Export and Foreign Loan Guarantee Corp.
FACTS:

Astro obtained loans from Philtrust Bank, secured by promissory notes that were signed by Roxas, both as President of Astro
Electronics and in his personal capacity. Thereafter, PhilGuarantee bound itself as a guarantor. At default of Astro, Phil
Guarantee paid the obligation. It then filed an action for collection of money from Astro and Roxas.
Issue:
Whether or not Roxas should be solidarily liable with Astro for the sum awarded by the RTC
Held:
Yes. In signing his name aside from being the President of Astro, Roxas became a co-maker of the promissory notes and
cannot escape any liability arising from it. Under the Negotiable Instruments Law, persons who write their names on the face of
promissory notes are makers, promising that they will pay to the order of the payee or any holder according to its tenor.

Gaite vs. Fonacier

FACTS:

Gaite was appointed by Fonacier as attorney-in-fact to contract any party for the exploration and development
of mining claims. Gaite executed a deed of assignment in favor of a single proprietorship owned by him. For
some reasons, Fonacier revoked the agency, which was acceded to by Gaite, subject to certain conditions, one
of which being the transfer of ores extracted from the mineral claims for P75,000, of which P10,000 has
already been paid upon signing of the agreement and the balance to be paid from the first letter of credit for
the first local sale of the iron ores. To secure payment, Fonacier delivered a surety agreement with Larap
Mines and some of its stockholders, and another one with Far Eastern Insurance. When the second surety
agreement expired with no sale being made on the ores, Gaite demanded the P65,000 balance. Defendants
contended that the payment was subject to the condition that the ores will be sold.
ISSUE: WON Fonacier and his sureties, still have the right to insist that Gaite should wait for the sale or
shipment of the ore before receiving payment;
Held:
Forfeited right court the right to compel gaite to wait for the sale before receiving payment, because they
were not able to renew bond with far eastern surety company.
ART. 1198:
When he does not furnish to the creditor the guaranties or securities which he has promised.
When by his own acts he has impaired said guaranties or securities after their establishment
AND When through fortuitous event they disappear, unless he immediately gives new ones equally
satisfactory.

CORONEL V. CA
FACTS:
Coronel et al. consummated the sale of his property located in Quezon City to respondent Alcaraz. Since the title
of the property was still in the name of the deceased father of the Coronels, they agreed to transfer its title to their
name upon payment of the down payment of 50K. and thereafter an absolute deed of sale will be executed.
Alcarazs mother paid the down payment in behalf of her daughter and as such, Coronel made the transfer of title
to their name. Notwithstanding this fact, Coronel sold the property to petitioner Mabanag and rescinded its prior
contract with Alcaraz.
ISSUE:
WON the rescission of the first contract between Coronel and Alcaraz is valid.
HELD:
With regard to double sale, the rule that the first in time, stronger in right should apply. In case of double sale,
what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether
or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the
title of the property sold.
The ruling should be in favor of Alcaraz because Mabanag registered the property two months after the notice of
lis pendens was annotated in the title and hence, she cannot be a buyer in good faith.

PARKS VS PROVINCE OF TARLAC

Facts
Plaintiff bought the land from Concepcon Ciper and James Hill. Prior to the sale, Ciper and Hill
donated the land to province of Tarlac subject to the condition that it will be absolutely used for
erection of a central school and a public park and the work shall commence within six months from the
ratification for the donation
Issue
W/N Parks has the right of action to recover the land from municipality of Tarlac on the condition that
the condition is suspensive and therefore the said municipality had never acquired a right thereto since
the condition was never performed
Ruling
In the present case, the condition that a public school be erected and a public park made on the donated
land, work on the same to commence within 6months from date of ratification of the donation by
parties, could not be complied with except after giving effect to the donation.
The done could not do any work on the donated land if the donation had not really been effected,
because it would be an invasion if anothers title for the land would have continued to belong to the
donor so long as the condition was imposed was not complied with. The condition was a condition
subsequent (resolutory)

CENTRAL PHIL UNIV. vs. Court of Appeals

FACTS:

When Don Ramon was still part of the board of trustees of the school, he donated a lot on the
condition that a medical school will be constructed therein. The heirs sought to annul the
donation on the ground that the school wanted to exchange the land with another owned by
NHA.

ISSUE:
WON there is a need to fix the period for compliance of the condition

HELD:
If there has been no compliance with the resolutory condition, the donation may now be
revoked and all rights which have been acquired under it shall be deemed lost and

extinguished.
QUIJADA V. CA
FACTS:
A parcel of land was donated for the construction of a school. The donation is subject to a resolutory condition.
The school wasnt constructed. The land was subsequently sold to Montejar. The donors sought to remove
Montejar from the premises.
Issue:
Whether the sale between Trinidad and Regalado is valid considering the capacity of the vendor to execute the
contract in view of the conditional deed of donation
HELD:
It has been held that when a person donates land to another on the condition that the latter would build upon the
land a school, the condition imposed is a resolutory one and not suspensive.
LAO LIM V CA
FACTS
Dy entered into a contract of lease with Lim foe a period of 3 years (1976-1979). After the stipulated term expired,
Dy refused to vacate the premises, hence Lim filed for an ejectment suit against Dy. The case was terminated by
a judicially approved compromise agreement.
The compromise agreement provides that the term of lease shall be renewed every three years retroacting from
Oct 1979 1982; after which the rental shall be raised automatically by 20% every three years for as long as the
defendant (DY) needed the premises and can meet and pay the said increases, the defendant to give notice of his
intent to renew 60 days before the expiration of the term.
ISSUE
WON the lease contract only depends on the partys need for the premises and his ability to pay the rents
HELD: The lease contract cannot be made to depend solely on the free and uncontrolled choice of the lessee.
The stipulation for as long as the defendant needed the premises and can meet and pay the said increases is
purely potestative.
NAGA TELEPHONE V COURT OF APPEALS
FACTS
The contract between NATELCO and CASURECO II included, among others, a stipulation to the effect that the
contract shall be as long as the party of the first part (NATELCO) has need for the electric post of the second part
(CASURECO II) it being understood that this contract shall terminate when for any reason whatsoever, the party
of the second part is forced to stop, abandoned its operation as a public service and it becomes necessary to
remove the electric post.
After over ten years, the respondent filed on January 2, 1989 with the RTC of Naga City action against the
petitioner for reformation of the contract on the grounds that it is too one sided in favor of the petitioner. The action
also prayed that petitioner be ordered to pay for the use of electric posts which are not covered by the agreement.
And finally, that CASURECO be indemnified no less than P100,000 arising out of the poor servicing of the ten
telephone units which had caused it great inconvenience and damages.
Issues: WON Art. 1267 is applicable.
Held: YES. NATELCO claims are not, since contract in this case doesnt involve rendition of service/personal prestation and
its not for future service w/future unusual change.
OSMEA VS. RAMA
FACTS:
RAMA EXECUTED CONTRACT TO OSMENA:
1890:
Received P200 which will be paid in sugar, with interest of half a cuartillo/month on each peso beginning on this
date until the day of the settlement
If it can not pay in full, a balance shall be struck, showing the amount outstanding at the end of each June,
including interest. He sell to Seor Osmea all the sugar that He may harvest.
As a guarantee, pledge as security all of his present and future property, and as special security the house with

tile roof and ground floor of stone.

Asked for further loan: P70 and 50 from Don Penares which will be paid in sugar. Osmena died. Property was
passed to heir, Agustina Rafols. Rama did not pay the amount.
ISSUE
WON the proof presented during the trial in CFI is sufficient for the lower court to recognize the debt of Doa
Rama, provided that she imposed the condition that she would pay her debts upon selling her house?
HELD
YES, the proof presented is sufficient. A condition imposed upon a contract by the promisor, the performance of
which depends upon his exclusive will, is void, in accordance with the provisions of article 1115 of the Civil Code.
HERMOSA V LONGORA
FACTS
Epifanio Longora had three claims against the intestate estate of Fernando Hermosa, Sr. The first represented
credit advances made to the intestate from 1932 to 1944, the second made to his son, and the third made to his
grandson from 1945 to 1947 after the death of the intestate, which occurred in December 1944. The claimant
presented evidence that the intestate had asked for said credit advances for himself and the members of his
family on condition that their payment should be made by Fernando Hermosa Sr. as soon as he receive funds
derived from the sale of his property in Spain. CA held that the payment did not become due until the
administrstrix received the payment from the buyer of the property. Upon authorization of the probate court, the
property was sold in November 1947. The claim was filed on Oct. 1948.
ISSUES
WON the claim was subject to a condition exclusively dependent upon the will of
HELD
NO. The condition of the obligation was not purely a potestative one, depending exclusively upon the will of the
intestate, but a mixed one, depending partly upon the will of the intestate and partly upon chance. The will to sell
on the part of the intestate was present in fact, or presumed to legally exist, although the price and other
conditions thereof were still within his discretion and final approval.
There were still other conditions that had to concur to effect the sale, mainly that a buyer, ready, able and willing
to purchase the property under the conditions demanded by the intestate.
SMITH, BELL & CO. V SOTELO
FACTS
August, 1918: Plaintiff Corporation Smith, Bell & Co., and defendant Sotelo entered into contract: Plaintiff
obligated itself to sell (and the defendant to purchase) 1) 2 steel tanks, to be shipped from New York and
delivered at Manila within 3 or 4 months; 2) 2 expellers to be shipped from San Francisco in the month of
September, 1918, or as soon as possible; 3) 2 electric motors to be delivered Approximate delivery within ninety
days. This is not guaranteed.
The plaintiff corporation notified Sotelo of the arrival of these goods, but Sotelo refused to receive them and to pay
the prices stipulated.
ISSUES
WON, under the contracts entered into and the circumstances established in the record, the plaintiff has fulfilled,
in due time, its obligation to bring the goods in question to Manila
HELD
Yes. When no definite date has been fixed for the delivery of goods, the obligor shall not be held guilty of delay in
the fulfillment of its obligation if it delivers the goods within a reasonable time. The obligation is regarded as
condition.
RUSTAN PULP V IAC
FACTS
Petitioner Rustan established a pulp and paper mill in Baloi, Lano del Norte. Respondent Romeo A. Lluch
propose to be Rustan's supplier of raw materials. Petitioner agreed but on the following conditions:
a. The contract to supply is not exclusive and Rustan shall have the option to buy from other qualified suppliers.

b. Seller has the priority to supply the materials to the buyer

c. Buyer shall have the right to stop delivery when supply has become sufficient until when said materials become
necessary, provided that the seller is given sufficient notice.
In the installation of the plant facilities, the technical staff of Rustan Pulp and Paper Mills, Inc. recommended the
acceptance of deliveries from other suppliers of materials. But during the test run of the pulp mill, the machinery
line thereat had major defects while deliveries of the raw materials piled up, which prompted the Japanese
supplier of the machinery to recommend the stoppage of the deliveries. A letter was sent to respondent asking to
suspend delivery for 30 days. Respondent sought to clarify the tenor of the letter as to whether stoppage of
delivery or termination of the contract of sale was intended, but the query was not answered by petitioners. This
led to the filing of a complain for a breach of contract.
ISSUE
WON Tantoco and Vergara should be personally liable
Held
NO. The President and Manager of a corporation who entered into and signed a contract in his official capacity,
cannot be made liable thereunder in his individual capacity in the absence of stipulation to that effect due to the
personality of the corporation being separate and distinct from the persons composing it. And because of this
precept, Vergara's supposed non-participation in the contract of sale although he signed the letter dated Sept 30,
1968 is completely immaterial.
ROMERO V. CA
Facts:
Private respondent entered into a Conditional Deed of Sale with petitioner over a parcel of land in Paranaque,
the latter advancing P50,000 for the eviction of squatters therein. An ejectment suit was then filed by the private
respondent against the squatters. Although successful, private respondent sought the return of the downpayment
she received because she could not get rid of the squatters.
ISSUE
WON the vendor may demand the rescission of a contract for the sale of a parcel of land for a cause traceable to
his own failure to have the squatters on the subject property evicted within the contractually stipulated period
HELD
NO. Private respondent's failure "to remove the squatters from the property" within the stipulated period gives
petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with
Article 1545 of the Civil Code." This option clearly belongs to petitioner and not to private respondent.
ROMAN CATHOLIC ARCHBISHOP OF MANILA V. CA
FACTS:
The spouses donated property to the archbishop with the condition that no disposition shall be made within 100
years.
ISSUES
WON the action has already prescribed
HELD:
There is no need for prescription to be applied in cases where there is stipulation for automatic reversion.
Nonetheless, the stipulation is against public policy and thus, is void.

Taylor vs Uy Tieng piao

Facts:
On Dec. 12, 1918, the plaintiff contracted his services to Tan Liuan and Co. as a superintendent
of an oil factory, which the latter planned to establish. The contract was for 2 yrs at Php
600/month for the first year and Php 700/month for the 2ndyr. Also a residence (complete
with light and water) for the plaintiff would be provided or in lieuthereof Php 60/month. The
machinery failed to arrive as stipulated, a preponderance of evidence shows that the
defendants either cancelled the order by choice or were unable to raise the capital required to
finance the project. Taylor was informed of the cancellation of the contract, upon which he

instituted this present action. He asserts that the stipulation is only valid in cases where the
non-arrival of the machinery is due to causes not originating from the act or will of the
defendants.
Issue:
WON the stipulation on issue is illegal?
HELD
NO. The Court disagrees with the plaintiff. The Court stated that the language of the contract
stipulation is clear and broad enough to cover ANY case of the non-arrival of the machinery;
therefore the defendants had the right to cancel the contract. The Court stated that this
condition is legal because it does not leave the validity and fulfillment of the contract to the will
of one party because both the contracting parties agreed that this option shall exist, both
equally agreed to abide by it. The Court said the stipulation, though it leaves one party in a
better position to dominate the contingency, does not infringe upon Art 1256, nor any other
law,so is therefore legal. A condition at once facultative and resolutory may be valid even
thought the condition is made to depend upon the will of the obligor
Herrera vs. Leviste
FACTS:
LEVISTE OBTAINED LOAN FROM GSIS P1,900,000. Mortgaged 2 lots. Sold Buendia
property to Herrera for P3,750,000. CONDITIONS are to Pay Leviste P11,900,000, Assume
Levistes indebtedness P1,900,000 to GSIS, Substitute Paranaque property with his own in 6
months. Leviste arranged conformity of GSIS to petitioners assumption of obligation. Failure
to comply shall render contract automatically cancelled, all payments forfeited, plus rental and
damages.
HERRERA only remitted P300,000 to GSIS. Requested GSIS for restructuring of the mortgage
obligation because of his own arrarages in the payment of the amortizations. GSIS sent notice
to Leviste to foreclose mortgage by reason of default in payment of amortizations. Public
auction with certificate in favor of GSIS occured.
Marcelo redeemed the properties from the GSIS by paying it the sum of P3,232,766.94 for
which he was issued a certificate of redemption.
Herrera instituted suit against Leviste for "Injunction, Damages, and Cancellation of
Annotation.
ISSUE:
Can Herrera file petition for lack of merit?
HELD:
The GSIS has not benefited in any way at the expense of Herrera. What it received, by way of

redemption from Marcelo, was the mortgage loan it had extended plus interest and sundry
charges. Neither has Marcelo and Leviste did not benefit due to expenses on mortgage.
HERRERA did not comply to the conditions of contract. He was not able to substitute the
Paraaque Property with another collateral for the GSIS loan. Leviste was not in a financial
position to redeem the foreclosed property. Has no other alternative, but to assign the right of
redemption to a person willing and capable to assume the same, if only to protect his interest
in the said property. Appellant could have preserved and protected whatever right he may have
to the property by tendering the redemption price to Marcelo.

PONCE DE LEON VS SYJUCO

Facts:
March 9,1936, PNB executed a contract to sell the properties to the plaintiff Jose Poncede Leon for the total of P26,300,
payable in: P2,630 upon execution of the deed, and thebalance in ten annual amortizations due a year after the
execution.1944, Japanese occupation, de Leon borrowed P216k in Jap military notes from Syjuco,promising to pay within one
year from May 5,1948 in Phil. Tender, mortgaging the land DeLeon agreed to buy from the bank.May 6,1944 De Leon paid the
bank the balance amounting to P23,670 in Jap military notes and, on the same date, the Bank executed a deed of absolute
sale to him.`Latter part of 1944, the Americans had landed in the Phils., De Leon tendered payment of the principal and
interest upto the date of maturity. The creditor refused to accept thepayment, so De Leon deposited the entire amount with the
clerk of court. And after liberation he brought action against the creditor to compel him to accept the amount.
Issue:
WON the lower court erred in not giving validity to the consignation made by the plaintiff of the principal and interest of his 2
promissory notes?
HELD
NoIn order for the consignation to be effective, one must follow requirements prescribed bylaw. The debtor must show that
there was a debt due; that the consignation was becausethe creditor refused to accept payment, or incapacitated to do so, or
several personsclaimed the payment(art.1176); that previous notice of consignation was given to theperson interested in the
performance of the obligation(art. 1177); that the payment wasplaced at the disposal of the court, and that after the
consignation, the person interested isnotified(art.1178).In this case, the payment of the debt that was refused existed and the
filing of thecomplaint was considered sufficient notice, BUT the failure of the 2 other elements rendered the consignation
incapacitated.Even if it may be argued that the creditor has nothing to lose but everything to gain by the acceleration of
payment of the obligation because the debtor has offered to pay all the interests up to the date it will become due, but this
argument loses force if we consider that the payment of interests is not the only reason why a creditor cannot be forced
toaccept payment contrary to the stipulation.

Araneta vs. Phil. Sugar Estate Devt., Inc

20 SCRA 330/GR L-22558
Art. 1197
Facts
Petitioner and Respondent entered into a contract of purchase and sale with mortgage whereas
P sold a big tract of land to R subject to following conditions: 1) that buyer will build on said
land the Sto. Domingo Church and Convent and 2) that seller will construct streets
surrounding the land which shall be named Sto. Domingo Avenue. Respondent finished the
construction of the church will Petitioner was unable to finish the construction of the streets

because a third party, occupying the middle part thereof, refuse to vacate the same.
Respondent filed a complaint seeking Petitioner to comply with the obligation and/or pay
damages in case of failure/refusal. RTC and CA decided in favor of Respondent and gave
Petitioner 2 years to comply with its obligation
Issue: Whether or not the fixing of the period of the Lower Court was valid and justified base
on the pleadings, the facts of the case, pursuant to Article 1197
Held
Even on the assumption that the court should have found out that no reasonable time or period
at all had been fixed, the complaint not having sought the court should set a period, the court
could not proceed to do so unless the complaint is amended
No basis to support the conclusion that period should be set at two years after finality of
judgment, considering that the land was occupied by squatters. Parties must comply with legal
processes in evicting the squatters. Reasonable time: at the date all the squatters on affected
areas are finally evicted.

Buce vs. CA/Tiongco

FACTS:
buce leased 56-meter land for period of 15 years and subject renewal to 10. Constructed a
building and monthly rental of P200. Tiongco demanded increase upto P1000.
Filed for complaint asking to have P200 rental for period of 15 years plus subject 10 year
renewal.
Buce Ordered to vacate premises is beyond bounds of authority because the case she filed was
for specific performance and not unlawful detainer. Phrase of renewal for another 10 years
at option of both parties indicates intention of parties to renew contract only upon mutual
agreement. Tiongco's Subsequent acts do not automatically indicate renewal of contracts
ISSUES:
If this lease shall be for a period of 15 years, subject to renewal for 10 years make stipulation
automatic and subsequent to parties?
HELD:
NO
nothing in the contract that expresses automatic renewal. allowance on improvements and
construction are not indicative of extension of contract. not indicated who may exercise option
to renew. Thus, period of lease should be set for the benefit of both parties upon mutal
agreement. Since private respondents were not amenable to renewal, they cannot be compelled to execute new. It

is their prerogative to terminate lease at its expiration.

Central Philippine University vs CA
FACTS:
In 1939, the late Don Ramon Lopez was a member of the board of trustees of Central
Philippine University when he executed a donation to the school, stating that the land must be
for exclusive use of a medical college. 50 years later, The heirs of Ramon Lopez filed an action
to annul the donation, stating the failure of the school to construct the medical college over the
land. RTC ruled in favor of respondents, which the CA affirmed.

ISSUE: Whether there is a resolutory condition

RULING:
The donation was an onerous one, where failure of the school to construct a medical college
would give the heirs the power to revoke the donation, reverting the property back to the heirs
of the donor. It is therefore a resolutory condition. Although, the period was not stated, and the
courts should have fixed a period, in this case, 50 years has lapsed since the donation was
executed, thus fixing a period would serve no purpose and the property must already be
reverted back.

Ynchausti Vs Yulo
Facts:
This suit is brought for the recovery of a certain sum of money, the balance of a
current account opened by the firm of Inchausti & Company with Teodor Yulo and after his
death continued by Gregorio Yulo as principal representative of his children. On Aug.12,
1909, Gregorio Yulo, in representation of his 3 siblings, executed a notarial instrument,
ratifying all the contents of the prior document of Jan.26, 1908, severally and joint
acknowledged their indebtedness for P253,445.42, 10 % per annum, 5 installments.
Plaintiff brought an action againsta Gregorio for the payment of the said balance due. But
on May 12, 1911, 3 siblings executed another instrument in recognition of the debt,
reduced to P225,000, interest reduced to 6% per annum, installments increased to 8.

Issue:
Whether or not Inchausti Lost its right for agreeing with other obligors?
HELD
NO. Even though the creditor may have stipulated with some of the solidary debtors
diverse installments and conditions, as in this case, INCHAUSTI did with its debtors
Manuel, Francisco, and Carmen Yulo through the instrument of May 12, 1911, this does not
lead to the conclusion that the solidarity stipulated in the instrument of August 12, 1909 is
broken, as we already know the law provides that "solidarity may exist even though the
debtors are not bound in the same manner and for the same periods and under the same
conditions."

Lafarge cement vs Continental Cement

Facts:
Origins of the controversy can be traced to the Letter of Intent (LOI) executed by
bothparties, whereby Petitioner Lafarge Cement Philippines, Inc. (Lafarge) -- on behalf of
its affiliatesand other qualified entities, including Petitioner Luzon Continental Land
Corporation (LCLC) --agreed to purchase the cement business of Respondent Continental
Cement Corporation (CCC).Both parties entered into a Sale and Purchase Agreement
(SPA). At the time of the foregoingtransactions, petitioners were well aware that CCC had a
case pending with the Supreme Court
Issue
Whether or not the RTC gravely erred in ruling
Held
The Trial Court is hereby ordered to take cognizance of the counterclaims pleaded
inpetitioners' Answer with Compulsory Counterclaims and to cause the service of
summonson Respondents Gregory T. Lim and Anthony A. Mariano. The ambiguity in
petitioners'counterclaims notwithstanding, respondents' liability, if proven, is solidary.
Thischaracterization finds basis in Article 1207 of the Civil Code, which provides that
obligationsare generally considered joint, except when otherwise expressly stated or when
the law orthe nature of the obligation requires solidarity. However, obligations arising from
tort are,by their nature, always solidary
LACHICA VS. ARANETA
FACTS:
Gregorio Araneta, Inc. (through President Jose Araneta) offered for sale a parcel of
land with the improvements thereon. This property was bought by Investment Corporation
through Maria Lachica, the wife of the Esteban Sadang who was sales agent of defendant
corporation. The parties signed was a contract of exact content as stated, which however
omitted the words or before. Thus, it would appear that the payment of the installments
would be on and not on or before the dates as specified.

The terms were complied with, together with some resolved differences, until on
Sept. 5, 1944, plaintiff Sadang went to see Araneta to pay the entire balance, including the
interest thereon and ask for the cancellation of the mortgage, but Araneta refused to
accept the tender of payment. Araneta gave as his reason for his non-acceptance that
such payment was not in accordance with the terms of the deed of sale with mortgage.
ISSUE:
Should Araneta be compelled to accept the payment?
RULING:
Yes. The contract does not prohibit if it is done before (p.5706, no. 2). A term is fixed
and it is presumed to have been established for the benefit of the creditor as sell as that
of the debtor, unless from its tenor or from other circumstances it should appear that the
terms as established for the benefit of one or the other.
ALIPIO V COURT OF APPEALS
FACTS
Respondent Romeo Jaring[1] was the lessee of a 14.5 hectare fishpond in Barito,
Mabuco, Hermosa, Bataan. The lease was for a period of five years ending on
September 12, 1990. On June 19, 1987, he subleased the fishpond, for the
remaining period of his lease, to the spouses Placido and Purita Alipio and the
spouses Bienvenido and Remedios Manuel. The stipulated amount of rent was
P485,600.00, payable in two installments of P300,000.00 and P185,600.00, with the
second installment falling due on June 30, 1989. Each of the four sublessees signed
the contract.
The first installment was duly paid but only a portion of the second was paid
leaving a balance of P50,600. despite demand, the balance remained unpaid thus
Jaring sued for the collection of such amount. In the alternative, he prayed for the
recission of the sublease contract should the defendants fail to pay the balance.
Purita Alipio on the other hand moved to dismiss the case on the ground that her
husband, Placido Alipio, had passed away on December 1, 1988.
ISSUE
WON a creditor can sue the surviving spouse for the collection of a debt which is
owed by the conjugal partnership of gains, or whether such claim must be filed in
proceedings for the settlement of the estate of the decedent
HELD
NO. Ratio We hold that a creditor cannot sue the surviving spouse of a decedent in
an
ordinary proceeding for the collection of a sum of money chargeable against the
conjugal partnership and that the proper remedy is for him to file a claim in the
settlement of estate of the decedent.
JAUCIAN V QUEROL

Facts: Lino Dayandante and Hermenegilda Rogero executed a private writing in

which they acknowledged their debt to Roman Jaucian. Rogero signed in the capacity of
surety for Dayandante; but as clearly appears from the instrument itself both debtors
bound themselves jointly and severally to the creditor. Rogero brought an action asking
that the document be canceled as to her upon the ground that her signature was obtained
by means of fraud. In his answer, Jaucian, by way of cross-complaint, asked for judgment
against the plaintiff for the amount due upon the obligation. While the case was pending in
the Supreme Court, Rogero died. Supreme Court rendered in its decision in favor of Jaucian
holding that the disputed claim was valid.
Meanwhile, proceedings were had for the administration of the estate of Rogero;
Querol was named administrator; and a committee was appointed to pass upon claims
against the estate. This committee made its report and about a year and half after the
filing of the report, Jaucian filed a petition praying that the court issue an order directing
the administrator of Rogeros estate to pay him. This was opposed by the administrator
upon the grounds that the claim had never been presented to the committee on claims for
allowance and that the court was therefore without jurisdiction to entertain the demand of
the claimant. A hearing was had upon the petition and on April 13, 1914, the decision was
rendered declaring that since Rogero was simply a surety for Dayandante, the
administrator has a right to require that Jaucian produce a judgment for his claim against
Dayandante. Pursuant to this order, Jaucian brought an action against Dayandante.
Execution was issued upon this judgment, but was returned by the sheriff wholly
unsatisfied. Jaucian then filed another petition in the proceedings upon the estate of
Rogero, and renewed the prayer of the original petition. The petition was again opposed
by the administrator. After hearing, the judge entered an order refusing to grant Jaucian's
petition.
Issue:

w/n Jaucian may claim from the estate. NO

Held:
No rights were conferred by the said order of April 13, 1914, and that it did not
preclude the administrator from making opposition to the petition of the appellant when it
was renewed.

ORIA VS MCMICKING
Facts:
Gutierrez Hermanos filed an action for recovery of a sum of money against Oria
Hermanos & Co. and herein plaintiff filed an action for recovery also for the same
defendant. Before the institution of the suits, members of the Company dissolved their
relations and entered into a liquidation. Tomas Oria y Balbas acting in behalf of his coowners entered into a contract with the herein plaintiff for the purpose of transferring and
selling all the property which the Oria Hermanos & Co. owned and among the goods stated
on that instrument was the steamship Serpantes and which the subject of this litigation.
When the Trail Court resolved the action for recovery filed by Gutierrez Hermanos and
jugdment was in his favor, The sheriff demanded to Tomas Oria y Balbas to make payment
but the latter said there were no funds to pay the same. The sheriff then levied on the
steamer, took possession of the same and announced it for public auction. Herein plaintiff

claimed that he is the owner of the steamer by virtue of the selling of all the properties of
the said Company.
Issue(s):
1. Whether or not there was a valid sale between Oria Hermanos & Co. to Manuel
Oria y Gonzales as against the creditors of the company.
2. Whether or not the sale was fraudulent.
Held: At the time of said sale the value of the assets of Oria Hermanos & Co., as
stated by the partners themselves, was P274,000. The vendee of said sale was a son of
Tomas Oria y Balbas and a nephew of the other two persons heretofore mentioned which
said three brothers together constituted all of the members of said company.The plaintiff is
a young man of 25 years old and has no property before the said selling. The court had
laid down the rules in determining whether a there has been fraud prejudicing creditors: 1)
consideration of conveyance is fictitious; 2) transfer was made while the suit against him
(Tomas Oria y Balbas) was pending; 3) sale by insolvent debtor; 4) evidence of insolvency;
5) transfer of all properties; 6) the sale was made between father and son; 7) and the
failure of the vendee to take exclusive possession of the property. The case at bar shows
every one of the badges of fraud.
Siguan vs. Lim
Facts: A criminal case was filed against LIM with RTC-Cebu city for issuing 2 bouncing checks in
the amounts of P300,000 and P241,668, respectively to Siguan
Meanwhile, on 2 July 1991, a Deed of Donation conveying the following parcels of land and
purportedly executed by LIM on 10 August 1989 in favor of her children, Linde, Ingrid and Neil,
was registered with the Office of the Register of Deeds of Cebu City. New transfer certificates of
title were thereafter issued in the names of the donees. On 23 June 1993, petitioner filed
an accion pauliana against LIM and her children before RTC-Cebu City to rescind the questioned
Deed of Donation and to declare as null and void the new transfer certificates of title issued for
the lots covered by the questioned Deed.
Petitioners contention: claimed therein that sometime in July 1991, LIM, through a Deed of
Donation, fraudulently transferred all her real property to her children in bad faith and in fraud of
creditors, including her; that LIM conspired and confederated with her children in antedating the
questioned Deed of Donation, to petitioner's and other creditors' prejudice; and that LIM, at the
time of the fraudulent conveyance, left no sufficient properties to pay her obligations.
LIMs contention: As regards the questioned Deed of Donation, LIM maintained that it was not
antedated but was made in good faith at a time when she had sufficient property. Finally, she
alleged that the Deed of Donation was registered only on 2 July 1991 because she was seriously
ill.
Issue: Whether the Deed of Donation executed by Rosa Lim (LIM) in favor of her children be
rescinded for being in fraud of petitioner Maria Antonia Siguan?
Ruling:
Even assuming arguendo that petitioner became a creditor of LIM prior to the celebration of the
contract of donation, still her action for rescission would not fare well because the third requisite
was not met. Under Article 1381 of the Civil Code, contracts entered into in fraud of creditors

may be rescinded only when the creditors cannot in any manner collect the claims due them.
SUNTAY V CA
FACTS
Federico Suntay is a wealthy land owner and rice miller from Bulacan. He owned a
5,118 square-meter land in Bulacan. On it was a rice mill, a warehouse and other
improvements.
Federico applied as a miller-contractor of the then National Rice and Com
Corporation (NARIC). His application was prepared by his nephew lawyer Rafael Suntay.
But it was disapproved because at that time he was tied up w/ several unpaid loans.
For purposes of circumvention, he had thought of allowing Rafael to make the application
for him. Rafael prepared an absolute deed of sale whereby Federico, for and in
consideration of P20,000.00 conveyed to Rafael said parcel of land with all its existing
structures.
Federico claims that the sale was merely fictitious/simulated and has been executed only
for purposes of accommodation. Less than three months after this conveyance, Rafael sold
it back to Federico for the same amount of P20,000. It was notarized by Atty. Herminio V.
Flores.
ISSUE
WON the deed of sale executed in favor of Rafael Suntay was valid
HELD
NO A contract of purchase and sale is void and produces no effect whatsoever
where the same is without cause or consideration in that the purchase price, which
appears thereon as paid, has in fact never been paid by the purchaser to the vendor two
veritable legal presumptions: first, that there was sufficient consideration for the contract
45 and, second, that it was the result of a fair and regular private transaction.
These presumptions if shown to hold, infer prima facie the transaction's validity,
except that it must yield to the evidence adduced.
UNIVERSAL FOOD CORP VS. CA
Facts:
This is a petition for certiorari by UFC against the decision of the CA whereby CA
ordered UFC to return to plaintiff Magdalo Francisco his Mafran sauce trademark and
formula and to pay his monthly salary of P300 per month.
In 1960 plaintiff and def corp entered into a contract where it was stipulated that
Francisco is the owner and the author of the formula of the mafran sauce and he will be
appointed Second VP and Chief Chemist. That he will have absolute control and
supervision over the lab assistants and personnel.
In return, plaintiff assigned to corp his interests and rights over the said trademark and
formula so that the def corp could use the formula in the preparation and manufacture of
the mafran sauce and the trade name for the marketing as shown in a contract entitled
Bill of Assignment.

Def without any justifiable cause dismissed all the assistants and laborers of plaintiff with
evident intention to discover the formula and were not able to do so, dismissed the
plaintiff as chief chemist and appointer other employees in his place in the preparation of
said sauce.
Def corp also deprived him of his right to the royalty equivalent to 2% of the net profit of
the corp. (He has registered his trademark in the Bureau of Patents in 1938).
Issue:
Was petitioners contention that Magdalo Francisco is not entitled to rescission
valid?
Held:
Yes. 1191 vs. 1383 and 1384.
General rule is that rescission of a contract will not be permitted for a slight causal breach
but only for such substantial and fundamental breach as would defeat the very object of
the parties in making the agreement. (Corp is alleging the rescission is only subsidiary
remedy and should be instituted if there are no other means)
The dismissal of Francisco is fundamental and substantial. Apart from the legal legal
principle that the option for rescission belongs to the injured party, the fact remains that
there is no alternative but to file the present action.

SINGSON VS. ISABELA SAWMILL

Facts:
Isabela Sawmill was formed by partners Saldajeno, Lon and Timoteo. Withdraw from
the partnership and after dissolution, L and T continued the business still under the name
Isabela Sawmill. The partnership is indebted to various creditors and that Sheriff sold the
assets of Isabela Sawmill to S and was subsequently sold to a separate company.
Issue:
Whether or not Isabela Sawmill ceased to be a partnership and that creditors could
no longer demand payment.
Ruling:
On dissolution, the partnership is not terminated but continues until the winding up
of the business. It does not appear that the withdrawal of S from the partnership was
published in the newspapers. The Apelles and the public had a right to expect the public
had a right to expect that whatever credit they extended to L & T doing business. In the
name of the partnership could be enforced against the partnership of said partnership. The
judicial foreclosure of the chattel mortgage executed in the favor of S did not relieve her
from liability to the creditors of the partnership.
It may be presumed S acted in good faith, the Apelles also acted in good faith in
extending credit to the partnership. Where one of the two innocent persons must suffer,

that persons must suffer, that person who gave occasion for the damages to be caused
must bear the consequences.
CADWALLER & CO. V SMITH, BELL, AND CO.
FACTS
Cadwaller & Co. as assignees of the Pacific Export Lumber Company (PELC) asks for
the amount of $3,486 which is the sum differential of the money that turned over to
them and the money actually received. PELC exported cedar piles to be bought by
Peabody & Company (defendant/appellee) for the amount of $12 apiece however
later on it was found out that P&C was able to negotiate with the government and
sold the piles for $19 apiece. Hence this case.
ISSUE
WON there is a breach of duty from which the defendant should not benefit from
HELD
YES, there is a breach of duty. The concealment from their principal of the
negotiation with the Government resulted in a sale at $19 apiece and in
misrepresenting the condition of the market is a breach of duty. The contract of sale
is founded on fraud and is subject to the annulment of the aggrieved party (CC Arts.
1265 and 1269). The defendants are not entitled to retain their commission realized
upon the piles included under the annulled contract. However this is only for those
that are subsequently sold at the time of the negotiation with the Government and
its selling at the amount of $19 apiece.
UY SOO LIM V TAN UNCHUAN
FACTS
In this case, the legitimate children (Francisca and Concepcion), the legal wife
(Candida Vivares) and the second wife (Chan Quieg) of the deceased Santiago
Pastrano Uy Toco are questioning the fairness and legality of the lion's share
received by Uy Soo Lim, the illegitimate child of the deceased. Santiago, in his last
will and testament gave the 7/9 share of his large estate to Uy Soo Lim, leaving his
legal heirs with so litte to enjoy.
The court issued an order requiring Benito Tan Unchuan, as executor of the
testamentary estate of Santiago pastrano, to deliver to Basilio Uy Bundan, guardian
of minors Francisca, Concepcion, Uy Soo Lim, the property .
ISSUE
WON the plaintiff might have the right to rescind this contract on the ground of
Minority
HELD
NO. The right of the minor to rescind, upon attaining his majority, a contract entered
into during his minority is subject to to the conditions (1) that the election to rescind
must be made within a reasonable time after majority and (2) that all of the

consideration which was in the minor's possession upon his reaching the majority
must be returned. The disposal of any part of th econsideration after the
attainment of majority imports an affirmance of the contract.
VELARDE VS. COURT OF APPEALS
FACTS:
The private respondent executed a Deed of Sale with Assumption of Mortgage, with
a balance of P1.8 million, in favor of the petitioners. Pursuant to said agreements, plaintiffs
paid the bank (BPI) for three (3) months until they were advised that the Application for
Assumption of Mortgage was denied. This prompted the plaintiffs not to make any further
payment. Private respondent wrote the petitioners informing the non-fulfillment of the
obligations. Petitioners, thru counsel responded that they are willing to pay in cash the
balance subject to several conditions. Private respondents sent a notarial notice of
cancellation/rescission of the Deed of Sale. Petitioners filed a complaint which was
consequently dismissed by an outgoing judge but was reversed by the assuming judge in
their Motion for Reconsideration. The Court of Appeals reinstated the decision to dismiss.
ISSUE:
Whether or not there is a substantial breach of contract that would entitle its
rescission.
RULING:
YES. Article 1191 of the New Civil Code applies. The breach committed did not
merely consist of a slight delay in payment or an irregularity; such breach would not
normally defeat the intention of the parties to the contract. Here, petitioners not only
failed to pay the P1.8 million balance, but they also imposed upon private respondents
new obligations as preconditions to the performance of their own obligation. In effect, the
qualified offer to pay was a repudiation of an existing obligation, which was legally due
and demandable under the contract of sale. Hence, private respondents were left with the
legal option of seeking rescission to protect their own interest.
CARBONNEL VS PONCIO
FACTS:
On January 27, 1955, respondent executed a private memorandum of sale of his
land with improvements in San Juan, Rizal in to petitioner who knew that the property was
at that time subject to a mortgage in favor of the RSB for the Php1500 . Four days later,
respondent, in another private memorandum, bound himself to sell the same property for
an improved price to one Infante for the sum of P2,357.52, with the latter still assuming
the existing mortgage debt in favor of the RSB in the amount of P1,177.48. Thus, in
February 2, respondent executed a formal deed of sale in her favor.
When the first buyer saw the respondent, with the formal deed of sale for the latter's
signature and the balance of the agreed cash payment, respondent said that he could no
longer proceed with formalizing the contract because he had already formalized a sales
contract with Infante.
To protect her legal rights as the first buyer, plaintiff registered on February 8, 1955

with the Register of Deeds her adverse claim as first buyer entitled to the property.
Meanwhile, Infante, the second buyer, was able to register the sale in her favor only on
February 12, 1955, so that the transfer certificate of title issued in her name carried the
duly annotated adverse claim of Carbonell as the first buyer. The trial court declared the
claim of the second buyer Infante to be superior to that of the first buyer Carbonell,
reversed by the CA.
ISSUE:
Who has the superior right over the subject property?
HELD:
The Supreme Court held that the first buyer have the superior right over the
property, relying on Article 1544 of the Civil Code. Unlike the first and third paragraphs of
said Article 1544, which accord preference to the one who first takes possession in good
faith of personal or real property, the second paragraph directs that ownership of
immovable property should be recognized in favor of one "who in good faith first recorded"
his right. Under the first and third paragraphs, good faith must characterize the prior
possession, while under the second paragraph, good faith must characterize the act of
anterior registration.
LIMKETKAL SONS MILLING INC VS CA
Facts:
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal
authority by BPI to sell the lot for P1,000.00 per square meter. The owners of the Philippine
Remnants concurred this arrangement. Broker Revilla contacted Alfonso Lim of petitioner
company who agreed to buy the land. On July 9, 1988, Revilla formally informed BPI that
he had procured a buyer, herein petitioner. On July 11, 1988, petitioner's officials, Alfonso
Lim and Albino Limketkai, went to BPI to confirm the sale. Vice-President Merlin Albano and
Asst. Vice-President Aromin entertained them. The parties agreed that the lot would be
sold at P1,000.00 per square meter to be paid in cash. The authority to sell was on a first
come, first served and non-exclusive basis; there is no dispute over petitioner's being the
first comer and the buyer to be first served. Alfonso Lim then asked if it was possible to
pay on terms. The bank officials stated that there was no harm in trying to ask for
payment on terms because in previous transactions, the same had been allowed. It was
the understanding, however, that should the term payment be disapproved, then the price
shall be paid in cash. Two or three days later, petitioner learned that its offer to pay on
terms had been frozen. Alfonso Lim went to BPI on July 18, 1988 and tendered the full
payment of P33,056,000.00 to Albano. The payment was refused because Albano stated
that the authority to sell that particular piece of property in Pasig had been withdrawn
from his unit. The same check was tendered to BPI Vice-President Nelson Bona who also
refused to receive payment. An action for specific performance with damages was
thereupon filed on August 25, 1988 by petitioner against BPI. In the course of the trial, BPI
informed the trial court that it had sold the property under litigation to NBS on July 14,
1989.
Issue: Whether or not such contract is covered by the statute of frauds.

Held: In the case at bench, the allegation that there was no concurrence of the offer and
the acceptance upon the cause of the contract is belied by the testimony of the very BPI
official with whom the contract was perfected. Aromin and Albano concluded the sale for
BPI. The fact that the deed of sale still had to be signed and notarized does not mean that
no contract had already been perfected. A sale of land is valid regardless of the form it
may have been entered into. The requisite form under Article 1458 of the Civil Code is
merely for greater efficacy or convenience and the failure to comply does not affect the
validity and binding effect of the act between parties. Therefore, such contract that was
made constituted fraud and is covered by the statute of frauds. BPI should be held liable
and can be sued for damages.
SWEDISH MATCH VS CA
Facts:
Swedish Match, AB (SMAB) is a corporation organized under the laws of Sweden, however,
had 3 subsidiary corporations in the Philippines organized under Philippine laws: Phimco,
Provident Tree Farms, Inc, and OTT/Louie (Phils,), Inc. In 1988, STORA, its parent company,
decided to sell SMAB and the latters worldwide match, lighter and shaving products
operation to Swedish Match NV (SMNV). Enriquez, VP of SMSA (management company of
SMAB), was held under special instructions that the sale of Phimco shares should be
executed on or before June 30, 1990. Respondent GM Antonio Litonjua of ALS Management
and Development Corp. was one of the interested parties to acquire Phimco shares,
offering US$36 million. After an exchange of information between CEO Rossi of SMAB and
Litonjua, the latter informed that they may not be able to submit their final bid on the
given deadline considering that the acquisition audit of Phimco and the review of the draft
agreements have not been completed.
In a letter dated July 3, 1990, Rossi informed Litonjua that on July 2, SMAB signed a
conditional contract with a local group for the disposal of Phimco and that the latters bid
would no longer be considered unless the local group would fail to consummate the
transaction on or before September 15, 1990. Irked by SMABs decision to junk his bid,
Litonjua asserted that the US$36 million bid was final, thus finalizing the terms of the sale.
Issue: Whether or not there was a perfected contract of sale between petitioners and
respondents, with respect to the Phimco shares.
Held: No, there was no perfected contract of sale since Litonjuas letter of proposing
acquisition of the Phimco shares for US$36 million was merely an offer. Consent in a
contract of sale should be manifested by the meeting of the offer and acceptance upon
the thing and the cause which are to constitute the contract.
LIGUEZ VS CA
Facts: The case began upon complaint filed by Conchita Liguez, plaintiff, against the widow
and heirs of the late Salvador P. Lopez to recover a parcel of land. Plaintiff averred to be its
legal owner, pursuant to a deed of donation of said land, executed in her favor by the late
owner, Salvador P. Lopez.
The donated land originally belonged to the conjugal partnership of Lopez and his wife,

Maria Ngo. The defense interposed was that the donation was null and void for having an
illicit causa or consideration, which was plaintiff's entering into marital relations with
Salvador P. Lopez, a married man. In the Court of First the property was adjudicated to the
appellees as heirs of Lopez.
At the time of the donation, plaintiff was a minor, only 16 years of age. The donation was
made in view of the desire of Salvador P. Lopez, a man of mature years, to have sexual
relations her. Lopez had
confessed to his love for but the parents of the plaintiff would not allow him to live with
her unless he first donated the land in question. He did.
Issue: Whether or not the donation is valid notwithstanding its illegal causa and does the
plaintiff have a right to recover the land adjudicated?
Held:
The motive of the parties may be regarded as causa when it predetermines the purpose of
the contract. Thus the motive of Lopez to bed the plaintiff is contrary to morals and is
illicit, which makes it illegal as well.
RELLOSA VS GAW CHEEN HUM
FACTS: On 1944, Dionisio Rellosa, a Filipino, sold to Gaw Chee Hun, a Chinese, a parcel of
land with a house erected on it, located in Manila. Both parties entered into a lease
contract, whereby Rellosa, the vendor, occupied the land under the condition that Gaw
Chee obtain the approval of the sale by the Japanese Administration. Gaw Chee did not
obtain such approval. Rellosa now seeks to annul the sale and the lease. Gaw Chee,
meanwhile, contends that such sale was absolute and conditional, the same not being
contrary to law, morals and public order. He further states that Rellosa is estopped from
asserting his ownership over the land, after having leased the same from Gaw Chee, and
thus, recognizing Gaw Chees title over the property.
ISSUES: WON Rellosa can have the sale declared null and void and recover the property
considering the effect of the law governing rescission of contracts.
HELD: The sale in question is null and void, but plaintiff is barred from taking the present
action under the principle of pari delicto.
PNB VS LUI SHE
FACTS:
Justina Santos y Canon Faustino and her sister Lorenza were the owners in common
of a piece of land in Manila.
The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in
the restaurant. Wong had been a long-time lessee of a portion of the property, having a
monthly rental of P2,620.
On September 22, 1957 Justina Santos became the owner of the entire property as

her sister died with no other heir. Then already well advanced in years, being at the time
90 years old, blind, crippled and an invalid, she was left with no other relative to live with,
but she was taken cared of by Wong.
"In grateful acknowledgment of the personal services of the Lessee to her," Justina Santos
executed on November 15, 1957, a contract of lease in favor of Wong, covering the portion
then already leased to him and another portion fronting Florentino Torres street. The lease
was for 50 years, although the lessee was given the right to withdraw at any time from the
agreement; the monthly rental was P3,120. Ten days later (November 25), the contract
was amended so as to make it cover the entire property, including the portion on which
the house of Justina Santos stood, at an additional monthly rental of P360.

ISSUES: Was the insertion in the contract of a resolutory condition, permitting the
cancellation of the contract by one of the parties, valid?
RULING: Yes. the right of the lessee to continue the lease or to terminate it was so
circumscribed by the term of the contract that it cannot be said that the continuance of
the lease depends upon his will. At any rate, even if no term had been fixed in the
agreement, this case would at most justify the fixing of a period but not the annulment of
the contract.
FRENZEL VS CATITU
FACTS
- Frenzel is a rich Australian guy legally married to a Filipina
- Catito is a Filipina legally married to a German guy
- They hooked up. Frenzel buys Catito businesses and land, all of which are
registered under Catitos name (i.e. deeds of sale, receipts, TCTs).
- The relationship goes sour. Frenzel filed a complaint against Catito for recovery of
real and personal property.
ISSUE
WON the transactions are illegal per se or merely prohibited, as Frenzel contends,
thereby entitling him to recover under Art 1416
HELD
Ratio The sales of three parcels of land in favor of the petitioner who is a foreigner
is illegal per se. The transactions are void ab initio because they were entered into
in violation of the Constitution. Thus, to allow the petitioner to recover the
properties or the money used in the purchase of the parcels of land would be
subversive of public policy. Art 1416 applies only to those contracts which are
merely prohibited, in order to benefit private interests. It does not apply to
contracts void ab initio

MODINA VS CA
FACTS:
The parcel of land under the name of Ramon Chiang is in questioned since Mr. Chiang
claims that the land has already been sold by his wife to him. Mr. Chiang in turn sells this
land to Modina which are all evidenced by deed of sale. Modina then filed Complaint for
Recovery of Possession with Damages before the Regional Trial Court of Iloilo City. On the
other hand, Merlinda, the wife of Ramon, presented also a complaint which is to make the
deed of sale between her husband and Modina null and void.
ISSUE:
The first issue raised was that whether the sale of the parcel of land should be nullified or
not. Second is that whether the petitioner, Modina, was a purchaser in good faith or not.
Third is whether the decision of the trial court was in excess of jurisdiction or the court's
acting beyond the limits of its power; and lastly whether or not only three-fourths of
subject lots should be returned to the private respondent.
RULING:
The court declares the sale of land between Chiang and Modina as null and void. This is
because under Art. 1490, husband and wife are prohibited to sell properties to each other.
Not being the owner of the land, Ramon Chiang cannot sell the land to Modina.