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
. FLORENTINO V ENCARNACION, SR.
NATURE
APPEAL from the decision of the Court of First Instance of Ilocos Sur. Arciaga, J.
FACTS
- On May 22, 1964, the petitioners-appellants and the petitioners-appelleed filed with CFI an
application for the registration under Act 496 of a parcel of agricultural land located at
Cabugao, Ilocos Sur. The application alleged among other things that the applicants are the
common and pro-indiviso owners in fee simple of the said land with the improvements
existing thereon; that to the best of the knowledge and belief, there is no mortgage, hen or
encumbrance of any kind whatsoever affecting said land, nor any other person having any
estate or interest thereon, legal or equitable, remainder, reservation at in expectancy; that
said applicants had acquired the aforesaid land thru and by inheritance from their
predecessors in interest, their aunt, Doña Encarnacion Florentino, and Angel Encarnacion
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of Lands filed an opposition but was later withdrawn so an order of general default was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 Exhibit O-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opposed and subsequently withdrawn their application on their shares, which was opposed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 no
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
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the applicants in this case, except that of Salvador Encarnacion, Sr., Salvador Encarnacion, Jr.
and Angel Encarnacion."
- The petitioners-appellants filed their Reply to the Opposition reiterating their previous
arguments, and also attacking the jurisdiction of the registration court to pass upon the
validity or invalidity of the agreement Exhibit O-1, alleging that such is litigable only in an
ordinary action and not proper in a land registration proceeding.
- The Motion for Reconsideration and of New Trial was denied for lack of merit, but the court
modified in highlighting that the donee Church has not showed its clear acceptance of the
donation, and is the real party of this case, not the petitioners-appellants
ISSUES
1. 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-owners
1.1 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 Encarnacion
2. WON the lower court erred in holding that rule that the petitioners-appellants are not the
real parties in interest, but the Church
3. 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
1. YES
The court erred in concluding that the stipulation is just an arrangement stipulation. It cannot
be revoked unilaterally.
Ratio 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.
1
Reasoning The stipulation (Exhibit O-1) is part of an extrajudicial partition (Exh. O) duly
agreed and signed by the parties, hence the same must bind the contracting parties thereto
and its validity or compliance cannot be left to the will of one of them
- The said stipulation is a stipulation pour autrui. A stipulation pour autrui is a stipulation in
favor of a third person conferring a clear and deliberate favor upon him, and which
stipulation is merely a part of a contract entered into by the parties, neither of whom acted
as agent of the third person, and such third person may demand its fulfillment provided that
he communicates his acceptance to the obligor before it is revoked.
-Requisites: (1) that the stipulation in favor of a third person should be a part, 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 pour autrui: 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 pour autrui is entitled to bring an action for its
enforcement or to prevent its breach is too clear to need any extensive discussion. Upon the
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other hand, that the contract involved contained a stipulation pour autrui 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 Exhibit O-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 in
consonance with our avowed policy of speedy justice.
Disposition 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.
COQUIA V FIELDMEN’S INSURANCE CO., INC.
NATURE
Appeal from a decision of the Court of First Instance of Manila
FACTS
- On Dec. 1, 1961, The Fieldmen’s Insurance Co. issued in favor of the Manila Yellow Taxicab
Co. a common carrier accident insurance policy, covering the period from Dec. 1, 1961 to
2
Dec. 1, 1962. It was stipulated in said policy that the “Company will indemnify the Insured in
the event of accident against all sums which the Insured will become legally liable to pay for
the death or bodily injury to any fare-paying passenger including the driver, conductor
and/or inspector who is riding in the motor vehicle insured at the time of accident or injury.”
On Feb. 10, 1962, as a result of a vehicular accident in Pangasinan, Carlito Coquia, driver of
one of the taxi cabs covered by said policy, was killed. The Insured filed therefor a claim for
P5,000.00 to which the Company replied with an offer to pay P2,000.00, by way of
compromise. The Insured rejected the same and made a counter-offer for P4,000.00, but the
Company did not accept it. Because of the failure of the Company and the Insured to agree
with respect to the amount to be paid to the heirs of the driver, the Insured and the parents
of Carlito, the Coquias, finally brought this action against the Company to collect the
proceeds of the aforementioned policy. The trial court rendered a decision sentencing the
Company to pay to the plaintiffs the sum of P4,000.00 and the costs. Hence, this appeal by
the Company, which contends that plaintiffs have no cause of action because: 1) the Coquias
have no contractual relation with the Company; and 2) the Insured has not complied with the
provisions of the policy concerning arbitration based on Sec 17 of the policy reading: “If any
difference or dispute shall arise with respect to the amount of the Company's liability under
this Policy, the same shall be referred to the decision of a single arbitrator to be agreed upon
by both parties or failing such agreement of a single arbitrator, to the decision of two
arbitrators, one to be appointed in writing by each of the parties within one calendar month
after having been required in writing so to do by either of the parties and in case of
disagreement between the arbitrators, to the decision of an umpire who shall have been
appointed in writing by the arbitrators before entering on the reference and the costs of and
incident to the reference shall be dealt with in the Award. And it is hereby expressly
stipulated and declared that it shall be a condition precedent to any right of action or suit
upon this Policy that the award by such arbitrator, arbitrators or umpire of the amount of the
Company's liability hereunder if disputed shall be first obtained.”
ISSUE
WON the Coquias have cause of action
HELD
YES
Ratio 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.
Reasoning 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 Art. 1311
of the Civil Code of the Philippines. This is but a 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. The policy in question
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provides, inter alia, that the Company ‘will indemnify any authorized driver who is driving the
motor vehicle’ of the Insured and, in the event of death of said driver, the Company shall,
likewise, ‘indemnify his personal representatives.’ Thus, the policy is typical of contracts pour
autrui, this characteristic being made more manifest by the fact that the deceased driver,
paid fifty percent of the premiums, which were deducted from his weekly commissions.
Under these conditions, 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 themselves, without the assistance of the Insured, it goes without saying that they
could and did properly join the latter in filing the complaint hereon. The second defense
cannot stand because none of the parties invoked this section, or made any reference to
arbitration, during the negotiations preceding the institution of the present case. Their
aforementioned acts or omissions had the effect of a waiver of their respective right to
demand an arbitration. The test for determining whether there has been a waiver in a
particular case is as follows: "Any conduct of the parties inconsistent with the notion that
they treated the arbitration provision as in effect, or any conduct which might be reasonably
construed as showing that they did not intend to avail themselves of such provision, may
amount to a waiver thereof and estop the party charged with such conduct from claiming its
benefits".
Disposition Decision appealed from is affirmed.
CONSTANTINO V ESPIRITU
NATURE
Direct appeal on a question of law taken by Pastor B. Constantino from an order of the Court
of First Instance of Rizal denying his motion for the admission of his amended complaint in
Civil Case No. 5924, entitled "Pastor B. Constantino vs. Herminia Espiritu."
FACTS
- Constantino had by a fictitious deed of absolute sale conveyed to Espiritu for a
consideration of P8,000.00, the two-storey house and four (4) subdivision lots in the name of
Pastor B. Constantino, married to Honorata Geukeko, with the understanding that Espiritu
would hold the properties in trust for their illegitimate son, Pastor Constantino, Jr., still
unborn at the time of the conveyance
- Espiritu mortgaged said properties to the Republic Savings Bank of Manila twice to secure
payment of two loans, one of P3,000.00 and the other of P2,000.00, and that thereafter she
offered them for sale.
- The complaint then prayed for the issuance of a writ of preliminary injunction restraining
Espiritu and her agents or representatives from further alienating or disposing of the
3
properties, and for judgment ordering her to execute a deed of absolute sale of said
properties in favor of Pastor B. Constantino, Jr., the beneficiary (who, at the filing of said
complaint, was about five years of age), and to pay attorney's fees in the sum of P2,000.00.
- TCT No, 20714 in the name of plaintiff was partially cancelled and in lieu thereof, TCT No.
32744 was issued by the Register of Deeds of Rizal in the name of appellee Herminia Espiritu.
- Espiritu moved to dismiss the complaint on the ground that it stated no cause of action
because Pastor Constantino, Jr., the beneficiary of the alleged trust, was not included as
party-plaintiff, and on the further ground that cause of action was unenforceable under the
Statute of Frauds.
- Constantino argued that the Statute of Frauds does not apply to trustee
- The trial court dismissed the complaint, with costs.
ISSUES
1. WON the contract of sale entered into between appellant and appellee was subject to the
agreement that appellee would hold the properties in trust for their unborn child
2. WON the contract in question is not enforceable by action by reason of the provisions of
the Statute of Frauds
HELD
1. This is a question of fact that appellee may raise in her answer for the lower court to
determine after trial.
- The contract between him and appellee was a contract pour autrui, although couched in
the form of a deed of absolute sale, and that appellant's action was, in effect, one for specific
performance.
- That one of the parties to a contract is entitled to bring an action for its enforcement or to
prevent its breach is too clear to need any extensive discussion.
- The contract contained a stipulation pour autrui 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.
- It appearing that the amended complaint submitted by appellant to the tower court
impleaded the beneficiary under the contract as a party co-plaintiff, it seems clear that the
three parties concerned therewith would, as a result, be before the court and the latter's
adjudication would be complete and binding upon them.
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2. YES
The contention that the contract in question is not enforceable by action by reason of the
provisions of the Statute of Frauds does not appear to be unquestionable, it being 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 the beneficiary thereunder.
. DAYWALT V LA CORP DE LOS PADRES AGUSTINOS RECOLETOS
NATURE
Appeal from judgment of CFI Manila
FACTS
- In 1902, Teodorica Endencia, an unmarried woman Mindoro, executed a contract where
she obligated herself to convey to Geo. W. Daywalt, a tract of land situated in the barrio of
Mangarin, Bulalacaoose, MIndoro
- It was agreed that a deed should be executed as soon as the title is perfected in the
proceedings of the Court of Land Registration and a Torrens title procured therefore in
Endencia’s name
- A decree recognizing the right of Endencia as owner was entered in said court in August
1906, but the Torrens certificate was not issued until later
- The parties made a new contract with a view to carrying their original agreement into
effect; this new contract was executed in the form of deed of conveyance and is dated 16
Aug 1906
- The price is P4,000 and the area of the land enclosed in the boundaries is 452 hectares and
a fraction
- The second contract was not immediately carried into effect for the reason that the Torrens
certificate was not yet obtainable
- On Oct 3 1908, the parties entered into another agreement, replacing the old; said
agreement bound Endencia to deliver the land, upon receiving the Torrens title, to the
Hongkong and Shanghai Bank in Manila, to be forwarded to the Crocker National Bank in San
Francisco, where it was to be delivered to the plaintiff upon payment of a balance of P3,100
4
- The Torrens certificate was in time issued to Teodorica Endencia, but in the course of the
proceedings in the registration of the land, it was found by official survey that the area of the
tract inclosed in the boundaries stated in the contract was about 1,248 hectares instead of
452 hectares as stated in the contract. Due to this, Endencia became reluctant to transfer the
whole tract to the purchaser Daywalt; this led to litigation which upon appeal to the SC,
Daywalt obtained a decree for specific performance; such decree appears to have become
finally effective in early 1914
- The defendant, La Corporacion de los Padres Recoletos, is a religious corporation. The
corporation was was at this time the owner of an estate in Mindoro known as the San Jose
Estate and also of a property immediately adjacent to the land which Endencia had sold to
Daywalt
- Its representative, Fr. Sanz, had long been well acquainted with Endencia and exerted over
her an influence and ascendency due to his religious character as well as to the personal
friendship which existed between them; and Endencia was accustomed to seek, and was
given the advice of Father Sanz and other members of his order
- Fr Sanz was aware of the contract of 1902 (1st contract to sell); Sanz and the other members
also knew about the 2nd contract executed in 1903
- When the Torrens certificate was finally issued in 1909 in favor of Endencia, she delivered it
for safekeeping to the defendant corporation, and it was then taken to Manila where it
remained in the custody and under the control of P. Juan Labarga
- When La Corporation sold the San Jose Estate in 1909, some 2,368 head of cattle were
removed to the estate of the corporation immediately adjacent to the property which the
plaintiff had purchased from Teodorica Endencia
- As Teodorica still retained possession of said property Father Sanz entered into an
arrangement with her where large numbers of cattle belonging to the defendant corporation
were pastured upon said land during a period extending from June 1, 1909, to May 1, 1914
- Daywalt sought to recover from corporation P24,000 as damages for the use and
occupation of the land by reason of pasturing the cattle during the said period
- TC fixed damages at P2,497
- Plaintiff appealed for higher damages; defendant did not question the fact of awarding
damages per se in the first cause of action
- Plaintiff, in a 2nd cause of action, also sought to recover from defendant P500,000, as
damages on the ground that said corporation, for its own selfish purposes, unlawfully
induced Endencia to refrain from the performance of her contract for the sale of the land in
question and to withhold delivery to the plaintiff of the Torrens title, and further, maliciously
and without reasonable cause, maintained her in her defense to the action of specific
performance which was finally decided in favor of the plaintiff in this court
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- Plaintiff claimed that in 1911, he, as the owner of the land which he bought from Endencia
entered into a contract with S. B. Wakefield, of San Francisco, for the sale and disposal of
said lands 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 certificate
of title, however, the Torrens title was still in Labarga’s hands, the latter having refused to
turn said title over to Endencia; thus, the contract could not be consummated
- Plaintiff alleged that, by interfering in the performance of the contract in question and
obstructing the plaintiff in his efforts to secure the certificate of title to the land, the
defendant corporation made itself a co-participant with Teodorica Endencia in the breach of
said contract
ISSUES
1. WON damages in the 1st cause of action should be increased
2. WON La Corporation who is not a party to the contract of sale of land will be liable for the
damages by colluding with the vendor and maintaining her in the effort to resist an action for
specific performance
HELD
1. NO
-The trial court estimated the rental value of the land for grazing purposes at 50 centavos per
hectare per annum, and roughly adopted the period of four years as the time for which
compensation at that rate should be made.
-The SC is of the opinion that the damages assessed are sufficient to compensate the plaintiff
for the use and occupation of the land during the whole time it was used
-There is evidence in the record strongly tending to show that the wrongful use of the land by
the defendant was not continuous throughout the year but was confined mostly to the
season when the forage obtainable on the land of the defendant was not sufficient to
maintain its cattle, for which reason it became necessary to allow them to go over to pasture
on the land in question
2. NO
-To our mind a fair conclusion on this feature of the case is that Fr Juan Labarga and his
associates believed in good faith that the contract could not be enforced and that Endencia
would be wronged if it should be carried into effect
5
-Whatever may be the character of the liability which a stranger to a contract may incur by
advising or assisting one of the parties to evade performance, there is one proposition upon
which all must agree. This is that the stranger cannot become more extensively liable in
damages for the nonperformance of the contract than the party in whose behalf he
intermeddles. To hold the stranger liable for damages in excess of those that could be
recovered against the immediate party to the contract would lead to results at once
grotesque and unjust.
-The defendant’s liability cannot exceed Endencia’s (the principal of the contract) (Court
proceeds to determine Endencia’s liability-- 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 the subject of
recovery)
-Plaintiff relies on English and US decisions which have ruled that a person who is a stranger
to a contract may, by an unjustifiable interference in the performance thereof, render
himself liable for the damages consequent upon non-performance, as recognized in Gilchrist
v Cuddy
-Upon the said authorities it is enough if the wrongdoer having knowledge of the existence of
the contract relation in bad faith sets about to break it up. Whether his motive is to benefit
himself or gratify his spite by working mischief to the employer is immaterial
-If a party enters into contract to go for another upon a journey to a remote and unhealthful
climate, and a third person with a bona fide purpose of benefiting the one who is under
contract to go dissuades him from the step, no action will lie. But if the advice is not
disinterested and the persuasion is used for "the indirect purpose of benefiting the
defendant at the expense of the plaintiff," the intermedler is liable if his advice is taken and
the contract broken
-No question can be made as to the liability of one who interferes with a contract existing
between others by means which under known legal canons can be denominated an unlawful
means. Thus, if performance is prevented by force, intimidation, coercion, or threats, or by
false or defamatory statements, or by nuisance or riot, the person using such unlawful means
is under all the authorities liable for the damage which ensues
-Article 1902 of the Civil Code declares that any person who by an act or omission
characterized by fault or negligence, causes damage to another shall be liable for the damage
so done. The SC takes the rule to mean that a person is liable for damage done to another by
any culpable act; and by "culpable act" we mean any act which is blameworthy when judged
by accepted legal standards. Nevertheless, it must be admitted that the codes and
jurisprudence of the civil law furnish a somewhat uncongenial field in which to propagate the
idea that a stranger to a contract may be sued for the breach thereof
-Article 1257 of the Civil Code declares that contracts are binding only between the parties
and their privies. In conformity with this it has been held that a stranger to a contract has no
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right of action for the nonfulfillment of the contract except in the case especially
contemplated in the second paragraph of the same article
-If the two antagonistic ideas which we have just brought into juxtaposition are capable of
reconciliation, the process must be accomplished by distinguishing clearly between the right
of action arising from the improper interference with the contract by a stranger thereto,
considered as an independent act generative of civil liability, and the right of action ex-
contractu against a party to the contract resulting from the breach thereof
. SO PING BUN V CA
NATURE
Petition for review on certiorari of a decision of the Court of Appeals
FACTS
- In 1963, Tek Hua Trading Co, through its managing partner, So Pek Giok, entered into lease
agreements with lessor Dee C. Chuan & Sons Inc. (DCCSI)
- Subjects of four (4) lease contracts were premises located at Nos. 930, 930-Int., 924-B and
924-C, Soler Street, Binondo, Manila which Tek Hua used as storage space for its textiles
-The contracts each had a one-year term. They provided that should the lessee continue to
occupy the premises after the term, the lease shall be on a month-to-month basis.
- When the contracts expired, the parties did not renew the contracts, but Tek Hua continued
to occupy the premises
-In 1976, Tek Hua Trading Co. was dissolved. Later, the original members of Tek Hua Trading
Co. including Manuel C. Tiong, formed Tek Hua Enterprising Corp., herein respondent
corporation.
- When So Pek Giok, managing partner of Tek Hua Trading, died in 1986, So Pek Giok’s
grandson, petitioner So Ping Bun, occupied the warehouse for his own textile business,
Trendsetter Marketing
-On March 1, 1991, private respondent Tiong, president of Tek Hua Enterprising Corp sent a
letter to petitioner So Ping Bun asking him to vacate the premises
-Petitioner refused to vacate and instead, on March 4, 1992, petitioner requested formal
contracts of lease with DCCSI in favor of Trendsetter Marketing
6
-DCCSI acceded to petitioner’s request
-Private respondents filed a petition for injunction, pressing for the nullification of the lease
contracts between DCCSI and petitioner. They also claimed damages.
-Trial Court ruled in favor of respondents
-CA affirmed
ISSUES
1. WON So Ping Bun is guilty of tortuous interference of contract
2. WON So Ping Bun should be liable for attorney’s fees
HELD
1. YES
Ratio There is tort interference when during the existence of a valid contract, a third person,
to whom the existence of such contract is known, interferes without legal justification or
excuse.
Reasoning A duty which the law of torts is concerned with is respect for the property of
others, and a cause of action ex delicto may be predicated upon an unlawful interference by
one person of the enjoyment by the other of his private property.
-This may pertain to a situation where a third person induces a party to renege on or violate
his undertaking under a contract.
-In the case at bar, 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, (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, are present in the instant case.
-In Gilchrist vs. Cuddy, the court held that 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.
-In the instant case, 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.
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-Section 1314 of the Civil Code categorically provides that, “Any third person who induces
another to violate his contract shall be liable for damages to the other contracting party”
-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.
2. YES
Ratio When the defendant’s act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest, the recovery of attorney’s fees is
allowed.
Reasoning Art. 2208 of the Civil Code reads:
In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest
-The court has consistently held that the award of considerable damages should have clear
factual and legal bases
- 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,
the reduced amount of attorney’s fees ordered by the Court of Appeals is 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 for attorney’s fees in favor of private
respondent corporation.
Disposition The petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals are hereby AFFIRMED, with MODIFICATION that the award of attorney’s fees is
reduced from two hundred thousand (P200,000.00) to one hundred thousand (P100,000.00)
pesos.
Rosenstock V Burke
Facts:
Defendant Edwin Burke owned a motor yacht, known as Bronzewing, which he acquired in
Australia in 1920. He wanted to sell the yacht and after several months plaintiff H. W. Elser,
at the beginning of the year 1922, began negotiations with the defendant for the purchase of
7
it. The plan of the plaintiff was to organize a yacht club and sell it afterwards the yacht for
P120,000, of which P20,000 was to be retained by him as commission and the remaining
P100,000 to be paid to the defendant. To be able to sell the yacht, he wanted to make a
voyage on board the yacht with business men so that he could make a sale to them. But the
yacht needed some repairs which in turn, plaintiff paid for because defendant had no budget
for that. It has been stipulated that the plaintiff was not to pay anything for the use of the
yacht. Because of the said repairs, plaintiff loaned money from the Asia Banking Corporation.
Since it amounted to its maximum amount already, the bank could no longer give loans to
plaintiff. Defendant now gave plaintiff the option of sale to plaintiff amounting to P80,000;
P5,000 each month during the first six months and P10,000 thereafter until full payment of
the price. Plaintiff in turn agreed by letter. Defendant demanded the plaintiff for
performance after he accepted the offer of plaintiff for the purchase of the yacht. However,
plaintiff now brings action to recover the sum of money he used for repairs of the yacht.
(Guys what happened here kay after Plaintiff naka gasto ug dako na amount for the repairs of
the yacht, ganahan siya na bayran siya for the repairs. In return, gusto sad sa defendant na
paliton na niya ang yacht as agreed sa letter. But plaintiff said na dili daw siya obliged to buy
kay wala daw siya ni agree na paliton ang yacht.)
Issue: Whether or not there was a valid contract of sale which is binding against plaintiff as
used in the letter of offer which was accepted by the defendant. (Our lesson here is art 1319,
if there really was a concurrence of the offer and acceptance)
Held: The Supreme Court held that it was not a valid contract of sale. The words used by
plaintiff could not be interpreted as a definite offer to purchase the yacht, but simply a
position to deliberate whether or not he would purchase the yacht. It was but a mere
invitation to a proposal being made to him, which might be accepted by him or not. He used
such words as, “I am in position and am willing to entertain the purchase of the yacht.” not “I
want to buy the yacht.” Furthermore, the plaintiff wanted to organize a yacht club and the
only thing he wanted from defendant was he sells it so that he could profit from it if he re-
sells it. The letter of the plaintiff not containing a definite offer but a mere invitation to an
offer being made to him. Plaintiff is bound to pay the amount of the repairs of the yacht in
exchange for the use thereof.
(The lower court ruled in favor of defendant, ordering plaintiff to purchase of the yacht.
That’s why gipasaka gyud sa plaintiff sa SC para i-reverse and decision. SC said that in the
letter by plaintiff he used the words “I am in the position and willing to entertain” meaning
dili pa gyud sa sure na paliton and all. There was never an acceptance of the offer, so walay
contract. Plaintiff was not obliged to purchase, and plaintiff will pay for the repairs since wala
daw sila nag sabot kinsa mu bayad sa repairs)
Article 1319
ObliCon Case Digests 2017
Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer.
26. Malbarosa v CA
Facts:
Petitioner (Malbaros) was the president and general manager of Philtectic Corp., a
subsidiary of respondent SEADC. Being an officer, he was issued a car and membership in the
Architectural Center. One day he informed the vice-chairman of the Board of Directors of
respondent his desire to retire and he requested that his incentive compensation be paid to
him as president of Philtectic. He then tendered his resignation to said VP. One of the officer
met with petitioner and informed him that he will get roughly around P395k. Following his
resignation, the VP sent a letter-offer (March 14, 1990) to petitioner stating therein
acceptance of petitioner’s resignation and advised him that he is entitled to P251k as his
incentive compensation. In the same letter, the VP proposed the satisfaction of his incentive
by giving him the car the company issued (Mitsubishi Super Saloon) and the membership
share in the Architectural Center will be transferred to him, instead of cash. Petitioner was
required by respondent to affix his signature in the letter if he was agreeable to the proposal.
Petitioner was dismayed when he received the letter-offer and refused to sign it as required
by respondent if he was agreeable to it. (Dismayed siya kay instead of 395k iya ma receive as
compensation, 251k ra ang gi hatag. So wala siya ni sign sa letter-offer, ana siya sa VP mag
think sa daw siya.)
Two weeks later, respondent company demanded the return of the car
and turn over the membership in the Architectural Center. (Because wala man siya ni
sign sa letter-offer, gi revoke nalang sa company ang offer. So ila gi order ang plaintiff to
return the car) Petitioner wrote the counsel of respondent telling him that he
cannot comply with the demand since he already accepted the offer fourteen (14) days or
on March 28, 1990 after it was made. In his letter, he enclosed a Xerox of the original with his
affixed signature as required. With his refusal, respondent instituted an action for recovery
with replevin. In his Answer to the complaint, the petitioner, as defendant therein, alleged
that he had already agreed on March 28, 1990 to the March 14, 1990 Letter-offer of the
respondent, the plaintiff therein, and had notified the said plaintiff of his acceptance; hence,
he had the right to the possession of the car. After the trial, judgment was rendered against
petitioner. The trial court opined that there existed no perfected contract between the
petitioner and the respondent on the latter’s March 14, 1990 Letter-offer for failure of the
petitioner to effectively notify the respondent of his acceptance of said letter-offer before
the respondent withdrew the same. He appealed to the CA which affirmed the decision of
the trial court. Hence, this present appeal.
Issues:
Whether or not there was a valid acceptance on his part of the March 14, 1990 Letter-offer
of the respondent? Whether or not there was an effective withdrawal by the respondent of
said letter-offer?
8

Ruling:
First Issue:
No. Under Article 1319 of the New Civil Code, the consent by a party is manifested
by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. An offer may be reached at anytime until it is accepted. An offer that
is not accepted does not give rise to a consent. To produce a contract, there must be
acceptance of the offer which may be express or implied but must not qualify the terms of
the offer. The acceptance must be absolute, unconditional and without variance of any sort
from the offer. The acceptance of an offer must be made known to the offeror. Unless the
offeror knows of the acceptance, there is no meeting of the minds of the parties, no real
concurrence of offer and acceptance.
The offeror may withdraw its offer and revoke the same before acceptance thereof
by the offeree. The contract is perfected only from the time an acceptance of an offer is
made known to the offeror. If an offeror prescribes the exclusive manner in which
acceptance of his offer shall be indicated by the offeree, an acceptance of the offer in the
manner prescribed will bind the offeror. On the other hand, an attempt on the part of the
offeree to accept theoffer in a different manner does not bind the offeror as the absence of
the meeting of the minds on the altered type of acceptance.
An offer made inter praesentes must be accepted immediately. If the parties
intended that there should be an express acceptance, the contract will be perfected only
upon knowledge by the offeror of the express acceptance by the offeree of the offer. An
acceptance which is not made in the manner prescribed by the offeror is not effective but
constitutes a counter-offer which the offeror may accept or reject.
In the case at bar, the respondent made its offer through its VP. On March 16, the
officer handed over the original letter-offer to petitioner. The respondent required the
petitioner to accept by affixing his signature and the date in the letter offer, thus foreclosing
an implied acceptance or any other mode of acceptance. And it is for a fact that the
petitioner did not accept or reject the offer for he needed time to decide whether to accept
or reject. Although the petitioner claims that he had affixed his conformity to the letter-offer
on March 28, 1990, the petitioner failed to transmit the said copy to the respondent. It was
only on April 7, 1990 when the petitioner appended to his letter to the respondent a copy
of the said March 14, 1990 Letter-offer bearing his conformity that he notified
the respondent of his acceptance to said offer. But then, the respondent, through Philtectic
Corporation, had already withdrawn its offer and had already notified the petitioner of said
withdrawal via respondent’s letter dated April 4,1990 which was delivered to the petitioner
on the same day. Indubitably, there was no contract perfected by the parties on the March
14, 1990 Letter-offer of the respondent.
Second Issue:
It is necessarily so because there was no need for the respondent to withdraw its
offer because the petitioner had already rejected the respondent’s offer on March
16, 1990 when the petitioner received the original of the March 14, 1990 Letter-
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offer of the respondent without the petitioner affixing his signature on the space
therefor.
. Sanchez v Rigos
FACTS:
Nicolas Sanchez and Severina Rigos executed an instrument entitled "Option to
Purchase," whereby Mrs. Rigos agreed, promised and committed to sell to Sanchez a parcel
of land within two (2) years from said date with the understanding that said option shall be
deemed terminated and elapsed if Sanchez shall fail to exercise his right to buy the property
within the stipulated period. Inasmuch as several tenders of payment made by Sanchez
within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited
said amount with the Court of First Instance of Nueva Ecija and commenced against the latter
the present action, for specific performance and damages.
Rigos contended that the contract between them was only a unilateral promise to
sell, and the same being unsupported by any valuable consideration, by force of the New
Civil Code, is null and void.
Sanchez alleged in his compliant that, by virtue of the option under consideration,
"defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy"
the land described in the option.
The lower court rendered judgment in favor of Sanchez and ordered Rigos to
accept the sum Sanchez judicially consigned, and to execute in his favor the requisite deed of
conveyance. Hence, this petition.
Issue:
Whether or not Rigos is bound by Sanchez’ acceptance even though the option is not
supported by a separate consideration?
Ruling:
Ruling in Southwestern abandoned; acceptance of option before withdrawal
creates a binding obligation to buy and sell even if not supported by consideration. Even if
the "offer of option" is not supported by any consideration, the option became binding on
the promissor when the promisee gave notice to it of its acceptance, and that having
accepted it within the period of option, the offer can no longer be withdrawn and in any
event such withdrawal is ineffective.
Article 1479 must be read in relation to Article 1324
ART. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
9
 An accepted unilateral promise to buy or sell a determinate thing for a price
certain is binding upon the promisor if the promise is supported by a consideration distinct
from the price.
ART. 1324. When the offerer has allowed the offeree a certain period to accept, the
offer may be withdrawn any time before acceptance by communicating such withdrawal,
except when the option is founded upon consideration as something paid or promised.
In Southwestern, the Court said while 1324 was applicable to contracts in general,
Article 1479 specifically states that in unilateral contracts to sell, there is a need for the
separate consideration before the obligation to buy and sell arises.
However, this ruling was abandoned in the case of Atkins v Cua Hian Tek, where
the Court decided there was no distinction between the two articles. Both articles produced
the same effect: the promise is treated as an option which, although not binding as a
contract in itself for lack of a separate consideration, nevertheless generated a bilateral
contract of purchase and sale upon acceptance.
In other words, since there may be no valid contract without a cause or
consideration, the promisor is not bound by his promise and may, acciordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of
an offer to sell which, if accepted, results in a perfected contract of sale.
SC affirmed the lower court’s decision.
(Guys nalibog ko ani nga case to be honest especially the articles na gi-apply. Basta akong
pagsabot kay art 1479 and art 1324 stipulates that there should be a consideration distinct
from the principal obligation as to prevent the promissor from rescinding/revoking the
contract within the stipulated period. However, in the given case, there was no consideration
distinct from the obligation but still, the SC ruled that there was still a perfected
sale/agreement kay willing daw mu palit si Sanchez sa lot. So dili daw to valid ang pag
withdraw ni Rigos sa agreement, thus was ordered to accept the consigned payment and sell
the land)
Asiain V Jalandoni
Facts:
Asiain and Jalandoni owned adjacent haciendas in La Carlota, Negros Occidental. In
May 1920, Asiain told Jalandoni that he was willing to sell a portion of his hacienda for of
P55,000. With a wave of his hand, Asiain indicated the land in question, saying it contained
25-30 hectares, and that the crop of sugarcane then planted would produce not less than
2,000 piculs of sugar. Jalandoni remained doubtful about the size of the land throughout the
negotiations, so Asiain repeatedly reassured him. They entered into a memorandum-
agreement for a "Purchase of land...containing 25 hectares more or less of land..." Jalandoni
paid P30,000 upon signing. Once in possession of the land, he (Jalandoni) had the sugarcane
ObliCon Case Digests 2017
ground and the land surveyed. The output was 800 piculs and the land area was 18 hectares.
Because the balance remained unpaid, Asiain filed an action either to recover the sum of
P25,000, or to obtain the certificate of title plus rent. Jalandoni filed a counter-complaint
asking for the annulment of the contract and mutual restitution, plus damages. CFI judge
annulled the contract and ordered the refund of the P30,000 and the return of the land and
title.
Issue:
Whether or not rescission is proper based on the discrepancy on the size?
Ruling:
Yes. It was a sale in gross in which there was a mutual mistake as to the quantity of
land sold and as to the amount of the standing crop. The phrase "more or less" in the
memorandum-agreement covers only a reasonable excess or deficiency. This was a case of
gross deficiency . The mistake with reference to the subject matter of the contract is such
that, at the option of the purchaser, it is rescindable. Without such mistake the agreement
would not have been made. Hence, the agreement is inoperative and void. The ultimate
result is to put the parties back in exactly their respective positions before they became
involved in the negotiations and before accomplishment of the agreement.
Relevant Principle:
Article 1331
In order that mistake may invalidate consent, it should refer to the substance of
the thing which is the object of the contract, or to those conditions which have principally
moved one or both parties to enter into the contract.
Mistake as to the identity or qualifications of one of the parties will vitiate consent
only when such identity or qualifications have been the principal cause of the contract.
A simple mistake of account shall give rise to its correction.
Heirs of William Sevilla, et al V Leopold Sevilla
Facts:
Felisa Almirol co-owned Lot No. 653 with her sisters Filomena Almirol de Sevilla,
deceased, and Honorata Almirol. Her 1/3 undivided share (Felisa’s share) in said lot was
increased by 1/2 when she and Filomena inherited the 1/3 share of their sister Honorata
after the latter's death. Felisa died single and without issue on August 8, 1986. On June 21,
1990, petitioners, heirs of Filomena, sought the annulment of the two deeds executed by
Felisa during her lifetime.
The first deed executed on August 8, 1986 was denominated as "Donat ion Int er
Vivos" whereby Felisa ceded to her nephew respondent Leopoldo Sevilla, son of Filomena,
her ½ undivided share in Lot 653, which was accepted by Leopoldo in the same document.
The second document was executed on September 3, 1986 denominated as the Deed of
Extra Judicial Partition dividing the share of Honorata to Felisa and to the heirs of Filomena.
10
 Petitioners alleged that the Deed of Donation was tainted with fraud because Felisa
Almirol, who was then 81 years of age, was seriously ill and of unsound mind at the time of
execution thereof; and that the Deed of Extra-judicial Partition was void because it was
executed without their knowledge and consent. Respondents, however, denied petitioners'
allegations. The trial court upheld the validity of the Deed of Donation, but declared the
Deed of Extra-judicial Partition unenforceable. On appeal, the Court of Appeals affirmed in
toto the assailed decision of the trial court. Hence, this petition.
(Characters of the story:
Mother: Filomena Almirol
Sisters of the Mother: Felisa Almirol and Honorata Almirol
Children of the Filomena: William, Peter, Leopoldo, Felipe, Rosa, Maria, Luzvilla, Jimmy
Guys and nag away ani kay ang mga heirs na ni Filomena: Heirs of William, Heirs of Maria,
Heirs of Jimmy, Felipe, Rosa VERSUS Peter, Leopoldo, Luzvilla.
Nagsuya-ay sila kay ang half share ni Felisa gihatag ni Felisa kang Leopoldo, iyang nephew,
kay si Leopoldo man nag care niya pagka tiguwang na niya. Suya ang uban heirs kay half ang
nakuha ni Leopoldo then sila kay mag tunga-tunga sa share ni Filomena, ilang mama.
Furthermore, lagot sila why nag extra judicial partition sila Peter Leopoldo ug Luzvilla without
their consent)
Issue:
Whether or not the deed of donation executed by Felisa was tainted with fraud?
Whether or not the Deed of Extra-Judicial Partition was void?
Ruling:
The Supreme Court sustained the validity of the Deed of Donation. According to
the Court, the self-serving testimonies of the petitioners were vague on what acts of
Leopoldo Sevilla constituted fraud and undue influence and on how these acts vitiated the
consent of Felisa Almirol. It held that fraud and undue influence that vitiated a party's
consent must be established by full, clear and convincing evidence, otherwise, the latter's
presumed consent to the contract prevails. Moreover, petitioners failed to show proof why
Felisa should be held incapable of exercising sufficient judgment in ceding her share to
respondent Leopoldo. The Court consistently applied the ancient rule that if the plaintiff,
upon whom rests the burden of proving his cause of action, fails to show in a satisfactory
manner facts on which he bases his claim, the defendant is under no obligation to prove his
except ion or defense.
The Court further ruled that the Deed of Extra-judicial Partition was void ab init io
and not merely unenforceable. According to the Court, there was no consent given to the
execution of the deed, and therefore, there is no contract to speak of since Felisa had no
legal capacity to give consent to the Deed of Partition at the time of its execution inasmuch
as she was neither the owner nor the authorized representative of respondent Leopoldo to
whom she previously transmitted ownership of her undivided share in Lot No. 653.
One of the requisites for a valid contract under Article 1318 of the Civil Code is the
consent and the capacity to give consent of the parties to the contract. Thus, there is said to
be no consent, and consequently, no contract when the agreement is entered into by one in
ObliCon Case Digests 2017
behalf of another who has never given him authorization therefor unless he has by law a
right to represent.
Dumasug V Modelo
FACTS:
On June 17, 1912, counsel for Andrea Dumasug filed a written complaint in the
Court of First Instance of Cebu, in which he alleged that about the month of November, 1911,
defendant persuaded plaintiff to sign a document by falsely and maliciously making her
believe that it contained an engagement on plaintiff's part to pay defendant a certain sum of
money as expresses occasioned the latter by reason of a lawsuit in which plaintiff Dumasug
was one of the parties and was protected and aided by defendant; that this document,
plaintiff, who does not know how to write, signed by affixing her mark thereto, believing in
good faith that defendant had told her the truth and that said document referred to the
expenses incurred by defendant; but that three months after the execution of said
document, defendant took possession of a carabao belonging to plaintiff and also of two
parcels of land, likewise belonging to her, situated in the barrio of Katang, pueblo of Argao,
Cebu, the area and boundaries of which are specified in the complaint, and notified plaintiff
that she had conveyed to him by absolute sale said parcels of land and the plow carabao;
that in spite of plaintiff's opposition and protests, defendant took possession of said property
and, up to the date of the complaint, continued to hold possession thereof and to enjoy the
products of the lands and of the labor of the carabao; and that, by reason of such acts,
defendant had caused loss and damage to plaintiff in the sum of P1,000. Said counsel
therefore prayed the court to render judgment by declaring null and void and of no value
whatever the alleged contract of purchase and sale of the carabao and the two parcels of
land described in the complaint, to order defendant to restore to plaintiff said work animal
and lands, and, besides, to pay her the sum of P1,000 for the loss and damage caused her, in
addition to the costs of the suit.
ISSUES:
Whether or not the instrument of purchase and sale of two parcels of land and a
plow carabao is null and void?
HELD:
The consent is null and void, as it was given by mistake (arts. 1265 and 1266, Civil
Code). This error invalidates the contract, because it goes to the very substance of the thing
which was the subject matter of said contract, for, had the maker thereof truly understood
the contents of said document, she would neither have accepted nor authenticated it by her
mark.
This case is an example of Mistake of Fact which is Mistake as to the Nature of the
Contract. If the mistake refers to the nature of the contract, the error or mistake goes to the
essence thereof. This may invalidate the contract. In this case Andrea Dumasug affixed her
thumbmark on the document that presented to her believing that it was a deed of
mortgaged and not a deed of sale therefore her consent vitiated the contract.
11
(Guys, this case happened on year 1912. In our civil code, the applicable article is 1331-In
order that mistake may invalidate consent, it should refer to the substance of the thing which
is the object of the contract, or to those conditions which have principally moved one or
both parties to enter into the contract.)
HEMEDES V COURT OF APPEALS
GONZAGA-REYES; October 8, 1999
NATURE
Petitions for review on certiorari of a decision and resolution of the Court of Appeals.
FACTS
- The controversy involves a question of ownership over an unregistered parcel of land,
identified as Lot 6, plan PSU-111331, with an area of 21,773 sq. m., situated in Sala, Cabuyao,
Laguna, originally owned by the late Jose Hemedes, father of Maxima Hemedes and Enrique
D. Hemedes.
- On March 22, 1947 Jose Hemedes executed a document entitled “Donation Inter Vivos with
Resolutory Conditions,” where he conveyed ownership over the subject land, in favor of his
3rd wife, Justa Kausapin, subject to the following:
Upon death or marriage of the DONEE, property shall revert to any of the children or their
heirs of the DONOR expressly designated by the DONEE;
“xxx”
- Pursuant to the first condition, Kausapin executed on September 27, 1960 a “Deed of
Conveyance of Unregistered Real Property by Reversion” conveying to Maxima Hemedes the
subject property.
- Original Certificate of Title was issued in the name of Maxima Hemedes, with the
annotation that Justa Kausapin shall have the usufructuary rights over the parcel of land
described during her lifetime or widowhood.
- R & B Insurance claims that Maxima Hemedes and her husband constituted a real estate
mortgage over the subject property in its favor to serve as security for a loan which they
obtained in the amount of P6k.On February 22, 1968, R&B Insurance extrajudicially
ObliCon Case Digests 2017
foreclosed the mortgage since Maxima Hemedes failed to pay the loan even after it became
due in August 2, 1964. The land was sold at a public auction with R&B Insurance as the
highest bidder, and a certificate of sale was issued in its favor. Since Maxima failed to redeem
the property within the redemption period, R&B executed an Affidavit of Consolidation and
acquired TCT in its name.
- Despite earlier conveyance, Kausapin executed a “Kasunduan” on May 27, 1971 whereby
she transferred the same land to her stepson Enrique D. Hemedes, pursuant to the
resolutory condition in the deed of donation executed in her favor.
- On February 28, 1979 Enrique sold the property to Dominium Realty and Construction
Corporation. On April 10, 1981 Kausapin executed an affidavit affirming the conveyance of
the property in favor of Enrique, at the same time denying the conveyance made to Maxima.
- Dominium leased the property to Asia Brewery, who even before the signing of the contract
of lease, constructed two warehouses. Upon learning of said constructions, R&B sent Asia
Brewery a letter informing of its ownership, and the right to appropriate the constructions
since Asia Brewery is a builder in bad faith. Maxima also wrote a letter wherein she asserted
that she is the rightful owner of the subject property.
Petitioner’s Claim
- Maxima Hemedes argues that Justa Kausapin's affidavit should not be given any credence
since she is obviously a biased witness as it has been shown that she is dependent upon
Enrique D. Hemedes for her daily subsistence, and she was most probably influenced by
Enrique D. Hemedes to execute the "Kasunduan" in his favor.
Respondents’ Comments
- The deed of conveyance in favor of Maxima Hemedes was in English and that it was not
explained to Justa Kausapin. Thus, Maxima Hemedes failed to discharge her burden,
pursuant to Article 1332 of the Civil Code, to show that the terms thereof were fully
explained to Justa Kausapin.
ISSUES
1. Which of the two conveyances by Justa Kausapin, the first in favor of Maxima Hemedes,
and the second in favor of Enrique Hemedes, effectively transferred ownership over the
property?
2. WON R&B Insurance should be considered an innocent purchaser of the land in question.
12

HELD
1.
Ratio A party to a contract cannot just evade compliance with his contractual obligations by
the simple expedient of denying the execution of such contract.
Reasoning If, after a perfect and binding contract has been executed between the parties, it
occurs to one of them to allege some defect therein as a reason for annulling it, the alleged
defect must be conclusively proven, since the validity and fulfillment of contracts cannot be
left to the will of one of the contracting parties.
- Moreover, public respondent's reliance upon Justa Kausapin's repudiation of the deed of
conveyance is misplaced for there are strong indications that she is a biased witness. The trial
court found that Justa Kausapin was dependent upon Enrique D. Hemedes for financial
assistance. Justa Kausapin was already 80 years old, suffering from worsening physical
infirmities and completely dependent upon her stepson Enrique D. Hemedes for support. It is
apparent that Enrique could easily have influenced his aging stepmother to donate the
subject property to him. Although it is a well-established rule that the matter of credibility
lies within the province of the trial court, such rule does not apply when the witness'
credibility has been put in serious doubt, such as when there appears on the record some
fact or circumstance of weight and influence, which has been overlooked or the significance
of which has been misinterpreted.
- Public respondent was in error when it sustained the trial court's decision to nullify the
"Deed of Conveyance of Unregistered Real Property by Reversion" for failure of Maxima
Hemedes to comply with article 1332 of the Civil Code, which states:
When one of the parties is unable to read, or if the contract is in a language not understood
by him, and mistake or fraud is alleged, the person enforcing the contract must show that the
terms thereof have been fully explained to the former.
Article 1330
A contract where consent is given through mistake, violence, intimidation, undue influence,
or fraud is voidable.
- In order that mistake may invalidate consent, it should refer to the substance of the thing
which is the object of the contract, or to those conditions which have principally moved one
or both parties to enter into the contract. Fraud, on the other hand, is present when, through
ObliCon Case Digests 2017
insidious words or machinations of one of the contracting parties, the other is induced to
enter into a contract which, without them, he would not have agreed to.
2.
Ratio The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima
Hemedes' OCT does not impose upon R & B Insurance the obligation to investigate the
validity of its mortgagor's title.
Reasoning Usufruct gives a right to enjoy the property of another with the obligation of
preserving its form and substance. The usufructuary is entitled to all the natural, industrial
and civil fruits of the property and may personally enjoy the thing in usufruct, lease it to
another, or alienate his right of usufruct, even by a gratuitous title, but all the contracts he
may enter into as such usufructuary shall terminate upon the expiration of the usufruct.
- it is a well-established principle that every person dealing with registered land may safely
rely on the correctness of the certificate of title issued and the law will in no way oblige him
to go behind the certificate to determine the condition of the property. An innocent
purchaser for value is one who buys the property of another without notice that some other
person has a right to or interest in such property and pays a full and fair price for the same at
the time of such purchase or before he has notice of the claim of another person.
- Clearly, only the jus utendi and jus fruendi over the property is transferred to the
usufructuary. The owner of the property maintains the jus disponendi or the power to
alienate, encumber, transform, and even destroy the same. This right is embodied in the
Civil Code, which provides that the owner of property the usufruct of which is held by
another, may alienate it, although he cannot alter the property's form or substance, or do
anything which may be prejudicial to the usufructuary.
- Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the
certificate of title and investigate the title of its mortgagor, still, it would not have discovered
any better rights in favor of private respondents. Enrique D. Hemedes and Dominium base
their claims to the property upon the "Kasunduan" allegedly executed by Justa Kausapin in
favor of Enrique Hemedes. As we have already stated earlier, such contract is a nullity as its
subject matter was inexistent.
- is a well-settled principle that where innocent third persons rely upon the correctness of a
certificate of title and acquire rights over the property, the court cannot just disregard such
rights. Otherwise, public confidence in the certificate of title, and ultimately, the Torrens
system, would be impaired for everyone dealing with registered property would still have to
inquire at every instance whether the title has been regularly or irregularly issued.
13
Disposition The donation in favor of Enrique D. Hemedes is null and void for the purported
object thereof did not exist at the time of the transfer, having already been transferred to
Maxima Hemedes.
SEPARATE OPINION
VITUG [concur]
- A donation would not be legally feasible if the donor has neither ownership nor real right
that he can transmit to the donee. Unlike an ordinary contract, a donation, under Article 712,
in relation to Article 725 of the Civil Code is also a mode of acquiring and transmitting
ownership and other real rights by an act of liberality whereby a person disposes gratuitously
that ownership or real right in favor of another who accepts it. It would be an ineffecacious
process if the donor would have nothing to convey at the time it is made.
- Article 744 of the Civil Code states that the "donation of the same thing to two or more
different donees shall be governed by the provisions concerning the sale of the same thing to
two or more persons," i.e., by Article 1544 of the same Code, as if so saying that there can be
a case of "double donations" to different donees with opposing interest. A donation once
perfected would deny the valid execution of a subsequent inconsistent donation (unles
perhaps if the prior donation has provided a suspensive condition which still pends when the
later donation is made).
MELO [concur]
- The Opinion will have far-searching ramifications on settled doctrines concerning the
finality and conclusiveness of the factual findings of the trial court in view of its unique
advantage of being able to observe at first-hand the demeanor and deportment of witnesses,
and especially when such findings of facts are affirmed by the Court of Appeals, which is the
final arbiter of questions of fact.
- “All these conditions are present in the case at bar, and I have grave reservation about the
propriety of setting aside time-tested principles in favor of a finding that hinges principally on
the credibility of a single witness, whom we are asked to disbelieve on the basis merely of
her recorded testimony without the benefit of the advantage that the trial court had,
disregarding in the process another long-established rule - that mere relationship of a
witness to a party does not discredit his testimony in court.”
- MAXIMA failed to comply with the requirements laid down by Article 1332 of the Civil Code.
MAXIMA admitted the entire document was written in English, a language not known to
ObliCon Case Digests 2017
Justa Kausapin. Yet, MAXIMA failed to introduce sufficient evidence that would purportedly
show that the deed of conveyance was explained to Justa Kausapin before the latter
allegedly affixed her thumbmark.
- MAXIMA failed to repudiate the allegation of Justa Kausapin disclaiming knowledge of her
having executed such a deed. Justa Kausapin claimed that it was only during the hearing
conducted on 07 December 1981 that she first caught glimpse of the deed of conveyance She
therefore could not have possibly affixed her thumbmark on said document. Affiant
disowned the alleged 'Deed of Conveyance of Unregistered Real Property by Reversion"
invoked by defendant Maxima Hemedes, and expressly stated that she never granted any
right over the property to Maxima Hemedes, whether as owner or mortgagor, that she never
allowed her to use the land as security or collateral for loan.
- It must be remembered that Justa Kausapin had a legal right to such financial assistance,
not only from respondent Enrique Hemedes, but also from Maxima Hemedes, who are both
her stepchildren. If one must impute improper motives in favor of Enrique, one could just as
easily ascribe these to Maxima.
- There are other indications which led this Court to believe that neither defendant Maxima
Hemedes nor defendant R & B INSURANCE consider themselves the owner of the property in
question. Both of these claimants never declared themselves as owners of the property for
tax purposes; much less did they pay a single centavo in real estate taxes.
HILL V VELOSO
ARELLANO; July 24, 1915
NATURE
Appeal from a judgment of the CFI absolving defendants from the complaint
FACTS
- Defendant Veloso and Domingo Franco jointly and severally executed a promissory note in
the amount of P6,319 on behalf of Michael & Co. for goods to be received by the former’s
company, La Cooperativa Filipina
14
- Goods were proven to have been delivered to La Cooperativa Reasoning

- P2,000 was already paid.
- Promissory note was indorsed to Plaintiff Hill.
- Hill brought the present suit to recover the P4,319 balance.
- Veloso alleged that she was deceived by Franco into signing a blank sheet of paper by
saying that it was for a promissory note to be executed by Veloso for P8,000 for the benefit
of the minor children of one Ricablanca, mother and former guardian of said children
- The new guardian is one Levering, to whom Veloso thought the obligation was due as
guardian of the estate of the minor children.
- Upon Franco’s death, Veloso alleged that she discovered that the former apparently used
her signature to execute the contract with Michael & Co, now indorsed to Hill.
- Therefore, she alleges that she has no transaction with Michael & Co. nor with the plaintiff,
and as they had not received any kind of goods whatever from said firm.
- During the pendency of the suit initiated by Hill, Levering commenced proceedings to
recover the P8,000.
- Veloso answered that her debt was to Ricablanca in her own right, and not in her capacity
as guardian of her minor children.
- With regard to the P8,000, what is natural and logical is that Veloso would have refused to
execute her obligation to Levering in the first instance (i.e. when she signed the blank sheet
of paper thinking it was for the P8,000) as she did reject it in 1912 saying she did not consider
herself in debt to the minors, but to their mother.
- It is of no importance whether La Cooperativa exclusively belonged to Veloso or Franco, the
obligation being joint.
- Deceit alleged could not annul the consent of the contracting parties to the promissory
note, nor exempt Veloso from the obligation incurred.
- There is deceit when by words or insidious machinations on the part of one of the
contracting parties, the other is induced to execute a contract which without them he would
not have made.
- Franco is not one contracting party with regard to Veloso as the other. They are both but
one single contracting party in a relation with or against Michael & Co.
- Franco could be as a third person inducing deceit. But, there is no reason for making one of
the parties suffer for the consequences of the act of a third person in whom the other
contracting party may have reposed an imprudent confidence.
- It has been fully proven that the goods, the consideration for the debt, were received by La
Cooperativa. It was likewise proven that La Cooperativa belonged to the defendant, and that
the goods came from Michael & Co.

Disposition Judgment appealed from is reversed against defendant Veloso ordering the
ISSUE
payment of the P4,319 with the stipulated interest.
WON the promissory note is binding on the defendants
WOODHOUSE V HALILI

LABRADOR; July 31, 1953

HELD

NO
FACTS
Ratio There is no other signed document than the promissory note presented with the
- November 29, 1947- plaintiff entered into a written agreement with defendant:
intention, on its being signed, of securing the payment of the goods sold to the La
Cooperativa. And the facts constituting the consideration for the contract contained in the
promissory note are fully proven.

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1. that they shall organize a partnership for the bottling and distribution of Mission soft 2. that defendant did not fail to carry out his undertakings, but that it was plaintiff who
drinks, plaintiff to act as industrial partner or manager, and the defendant as a capitalist, failed
furnishing the capital necessary therefore 3. that plaintiff agreed to contribute to the exclusive franchise to the partnership, but
plaintiff failed to do so
2. that the defendant was to decide matters of general policy regarding the business, while 4. counterclaim for P200,00 as damages
- CFI ruling:
the plaintiff was to attend to the operation and development of the bottling plant
1. accounting of profits and to pay plaintiff 15 % of the profits
3. that plaintiff was to secure the Mission Soft Drinks franchise for and in behalf of the
2. execution of contract cannot be enforced upon parties
proposed partnership 3. fraud wasn’t proved

4. that the plaintiff was to receive 30 per cent of the net profits of the business
ISSUES
- Prior to entering into this agreement, plaintiff had informed the Mission Dry Corporation of
Los Angeles, California, U. S. A., manufacturers of the bases and ingredients of the beverages 1. WON plaintiff falsely represented that he had an exclusive franchise to bottle Mission
bearing its name, that he had interested a prominent financier (defendant herein) in the beverages
business, who was willing to invest half a million dollars in the bottling and distribution of the
said beverages, and requested, in order that he may close the deal with him, that the right to 2. WON false representation, if it existed, annuls the agreement to form the partnership
bottle and distribute be granted him for a limited time under the condition that it will finally
be transferred to the corporation

- Pursuant to this request, plaintiff was given "a thirty days' option on exclusive bottling and HELD
distribution rights for the Philippines"
1. Yes. Plaintiff did make false representations and this can be seen through his letters to
- The contract was finally signed by plaintiff on December 3, 1947. Mission Dry Corporation asking for the latter to grant him temporary franchise so that he
could settle the agreement with defendant. The trial court reasoned, and the plaintiff on this
- When the bottling plant was already in operation, plaintiff demanded of defendant that the appeal argues, that plaintiff only undertook in the agreement "to secure the Mission Dry
partnership papers be executed. franchise for and in behalf of the proposed partnership." The existence of this provision in
the final agreement does not militate against plaintiff having represented that he had the
- Defendant gave excuses and would not execute said agreement, thus the complaint by the exclusive franchise; it rather strengthens belief that he did actually make the representation.
plaintiff. defendant believed, or was made to believe, that plaintiff was the grantee of an exclusive
franchise. Thus it is that it was also agreed upon that the franchise was to be transferred to
- Plaintiff:
the name of the partnership, and that, upon its dissolution or termination, the same shall be
reassigned to the plaintiff.
1. execution of the contract of partnership
2. and accounting of profits
- Again, the immediate reaction of defendant, when in California he learned that plaintiff did
3. share thereof of 30 per cent
4. damages in the amount of P200,000 not have the exclusive franchise, was to reduce, as he himself testified, plaintiff's
- Defendant: participation in the net profits to one half of that agreed upon. He could not have had such a
feeling had not plaintiff actually made him believe that he (plaintiff) was the exclusive
1. the defendant’s consent to the agreement, was secured by the representation of grantee of the franchise.
plaintiff that he was the owner, or was about to become owner of an exclusive bottling
franchise, which representation was false, and that plaintiff did not secure the franchise 2. No. In consequence, article 1270 of the Spanish Civil Code distinguishes two kinds of (civil)
but was given to defendant himself fraud, the causal fraud, which may be ground for the annulment of a contract, and the

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incidental deceit, which only renders the party who employs it liable for damages. This Court
has held that in order that fraud may vitiate consent, it must be the causal (dolo causante),
not merely the incidental (dolo incidente) inducement to the making of the contract. The
record abounds with circumstances indicative of the fact that the principal consideration, the
main cause that induced defendant to enter into the partnership agreement with plaintiff,
was the ability of plaintiff to get the exclusive franchise to bottle and distribute for the
defendant or for the partnership. The original draft prepared by defendant's counsel was to
the effect that plaintiff obligated himself to secure a franchise for the defendant.
- But if plaintiff was guilty of a false representation, this was not the causal consideration, or
the principal inducement, that led plaintiff to enter into the partnership agreement. On the
other hand, this supposed ownership of an exclusive franchise was actually the consideration
or price plaintiff gave in exchange for the share of 30 per cent granted him in the net profits
of the partnership business. Defendant agreed to give plaintiff 30 per cent share in the net
profits because he was transferring his exclusive franchise to the partnership.
- May the agreement be carried out or executed? We find no merit in the claim of plaintiff
that the partnership was already a fait accompli from the time of the operation of the plant,
as it is evident from the very language of the agreement that the parties intended that the
execution of the agreement to form a partnership was to be carried out at a later date. , The
defendant may not be compelled against his will to carry out the agreement nor execute the
partnership papers. The law recognizes the individual's freedom or liberty to do an act he
has promised to do, or not to do it, as he pleases.
GERALDEZ V CA
REGALADO; February 23, 1994
NATURE
- Petition for review on Certiorari
- This is an action for damages by reason of contractual breach filed by Lydia Geraldez against
Kenstar Travel Corporation.
FACTS
ObliCon Case Digests 2017
- Lydia came to know about the respondent through advertisements about tours in Europe
and eventually availed of one of the packages they offered.
- The package was “VOLARE 3” which covered 22-day tour of Europe for 190,000 Php which
she paid for herself and her sister.
- Her disappointments (because it was contrary to what was in the brochure) during the trip
were:
 There was no European tour manager for their group of tourists
 The hotels which she and the group were billeted were not first- class
 The UGC Leather Factory, which was a highlight of the tour, was not visited
 The Filipino lady tour guide was performing said job for the first time.
- RTC: granted a writ of preliminary attachment against private respondent on the ground
respondent committed fraud in contracting an obligation (as per petitioner’s motion) but
said writ was also lifted upon filing a counterbond of Php 990k
- Lydia also filed other complaints at the Department of Tourism and the Securities and
Exchange Commission which fined the respondent Php 5k and Php 10k respectively.
- RTC awarded moral damages, nominal damages, exemplary damages, and for attorney’s
fees to Lydia Geraldez worth Php 500k, Php 200k, Php 300k and Php 50k respectively.
Respondent also had to pay for the costs of the suit.
- CA modified the RTC’s decision since they found no malice could be imputed against
Kenstar Travel Corporation.
ISSUE
WON private respondent acted in bad faith or with gross negligence in discharging its
obligations under the contract.
HELD
Yes, Kenstar Travel Corporation did commit fraudulent misrepresentations amounting to bad
faith to the prejudice of Lydia Geraldez and the members of the tour group.
Reasoning
- On respondent’s choice of tour guide
17
By providing the Volare 3 tourist group with an inexperienced and a first timer tour escort,
KTC manifested its indifference to the convenience, satisfaction and peace of mind of its
clients during the trip. Respondent should have selected an experienced European tour
guide, or it could have allowed Zapanta (the lady guide) to go as an understudy under the
guidance, control, and supervision of an experienced and competent European or Filipino
tour guide who could’ve given her training.
thereto. Such a contract must be strictly construed against the one who drafted the same,
especially where there are stipulations that are printed in fine letters and are hardly
legible.
SC: Private respondents cannot rely on its defense of “substantial compliance” with the
contract.

- The inability of the group to visit the leather factory is likewise reflective of the neglect and
ineptness of Zapanta in attentively following the itinerary for the day. This incompetence
must necessarily be traced to the lack of due diligence on the part of KTC in the selection of
its employees. The UGC leather factory was one of the highlights of the tour and it was
- On the First Class Hotels
incumbent upon the organizers of the tour to take special efforts to ensure the same.
The respondents likewise committed a grave misrepresentation when it assured in its Volare
- Clearly, KTC’s choice of Zapanta as tour guide is a manifest disregard of its specific
3 tour package that the hotels it had chosen would provide the tourists complete amenities
assurances to the tour group, resulting in agitation and anxiety on their part, and which is
and were conveniently located along the way for the daily itineraries. It turned out that some
contrary to the elementary rules of good faith and fair play.
of the hotels were not sufficiently equipped with even the basic facilities and were at a
distance from the cities covered by the projected tour.
- On the European Tour Manager
- Even assuming arguendo that there is indeed a difference in classifications , it cannot be
KTC: the euro tour manager refers to an organization and not to an individual; Geraldez
denied that a first-class hotel could at the very least provide basic necessities and sanitary
didn’t attend the pre-departure briefing, wherein we explained the concept of the euro tour
accommodations.
manager
- if it could not provide the tour participants with first-class lodgings on the basis of the
SC: the advertisement reveals that the contemplated tour manager contemplated is a natural
amount that they paid, it could and should have instead increased the price to enable it to
person not a juridical one as KTC asserts. Furthermore, the obligation to provide not only a
arrange for the promised first-class accommodations.
European tour manager, but with local European tour guides were likewise never made
available. Zapanta couldn’t even remember the name of the European guide with her
- Damages
supposedly.
Moral damages may be awarded in breaches of contract where the obligor acted
From the advertisement, it is beyond cavil that the import of the “he” is a natural and not a
fraudulently or in bad faith.
juridical person (in reference to the euro tour guide). There is no need for further
interpretation when the wordings are clear. The meaning that will determine the legal - The fraud or dolo which is present or employed at the time of birth or perfection of a
effect of a contract is that which is arrived at by objective standards; One is bound not by contract may either be dolo causante or dolo incidente.
what he subjectively intends, but by what he leads others reasonably to think he intends.
- Dolo Causante – causal fraud , referred to in Art. 1338,
KTC relies in the delimitation of its responsibility printed on the face of its brochure. (see
page 330) - are those deceptions or misrepresentations of a serious character employed by one party

SC: - without which the other party would NOT have entered into the contract

* CONTRACT OF ADHESION: contracts drafted by only one party (i.e. corporations); the - essential cause of the consent
only participation of the other party is the affixing of his signature or his “adhesion”

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 - effects: nullity of the contract and indemnification of damages
- Dolo Incidente – incidental fraud, referred to in Art. 1334,
- are those which are not serious in character
-without which the other party would still have entered into the contract
- some particular or accident of the obligation
- effects: damages
- SC: KTC is responsible for damages whether it has committed either dolo causante or
incidente.
- Lydia joined the tour with the belief of a euro tour guide accompanying them; she suffered
serious anxiety and distress when the group was unable to visit the leather factory and when
she didn’t receive first-class accommodations in their lodgings. These entitle her to moral
damages.
- Exemplary damages are imposed by way of example or correction for the public good, in
addition to moral, temperate, liquidated or compensatory damages. According to the Code
Commission, exemplary damages are required by public policy, for wanton acts must be
suppressed.
- Under the present state of law, extraordinary diligence is not required in travel or tour
contracts, such as that in the case at bar, the travel agency acting as tour operator must
nevertheless be held to strict accounting for contracted services, considering the public
interest in tourism, whether in the local or in the international scene.
Disposition MORAL DAMAGES –Php 100k, EXEMPLARY DAMAGES – Php 50k, ATTY’S FEES –
Php 20k and costs against the respondent KTC. Award for nominal damages is deleted.
Note Nominal damages are awarded when there the complainant suffered actual or
substantial damage from the breach of contract.
TUASON V MARQUEZ
MALCOLM; November 3, 1923
NATURE
ObliCon Case Digests 2017
Petition to review the decision of the CFI.
FACTS
- On March 5, 1921, Crisanto Marquez, the owner of the electric light plan of Lucena Tayabas,
called Sucesores del Lucena Electric, gave an option to Antonio Tuason for the purchase of
the plant for P14,400. The option was taken advantage of by Mariano S. Tuason.
- The agreement was, that Tuason was to pay Marquez a total of P14,400; P2,400 within sixty
days, and the remainder, P12,000, within a year. The first installment was paid subsequent to
the sixty-day period; the second installment has not been paid.
- Tuason being once in possession of the electric light plant, it was run under the
management of the Consolidated Electric Company for about sixteen months, that is, from
March 20, 1921, to July 19, 1922. On the date last mentioned, the property was sold under
execution by reason of a judgment. The purchaser at said sale was Gregorio Marquez,
brother of Crisanto Marquez, who paid P5,501.57 for the property.
- It appears that originally in either 1913 or 1914, a franchise for thirty-five years was granted
the Lucena Electric Company. The rights of this company passed to Crisanto Marquez at a
sheriff's sale on September 10, 1919. The company seems never to have functioned very
efficiently either at that time or at any other time, as appears from the constant complaint of
the municipal authorities of Lucena. Evidently, Marquez became disgusted with the business,
with the result that on February 28, 1921, that is, prior to the accomplishment of the
contract, he announced to the Public Utility Commissioner his intention to give up the
franchise.
- On March 29, 1921, that is, subsequent to the accomplishment of the contract, the Public
Utility Commissioner took action and declared cancelled the franchise acquired by Crisanto
Marquez from the Lucena Electric Light, Ice & Water Company.
- Tuason and his outfit were permitted to operate the company pursuant to a special license
which was to continue until they obtained a new franchise. The new franchise was finally
granted by the Public Utility Commissioner with certain conditions, which amounted to a
renovation of the entire plant. It was then, following a knowledge of what was expected by
the Government, and following the execution sale, that Tuason conceived the idea of
bringing action against Marquez for a rescission of the contract.
- In the complaint filed in the CFI of Manila, Tuason, the plaintiff, asked for judgment against
Crisanto Marquez, defendant, for a total of P37,400. The answer and cross-complaint of the
19
defendant asked for a dismissal of the action and for an allowance of a total of P12,654.50
from the plaintiff. The case was submitted on an agreed statement of facts in relation with
certain telegrams of record. Judgment was rendered, absolving the defendant from the
complaint and permitting the defendant to recover from the plaintiff P12,240, with legal
interest from August 1, 1922. The P12,000 of this judgment represented the amount still due
on the contract, and P240 represented rent which the plaintiff was expected to pay the
defendant.
- The plaintiff claims in effect that the contract should be rescinded and that he should be
allowed his damages, on account of the misrepresentation and fraud perpetrated by the
defendant in selling an electric light plan with a franchise, when the defendant had already
given up his rights to that franchise.
ISSUE
WON the sale may be rescinded on the ground of misrepresentation and fraud.
HELD
- The contract in making mention of the property of the electric light company, merely
renewed a previous inventory of the property. The franchise, therefore, was not the
determining cause of the purchase. Indeed, the franchise was then in force and either party
could easily have ascertained its status by applying at the office of the Public Utility
Commissioner. The innocent non-disclosure of a fact does not effect the formation of the
contract or operate to discharge the parties from their agreement.
- The equitable doctrine termed with questionable propriety "estoppel by laches," has
particular applicability to the facts before us. Inexcusable delay in asserting a right and
acquiescene in existing conditions are a bar to legal action. The plaintiff operated the electric
light plant for about sixteen months without question; he made the first payment on the
contract without protest; he bestirred himself to secure what damages he could from the
defendant only after the venture had proved disastrous and only after the property had
passed into the hands of a third party.
- There is no proof of fraud on the part of the defendant and find the plaintiff is estopped to
press his action.
Disposition Judgment is affirmed.
ObliCon Case Digests 2017
AZARRAGA V GAY
VILLAMOR; December 29, 1928
FACTS
- January 17, 1921, the plaintiff sold two parcels of lands to the defendant for the lump sum
of P47,000, payable in installments.
- The conditions of the payment were: P5,000 at the time of signing the contract Exhibit A;
P20,000 upon delivery by the vendor to the purchaser of the Torrens title to the first parcel
described in the deed of sale, P10,000 upon delivery by the vendor to the purchaser of
Torrens title to the second parcel; and lastly the sum of P12,000 one year after the delivery
of the Torrens title to the second parcel.
- The vendee paid P5,000 to the vendor when the contract was signed. The vendor delivered
the Torrens title to the first parcel to the vendee who, pursuant to the agreement, paid him
P20,000. In the month of March 1921, Torrens title to the second parcel was issued and
forthwith delivered by the vendor to the vendee who, however, failed to pay the P10,000 as
agreed, neither did she pay the remaining P12,000 one year after having received the
Torrens title to the second parcel.
- The plaintiff here claims the sum of P22,000, with legal interest from the month of April
1921 on the sum of P10,000, and from April 1922 on the sum of P12,000, until full payment
of the amounts claimed.
- Defendant admits that she purchased the two parcels of land referred to by plaintiff, but
alleges in defense: (a) That the plaintiff knowing that the second parcels of land he sold had
an area of 60 hectares, by misrepresentation lead the defendant to believe that said second
parcel contained 98 hectares, and thus made it appear in the deed of sale and induced the
vendee to bind herself to pay the price of P47,000 for the two parcels of land, which he
represented contained an area of no less than 200 hectares, to which price the defendant
would not have bound herself had she known that the real area of the second parcel was 60
hectares, and, consequently, she is entitled to a reduction in the price of the two parcels in
proportion to the area lacking which ought to be reduced to P38,000
- The lower court, having found no fraud when the parties agreed to the lump sum for the
two parcels of land described in the deed Exhibit A, following article 1471 of the Civil Code,
ordered the defendant to pay the plaintiff the sum of P19,300 with legal interest at 8 per
20
cent per annum from April 30, 1921 on the sum of P7,300, and from April 30, 1922, on the
sum of P12,000.
ISSUE
WON there was fraud in the circumstances leading to the agreement in the contract
HELD
NO
- There is no evidence of record that the plaintiff made representation to the defendant as to
the area of said second parcel, and even if he did make such false representations as are now
imputed to him by the defendant, the latter accepted such representations at her own risk
and she is the only one responsible for the consqunces of her inexcusable credulousness. In
the case of Songco vs. Sellner (37 Phil., 254), the court said:
The law allows considerable latitude to seller's statements, or dealer's talk; and experience
teaches that it as exceedingly risky to accept it at its face value.
Assertions concerning the property which is the subject of a contract of sale, or in regard to its
qualities and characteristics, are the usual and ordinary means used by sellers to obtain a
high price and are always understood as affording to buyers no grund from omitting to make
inquires. A man who relies upon such an affirmation made by a person whose interest might
so readily prompt him to exaggerate the value of his property does so at his peril, and must
take the consequences of his own imprudence.
- The defendant had ample opportunity to appraise herself of the condition of the land which
she purchased, and the plaintiff did nothing to prevent her from making such investigation as
she deemed fit, and as was said in Songco vs. Sellner, supra, when the purchaser proceeds to
make investigations by himself, and the vendor does nothing to prevent such investigation
from being as complete as the former might wish, the purchaser cannot later allege that the
vendor made false representations to him.
- "One who contracts for the purchase of real estate in reliance on the representations and
statements of the vendor as to its character and value, but after he has visited and examined
it for himself, and has had the means and opportunity of verifying such statements, cannot
avoid the contract on the ground that they were false or exaggerated."- She did not complain
of the difference in the area of said second parcel until the year 1926.
ObliCon Case Digests 2017
- More so, it appears that by the contract Exhibit A, the parties agreed to the sale of two
parcels of land, the first one containing 102 hectares, 67 ares and 32 centares, and the
second one containing about 98 hectares, for the lump sum of P47,000 payable partly in cash
and partly in installments. Said two parcels are defind by means of the boundaries given in
the instrument. Therefore, the case falls within the provision of article 1471 of the Civil Code,
which reads as follows:
ART. 1471. In case of the sale of real estate for a lump sum and not at the rate of a specified
price for each unit of measure, there shall be no increase or decrease of the price even if the
area be found to be more or less than that stated in the contract.
- As the hectares were paid due to a lump sum and not based of a defined unit of measure –
if the sale was made for a price per unit of measure or number, the consideration of the
contract with respect to the vendee, is the number of such units, or, if you wish, the thing
purchased as determined by the stipulated number of units. But if, on the other hand, the
sale was made for a lump sum, the consideration of the contract is the object sold,
independently of its number or measure, the thing as determined by the stipulated
boundaries, which has been called in law a determinate object.
- From all this, it follows that the provisions of article 1471 concerning the delivery of
determinate objects had to be materially different from those governing the delivery of
things sold a price per unit of measure or number.
- The reason for the regulation is clear and no doubts can arise from its application. It is
concerned with determinate objects. The consideration of the contract, and the thing to be
delivered is a determinate object, and not the number of units it contains. The price is
determined with relation to it; hence, its greater or lesser area cannot influence the increase
or decrease of the price agreed upon. We have just learned the reason for the regulation,
bearing in mind that the Code has rightly considered an object as determinate for the
purposes now treated, when it is a single realty as when it is two or more, so long as they are
sold for a single price constituting a lump sum and not for a specified amount per unit of
measure or number.
TRINIDAD V IAC
CRUZ; December 3, 1991
NATURE
Petition for review on certiorari
21

FACTS
- Sometime in early 1969, Laureta Trinidad, petitioner, approached Vicente J. Francisco and
offered to buy the property. The house was Bungalow No. 17, situated at Commonwealth
Village in Quezon City. Francisco was willing to sell. Trinidad inspected the house and lot and
examined a vicinity map which indicated drainage canals along the property. The purchase
price was P70,000 with a down payment of P17,500. The balance was to be paid in 5 equal
annual installments not later than July 1 of each year at 12% interest per annum.
- On March 29,1969, Trinidad paid Francisco P5,000 as earnest money and entered into the
possession of the house. She heard from her new neighbors that two buyers had previously
vacated the property because it was subject to flooding. She talked to Francisco who told her
everything had been fixed and the house would never be flooded again. Thus assured, she
gave him P12,500 to complete the down payment. They signed the Contract of Conditional
Sale on August 8,1969.
- The Contract of Conditional Sale contains a *condition that should Trinidad fail to make any
of the payments the contract shall be considered automatically rescinded and cancelled
without the necessity of notice or of any judicial declaration to that effect, and any and all
sums paid shall be considered rents and liquidated damages for the breach, and Trinidad
shall vacate the property peacefully.
- Trinidad paid the installment for 1970 and 1971 on time but asked Francisco for an
extension of 60 days to pay the third installment due on July 1, 1972. However, she
eventually decided not to continue paying the amortizations because the house was flooded
again on July 18, 21, and 30, 1972, the waters rising to as high as five feet on July 21. Upon
her return from the US on October 11, 1972, she wrote the City Engineer's office of QC and
requested an inspection to determine the cause of the flooding. The finding of City Engineer
Pantaleon P. Tabora was that "the lot is low and is a narrowed portion of the creek."
- On January 10, 1973, Trinidad filed her complaint against Francisco alleging that she was
induced to enter into the contract of sale because of his misrepresentations. She asked that
the agreement be annulled and her payments refunded to her, together with the actual
expenses she had incurred for the "annexes and decorations" she had made on the house.
She also demanded the actual cost of the losses she had suffered as a result of the floods,
moral and exemplary damages in the sum of P200,000 and P10,000 attorney's fees.
- Francisco denied the charge of misrepresentation and stressed that Trinidad had thoroughly
inspected the property before she decided to buy it. The claimed creek was a drainage lot,
and the floods complained of were not uncommon in the village and indeed even in the
Greater Manila area if not the entire Luzon. In any event, the floods were fortuitous events
ObliCon Case Digests 2017
not imputable to him. He asked for the rescission of the contract and the forfeiture of the
payments made by the plaintiff plus monthly rentals with interest of P700 for the property
from July 2, 1972, until the actual vacation of the property by the plaintiff. He also claimed
litigation expenses, including attorney's fees.
- Pendente lite, Vicente J. Francisco died and was eventually substituted by his heirs, two of
whom, Trinidad J. Francisco and Rosario F. Kelemen, filed their own joint memorandum.
ISSUE
WON there was misrepresentation on the part of Francisco to justify the rescission of the
sale and the award of damages to the petitioner
HELD
NO
Ratio One who contracts for the purchase of real estate in reliance on the representations
and statements of the vendor as to its character and value, but after he has visited and
examined it for himself and has had the means and opportunity of verifying such statements,
cannot avoid the contract on the ground that they were false and exaggerated.
Reasoning It has not been satisfactorily established that Francisco inveigled the petitioner
through false representation to buy the subject property. Assuming that he did make such
representations, as the petitioner contends, she is deemed to have accepted them at her
own risk and must therefore be responsible for the consequences of her careless
credulousness. The law allows considerable latitude to seller's statements, or dealer's talk,
and experience teaches that it is exceedingly risky to accept it at its face value. Assertions
concerning the property, subject of a contract of sale, or in regard to its qualities and
characteristics, are the usual and ordinary means used by sellers to obtain a high price and
are always understood as affording to buyers no ground for omitting to make inquiries. A
man who relies upon such affirmation made by a person whose interest might so readily
prompt him to exaggerate the value of his property does so at his peril, and must take the
consequences of his own imprudence. What we see here is a bad bargain, not an illegal
transaction vitiated by fraud. While we may commiserate with the petitioner for a purchase
that has proved unwise, we can only echo what Mr. Justice Moreland observed in Vales v.
Villa:
22
“Courts cannot follow one every stop of his life and extricate him from bad bargains, protect
him from unwise investments, relieve him from one-sided contracts, or annul the effects of
foolish acts. Courts cannot constitute themselves guardians of persons who are not legally
incompetent. Courts operate not because one person has been defeated or overcome by
another, but because he has been defeated or overcome illegally. Men may do foolish things,
make ridiculous contracts, use miserable judgment, and lose money by them-indeed, all they
have in the world; but not for that alone can the law intervene and restore. There must be, in
addition, a violation of law, the commission of what the law knows as an actionable wrong
before the courts are authorized to lay hold of the situation and remedy it.”
The fraud alleged by the petitioner has not been satisfactorily established to call for the
annulment of the contract. This finding is based on the following considerations.
- First, it was the petitioner who admittedly approached the private respondent, who never
advertised the property nor offered it for sale to her.
- Second, the petitioner had full opportunity to inspect the premises, including the drainage
canals indicated in the vicinity map that was furnished her, before she entered into the
contract of conditional sale.
- Third, it is assumed that she made her appraisal of the property not with the untrained eye
of the ordinary prospective buyer but with the experience and even expertise of the licensed
real estate broker that she was. If she minimized the presence of the drainage canals, she has
only her own negligence to blame.
- Fourth, seeing that the lot was depressed and there was a drainage lot abutting it, she
cannot say she was not forewarned of the possibility that the place might be flooded.
Notwithstanding the obvious condition of the property, she still decided to buy it.
- Fifth, there is no evidence except her own testimony that two previous owners of the
property had vacated because of the floods and that Francisco assured her that the have
would not be flooded again. The supposed previous owners were not presented as witnesses
and neither were the neighbors. Francisco himself denied having made the alleged
assurance.
- Sixth, the petitioner paid the 1970 and 1971 amortizations even if, according to her
Complaint, "since 1969 said lot had been under floods of about one (1) foot deep,"' and
despite the floods of September and November 1970.
- Seventh, it is also curious that notwithstanding the said floods, the petitioner still "made
annexes and decorations on the house," all of a permanent nature, for which she now claims
reimbursement from the private respondent.
ObliCon Case Digests 2017
Regarding Trinidad’s refusal to continue paying the amortizations, we cannot say that the
petitioner was, strictly speaking, in default in the payment of the remaining amortizations in
the sense contemplated in the contract. If she asked for the annulment of the contract and
the refund to her of the payments she had already made, plus damages, it was because she
felt she had the right to do so. Given such circumstances, the Court feels that the stipulation
[see condition in facts] should not be strictly enforced, to justify the rescission of the
contract. To make her forfeit the payments already made by her and at the same time return
the property to the private respondents for standing up to what she considered her right
would, in our view, be unfair and unconscionable. Justice demands that we moderate the
harsh effects of the stipulation.
Disposition Appealed decision is AFFIRMED with modification.
SONGCO V SELLNER
STREET; December 4, 1917
FACTS
- In Dec. 1915, the defendant George Sellner, was the owner of a sugar farm at FloridaBlanca,
Pampanga adjacent to another sugar farm owned by plaintiff Lamberto Songco. Sellner
wished to mill his cane at a sugar central in nearby Dinalupijan but the owners of the mill
would not promise to take it. Sellner found out that the central was going to mill Songco’s
cane and decided to buy it and run his own cane at the same time the latter’s cane was to be
milled. Sellner also desired to get a right of way over Songco’s land for converting his own
cane to the central. He bought the cane for an agreed sum of P12,000 and executed 3
promissory notes of P4,000, paying for two; an action was instituted to recover the 3 rd for
which a judgment was rendered in favor of the plaintiff and to which defendant has
appealed.
- The defendant denied all allegations of the complaint, further asserting by way of special
defense that the defendant obtained the note by means of fraudulent representations. The
note, on which the action was brought, was admitted in court as evidence.
ISSUES
1. WON the court erred in admitting the note as evidence even though its genuineness and
due execution were not proven
23
2. WON plaintiff is guilty of false representation
HELD
1. NO
- Under Sec 103 of the Code of Civil Procedure, it is necessary that the genuineness and due
execution of a written instrument be specifically denied by the defendant under oath before
such an issue is raised. The answer to the effect that the note was procured by fraudulent
representation is actually an admission of its genuineness and due execution since it seeks to
avoid the instrument on a ground not affecting either. Furthermore, the defendant admits
the note’s execution in his answer.
2. NO
- Songco estimated that his cane would produce 3,000 piculs of sugar but instead produced
2,017. Although Songco had grossly exaggerated his estimate, the court finds that Sellner is
still bound to pay the price stipulated. Matters of opinion, judgment, probability or
expectation are not actionable deceits and cannot void a contract. Jurisprudence dictates
that one may not rely on a vendor’s misrepresentations as to the value of his goods if that
person is given an ample opportunity to investigate/examine the goods. Using expert
knowledge to take advantage of the ignorance of another may be grounds for relief;
however, the court finds Sellner’s relative inexperience lacking.
- An incident to the action was that the plaintiffs sued out an attachment against the
defendant on the ground that he was disposing of his property in fraud of his creditors. This
was refuted upon a showing that defendant had not attempted to convey away his property,
and thus damages were awarded to him equal to the cost of procuring the dissolution of the
attachment. The defendant assigns error to the court’s refusal to award further damages,
claiming that the attachment caused a creditor to withhold credit, forcing him to sell sugar at
lower prices and losing money. The damages were remote and speculative; the plaintiff
cannot be held accountable for such complications leading to said damages.
Disposition From what has been said it follows that the judgment of the court below must be
affirmed, with costs against the appellant.
ObliCon Case Digests 2017
MERCADO V ESPIRITU
TORRES; December 1, 1917
NATURE
Appeal from a judgment of the Court of First Instance Bulacan
FACTS
- The annulment of a deed of sale regarding parcels of land was sought on the ground that
the two of the four parties (Domingo Mercado and Josefa Mercado) thereto were minors
(under the Civil Code), 18 and 19 years old, respectively on the date the instrument was
executed. In the deed of sale, however, these minors stated that they were of legal age at
the time they executed and signed it; and they made the same manifestation before the
notary public when the document was prepared.
ISSUE
WON the minors Domingo and Josefa misrepresented themselves in the sale of the real
estate thus making the deed of sale valid
HELD
YES
- The courts have laid down the rule that the sale of real estate, effected by minors who have
already passed the ages of puberty and adolescence and are near the adult age, when they
pretend to have already reached their majority, while in fact they have not, is valid, and they
cannot be permitted afterwards to excuse themselves from compliance with the obligation
assumed by them or seek their annulment. This doctrine is entirely in accord with the
provisions of our law on estoppel.
Disposition CFI ruling affirmed. Petition dismissed.
24

BRAGANZA V VILLA ABRILLE
CONCEPCION; May 14, 1954
NATURE
Petition for review of the Court of Appeal's decision
FACTS
- Rodolfo and Guillermo Braganza, received from Villa Abrille, as a loan, on October 30, 1944
P70,000 in Japanese war notes. They promised to pay him P10,000 "in legal currency of the
P. I. two years after the cessation of the present hostilities or as soon as International
Exchange has been established in the Philippines", plus 2 % per annum. Payment was not
made, thus, Villa Abrille sued them.
- Rodolfo and Guillermo claimed to have received P40,000 only. They also claim that they
were minors when they signed the promissory note. The trial court ordered them solidarily
to pay Fernando F. de Villa Abrille the sum of P10,000 plus 2 % interest from October 30,
1944
ISSUE
WON the minors are liable for the said loan
HELD
NO
- From the minors' failure to disclose their minority in the same promissory note they signed,
it does not follow as a legal proposition, that they will not be permitted thereafter to assert
it. They had no juridical duty to disclose their inability.
- In order to hold infant liable, however, the fraud must be actual and not constructure. It has
been held that his mere silence when making a contract as to age does not constitute a fraud
which can be made the basis of an action of deceit
ObliCon Case Digests 2017
- However, they are not entirely absolved from monetary responsibility. They shall make
restitution to the extent that they have profited by the money they received. (Art. 1340)
Disposition Decision reversed
RODRIGUEZ V RODRIGUEZ
REYES; July 31, 1967
NATURE
Appeal from a judgment of the CFI
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, a widower with four children by a previous marriage, named Geronimo,
Esmeragdo, Jose and Mauricio, all surnamed Rodriguez.
- Prior to her marriage to Rodriguez, Concepcion Felix was the registered owner of 2
fishponds. 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
were registered in the Office of the Register of Deeds of Bulacan on January 29, 1934, as a
consequence of which, the original title 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, Doming 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
extrajudicial settlement of his (Domingo's) estate, consisting of one-half of the properties
allegedly belonging to the conjugal partnership. Among the properties listed as conjugal were
the two parcels of land in Bulacan, Bulacan, which, together with another piece of property,
were divided among the heirs.
- On October 12, 1954, the 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 petitioner. Then in a
contract dated December 15, 1961, the widow appeared to have leased from the Rodriguez
children and grandchildren the fishpond for a period of 5 years commencing August 16, 1962.
for an annual rental of P7,161.37. At about this time. it seemed that the relationship
25
between the widow and her stepchildren had turned for the worse. Thus, when she failed to
deliver to them the balance of the earnings of the fishponds, in the amount of P3,000.00, her
stepchildren endorsed the matter to their lawyer who, on May 16, 1962, sent a letter of
demand to the widow for payment thereof.
- On May 28, 1962, petitioner filed the present action in the CFI of Manila. 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
1953 to 1961, the total amount of P56,976.58. As alternative cause of action, she contended
that she would claim for her share, as surviving widow of 1/5 of the properties in
controversy, should such properties be adjudicated as belonging to the conjugal partnership.
ISSUES
1. WON plaintiff can recover the illegally donated properties
2. WON plaintiff is estopped from questioning the transfer of properties
3. WON plaintiff’s cause of action has prescribed
4. WON the conveyances of title are void ab initio
HELD
1. NO
Ratio In contracts invalidated by illegal subject matter or illegal causa, Article 1305 and 1306
of the Civil Code then in force apply rigorously the rule in pari delicto non oritur actio,
denying all recovery to the guilty parties inter se. And appellant is clearly as guilty as her
husband in the attempt to evade the legal interdiction.
2. YES
Ratio Having taken part in the questioned transactions, petitioner was not the proper party
to plead lack of consideration to avoid the transfers On top of it, she entered into a series of
subsequent transactions with respondents that confirmed the contracts that she now tries to
set aside. There was ratification or confirmation by the plaintiff of the transfer of her
property, by her execution (with the other heirs) of the extrajudicial settlement of estate.
ObliCon Case Digests 2017
3. YES
Ratio Duress being merely a vice or defect of consent, an action based upon it must be
brought within four years after it has ceased, and the present action was instituted only in
1962, 28 years after the intimidation is claimed to have occurred, and no less than 9 years
after the supposed culprit died in 1953. Likewise, the action for rescission of the deed of
extrajudicial settlement should have been filed within 4 years from its execution.
4. NO
Ratio Although the two documents were executed for the purpose of converting plaintiff's
separate properties into conjugal assets of the marriage with Domingo Rodriguez, the
consent of the parties thereto was voluntary, contrary to the allegations of plaintiff and her
witness. In the first transaction, the price of P2,500.00 is recited in the deed itself; in the
second, the consideration set forth is P3,000.00. Since in each conveyance the buyer became
obligated to pay a definite price in money, such undertakings constituted in themselves
actual causa or consideration for the conveyance of the fishponds. That the prices were not
paid does not make the sales inexistent for want of causa. The characteristic of simulation is
the fact that the apparent contract is not really desired or intended to produce legal effects
or in any way alter the juridical situation of the parties. But appellant contends that the sale
by her to her daughter, and the subsequent sale by the latter to appellant and her late
husband 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. If this is true, then the appellant and
her daughter must have intended the two conveyances 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.
SUNTAY V CA
HERMOSISIMA; December 19,1995
NATURE
Petition for Review on Certiorari of the Amended Decision of respondent Court of Appeals
and of its Resolution denying petitioner's motion for reconsideration.
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 rica mill, a warehouse and other improvements.
26
- 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.
- However, the said document was not the said deed of sale but a certain "real estate
mortgage of a parcel of land to secure a loan of P3,500.00 in favor of the Hagonoy Rural
Bank. It could not be found in the notarial register as well
- Federico through his new counsel requested that Rafael have TCT No. T-36714 so that he
can have the counter deed of sale in favor registered in his . But the request was turned
down.
- So Federico’s counsel filed a case in the CFI. The trial court upheld the validity and
genuineness of the deed of sale executed by Federico in favor of Rafael, but it ruled that the
counter-deed, executed by Rafael in favor of Federico, was simulated and without
consideration, hence, null and void ab initio. (it was not dated, not notarized and above all it
has no consideration because plaintiff did not pay defendant the consideration of the sale in
the sum of P20,000.00)
- CA ruled the same. BUT it then reversed itself upon petition and said that the first Deed of
Sale was a mere accommodation arrangement executed without any consideration and
therefore a simulated contract of sale. Considering the ff. circumstances:
> the 2 instruments were executed closely one after the other
> the close relationship bet. the parties
>the value and location of the property purportedly sold . (P20,000)
> Rafael also never assumed ownership nor did eh gather any benefit.
- Rafael Suntay on the other hand insists that the transaction was a veritable sale.
ISSUE
WON the deed of sale executed in favor of Rafael Suntay was valid
HELD
ObliCon Case Digests 2017
NO
Reasoning 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.
- The late Rafael insisted that the sale to him of his uncle's property was in fact a "dacion en
pago" in satisfaction of Federico's unpaid attorney's fees. But such claim cannot prosper. He
did not even tell Federico that he considered such to be his fee. Federico was also liquid
enough to pay him.
- All circumstances point to the conclusion that such was simulated transaction.
Ratio 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.46
These presumptions if shown to hold, infer prima facie the transaction's validity, except that
it must yield to the evidence adduced.
Disposition WHEREFORE, the Amended Decision promulgated by the Court of Appeals on
December 15, 1993 in CA-G.R. CV No. 08179 is hereby AFFIRMED IN TOTO.
.BLAS V SANTOS
LABRADOR; March 29, 1961
NATURE
Appeal from a judgement of the Court of the First Instance of Rizal
FACTS
- Simeon Blas married twice. His first marriage was with Marta Cruz. They had 3 children only
one of whom, Eulalia left children namely Maria, Marta and Lazaro. Lazaro laft 3 legitimate
children. Maria and Lazaro’s children are plaintiffs herein. Simeon Blas contracted another
marriage with Maxima Santos when Marta Cruz died. Ti should be noted that when Marta
Cruz died, there was no liquidation of the couple’s property. A week before the death of
Simeon Blas, he executed a will which stated that half of their property (with Maxima) is the
share of his wife.another document (exibit A) was executed by Maxima Santos which states
that one-half of her share of the properties left to her by her husband, she would give to the
heirs and legatees or the beneficiaries (plaintiffs) named in the will of her husband.
- This action was instituted by plaintiffs against the administratrix of the estate of Maxima
Santos, to secure a judicial declaration that one-half of the properties left by said Maxima
Santos Vda. de Blas and requesting that the said properties so promised be adjudicated to
the plaintiffs.
27
- Trial court held that said Exhibit "A" has not created any right in favor of plaintiffs which can
serve as a basis of the complaint; that neither can it be considered as a valid and enforceable
contract for lack of consideration and because it deals with future inheritance. The court also
declared that Exhibit "A" is not a will because it does not comply with the requisites for the
execution of a will; nor could it be considered as a donation.
- Both the court below in its decision and the appellees in their brief before us, argue
vehemently that the heirs of Simeon Blas and his wife Marta Cruz can no longer make any
claim for the unliquidated conjugal properties acquired during said first marriage, because
the same were already included in the mass of properties constituting the estate of the
deceased Simeon Blas and in the adjudications made by virtue of his will, and that the action
to recover the same has prescribed.
ISSUE
WON plaintiffs can make a claim for half of the properties received by Maxima Santos after
the death of Simeon Blas
HELD
YES
Ratio The principal basis for the plaintiffs' action in the case at bar is the document Exhibit
"A". Plaintiffs-appellants argue before the Court that Exhibit "A" is both a trust agreement
and a contract in the nature of a compromise to avoid litigation. Defendants-appellees, in
answer, claim that it is neither a trust agreement nor a compromise agreement. The Court
finds that the preparation and execution of Exhibit "A" was ordered by Simeon Blas evidently
to prevent his heirs by his first marriage from contesting his will and demanding liquidation
of the conjugal properties acquired during his -first marriage, and an accounting of the fruits
and proceeds thereof from the time of the death of his first wife.
Exhibit "A", therefore, appears to be the compromise defined in Article 1809 of the Civil Code
of Spain, in force at the time of the execution of Exhibit "A", which provides as follows:
"Compromise is a contract by which each of the parties in interest, by giving, promising, or
retaining something avoids the provocation of a suit or terminates one which has already
been instituted."
The agreement or promise that Maxima Santos makes in Exhibit "A" is to hold one-half of her
said share in the conjugal assets in trust for the heirs and legatees of her husband in his will,
with the obligation of conveying, the same to such of his heirs or legatees as she may choose
in her last will and testament. Under Exhibit "A", therefore, Maxima Santos contracted the
obligation and promised to give one-half of the above indicated properties to the heirs and
legatees of Simeon Blas
*this case is under future inheritance so this next paragraph is important
ObliCon Case Digests 2017
- The Court also rejects the defendant’s contention that Exibit A is a contract on future
inheritance. It is an obligation or promise made by the maker to transmit one-half of her
share in the conjugal properties acquired with her husband, which properties are stated or
declared to be conjugal properties in the will of the husband. The conjugal properties were in
existence at the time of the execution of Exhibit "A" on December 26, 1936. The properties
mentioned were even included by Maxima in the inventory of her husband’s property. The
document refers to existing properties which she will receive by operation of law on the
death of her husband, because it is her share in the conjugal assets.
- It will be noted that what is prohibited to be the subject matter of a contract under Article
1271 of the Civil Code is "future inheritance." To us future inheritance is any property or right
not in existence or capable of determination at the time of the contract, that a person may in
the future acquire by succession. The properties subject of the contract Exhibit "A" are well-
defined properties, existing at the time of the agreement, which Simeon Blas declares in his
testament as belonging to his wife as her share in the conjugal partnership.
- It is also claimed that the case at bar are concluded by the judgment rendered in the
proceedings for the settlement of the estate of Simeon Blas for the reason that the
properties left by him be longed to himself and his wife Maxima Santos; that the project of
partition in the said case. But the main ground upon which plaintiffs base their present action
is the document Exhibit "A", already fully considered above. As this private document
contains the express promise made by Maxima Santos to convey in her testament, upon her
death, one-half of the conjugal properties she would receive as her share in the conjugal
properties, the action to enforce the said promise did not arise until and after her death
when it was found that she did not comply with her above-mentioned promise. It may be
added that plaintiffs-appellants did not question the validity of the project of partition
precisely because of the promise made by Maxima Santos in the compromise Exhibit "A".
Disposition The defendant-appellee, administratrix of the estate of Maxima Santos, is
ordered to convey and deliver one-half of the properties adjudicated to Maxima Santos as
her share in the conjugal properties to the heirs and the legatees of her husband Simeon
Blas.
.LIGUEZ V COURT OF APPEALS
REYES; December 18, 1957
NATURE
Petition for review by certiorari of a decision of the CA, affirming the CFI Davao’s decision
dismissing Liguez’ complaint for recovery of land
FACTS
- Conchita LIGUEZ filed a complaint against the widow and heirs of the late Salvador LOPEZ so
as to recover a parcel of 51.84 hectares of land, situated in barrio Bogac-Linot, in Mati,
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Davao. She claimed to be its legal owner, pursuant to a deed of donation of said land,
executed in her favor by the owner, Salvador Lopez, on 18 May 1943.
- The defense interposed was that the donation was null and void for having an illicit causa or
consideration, which was the plaintiff's entering into marital relations with Salvador Lopez, a
married man. Also, the property had already been adjudicated to the appellees as heirs of
Lopez.
> Findings of the Court of Appeals:
- The deed of donation was prepared by the Justice of the Peace of Mati, Davao, before
whom it was signed and ratified on the said date. At that time, Liguez was a minor and only
16 years of age. When the donation was made, Lopez had been living with the parents of
Liguez for barely a month. The donation was made in view of the desire of Lopez to have
sexual relations with Liguez. Lopez had confessed to his love for appellant to the
instrumental witnesses, with the remark that her parents would not allow Lopez to live with
her unless he first donated the land in question. After the donation, Conchita Liguez and
Salvador Lopez lived together in the house that was built upon the latter's orders, until Lopez
was killed on July 1, 1943.
- The donated land originally belonged to the conjugal partnership of Salvador Lopez and his
wife, Maria Ngo. The widow and children of Lopez were in possession of the land and made
improvements. The deed of donation was never recorded.
Court of Appeal’s Ruling
- The deed of donation was inoperative, and null and void (1) because the husband, Lopez,
had no right to donate conjugal property to the plaintiff appellant; and (2) because the
donation was tainted with illegal cause or consideration, of which donor and donee were
participants.
- CA rejected appellant's claim on the basis of "in pari delicto non oritur actio" rule as
embodied in Art.1412 of the New Civil Code.1
Petitioners' Claim
- CFI and CA erred in holding the donation void for having an illicit cause or consideration.
Under Art 1274 of the Civil Code of 1889, "in contracts of pure beneficence the consideration
is the liberality of the donor", and that liberality can never be illegal, since it is neither against
law or morals or public policy.
ObliCon Case Digests 2017
ISSUES
1. WON donation was predicated upon an illicit causa
2. WON the “in pare delicto” rule is applicable to the case
3. WON heirs of Lopez can plead illegality of deed of donation
4. WON Liguez is entitled to the land donated by Lopez
HELD
1. YES
Ratio The motive may be regarded as causa when it predetermines the purpose of the
contract. The cohabitation was an implied condition to the donation, and being unlawful, it
necessarily tainted the donation itself.
Reasoning Art 1274 is not applicable because liberality of the donor therein is deemed causa
in those contracts that are of "pure" beneficence. These are contracts designed solely and
exclusively to procure the welfare of the beneficiary, without any intent of producing any
satisfaction for the donor. Art 1274 also provides that in remuneratory contracts, the
consideration is the service or benefit for which the remuneration is given; causa is not
liberality in these cases because the contract or conveyance is not made out of pure
beneficence, but "solvendi animo."
- In making the donation, the late Lopez was not moved exclusively by the desire to benefit
Conchita Liguez, but also to secure her cohabiting with him, so that he could gratify his sexual
impulses. This is clear from the confession of Lopez to the witnesses Rodriguez and Ragay,
that he was in love with appellant, but her parents would not agree unless he donated the
land in question to her. Therefore, the donation was but one part of an onerous transaction
(at least with appellant's parents) that must be viewed in its totality.
- Appellant sought to differentiate between the alleged liberality of Lopez, as causa for the
donation in her favor, and his desire for cohabiting with appellant, as motives that impelled
him to make the donation. She quoted from Manresa and the jurisprudence of this Court on
the distinction that must be maintained between causa and motives. However, Manresa
himself expressly exempted from the rule those contracts that are conditioned upon the
attainment of the motives of either party.
2. NO
Reasoning It cannot be said that both parties had equal guilt when we consider that as
29
against Lopez, who was a man advanced in years and mature experience, the appellant was a
mere minor, 16 years of age, when the donation was made. There is no finding made by the
Court of Appeals that she was fully aware of the terms of the bargain entered into by and
Lopez and her parents. Her acceptance in the deed of donation did not necessarily imply
knowledge of conditions and terms not set forth therein. The facts are of the case are actually
more suggestive of seduction than of immoral bargaining on the part of appellant.
- Memo auditor propriam turpitudinem allegans. The rule that parties to an illegal contract, if
equally guilty, will not be aided by the law but will both be left where it finds them, has been
interpreted by this Court as barring the party from pleading the illegality of the bargain either
as a cause of action or as a defense.
3. NO
Reasoning The deed of donation is regular on its face, and to defeat its effect, the appellees
must plead and prove that it is illegal. But such plea on the part of the Lopez heirs is not
receivable, since Lopez, himself, if living, would be barred from setting up that plea; and his
heirs can have no better rights than Lopez himself.
4. YES
Ratio The prima facie donation inter vivos and its acceptance by the donees having been
proved by means of a public instrument, and the donor having been duly notified of said
acceptance, the contract is perfect and obligatory, unless an exception is proved which is
based on some legal reason opportunely alleged by the donor or his heirs. (Lopez v. Olbes)
- The donation made by the husband in contravention of law is not void in its entirety, but
only in so far as it prejudices the interest of the wife, because said property was conjugal in
character and the right of the husband to donate community property is strictly limited by
law (Civil Code of 1889, Arts. 1409, 1415, 1413)2
Reasoning Only the court of origin that settled the estate of the late Salvador Lopez. has the
requisite data to determine whether the donation is inofficious or not. To determine the
prejudice to the widow, it must be shown that the value of her share in the property donated
can not be paid out of the husband's share of the community profits.
- The situation of the children and forced heirs of Lopez approximates that of the widow. As
privies of their parent, they are barred from invoking the illegality of the donation. But their
right to a legitime out of his estate is not thereby affected, since the legitime is granted them
by the law itself. The forced heirs are then entitled to have the donation set aside in so far as
in officious: i.e., in excess of the portion of free disposal. In computing the legitimes, the value
of the property to Liguez, should be considered part of the donor's estate.
- With regard to the improvements in the land in question, the same should be governed by
the rules of accession and possession in good faith, it being undisputed that the widow and
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heirs of Lopez were unaware of the donation in favor of the appellant when the
improvements were made.
Disposition Decisions appealed from are reversed and set aside, and the appellant Conchita
LIGUEZ declared entitled to so much of the donated property as may be found, upon proper
liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership
with Salvador P. Lopez or the legitimes of the forced heirs of the latter. The records are
ordered remanded to the court of origin for further proceedings in accordance with this
opinion.
CASE 43: CARANTES vs COURT OF APPEALS (G.R. No. sL-33360 April 25, 1977)
 FACTS
Mateo Carantes was the original owner of Lot No. 44. He died and was survived by his widow
and six children, all surnamed Carantes. Lot No. 44 was subdivided into Lots Nos. 44-A, 44-B,
44-C, 44-D and 44-E. Construction of the Loakan Airport affected a portion of Lot No. 44
needed for the landing field, and so the Government instituted expropriation proceeding on
Lot 44-A.
The late Mateo’s son, petitioner Maximino Carantes, was the administrator of the estate and
he filed a partition and listed himself, his brothers and sisters as heirs. The only property
listed by Maximino in the partition was the remaining portion of Lot because the
Government wanted to purchase Lots Nos. 44-B and 44-C that time.
A deed "Assignment of Right to Inheritance" was executed by four of Mateo’s children and
the heirs of Apung Carantes (a son of Mateo who died) assigning to Maximino their rights to
the Lot. The monetary consideration for the assignment was P1.00 and contains a recital that
the said lots,
"by agreement of all the direct heirs and heirs by representation of the deceased
Mateo Carantes as expressed and conveyed verbally. by him during his lifetime, rightly
and exclusively belong to the particular heir, Maximino Carantes, now and in the past
in the exclusive, continuous, peaceful and notorious possession of the same for more
than 10 years."
Maximino sold to the Government Lots Nos. 44-B & 44-C, and divided the proceeds of the
sale to the heirs. He then registered the deed of "Assignment of Right to Inheritance."
Transfer Certificate of Title (TCT) No. 2540 was issued in the name of Maximino, and acting as
exclusive owner of the land covered by T.C.T. No. 2540, he executed a formal deed of sale in
favor of the Government over Lots Nos. 44-B and 44-C. And so, T.C.T. No. 2540 in Maximino's
name was cancelled, and another 2 TCTs were issued in favor of the government, the other
one for Maximino for the remaining lots not subject to the sale.
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3 children of the late Mateo, and surviving heirs of Apung and of Sianang (children of Mateo)
filed a case against Maximino.
 Contentions
Plaintiffs- they were made to believe by the defendant Maximino that the said instrument
(Assignment of Right to Inheritance) merely authorized the defendant Maximino to convey
portions of Lot No. 44 to the Government, but they came to know that the instrument
purported to assign in favor of Maximino their rights to inheritance from Mateo. [They
prayed that the instrument be declared null and void.]
Defendant (Maximino)- Any supposed agreement between the plaintiffs and the defendant
Maximino, other than the deed of assignment, is barred by the statute of frauds and is null
and void because not in writing, much less, in a public instrument; that the only agreement
between the parties is what appears in the deed of assignment.
RTC: Dismissed the complaint saying that an action based on fraud prescribes in 4 years from
the discovery of the fraud. Fraud must be deemed to have been discovered on March 16,
1940 when the deed of assignment was registered, the plaintiffs' right of action (filed on
September 4, 1958) had already prescribed.
CA- Reversed the judgment above. Deed of Assignment is void ab initio and inexistent
because the real consent was wanting and consideration of 1.00 is shocking.
 ISSUE: WON the deed of Assignment of Right to Inheritance is void and inexistent
pursuant to ART 1410.
 HELD: No.
Respondent court (CA) argued that Art 1410 provides that contracts which are absolutely
simulated or fictitious are inexistent and void. Simulation is when a contract is not desired or
intended to produce legal effects.
But the respondents' argument is untenable because the deed of Assignment cannot be
considered as one to declare the inexistence of a contract for lack of consideration. It is
total absence of cause or consideration that renders a contract void and inexistent.
Consideration was not absent in the case, like the sum of P1.00 as one of the considerations
for the assignment of inheritance. Also, the document recites that the decedent Mateo had,
during his lifetime, expressed to the signatories to the contract that the property subject-
matter thereof rightly and exclusively belonged to the petitioner Maximino which constitutes
valuable consideration for the contract.
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Contracts without just cause, or with unlawful cause, produce no effect whatever.
The cause is unlawful if it is contrary to law, morals, good customs, public order or
public policy. ART 1352
If contract is not founded upon any cause, it shall not produce any effect But if the contract
has some kind of consideration, it may be voidable because of the inadequacy of the cause or
consideration, but not necessarily void and inexistent. Why? There is a consideration
present, not total absence.
As for Fraud and the prescription of action, the Court agrees with the RTC.
***
CASE 44: SPS. BUENAVENTURA vs. CA (416 SCRA 263)
 FACTS
Defendant spouses Joaquin and Landrito are the parents of plaintiffs as well as of
defendants, all surnamed JOAQUIN. Sought to be declared null and void ab initio are certain
deeds of sale of real property executed by defendant spouses in favor of their co-defendant
children and the corresponding certificates of title issued in their names
Plaintiffs: The deeds of sale are simulated as they are, are null and void because there was
no actual valid consideration for the deeds of sale over the properties; assuming that there
was consideration in the sums reflected in the deeds, the properties are more than three-
fold times more valuable than the measly sums appearing therein; the deeds of sale do not
reflect and express the true intent of the parties (vendors and vendees); and the purported
sale of the properties was the result of a deliberate conspiracy designed to unjustly deprive
the rest of the compulsory heirs (plaintiffs herein) of their legitime.
Defendants: the sales were with sufficient considerations and made by defendants parents
voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale
Trial court: Dismissed the case against defendant spouses. In the first place, the testimony of
the defendants, particularly that of the father will show that the Deeds of Sale were all
executed for valuable consideration.
CA- Affirmed the decision of the trial court.
 ISSUES
1) WON the lower court erred in holding that the conveyance had no valid consideration.
2) Assuming that there was a consideration, WON the same is grossly inadequate.
31

 HELD: Petition without merit.
 First Issue: No. With valid consideration.
[Petitioners: their respondent siblings did not actually pay the prices stated in the Deeds of
Sale to their respondent father.]
Failure to pay the consideration is different from lack of consideration. The former results in
a right to demand the fulfillment or cancellation of the obligation under an existing valid
contract while the latter prevents the existence of a valid contract.
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To
prove simulation, petitioners presented Valdozs testimony stating that their father,
respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of
sale without need for her payment of the purchase price. The trial court did not find the
allegation of absolute simulation of price credible.
Petitioners failure to prove absolute simulation of price is magnified by their lack of
knowledge of their respondent siblings financial capacity to buy the questioned lots. On the
other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the
cost of each lot sold. Not only did respondents minds meet as to the purchase price, but
the real price was also stated in the Deeds of Sale. As of the filing of the complaint,
respondent siblings have also fully paid the price to their respondent father.
 Second Issue. No inadequacy of consideration.
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been fraud, mistake or undue influence.
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as
may indicate a defect in the consent, or that the parties really intended a donation or
some other act or contract.
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 which
would invalidate, or even affect, the Deeds of Sale. In fact, there is no requirement that the
price be equal to the exact value of the subject matter of sale. The trial court found that the
lots were sold for a valid consideration.
***
ART 1356 and the kinds of formalities required by law
CASE 45: HERNAEZ vs DE LOS ANGELES (27 SCRA 1276)
 FACTS
ObliCon Case Digests 2017
Petitioner Hernaez, a motion picture actress, had filed a complaint against Private
respondent Hollywood Far East Productions, Inc., and its President and General Manager,
Valenzuela, to recover P14,700.00 representing a balance said petitioner for her services as
leading actress in two motion pictures produced by the company.
Respondent court (Judge de los Angeles presiding/respondent): the proposed amended
complaint did not vary in any material respect from the original complaint except in minor
details, and suffers from the same vital defect of the original complaint", which is the
violation of Article 1356. The contract sued upon was not alleged to be in writing, that by
Article 1358 the writing was absolute and indispensable, because the amount involved
exceeds 500 pesos;
MORs filed by the Plaintiff were dismissed by the respondent court. Hence, plaintiff resorted
to this Court.
 ISSUE: WON the respondent curt abuse its discretion in ruling that a contract for
personal services involving more than P500.00 was either invalid or unenforceable
under the last paragraph of Article 1358.
 HELD: Yes. There was abuse, since the ruling betrays a basic and lamentable
misunderstanding of the role of the written form in contracts.
Generally, contracts are valid and binding from their perfection regardless of form whether
they be oral or written. This is plain from Articles 1315 and 1356 of the present Civil Code.
ART. 1315. Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with
good faith, usage and law.
ART. 1356 (1). Contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present..
These essential requisites are normally (1) consent (2) proper subject matter, and (3)
consideration or causa for the obligation assumed (Article 1318). Once the three elements
exist, the contract is generally valid and obligatory, regardless of the form, oral or written, in
which they are couched. The form (oral or written) is irrelevant to the binding effect of a
contract that possesses the three validating elements of consent, subject matter, and Article
1356 establishes only two exceptions:
(a) Contracts for which the law itself requires that they be in some particular form
(writing) in order to make them valid and enforceable.
(b) Contracts that the law requires to be proved by some writing (memorandum)
of its terms, as in those covered by the old Statute of Frauds, now Article 1403(2) of the
32
 Civil Code. Their existence not being provable by mere oral testimony (unless wholly or
partly executed), these contracts are exceptional in requiring a writing embodying the
terms thereof for their enforceability by action in court.
The contract sued upon by petitioner (compensation for services) does not come under
either exception above stated. It is true that it appears included in Article 1358 providing that
all other contracts where the amount involved exceeds 500 pesos must appear in writing,
even a private one. But Article 1358 nowhere provides that the absence of written form will
make the agreement invalid or unenforceable. On the contrary, Article 1357 indicates that
contracts covered by Article 1358 are binding and enforceable by action or suit despite the
absence of writing.
ART. 1357. If the law requires a document or other special form, as in the acts
and contracts enumerated in the following article, the contracting parties may compel
each other to observe that form, once the contract has been perfected. This right may
be exercised simultaneously with the action the contract.
Thus, both the respondent court as well as the private respondents were grossly mistaken in
holding that because petitioner 's contract for services was not in writing the same could not
be sued upon, or that her complaint should be dismissed for failure to state a cause of action
because it did not plead any written agreement.
***
There must be an allegation “that the instrument to be 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 be real agreement or
intention of the parties. It is not the function of the remedy to make a new agreement, but to
establish and perpetuate the true existing one.” ART 1359
CASE 46: GARCIA vs BISAYA (97 Phil 609)
 FACTS
Plaintiff filed a complaint against the defendants alleging that defendants executed in favor
of plaintiff a deed of sale covering a parcel of land but the said land was erroneously
designated by the parties in the deed of sale as an unregistered land 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. Despite persistent
demand from plaintiff to have the error corrected, defendants have refused to do so. Plaintiff
prayed for judgment ordering defendants to make the aforesaid correction in the deed of
sale.
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Plaintiff alleged 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. (in response to the prescription defense of the defendants)
Defendants: denied having executed the alleged deed of sale
Lower Court: Dismissed the case on the ground that plaintiff’s action had already prescribed.
 ISSUES:
1.) WON the action for reformation of instruments has already prescribed
2.)WON the action for reformation of instruments may prosper
 First Issue. No
Both appellant and appellees apparently regard the present action as one for the
reformation of an instrument under Chapter 4, Title II, Book IV of the new Civil Code.
Specifically, the object sought is the correction of an alleged mistake in a deed of sale
covering a piece of land. The action. being upon a written contract, it should prescribe in ten
years counted from the day it could have been instituted. Obviously, appellant could not
have instituted his action to correct an error in a deed until that error was discovered. There
being nothing in the pleadings to show that the error was discovered more than ten years
before the present action was filed on May 20, 1952, while, on the other hand, there is
allegation that the error was discovered "only recently", we think the action should not have
been dismissed as having already prescribed before the factual basis for prescription had
been established and clarified by evidence.
 Second Issue: No.
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. How then is the court to know that the correction
sought will make the instrument conform to what was agreed or intended by the parties? It
33
is not the function of the remedy of reformation to make a new agreement, but to establish
and perpetuate the true existing one. Moreover, courts do not reform instruments merely
for the sake of reforming them, but only to enable some party to assert right under them as
reformed.
***
Reformation of an instrument is that remedy in equity by means of which a written
instrument is made or construed so as to express or conform to the real intention of the
parties when some error or mistake has been committed. An action for reformation must be
brought within the period prescribed by law, otherwise, it will be barred by the mere lapse of
time. ART 1359
CASE 47: BENTIR vs LEANDE (330 SCRA 591)
 FACTSldmiso
May 15, 1992: Respondent corporation filed a complaint for reformation of instrument,
specific performance, annulment of conditional sale and damages with prayer for writ of
injunction against petitioners Bentir and the spouses Pormada.
Respondent corporation: Contract of lease of a parcel of land was entered on May 5, 1968
for a period of 20 years and renewed for an additional 4 years thereafter with the verbal
agreement that in case the lessor decides to sell the property after the lease, she shall give
the plaintiff the right to equal the offers of other prospective buyers. It was claimed that the
lessor violated this right of first refusal of the plaintiff when she sureptitiously sold the land
to co-defendant Pormida on May 5, 1989 under a Deed of Conditional Sale. Plaintiffs right
was further violated when after discovery of the final sale, plaintiff ordered to equal the price
of co-defendant Pormida was refused and again defendant Bentir surreptitiously executed a
final deed of sale in favor of co-defendant Pormida.
Petitioner Bentir: Denies that she bound herself to give the plaintiff the right of first refusal
in case she sells the property. But assuming for the sake of argument that such right of first
refusal was made, respondent corporation is guilty of laches for not bringing the case for
reformation of the lease contract within the prescriptive period of 10 years from its
execution in 1968.
Trial court: issued an order dismissing the complaint premised on its finding that the action
for reformation had already prescribed.
Respondent corporation filed a MOR of the order dismissing the complaint.
ObliCon Case Digests 2017
Respondent judge (RTC): issued an order reversing the order of dismissal on the ground that
the action for reformation had not yet prescribed thus resulting denial upon the right of
respondent corporation of procedural due process. Also respondent judge issued an order
for status quo ante, enjoining petitioners to desist from occupying the property.
Petitioners filed a petition for certiorari to the CA seeking the annulment of the order of
respondent court.
CA: Denied the petition and affirmed the questioned order. The 10-year prescriptive period
(Art. 1144) should be reckoned not from the execution of the contract of lease in 1968, but
from the date of the alleged 4-year extension of the lease contract after it expired in 1988.
Consequently, when the action for reformation of instrument was filed in 1992 it was within
ten (10) years from the extended period of the lease. The extended period of lease was an
"implied new lease" within the contemplation of Article 1670 of the Civil Code, under which
provision, the other terms of the original contract were deemed revived in the implied new
lease.
 ISSUE: WON the CA erred in holding that the action for reformation has not yet
prescribed.
 HELD: Yes. Action prescribed
The prescriptive period for actions based upon a written contract and for reformation of an
instrument is ten (10) years. Respondent corporation had ten (10) years from 1968, the time
when the contract of lease was executed, to file an action for reformation. It did so only on
May 15, 1992 or twenty-four (24) years after the cause of action accrued, hence, its cause of
action has become stale, hence, time-barred.
As for the extended lease, if the extended period of lease was expressly agreed upon by the
parties, then the term should be exactly what the parties stipulated, not more, not less. And
if the supposed 4-year extended lease be considered as an implied new lease under Art.
1670, "the other terms of the original contract" contemplated in said provision are only
those terms which are germane to the lessees right of continued enjoyment of the property
leased. The prescriptive period of ten (10) years applies by operation of law, not by the will of
the parties. Therefore, the right of action for reformation accrued from the date of execution
of the contract of lease in 1968.
Even if we were to assume for the sake of argument that the instant action for reformation is
not time-barred, respondent corporations action will still not prosper. An action for the
reformation of an instrument is instituted as a special civil action for declaratory relief
(Section 1, Rule 64 of the New Rules of Court). Since the purpose of an action for declaratory
relief is to secure an authoritative statement of the rights and obligations of the parties for
their guidance in the enforcement thereof, or compliance therewith, and not to settle issues
arising from an alleged breach thereof, it may be entertained only before the breach or
violation of the law or contract to which it refers. Here, respondent corporation brought the
present action for reformation after an alleged breach or violation of the contract was
34
already committed by petitioner Bentir. Consequently, the remedy of reformation no longer
lies.
***
ART 1366-1369
CASE 48: ATILANO v. ATILANO(28 SCRA 2232)
 FACTS
Atilano I acquired lot No. 535. and obtained transfer certificate of title No. 1134 in his name.
He had the land subdivided into five parts, identified as lots Nos. 535-A, 535-B, 535-C, 535-D
and 535-E, respectively. After the subdivision had been effected, Atilano I, for the sum of
P150.00, executed a deed of sale covering lot No. 535-E in favor of his brother Atilano II, who
thereupon obtained transfer certificate of title No. 3129 in his name. Three other portions,
lots Nos. 535-B, 535-C and 535-D, were likewise sold to other persons. Atilano I retained for
himself only the remaining portion of the land covered by the title to lot No. 535-A. Upon his
death the title to this lot passed to Ladislao Atilano (defendant).
Atilano II having become a widower upon the death of his wife Luisa Bautista, he and his
children obtained transfer certificate of title No. 4889 over lot No. 535-E in their names as co-
owners. Desiring to put an end to the co-ownership, they had the land resurveyed so that it
could properly be subdivided; and it was then discovered that the land they were actually
occupying was lot No. 535-A and not lot 535-E, as referred to in the deed, while the land
which remained in the possession of the defendant Ladislao Atilano, was lot No. 535-E and
not lot No. 535-A.
Plaintiffs Heirs of Atilano II filed the present action alleging that they had offered to
surrender to the defendants the possession of lot No. 535-A and demanded in return the
possession of lot No. 535-E, but that the defendants had refused to accept the exchange. The
plaintiffs' insistence is quite understandable, since lot No. 535-E has an area of 2,612 square
meters, as compared to the 1,808 square-meter area of lot No. 535-A.
Defendants: alleged that the reference to lot No. 535-E in the deed of sale was an
involuntary error; that the intention of the parties to that sale was to convey the lot correctly
identified as lot No. 535-A. Ssince 1916, when he acquired the entirety of lot No. 535, and up
to the time of his death, Atilano I had been possessing and had his house on the portion
designated as lot No. 535-E, after which he was succeeded in such possession by the
defendants; and that as a matter of fact Atilano I even increased the area under his
possession when he bought a portion of an adjoining lot, No. 536, from its another owner.
Trial Court: rendered judgment for the plaintiffs since the property was registered under the
Land Registration Act the defendants could not acquire it through prescription. There can be
ObliCon Case Digests 2017
no dispute as to the correctness of this legal proposition; but the defendants, aside from
alleging adverse possession in their answer and counterclaim, also alleged error in the deed
of sale of May 18, 1920
 ISSUE: WON the trial court rendered proper judgment for the plaintiffs since the
property was registered under the Land Registration Act the defendants could not
acquire it through prescription
 HELD: Yes. The court erred in granting the plaintiffs the lot.
The portion correctly referred to as lot No. 535-A was already in the possession of Atilano II,
who had constructed his residence therein, even before the sale in his favor and before the
subdivision of the entire lot No. 535. In like manner the Atilano I had his house on the portion
correctly identified, after the subdivision, as lot No. 535-E, even adding to the area thereof by
purchasing a portion of an adjoining property belonging to a different owner. The two
brothers continued in possession of the respective portions the rest of their lives, obviously
ignorant of the initial mistake in the designation of the lot subject of the 1920 until 1959,
when the mistake was discovered for the first time.
But the real issue is not adverse possession, but the real intention of the parties to that sale.
The object thereof, as intended and understood by the parties, was that specific portion
where Atilano II was then already residing, where he reconstructed his house at the end of
the war, and where his heirs, the plaintiffs, continued to reside thereafter: namely, lot No.
535-A; and that its designation as lot No. 535-E in the deed of sale was simple mistake in the
drafting of the document.
The mistake did not vitiate the consent of the parties, or affect the validity and binding effect
of the contract between them. The new Civil Code provides a remedy for such a situation by
means of reformation of the instrument. This remedy is available when, there having been
a meeting of the funds of the parties to a contract, their true intention is not expressed in
the instrument purporting to embody the agreement by reason of mistake, fraud,
inequitable conduct on accident (Art. 1359.) In this case, the deed of sale executed in 1920
need no longer reformed. The parties have retained possession of their respective
properties conformably to the real intention of the parties to that sale, and all they should
do is to execute mutual deeds of conveyance.
Plaintiffs are ordered to execute a deed of conveyance of lot No. 535-E in favor of the
defendants, and the latter are ordered to execute a similar document covering lot No. 595-A
in favor of the plaintiffs.
49. GARCIA V BISAYA
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Syllabus: Requisites for the Action for Reformation -the complaint must allege what the real
agreement or intention was
FACTS:
Garcia (Plaintiff) filed a complaint against Bisaya (defendant) in the Court of
First Instance of Oriental Mindoro, alleging that Bisaya executed in favor of Garcia a
deed of sale covering a parcel of land which "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 in the Office of the Register of Deeds of Oriental Mindoro". Despite
persistent demand from plaintiff to have the error corrected, defendants have refused
to do so. Garcia then prayed for judgment ordering Bisaya to make the correction in the
deed of sale.
Answering the complaint, Bisaya denied having executed the alleged deed of
sale and pleaded prescription as a defense. Traversing the plea of prescription, Garcia
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. From
this order plaintiff has appealed directly to this Court.
ISSUE: W/N the the contention of Garcia for the reformation of instrument tenable?
SC: No.
Garcia’s complaint states no cause of action, for it fails to allege that the
instrument to be 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 be real agreement or intention of the parties. It is
not the function of the remedy to make a new agreement, but to establish and
perpetuate the true existing one.
Na dismiss ang case not because of the contention of Bisaya about the
prescription (since wla mn jud sya na prescribe kay wala pman naabot ug 10yrs. Since
there was nothing in the pleading that shows it) but bec. There was no cause of action.
50. BENTIR VS LEANDA
Syllabus: Requisites for the Action for Reformation - It must be brought within the proper
prescriptive period
FACTS:
-May 15, 1992, respondent Leyte Gulf Traders, Inc. (LGT) filed a complaint for reformation
of instrument, specific performance, annulment of conditional sale and damages with
prayer for writ of injunction against petitioners Yolanda Rosello-Bentir and the
spouses Samuel and Charito Pormida.
- The respondent corporation alleged that they entered into a contract of lease of a parcel
of land with petitioner Bentir (period is 20 years from May 5, 1968).
ObliCon Case Digests 2017
- LGT also alleged that said lease was extended for four years until May 31, 1992.
- May 5, 1989: Bentir sold the leased land to spouses Pormida.
- LGT questioned the sale alleging that it had a right of first refusal.
- LGT filed a civil case for the reformation of the expired contract of lease on the ground
that its lawyer failed to state in the contract the verbal agreement between the
corporation and Bentir which says that in case the latter leases or sells the lot after the
expiration of the lease, LGT has the right to equal the highest offer.
- Petitioner Bentir filed an answer saying that the failure of the lawyer to incorporate
certain conditions in a contract is not a ground for reformation and that LGT is guilty of
laches for not filing an action within prescriptive period of 10 years from May 5, 1968.
- November 18, 1992, LGT filed a motion to admit the amended complaint; the lower court
granted the motion. Petitioner filed a motion to dismiss on the ground of prescription.
- December 15, 1995: the trial court through Judge Pedro S. Espina issued an order
dismissing the complaint premised on its finding that the action for reformation had
already prescribed.
- December 29, 1995: LGT filed a motion for reconsideration of the order dismissing the
complaint.
- January 11, 1996: LGT filed an urgent ex-parte motion for issuance of an order directing
the petitioners, or their representatives or agents to refrain from taking possession of the
land in question.
- May 10, 1996: respondent judge Leanda issued an order reversing the order of dismissal
on the grounds that the action for reformation had not yet prescribed and the dismissal
was "premature and precipitate", denying respondent corporation of its right to
procedural due process.
- June 10, 1996: Judge Leanda issued an order for status quo ante, enjoining petitioners to
desist from occupying the property
- Aggrieved, petitioners herein filed a petition for certiorari to the Court of Appeals seeking
the annulment of the order of respondent court with prayer for issuance of a writ of
preliminary injunction and temporary restraining order to restrain respondent judge from
further hearing the case and to direct respondent corporation to desist from further
possessing the litigated premises and to turn over possession to petitioners
.- January 17, 1997: the Court of Appeals, after finding no error in the questioned order
nor grave abuse of discretion on the part of the trial court that would amount to lack, or in
excess of jurisdiction, denied the petition and affirmed the questioned order.
- A reconsideration of said decision was, likewise, denied on April 16, 1997.
ISSUE: W/N Whether or not the complaint for reformation filed by respondent Leyte Gulf
Traders, Inc. Has prescribed and in the negative, whether or not it is entitled to the remedy
of reformation sought.
RULING:
The remedy of reformation of an instrument is grounded on the principle of equity
where, in order to express the true intention of the contracting parties, an instrument
already executed is allowed by law to be reformed.
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 A suit for reformation of an instrument may be barred by lapse of time. The
prescriptive period for actions based upon a written contract and for reformation of
an instrument is ten (10) years under Article 1144 of the Civil Code.
In the case at bar, respondent corporation had ten (10) years from 1968, the time
when the contract of lease was executed, to file an action for reformation. Sadly, it did so
only on May 15, 1992 or twenty-four (24) years after the cause of action accrued, hence,
its cause of action has become stale, hence,time-barred.
In holding that the action for reformation has not prescribed, the Court of Appeals
upheld the ruling of the Regional Trial Court that the 10-year prescriptive period should be
reckoned not from the execution of the contract of lease in 1968, but from the date of the
alleged 4-year extension of the lease contract after it expired in 1988. Consequently, when
the action for reformation of instrument was filed in 1992 it was within ten (10) years from
the extended period of the lease. Private respondent theorized, and the Court of Appeals
agreed, that the extended period of lease was an "implied new lease" within the
contemplation of Article 1670 of the Civil Code, under which provision, the other terms
of the original contract were deemed revived in the implied new lease.
If the extended period of lease was expressly agreed upon by the parties, then the
term should be exactly what the parties stipulated, not more, not less. Second, even if the
supposed 4-year extended lease be considered as an implied new lease under Art. 1670,
"the other terms of the original contract "contemplated in said provision are only those
terms which are germane to the lessee’s right of continued enjoyment of the property
leased.
The prescriptive period of ten (10) years provided for in Art. 1144 applies by
operation of law, not by the will of the parties. Therefore, the right of action for
reformation accrued from the date of execution of the contract of lease in 1968. (Sayop
ang CA then gi dismiss jud ang Action for Reformation bec. Na bar na sya due to the
prescription)
51. ATILANO VS ATILANO
Syllabus: Procedure of reformation (Art.1369)- Reformation can only be sought pending
the enforcement of the contract but not when the intended consideration or obligations
have already been carried out.
Brief Facts:
Eulogio II buys a plot of land from Eulogio II. 39 yrs later, it was found that Eulogio II had
been occupying the wrong plot and had accidentally switched with Euologio I. Eulogio II’s
heirs now want to exchange lands with Eulogio I’s heirs to correct the mistake.
SC: Di na kinahanglan ang reformation uy kay naa man real intention sa parties (w/c is to
convey Lot 535-A and not Lot 535-E. Gi show mani sa katong when Atilano2 already built
his house on Lot 535-A even before Atilano 1 executed the deed of sale), all they should do
is to execute mutual deeds of conveyance.
IMPORTANT PEOPLE:
Eulogio Atilano I (Atilano I) - original orwner of 5 lots (Lot 535-A to 535-E); his heirs
are the defendants
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Eulogio Atilano II (Atilano II) - Atilano I’s brother, buyer of Lot 535-E; his heirs are the
plaintiffs
FACTS:
- In 1916, Eulogio Atilano I (Atilano 1) acquired by purchase from one Gerardo Villanueva
lot No. 535.
- In 1920, Atilano I subdivided land he owned into five parcels, identifying them as Lots
535-A to 535-E.
- He sold one parcel, designated as No. 535-E, to his brother Eulogio Atilano II (Atilano
2) for P150. Lots 535-B, C and D were sold to other people, while he kept the
remaining portion of land, presumably covered by title 535-A for himself, which passed to
defendant Ladislao Atilano after Eulogio I passed away.
- In 1952, after his wife died, Atilano 2 wanted to partition Lot 535-A among himself and
his children. They had the land resurveyed, only to find out their lot was actually 535-E,
and not 535-A, while the land that Ladislao had inherited from Atilano 1 was 535-A, and
not 535-E. (The titles on their respective deeds of sale were mixed up.)
- Atilano 2 died, so his heirs instituted an action against Ladislao offering up 535-A to
Ladislao in exchange for535-E, which they alleged was what was written in their deed of
sale (Since 535-E had a bigger area than 535-A,2,612 sqm compared to 1,808 sqm).
- Ladislao’s defense was that the 1920 deed of sale to Atilano 2 was an involuntary error,
and that the intention of the parties to that sale (Atilano 1 and Atilano 2) meant to convey
the lot correctly identified as 535-A, even if the deed stated 535-E, on the basis that
Atilano 1 had built a house on this lot and had even increased its area while it was in his
possession by purchasing a lot next to it, before it passed to Ladislao.
-Ladislao then interposed a counterclaim that Atilano 2 execute in his favor the
corresponding deed of transfer with respect to 535-E.
ISSUE: WON the heirs of Atilano 2 are entitled to the real 535-E,as stated in his deed of
sale - NO
RULING:
When one sells or buys real property — a piece of land, for example — one sells or
buys the property as he sees it,in its actual setting and by its physical metes and
bounds,and not by the mere lot number assigned to it in thecertificate of title.
In this case, the portion correctly referred to as lot No. 535-A was already in the
possession of the Atilano 2, who had built a house on it even before Atilano 1 had sold it to
him. Atilano 1 had built a house for himself on the real 535-E,and both brothers had lived
on their respective lands foryears until the mistake was discovered in 1959.
The real issue here is not adverse possession, but the real intention of the parties to
that sale. From all the facts and circumstances, the object of the sale between the
Atilano brothers was 535-A, even if the deed referred to it as 535-E, which was a simple
mistake in the drafting of the document. The mistake did not vitiate the consent of
the parties or affect the validity and binding effect of the contract between them.
The proper remedy to such mistake is reformation of the instrument. This remedy is
available when, there having been a meeting of the minds of the parties to a contract,
their true intention is not expressed in the instrument purporting to embody the
agreement by reason of mistake,fraud, inequitable conduct on accident (Art. 1359, et seq.)
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In this case, there is no need to reform the 1920 deed of sale since the parties retained
possession their respective properties conformably to the real intention of the parties to
that sale, and all they should do is to execute mutual deeds of conveyance.
52. CARANTES VS CA
Syllabus: Procedure of Reformation (Art.1369)- Action for Reformation cannot be raised
for the first time when it was not raised in the RTC.
Brief Facts: The heirs of the land of Mateo Carantes executed a deed of “Assignment of
Right to Inheritance” in favor of their brother, Maximino. Later on, they wanted to annul
the Deed on the ground that they executed it only because Maximino made them believe
it would make a transaction with the Government (nga ganahan daw mo palit sa part of
land para himuong airport) easier. When the case reached the SC, Maximino’s wife who
substituted him says that the other heirs’ action is not for annulment but for reformation
of the deed.
SC: she cannot raise this for the first time. Deed is voidable, but heirs’ action has
prescribed.
FACTS:
Mateo Carantes, original owner of Lot No. 44 situated at Loakan, Baguio City, died in 1913
leaving his widow Ogasia, and six children, namely, Bilad, Lauro, Crispino, Maximino, Apung
and Sianang,. In 1930, the government, in order to expand the landing field of the Loakan
Airport, filed for the expropriation of a portion of Lot. No. 44. Said lot was subdivided into
Lots. No. 44A to 44E for the purpose.
In 1913, Maximino Carrantes (MAX) was appointed the judicial administrator of the estate of
Mateo. Four heirs, namely, Bilad, Lauro, Sianang, and Crisipino, executed a deed
denominated “Assignment of Right to Inheritance” assigning to Max their rights over said lot
in 1939. The stated monetary consideration is P1.00. On same date, Max sold Lot Nos. 44B
and 44C to the government. One year later the Court of First Instance, upon joint petition of
the Carrantes heirs, issued an order cancelling O.C.T. No. 3 and TCT No. 2533 was issued in its
place.
On 16 March 1940, Max registered the deed of “Assignment of Right to
Inheritance”. Thus, TCT No. 2533 was cancelled and TCT 2540 was issued in the name of Max.
A formal deed of Sale was also executed by Max on the same date in favor of the
government. Hence, TCT 2540 was cancelled and new TCTs were issued in favor of the
government and Max, respectively. On 4 Sept. 1958, Bilad, Lauro, and Crispino, along with
the surviving heirs of Apung and Sianang filed complaint in the CFI.
They claimed that the execution of the deed of assignment was attended by fraud because
Maximino made them believe that the deed embodied the understanding among the parties
that it merely authorized Maximino to convey portions of Lot No 44 to the Government (kay
I’expropriate daw sa gov’t kay gamiton ang portion sa Lot 44 para sa Loakan Airport) in their
behalf to minimize expenses and facilitate the transaction.
The trial court decided that the action of the heirs had already prescribed since an action on
fraud prescribes on four years from discovery of such, in this case, on 16 March 1940 when
Max registered the deed of assignment. The Court of Appeals reversed and found that a
constructive trust was created. Hence, the present petition.
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ISSUE: W/N the heirs action, being one for reformation of the deed, prescribed?
RULING: Yes.
Engracia cannot raise this issue for the first time when she did not raise it in his answer in
the RTC.
• Maximino did not raise the defense of prescription of the action for reformation in his
answer to the heirs’ complaint in the RTC, so Engracia cannot raise this anymore
• The trial proceeded on the theory that the action sought the declaration of the nullity of
the deed of Assignment
• Settled rule: defenses not pleaded in the answer may not be raised for the first time on
appeal
Another issue: FYI lang ni
WON the deed is voidable?
- Yes it is voidable, but the action has prescribed.
• NCC 1390: a contract where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud is voidable
• NCC 1359 par 2: if mistake, fraud, inequitable conduct or accident has prevented a
meeting of the minds of parties, the proper remedy is not reformation of the instrument
but annulment of the contract
• Fraud or deceit does not render a contract void ab initio, but merely voidable. An action
to annul a contract on the ground of fraud prescribes in 4 years
• In this case, the fraud must be deemed to have been discovered on March 16, 1940,
when the Deed was registered in the Register of Deeds
• The registration of an instrument constitutes a constructive notice to the whole world,
and discovery of fraud is deemed to have taken place at the time of registration
Thus, since the heirs filed the present action only in 1958, the action has prescribed. CA
Judgment set aside.
53. SARMING ET AL. VS CRESENCIO DY ET AL.
Syllabus: Procedure of Reformation (Art.1369)
FACTS:
Valentina Unto Flores, who owned, among others, Lot 5734, covered by OCT 4918-A; and
Lot 4163. After the death of Valentina, her three children, namely: Jose, Venancio, and
Silveria, took possession of Lot 5734 with each occupying a one-third portion. Upon their
death, their children and grandchildren took possession of their respective shares. The
other parcel, Lot 4163 which is solely registered under the name of Silveria, was sub-
divided between Silveria and Jose. Two rows of coconut trees planted in the middle of this
lot serves as boundary line.
The grandchildren of Jose and now owners of one-half of Lot 4163, entered into a contract
with plaintiff Alejandra Delfino, for the sale of one-half share of Lot 4163 after offering the
same to their co-owner, Silveria, who declined for lack of money. Silveria did not object to
the sale of said portion to Alejandra Delfino.
The late Atty. Pinili, Alejandra's lawyer, called Silveria and the heirs of Venancio to a
conference where Silveria declared that she owned half of the lot while the other half
belonged to the vendors; and that she was selling her three coconut trees found in the half
38
portion offered to Alejandra Delfino for P15. When Pinili asked for the title of the land,
Silveria Flores, through her daughter, Cristita Corsame, delivered Original Certificate of
Title No. 4918-A, covering Lot No. 5734, and not the correct title covering Lot 4163. At that
time, the parties knew the location of Lot 4163 but not the OCT Number corresponding to
said lot.
Believing that OCT No. 4918-A was the correct title corresponding to Lot 4163, Pinili
prepared a notarized Settlement of Estate and Sale (hereinafter "deed") duly signed by the
parties. As a result, OCT No. 4918-A was cancelled and in lieu thereof, TCT No. 5078 was
issued in the names of Silveria Flores and Alejandra Delfino, with one-half share each.
Silveria Flores was present during the preparation and signing of the deed and she stated
that the title presented covered Lot No. 4163. Alejandra Delfino immediately took
possession and introduced improvements on the purchased lot, which was actually one-
half of Lot 4163 instead of Lot 5734 as designated in the deed.
Two years later, when Alejandra Delfino purchased the adjoining portion of the lot she had
been occupying, she discovered that what was designated in the deed, Lot 5734, was the
wrong lot. She sought the assistance of Pinili who approached Silveria and together they
inquired from the Registry of Deeds about the status of Lot 4163. They found out that OCT
No. 3129-A covering Lot 4163 was still on file. Alejandra Delfino paid the necessary fees so
that the title to Lot 4163 could be released to Silveria Flores, who promised to turn it over
to Pinili for the reformation of the deed of sale. However, despite repeated demands,
Silveria did not do so, prompting Alejandra and the vendors to file a complaint against
Silveria for reformation of the deed of sale.
ISSUE: Whether or not a reformation of the contract can take place
RULING: YES.
Reformation is that remedy in equity by means of which a written instrument is
made or construed so as to express or conform to the real intention of the parties. As
provided in Article 1359 of the Civil Code:
Art. 1359. When, there having been a meeting of the minds of the parties to a contract,
their true intention is not expressed in the instrument purporting to embody the
agreement by reason of mistake, fraud, inequitable conduct or accident, one of the parties
may ask for the reformation of the instrument to the end that such true intention may be
expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of
the parties, the proper remedy is not reformation of the instrument but annulment of the
contract.
An action for reformation of instrument under this provision of law may prosper only upon
the concurrence of the following requisites: (1) there must have been a meeting of the
minds of the parties to the contact; (2) the instrument does not express the true intention
of the parties; and (3) the failure of the instrument to express the true intention of the
parties is due to mistake, fraud, inequitable conduct or accident.
All of these requisites, in our view, are present in this case. There was a meeting of the
minds between the parties to the contract but the deed did not express the true intention
of the parties due to mistake in the designation of the lot subject of the deed. There is no
ObliCon Case Digests 2017
dispute as to the intention of the parties to sell the land to Alejandra Delfino but there was
a mistake as to the designation of the lot intended to be sold as stated in the Settlement of
Estate and Sale.
The totality of the evidence clearly indicates that what was intended to be sold to
Alejandra Delfino was Lot 4163 and not Lot 5734. As found by both courts below, there are
enough bases to support such conclusion. We particularly note that one of the stipulated
facts during the pre-trial is that one-half of Lot 4163 is in the possession of plaintiff
Alejandra Delfino since 1956 up to the present.
Now, why would Alejandra occupy and possess one-half of said lot if it was not the parcel
of land which was the object of the sale to her? Besides, as found by the Court of Appeals,
if it were true that Silveria Flores was the sole owner of Lot 4163, then she should have
objected when Alejandra Delfino took possession of one-half thereof immediately after
the sale. Additionally, we find no cogent reason to depart from the conclusion of both the
Court of Appeals and the trial court, based on the evidence on record, that Silveria Flores
owns only one-half of Lot 4163. The other half belongs to her brother Jose, represented
now by his grandchildren successors-in-interest. As such, the latter could rightfully sell the
land to Alejandra Delfino
54. Borromeo vs CA
Syllabus: Primacy of Intention (Arts. 1370-1372)
FACTS:
Jose A. Villamor (defendant) 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 Canuto O. Borromeo (plaintiff) used to borrow from the latter
certain amounts from time to time. On one occasion, Villamor borrowed from Borromeo 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 therefor 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 stipulate 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
39
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 xpiration of
such ninety-day period. CA: reversed CFI ruling
ISSUE:
Whether or not 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:
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” (Art. 1370). 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.
Reasoning:
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. (so CA should have interpreted the stipulation based on the context of the friendship
goals sa two parties haha )-'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, 1953 embodying not
ObliCon Case Digests 2017
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.
55. KASILAG VS RODRIGUEZ
Syllabus: Primacy of Intention (Art.1370-1372)
FACTS:
PROCEDURAL FACTS:
This is an appeal taken by the KASILAG(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
RODRIGUEZ et al (plaintiffs-respondents), 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.
SUBSTANTIVE 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
Petitioner, acting in good faith took possession of the land. To wit, the Petitioner has no
knowledge that the enjoyment of the fruits of the land is an element of the credit transaction
of Antichresis.
ISSUE
1. Whether or not the principal contract entered into is null and void.
2. Whether or not the subsequent contract is null and void.
3. Whether or not the Kasilag is a possessor in good faith of the land.
HELD
1. The cardinal rule in the interpretation of contracts is to the effect that the intention of
the contracting parties should always prevail because their will has the force of law between
them. Article 1281 (now Art. 1370) of the Civil Code consecrates this rule and provides, that if
the terms of a contract are clear and leave no doubt as to the intention of the contracting
parties, the literal sense of its stipulations shall be followed; and if the words appear to be
contrary to the evident intention of the contracting parties, the intention shall prevail. The
contract should be interpreted in accordance with these rules. As the terms thereof are clear
and leave no room for doubt, it should be interpreted according to the literal meaning of its
clauses.
The words used by the contracting parties in the contract clearly show that they intended to
enter into the principal contract of loan in the amount of P1,000, with interest at 12 per cent
per annum, and into the accessory contract of mortgage of the improvements on the land
40
acquired as homestead, the parties having moreover, agreed upon the pacts and conditions
stated in the deed. In other words, the parties entered into a contract of mortgage of the
improvements on the land acquired as homestead, to secure the payment of the
indebtedness for P1,000 and the stipulated interest thereon.
Another fundamental rule in the interpretation of contracts, not less important than those
indicated, is to the effect that the terms, clauses and conditions contrary to law, morals and
public order should be separated from the valid and legal contract and when such separation
can be made because they are independent of the valid contract which expresses the will of
the contracting parties.
Principal contract is that of loan and the accessory that of mortgage of the improvements
upon the land acquired as a homestead. There is no question that the first of these contract
is valid as it is not against the law.
2. Parties entered into another verbal contract whereby the petitioner was authorized to
take possession of the land, to receive the fruits thereof and to introduce improvements
thereon, provided that he would renounce the payment of stipulated interest and he would
assume payment of the land tax. The possession by the petitioner and his receipt of the fruits
of the land, considered as integral elements of the contract of antichresis, are illegal and void
agreements because the contract of antichresis is a lien and such is expressly prohibited by
section 116 of Act No. 2874.
3. Despite the foregoing, SC found the defendant-petitioner Kasilag as a possessor of the
land in good faith. 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.
56. Universal Food Corporation (UFC) vs CA
Syllabus: The difference of rescission under Art.1191 and Art. 1380
Brief facts:
The petitioner contends that
(a) under the terms of the Bill of Assignment, the respondent Magdalo V. Francisco
ceded and transferred to the petitioner not only the right to the use of the formula for
Mafran sauce but also the formula itself, because this, allegedly, was the intention of the
parties;
(b) that on the basis of the entire evidence on record and as found by the trial court, the
petitioner did not dismiss the respondent Francisco because he was, and still is, a member of
the board of directors, a stockholder, and an officer of the petitioner corporation, and that as
such, had actual knowledge of the resumption of production by the petitioner, but that
despite such knowledge, he refused to report back for work notwithstanding the petitioner's
call for him to do so;
ObliCon Case Digests 2017
(c) that the private respondents are not entitled to rescind the Bill of Assignment; and
(d) that the evidence on record shows that the respondent Francisco was the one not ready,
willing and able to comply with his obligations under the Bill of Assignment, in the sense that
he not only irregularly reported for work but also failed to assign, transfer and convey to the
petitioner of the said deed of conveyance
FACTS:
This is a petition for certiorari by the UFC against the CA decision of February 13, 1968
declaring the BILL OF ASSIGNMENT rescinded, ordering UFC to return to Magdalo Francisco
his Mafran sauce trademark and to pay his monthly salary of P300.00 from Dec. 1, 1960
until the return to him of said trademark and formula.
In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for the manufacture of a
food seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was
used commercially since 1942, and in the same year plaintiff registered his trademark in his
name as owner and inventor with the
Bureau of Patents. However, due to lack of sufficient capital to finance the expansion of the
business, in 1960, Magdalo secured the financial assistance of Tirso T. Reyes who, after a
series of negotiations, formed with
others defendant Universal Food Corporation eventually leading to the execution on May 11,
1960 of the aforequoted "Bill of Assignment" (Exhibit A or 1).
On May 31, 1960, Magdalo Francisco entered into contract with UFC stipulating among other
things that he
be the Chief Chemist and Second Vice-President of UFC and shall have absolute control and
supervision over the laboratory assistants and personnel and in the purchase and
safekeeping of the chemicals used in the preparation of said Mafran sauce and that said
positions are permanent in nature.
In line with the terms and conditions of the Bill of Assignment, Magdalo Francisco was
appointed Chief Chemist with a salary of P300.00 a month. Magdalo Francisco kept the
formula of the Mafran sauce secret to himself. Thereafter, however, due to the alleged
scarcity and high prices of raw materials, on November 28, 1960, Secretary-Treasurer Ciriaco
L. de Guzman of UFC issued a Memorandum duly approved by the President and General
Manager Tirso T. Reyes that only Supervisor Ricardo Francisco should be retained in the
factory and that the salary of plaintiff Magdalo V. Francisco, Sr., should be stopped for the
time being until the corporation should resume its operation. On December 3, 1960,
President and General Manager Tirso T. Reyes, issued a memorandum to Victoriano
Francisco ordering him to report to the factory and produce "Mafran Sauce" at the rate of
not less than 100 cases a day so as to cope with the orders of the corporation's various
distributors and dealers, and with instructions to take only the necessary daily employees
without employing permanent employees.
Again, on December 6, 1961, another memorandum was issued by the same President and
General Manager instructing the Assistant Chief Chemist Ricardo Francisco, to recall all daily
41
employees who are connected in the production of Mafran Sauce and also some additional
daily employees for the production of Porky Pops.
On December 29, 1960, another memorandum was issued by the President and General
Manager instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as Acting
Superintendent, to produce Mafran Sauce and Porky Pops in full swing starting January 2,
1961 with further instructions to hire daily laborers in order to cope with the full blast
operation. Magdalo V. Francisco, Sr. received his salary as Chief Chemist in the amount of
P300.00 a month only until his services were terminated on November 30, 1960. On January
9 and 16, 1961, UFC, acting thru its President and General Manager, authorized Porfirio
Zarraga and Paula de Bacula to look for a buyer of the corporation including its trademarks,
formula and assets at a price of not less than P300,000.00. Due to these successive
memoranda, without plaintiff Magdalo V. Francisco, Sr. being recalled back to work, he filed
the present action on February 14, 1961. Then in a letter dated March 20, 1961, UFC
requested said plaintiff to report for duty, but the latter declined the request because the
present action was already filed in court.
ISSUE: Was petitioner’s contention that Magdalo Francisco is not entitled to rescission valid?
RUILING:
No. Petitioner’s contention that Magdalo Francisco’s petition for rescission should be denied
because under Article 1383 of the Civil Code of the Philippines rescission can not be
demanded except when the party suffering damage has no other legal means to obtain
reparation, was of no merit because “it is predicated on a failure to distinguish between a
rescission for breach of contract under Article 1191 of the Civil Code and a
rescission by reason of lesion or economic prejudice, under Article 1381, et seq.” This was a
case of reciprocal
obligation. Article 1191 may be scanned without disclosing anywhere that the action for
rescission thereunder was subordinated to anything other than the culpable breach of his
obligations by the defendant. Hence, the reparation of damages for the breach was purely
secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission and the
payment for damages. Rescission is not given to the party as a last resort, hence, it is not
subsidiary in nature.
57. ORIA VS MCMICKING
Syllabus: Presumption of Fraud (Art. 1384)- Badges of Fraud
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 co-owners entered into
a contract with the herein plaintiff for the purpose of transferring and selling all the property
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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.
ISSUES: Whether or not the sale was fraudulent
RULING: YES.
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. Tested by the inquiry, does the
sale prejudice the rights of the creditors, the result is clear. The sale in the form in which it
was made leaves the creditors substantially without recourse. The property of the company
is gone, its income is gone, the business itself is likely to fail, the property is being dissipated,
and is depreciating in value. As a result, even if the claims of the creditors should live twelve
years and the creditors themselves wait that long, it more than likely that nothing would be
found to satisfy their claim at the end of the long wait. (Regalado vs. Luchsinger & Co., 5 Phil.
Rep., 625; art. 1297, Civil Code, par. 1; Manresa's Commentaries, vol. 8, pp. 713-719.)
Defendant had the right to make the levy and test the validity of the sale in that way,
without first resorting to a direct action to annul the sale. The creditor may attack the sale by
ignoring it and seizing under his execution the property, or any necessary portion thereof,
which is the subject of the sale.
58. SIGUAN VS LIM ET AL.,
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Syllabus: Presumption of Fraud (Art. 1384)- Badges of fraud
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.
Petitioner’s 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.
LIM’s 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.
ISSUES: 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: NO.
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. Also, Article 1383 of the same Code provides that the
action for rescission is but a subsidiary remedy which cannot be instituted except when the
party suffering damage has no other legal means to obtain reparation for the same. The
term "subsidiary remedy" has been defined as "the exhaustion of all remedies by the
prejudiced creditor to collect claims due him before rescission is resorted to." It is, therefore,
"essential that the party asking for rescission prove that he has exhausted all other legal
means to obtain satisfaction of his claim. Petitioner neither alleged nor proved that she did
so. On this score, her action for the rescission of the questioned deed is not maintainable
even if the fraud charged actually did exist."
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For the presumption of fraud to apply, it must be established that the donor did not
leave adequate properties which creditors might have recourse for the collection of their
credits existing before the execution of the donation. Since petitioner’s alleged credit existed
only a year after the deed of donation was executed, she be said to have been prejudiced or
defrauded by such alienation.
Further, petitioner did not present evidence that would indicate the actual market
value of Lim's properties. It was not, therefore, sufficiently established that the properties
left behind by Lim were not sufficient to cover her debts existing before the donation was
made. Hence, the presumption of fraud will not come into play.
The seven badges of fraud mentioned in Oria vs McMicking is not an exclusive list,
circumstances evidencing fraud are as varied as the men who perpetrate the fraud in each
case. But in this case the petitioner failed to discharge the burden of proving any of the
circumstances enumerated above or any other circumstance from which fraud can be
inferred. Accordingly, since the four requirements for the rescission of a gratuitous contract
are not present in this case, petitioner’s action must fail.
In any case it is essential that the party asking for rescission under accion pauliana to
prove that he has exhausted all other legal means to obtain satisfaction of his claim.
Petitioner neither alleged nor proved that she did so. On this score, her action for the
rescission of the questioned deed is not maintainable even if the fraud charged actually did
exist.
59. SUNTAY VS CA
Syllabus: Presumption of Fraud (Art. 1384)- Badges of fraud
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 rica 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.
- However, the said document was not the said deed of sale but a certain "real estate
mortgage of a parcel of land to secure a loan of P3,500.00 in favor of the Hagonoy Rural
Bank. It could not be found in the notarial register as well
43
- Federico through his new counsel requested that Rafael have TCT No. T-36714 so that he
can have the counter deed of sale in favor registered in his. But the request was turned
down.
- So Federico’s counsel filed a case in the CFI. The trial court upheld the validity and
genuineness of the deed of sale executed by Federico in favor of Rafael, but it ruled that the
counter-deed, executed by Rafael in favor of Federico, was simulated and without
consideration, hence, null and void ab initio. (it was not dated, not notarized and above all it
has no consideration because plaintiff did not pay defendant the consideration of the sale in
the sum of P20,000.00)
- CA ruled the same. BUT it then reversed itself upon petition and said that the first Deed of
Sale was a mere accommodation arrangement executed without any consideration and
therefore a simulated contract of sale. Considering the ff. circumstances:
> The 2 instruments were executed closely one after the other
> The close relationship between the parties
>the value and location of the property purportedly sold. (P20, 000)
> Rafael also never assumed ownership nor did he gather any benefit.
- Rafael Suntay on the other hand insists that the transaction was a veritable sale.
ISSUE:
WON the deed of sale executed in favor of Rafael Suntay was valid
HELD:
NO.
Reasoning 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.
- The late Rafael insisted that the sale to him of his uncle's property was in fact a "dacion en
pago" in satisfaction of Federico's unpaid attorney's fees. But such claim cannot prosper. He
did not even tell Federico that he considered such to be his fee. Federico was also liquid
enough to pay him.
- All circumstances point to the conclusion that such was simulated transaction.
- The failure of the late Rafael to take exclusive possession of the property allegedly sold to
him is a clear badge of fraud. The fact that, notwithstanding the title transfer, Federico
remained in actual possession, cultivation and occupation of the disputed lot from the time
the deed of sale was executed until the present, is a circumstance which is unmistakably
added proof of the fictitiousness of the said transfer, the same being contrary to the principle
of ownership.
Ratio 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 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.
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60. SINGSONG V ISABELA SAWMILL
NATURE
Appeal from the judgment of the CFI of Negros Occidental
FACTS
- On January 30, 1951 the defendants Leon Garibay, Margarita G. Saldejeno, and Timoteo
Tubungbanua entered into a Contract of Partnership under the firm name "Isabela Sawmill"
- On April 25, 1958, an action to dissolve the partnership was filed by the spouses Cecilio
Saldajeno and Margarita G. Saldajeno against Isabela Sawmill, Leon Garibay, and Timoteo
Tubungbanua
- On April 27, 1958 the defendants Leon Garibay, Timoteo Tubungbanua and Margarita G.
Saldajeno entered into a "Memorandum of Agreement”
- On May 26, 1958 the defendants Leon Garibay, Timoteo Tubungbanua and Margarita G.
Saldajeno executed a document entitled "Assignment of Rights with Chattel Mortgage" in
favor of Saldejano
- Thereafter the defendants Leon Garibay and Timoteo Tubungbanua did not divide the
assets and properties of the "Isabela Sawmill" between them, but they continued the
business of said partnership under the same firm name "Isabela Sawmill".
- The chattel mortgage was later foreclosed
- On May 18, 1959 the Provincial Sheriff of Negros Occidental published two (2) notices that
he would sell at public auction on June 5, 1959 at Isabela, Negros Occidental certain trucks,
tractors, machinery, office equipment and other things
- On October 15, 1969 the Provincial Sheriff of Negros Occidental executed a Certificate of
Sale in favor of the defendant Margarita G. Saldajeno
- On October 20, 1959 the defendant Margarita G. Saldajeno executed a deed of sale in favor
of the Pan Oriental Lumber Company transferring to the latter for the sum of P45,000.00 the
trucks, tractors, machinery, and other things that she had purchased at a public auction
- Plaintiffs herein are creditors of the defendant partnership
- Breakdown of Outstanding Balance
a. Oppen, Esteban, Inc.- P1,288.89
b. Agustin E. Tonssay- P933.73
c. Manuel G. Singsong- P3,580.50, P143.00
d. Jose L. Espinos- P1,579.44
e. Bacolod Southern Lumber Yard- P1,048.78
f. Jose Balzunce- P2,052.10
- They sued the defendants to recover the sums of money they have advanced to the
partnership, and asked for the nullity of the chattel mortgage.
- CFI of Negros Occidental ruled in favor of plaintiffs, saying that plaintiffs, as creditors of the
defendant partnership, have a preferred right over the assets of the said partnership, and
over the proceeds of their sale at the public auction.
- Saldejanos appealed
- CA certified the case to SC considering that the resolution of appeal involves purely
questions of law
44
ISSUES
1. WON the Court of First Instance of Negros Occidental had no jurisdiction over the case
because the plaintiffs Oppen, Esteban, Inc., Agustin R. Tonsay, Jose L. Espinos and the
Bacolod Southern Lumber Yard sought to collect sums of money, the biggest amount of
which was less than P2,000.00 and, therefore, within the jurisdiction of the municipal court
2. WON the chattel mortgage may no longer be annulled because it had been judicially
approved by the Court of First Instance of Negros Occidental and said chattel mortgage had
been ordered foreclosed by the same court (different branch from that which gave the
judgment subject of this appeal)
3. WON plaintiffs cannot bring an action to annul the chattel mortgage of the properties of
the partnership executed by Leon Garibay and Timoteo Tubungbanua in favor of Margarita G.
Saldajeno
4. WON appellants are liable for attorney’s fees
HELD
1. NO
This contention is devoid of merit because all the plaintiffs also asked for the nullity of the
assignment of right with chattel mortgage.
-This cause of action is not capable of pecuniary estimation and falls under the jurisdiction of
the Court of First Instance.
Ratio Where the basic issue is something more than the right to recover a sum of money
and where the money claim is purely incidental to or a consequence of the principal relief
sought, the action is as a case where the subject of the litigation is not capable of pecuniary
estimation and is cognizable exclusively by the Court of First Instance.
2. NO
Ratio One branch of the Court of First Instance of Negros Occidental can take cognizance of
an action to nullify a final judgment of the other two branches of the same court.
Reasoning On the question of whether a court may nullify a final judgment of another court
of co-equal, concurrent and coordinate jusridiction, this Court originally ruled that a court
has no power to interfere with the judgments or decrees of a court of concurrent or
coordinate jurisdiction having equal power to grant the relief sought by the injunction.
-This was pursuant to the policy of judicial stability
-In December 1971, however, this court re-examined and reversed its earlier doctrine on the
matter. In Dupla V Court of Appeals, the SC declared that a court of first instance or a branch
thereof has the authority and jurisdiction to take cognizance of, and to act in, suit to annul
final and executory judgment or order rendered by another court of first instance or by
another branch of the same court.
3. NO
Ratio A contract cannot be assailed by one who is not a party thereto. However, when a
contract prejudices the rights of a third person, he may file an action to annul the contract.
Reasoning This Court has held that a person, who is not a party obliged principally or
subsidiarily under a contract, may exercise an action for nullity of the contract if he is
prejudiced in his rights with respect to one of the contracting parties, and can show
detriment which would positively result to him from the contract in which he has no
intervention.
ObliCon Case Digests 2017
-The plaintiffs-appellees were prejudiced in their rights by the execution of the chattel
mortgage over the properties of the partnership "Isabela Sawmill" in favor of Margarita G.
Saldajeno by the remaining partners, Leon Garibay and Timoteo Tubungbanua, hence, they
have a right to file an action to nullify the chattel mortgage.
4. NO
Ratio There will be no liability for attorney’s fees absent a showing of wanton disregard of
the rights of the plaintiffs.
Disposition The decision appealed from is hereby affirmed with the elimination of the
portion ordering appellants to pay attorney's fees and with the modification that the
defendants, Leon Garibay and Timoteo Tubungbanua, should reimburse the defendants-
appellants, Margarita G. Saldajeno and her husband Cecilio Saldajeno, whatever they shall
pay to the plaintiffs-appellees.
61.CADWALLER & CO. V SMITH, BELL, AND CO.
NATURE
Appeal from a judgment of the C FI of Manila
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.
Disposition Judgment modified
62.VELARDE V COURT OF APPEALS
FACTS
- David Raymundo (private respondent) is the absolute and registered owner of a parcel of
land, together with the house and other improvements.
- Gorge Raymundo, David’s father, negotiated with Avelina and Mariano Velarde (plaintiffs)
for the sale of David’s property, which was under lease.
- Aug 8, 1986, a Deed of Sale with Assumption of Mortgage was executed by David
Raymundo in favor of Avelina Velarde. It states that David Raymundo sells, cedes, transfers
45
conveys and delivers the property to Avelina Velarde for P800,000 and that Avelina Velarde
assumes to pay the mortgage obligations on the property in the amount of P1,800,000 in
favor of BPI.
- On the same date, Avelina, with the consent of husband Mariano, executed an Undertaking,
parts of which as follows:
1. that Avelina Velarde paid David Raymundo P800,000, and assumes the mortgage
obligations on the property with BPI in the amount of P1.8M.
2. while Avelina’s application for the assumption of the mortgage obligations on the
property is not yet approved by BPI, Avelina agreed to pay the mortgage obligations
on the property, including interest and charges for late payment.
3. Avelina binds and obligates herself to strictly and faithfully comply with the ff terms
and conditions:
a. until such time that assumption of mortgage obligations on the property is
approved by BPI, Avelina shall continue to pay said loan in accordance with its
terms and conditions.
b. In the event Avelina violates any of the terms and conditions, her downpayment of
P800,000 plus all payments made with BPI on the mortgage loan shall be forfeited
in favor of David Raymundo, and that David shall resume total and complete
possession and ownership of the property, and the Deed of Sale with Assumption
of Mortgage shall be deemed automatically cancelled.
- As per agreement, the Velardes paid BPI the monthly interest on the loan for 3 months,
(Sept 19, 1986 at P27,225; Oct 20, 1986 at 23,000; Nov 19, 1986 at 23, 925)
- Dec. 15, 1986, plaintiffs were advised that their Application for Assumption of Mortgage
with BPI was not approved. This prompted the Velardes not to make any further payment.
- Jan. 5, 1987, the Raymundos, thru counsel, wrote plaintiffs informing them that their
nonpayment to BPI constituted nonperformance of their obligation.
- On January 7, 1987, the Velardes responded thru counsel and advised that they are willing
to pay the balance in cash not later that Jan 21 1987 provided that: a) respondents deliver
actual possession of the property not later that Jan 15, 1987; b) respondents cause the
release of title and mortgage from BPI and make the title available and free from any liens
and encumbrances; and c) respondents execute an absolute deed of sale in favor of Avelina
Velarde not later than Jan 21, 1987.
- Jan 8, 1987, defendants sent the Velardes a notarial notice of cancellation/rescission of the
intended sale of the property, allegedly due to the plaintiffs’ failure to comply with the terms
and conditions of the Deed of Sale with Assumption of Mortgage and the Undertaking.
- Feb 9, 1987, the Velardes filed a complaint against respondents for specific performance,
nullity of cancellation, writ of possession, and damages.
- RTC instructed the parties to proceed with the sale, directing the Velardes to pay the
balance of P1.8M and ordered the Raymundos to execute a deed of absolute sale and to
surrender possession of property to the Velardes.
- CA reversed the ruling and dismissed the Velardes’ Complaint.
ISSUES
1. WON there is a breach of contract
2. WON the rescission by the Raymundos of the contract valid
ObliCon Case Digests 2017
3. WON the finding of the CA that the Velardes’ Jan 7, 1987 letter gave three “new
conditions” constituted an attempt to novate, thus necessitating a new agreement between
the parties
HELD
1. Yes. In a contract of sale, the seller obligates itself to transfer the ownership of and deliver
a determinate thing, and the buyer to pay therefore a price certain in money or its
equivalent.
- Private respondents already performed their obligation through the execution of the Deed
of Sale, which effectively transferred ownership of property to Velarde through consecutive
delivery. Prior physical delivery or possession is not legally required, and the execution of the
Deed of Sale is deemed equivalent to delivery.
- Petitioners did not perform their correlative obligation of paying the contract price in the
manner agreed upon. They wanted private respondents to perform obligations beyond those
stipulated in the contract before fulfilling their own obligation to pay the full purchase price.
2. Yes. Private respondents’ right to rescind the contract finds basis in Article 1191 of the Civil
Code, which provides:
“Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission even after he has chosen
fulfillment, of the latter should become impossible.”
- The right of rescission of a party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party who violates the reciprocity between
them. The breach contemplated in said provision is the obligor’s failure to comply with an
existing obligation. When the obligor cannot comply with what is incumbent upon it, the
oblige may seek rescission and, in the absence of any just cause for the court to determine
the period of compliance, the court shall decree the rescission.
- Private respondents validly exercised their right to rescind the contract, because of the
failure of petitioners to comply with their obligation to pay the balance of the purchase price.
The Velardes violated the very essence of reciprocity in the contract of sale, a violation that
consequently gave rise to private respondents’ right to rescind the same in accordance with
law.
- Mutual restitution required in rescission.
- the breach committed by petitioners was a nonperformance of a reciprocal obligation,
not a violation of the terms and conditions of the mortgage contract. Thus, the
automatic rescission and forfeiture of payment clauses do not apply. Civil Code
provisions shall govern.
- Since breach herein is under A1191, mutual restitution is required to bring back the
parties their original situation prior to the inception of the contract.
- Rescission creates an obligation to return the object of the contract. It can be carried
out only when the one who demands rescission can return whatever he may be obliged
to restore.
- To rescind is t declare a contract void at its inception and to put an end to it as though it
never was.
46
3. SC did not find it necessary to discuss third issue but said that the three conditions were
not part of the original contract, and that petitioners had no right to demand
preconditions to the fulfillment of their obligation, which had become due.
Disposition CA decision affirmed with modification that private respondents are ordered to
return to petitioners P874,150 with legal interest.
63.UY SOO LIM V TAN UNCHUAN
FISHER; September 7, 1918
NATURE
APPEAL from a judgment of the CFI of Cebu
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 .
- The abovementioned heirs opposed the distribution of the property in accordance with
what was stipulated in the will. At the end, an agreement was reached between Choa Tek
Hee (lawyer of the plaintiff) and the the plaintiff, of the one part, and Tan Unchuan and Del
Rosario, an attorney of Cebu, representing the interest of Candida, Francisca and
Concepcion, on the other, to submit the entire matter in dispute to the judgment of three
respectable Chinese merchants/lawyers designated.
- These advisers came to the conclusion that the sum of P82,500 should be accepted by
plaintiff in full satisfaction and relinquisment of all his right, title, and interest in and to the
estate of the deceased Santiago Pastrano, and this recommendation was accepted by Choa
Tek Hee and plaintiff and by Tan Unchuan and Del Rosario.
- Candida and Concepcion later sold their shares to Francisca. But after the agreed amount
was paid in installments by the Francisca and after the plaintiff spent most of it, Uy Soo Lim,
three (3) years after attaining the age of majority, commenced this present action to rescind
and annul the contract by which he had sold and trasferred to Francisca Pastrano his interest
in the estate of Santiago Pastrano.
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
ObliCon Case Digests 2017
part of th econsideration after the attainment of majority imports an affirmance of the
contract.
Reasoning Because, with full knowledge of his rights in the premises, he failed to disaffirm
his contract within a reasonable time after reaching majority; and
Because he not only failed to tender, or offer, to produce and pay the consideration in esse
when he reached majority, and when he filed his action, but proceeded, after such events, to
demand, collect and dispose of such consideration, when according to his own statement
under oath he had no other funds with which to make reisingson
mbursement.
Disposition The judgment of the trial court is without erro and it is therefore, AFFIRMED
64. PHILIPPINE NATIONAL BANK V PHILIPPINE VEGETABLE OIL CO.
MALCOLM; January 14, 1927
NATURE
Appeal from a judgment of the CFI of Manila
FACTS
- In 1920, Phil Vegetable was in debt to the extent of around P30M. PNB was the largest
creditor, w/ Phil Vegetable owing it P17M. The PNB loan was secured by a real and chattel
mortgage for P3.5M. Phil Vegetable executed another chattel mortgage in favor of the bank
on its vessels to guarantee around P4M.
- Bankruptcy was imminent. Phil Vegetable General Manager Whitaker made his first offer to
pledge certain private properties to secure creditors of Phil Vegetable. A creditors’ meeting
was held and a receiver for the Phil Vegetable was appointed by the CFI.
- During the period when receiver was in control of Phil Vegetable’s property, an agreement
was perfected by Phil Vegetable, Whitaker, and some creditors whereby creditors
transferred to Whitaker a part of their claims against Phil Vegetable. PNB was not a direct
party to the agreement though the officials had full knowledge of its accomplishment and its
GM placed his OK at the end of the final draft.
- The next move of PNB was to obtain a new mortgage fr Phil Vegetable. (2/20/1922)
- Receivership for Phil Vegetable was terminated. Phil Vegetable’s plant was definitely
closed.
- PNB filed action to foreclose its mortgage on Phil Vegetable’s property. Phil Vegetable
countered with special defenses.
ISSUES
1. WON mortgage was null bec at time of its execution all the properties of Phil Vegetable
was under receiver and neither the approval of the receiver nor the court had been obtained
2. WON PNB failed to comply w/ contract that it was alleged to have celebrated w/ Phil
Vegetable that it would furnish funds to the company so that it could continue operating its
factory and WON Whitaker has established his right to recover damages fr PNB by reason of
the latter’s alleged refusal to finance the operation of Phil Vegetable
47
HELD
1. NO (It is merely voidable or valid until annulled)
- PNB challenged the right of Whitaker as intervenor. PNB is right. Phil Vegetable is the
defendant, the corporation has not appealed. Whitaker was one of the largest individual
stockholders. It was he who asked for appointment of receiver. It was he who was the
leading figure in the negotiations. It was he who pledged own property to assist in rehab of
Phil Vegetable. Whitaker is more vitally interested in case than Phil Vegetable. If the
mortgage had been the free act of Phil Vegetable, it could not be heard to allege its own
fraud, and only a creditor could take advantage of fraud to intervene to avoid conveyance.
- Mssrs. Wilson and Cuaderno, PNB Directors, were serving as Phil Vegetable Directors after
Wilson suggested reorganization of Phil Vegetable so that the bank might have close working
relationship w/ Phil Vegetable. Wilson became Pres of Phil Vegetable.
- Mortgage was not ratified before notary public until 3/8/22 and was not recorded in
registry of property until 3/21/22. In other words, mortgage was executed by PNB thru its
GM and another corp before the termination of receivership of the said corp, but was not
acknowledged or recorded until after termination of the receivership.
- It must be evident that PNB could secure no new mortgage while the prop of Phil
Vegetable was in custodia legis. Phil Vegetable was then inhibited fr giving mortgage on its
property. The receiver was not a party to the mortgage. Court had not authorized receiver
to consent to the execution of a new mortgage. The Court would want to protect rights of all
creditors and not just one particular creditor.
- While the mortgage could not have been executed w/o dissolution of the receivership,
dissolution was apparently secured through representations that PNB would continue to
finance the operations of Phil Vegetable. Instead of so doing, the bank within less than 2
mos after the mortgage was recorded, withdrew its support.
- Another reason is that the mortgage was accomplished when PNB was an influence in
affairs of Phil Vegetable thru Wilson and Cuaderno. On one hand was PNB in person and on
the other hand was PNB by proxy. It is unconscionable to allow the bank after the hands of
the creditors were tied, to appropriate to itself all the property of Phil Vegetable.
- The setting aside of this mortgage does not mean PNB is left w/o security. Even before the
receivership, PNB already had 3 mortgages on property of Phil Vegetable. They’re still in
effect and can be foreclosed.
2. NO
- As disclosed in docs such as minutes of mtgs, there has been no promise made by PNB to
continue indefinitely its backing of the Phil Vegetable.
- Whitaker was in no way personally responsible for obligations of Phil Vegetable.
Nevertheless, he signed in creditors’ agreement. Now the creditors have large amt of his
property. The Court sympathizes with him but said that sympathy cannot be transmuted into
legal authoritativeness.
SEPARATE OPINION
AVANCEÑA AND VILLAMOR [concur & dissent]
- The alleged fraud in the mortgage is unsupported by the record. Fraud is never presumed.
JOHNSON [dissent]
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- The mortgage is a valid and subsisting contract.
- PNB promised to furnish sufficient funds.
STREET [concur & dissent]
- Intervenor can’t recover damages fr PNB.
- I agree w/ CJ that judgment of foreclosure should be affirmed
65.ROSENCOR DEV. CORP v INQUING
FACTS:
Respondents are tenants of a two-storey residential apartment in Tomas Morato
QC. The lease was not covered by any contract. Lessees were verbally given by the lessors
the pre-emptive right to purchase the property in case of sale.
The original lessors, spouses Tiangcos, died and the management of the property was
promised to their heirs who were represented by Eufrocina de Leon. The lessees were
allegedly promised the same pre-emptive right to purchase by the heirs. They also continued
to occupy the same property.
Atty. Erlinda Aguila demanded the lessees to vacate the property because the
building will be demolished and when the latter refused, Eufrocina sent them a letter
offering to sell the property for P2M. Lessees made a counter-offer of P1M but there was no
reply. Later, Rene Joaquin came to the leased premises introducing himself as its new owner.
De Leon subsequently informed the lessees that the property was already sold to
Rosencor. Lessees claimed that they were deceived because the property was already sold to
Rosencor before it was offered to them. They offered to reimburse the payment to the
lessors but the offer was declined. Hence, this petition.
ISSUES:
1.W/N a “right of first refusal" is among those enumerated in the list of contracts covered by
the Statute of Frauds.
2. More specifically, is a right of first refusal akin to "an agreement for the leasing of a longer
period than one year, or for the sale of real property or of an interest therein" as
contemplated by Article 1403, par. 2(e) of the New Civil Code.
HELD:
The term "statute of frauds" is descriptive of statutes which require certain classes of
contracts to be in writing. This statute does not deprive the parties of the right to contract
with respect to the matters therein involved, but merely regulates the formalities of the
contract necessary to render it enforceable. Thus, they are included in the provisions of the
New Civil Code regarding unenforceable contracts, more particularly Art. 1403, paragraph 2.
The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations
depending for their evidence on the unassisted memory of witnesses by requiring certain
enumerated contracts and transactions to be evidenced by a writing signed by the party to
be charged. Moreover, the statute of frauds refers to specific kinds of transactions and
cannot apply to any other transaction that is not enumerated therein. The application of such
statute presupposes the existence of a perfected contract.
We have previously held that not all agreements "affecting land" must be put into writing to
attain enforceability. Thus, we have held that the setting up of boundaries, the oral partition
of real property, and an agreement creating a right of way are not covered by the provisions
of the statute of frauds. The reason simply is that these agreements are not among those
enumerated in Article 1403 of the New Civil Code.
48
A right of first refusal is not among those listed as unenforceable under the statute of frauds.
Furthermore, the application of Article 1403, par. 2(e) of the New Civil Code presupposes the
existence of a perfected, albeit unwritten, contract of sale.
A right of first refusal, such as the one involved in the instant case, is not by any means a
perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of
the real property involved, but of the right of first refusal over the property sought to be
sold.
It is thus evident that the statute of frauds does not contemplate cases involving a right of
first refusal. As such, a right of first refusal need not be written to be enforceable and may be
proven by oral evidence.
66. CARBONNEL V PONCIO
CONCEPCION; May 12,1958
NATURE
APPEAL from an order of the Court of First Instance of Rizal. Caluag, J.
FACTS
- Plaintiff Rosario Carbonnel filed this case with the Court of First Instance of Rizal alleging
that on January 27, 1955, she purchased from defendant Jose Poncio, at P9.50 a square
meter, a parcel of land of about 195 square meters, more or less, located in San Juan del
Monte, Rizal. Plaintiff allegedly paid P247.26 on account of the price and assumed Poncio's
obligation with the Republic Savings Bank amounting to P1,177.48, with the understanding
that the balance would be payable upon execution of the corresponding deed of conveyance.
Poncio however allegedly refused to convey the title to the plaintiff and conveyed the same
property to defendants Infante spouses who knew of the first sale to plaintiff.
- Plaintiff prayed, therefore, that she be declared owner of the land in question; that the sale
to the Infantes be annulled; that Poncio be required to execute the corresponding deed of
conveyance in plaintiff's favor; that the Register of Deeds of Rizal be directed to issue the
corresponding title in plaintiff's name; and that defendants be sentenced to pay damages.
Defendants moved to dismiss said complaint upon the ground that plaintiff's claim is
unenforceable under the Statute of Frauds, and that said pleading does not state facts
sufficient to constitute a cause of action. The motion was denied, "without prejudice to
considering, when this case is decided on the merits, whether the same falls under the Statute
of Frauds."
- As the case came up for trial, on February 23, 1956, plaintiff introduced the testimony of
one Constancio Meonada, who corroborated the existence of a document written in Ivatan
(Batanes language) purporting to effect the sale, which was translated as follows: "From this
date, January 27, Jose Poncio may stay in this lot that I bought from him until one year
without payment. After that one year and he cannot find any place where to transfer his
house, he can also stay in this lot and he will pay according to agreement.
- Then, taking the witness stand, plaintiff testified that she has known Poncio since
childhood, he being related to her mother; that Poncio's lot adjoins her lot, in San Juan, Rizal;
that one day Poncio told her that he wanted to sell his property; that, after both had agreed
ObliCon Case Digests 2017
on its price, he said that his lot is mortgaged to the Republic Savings Bank; and that, at noon
time, on the same clay, he came back stating that both would "go to the bank to pay the
balance in arrears." At this juncture, defense counsel moved to strike out the statement of
the witness, invoking, in support of the motion, the Statute of Frauds. Later on, the lower
court issued an order dismissing plaintiff's complaint, without costs, upon the ground that
her cause of action is unenforceable under the Statute of Frauds. The counterclaims were,
also, dismissed.
- Hence, this appeal by plaintiff with the theory that the Statute of Frauds cannot be invoked
by respondents because it only applies to executory contracts. As borne by the evidence,
there was already partial performance. The nature of the contract in this case is therefore no
longer covered by the term “executory.”
ISSUE
WON the lower court erred in holding that the Statute of Frauds bars the plaintiff’s cause of
action.
HELD
YES
Ratio The Statute of Frauds is applicable only to executory contracts not to contracts that
are totally or partially performed.
Reasoning “It is well settled in Great Britain and in this country, with the exception of a few
states, that a sufficient part performance by the purchaser under a parol contract for the sale
of real estate removes the contract from the operation of the statute of frauds." (49 Am. Jur.
722-723.)
- In the words of former Chief Justice Moran: "The reason is simple. In executory contracts
there is a wide field for fraud because unless they be in writing there is no palpable evidence
of the intention of the contracting parties. The statute has precisely been enacted to prevent
fraud." (Comments on the Rules of Court, by Moran, Vol. 111 [1957 ed.], p. 178.) However, if
a contract has been totally or partially performed, the exclusion of parol evidence would
promote fraud or bad faith, for it would enable the defendant to keep the benefits already
derived by him from the transaction in litigation, and, at the same time, evade the
obligations, responsibilities or liabilities assumed or contracted by him thereby.
- For obvious reasons, it is not enough for a party to allege partial performance in order to
hold that there has been such performance and to render a decision declaring that the
Statute of Frauds is inapplicable. But neither is such party required to establish such partial
performance by documentary proof before he could have the opportunity to introduce oral
testimony on the transaction. Indeed, such oral testimony would usually be unnecessary if
there were documents proving partial performance. Thus, the rejection of any and all
testimonial evidence on partial performance, would nullify the rule that the Statute of Frauds
is inapplicable to contracts which have been partly executed, and lead to the very evils that
the statute seeks to prevent.
- The true basis of the doctrine of part performance according to the overwhelming weight of
authority, is that it would be a fraud upon the plaintiff if the defendant were permitted to
escape performance of his part of the oral agreement after he has permitted the plaintiff to
perform in reliance upon the agreement. The oral contract is enforced in harmony with the
principle that courts of equity will not allow the statute of frauds to be used as all instrument
49
of fraud. In other words, the doctrine of part performance was established for the same
purpose for which the statute of frauds itself was enacted, namely, for the, prevention of,
and fraud, and arose from the necessity of preventing, the statute from becoming an agent
of fraud for it could not have been the intention of the statute to enable any party to commit
a fraud with impunity." (49 Am. Jur., 725-726; italics supplied.)
- When the party concerned has pleaded partial performance, such part is entitled to a
reasonable chance to establish by parol evidence the truth of this allegation, as well as the
contract itself. "The recognition of the exceptional effect of part performance in taking an
oral contract out of the statute of frauds involves the principle that oral evidence is
admissible in such cases to prove both the contract and the part performance of the
contract" (49 Am. Jur., 927).
- Upon submission of the case for decision on the merits, the Court should determine
whether said allegation is true, bearing in mind that parol evidence is easier to concoct and
more likely to be colored or inaccurate than documentary evidence. If the evidence of record
fails to prove clearly that there has been partial performance, then the Court should apply
the Statute of Frauds, if the cause of action involved falls within the purview thereof. If the
Court is, however, convinced that the obligation in question has been partly executed and
that the allegation of partial performance was not resorted to as a devise to circumvent the
Statute, then the same should not be applied.
- Apart from the foregoing, there are in the case at bar several circumstances indicating that
plaintiff's claim might not be entirely devoid of factual basis. Thus, for instance, Poncio
admitted in his answer that plaintiff had offered several times to purchase his land. The fact
that Poncio’s bank book is with the plaintiff should be also clarified in a full trial.
- Without expressing any opinion on the merits of plaintiff's claim, it is clear, therefore, that
she is entitled, legally as well as from the viewpoint of equity, to an opportunity to introduce
parol evidence in support of the allegations of her second amended complaint. Wherefore,
the order appealed from is hereby set aside, and let this case be REMANDED to the lower
court for further proceedings not inconsistent with this decision, with the costs of this
instance against defendants-appellees. It is so ordered.
CASE# 67 TO 70
71. VILLARROEL V ESTRADA
NATURE
Petition to review the decision of the CFI.
FACTS
On May 9, 1912, Alexander F. Callao, mother of Juan F. Villarroel, obtained from the spouses
Mariano Estrada and Severina debt of P1,000, payable after seven years. Alejandra, passed
away, leaving Villaroel as sole heir. The spouses Mariano Estrada and Severina also passed
away, leaving Bernardino Estrada as sole heir. On August 9, 1930, Villaroel gave a document
to Estrada, in which he declared in owing the amount of P1,000, with an interest of 12
percent per year. This action turns on the collection of this amount. The Court of First
Instance of Lagoon, in as interposed this action, and decided for Villaroel to pay the amount
ObliCon Case Digests 2017
demanded of P1,000 with its legal interests of 12 percent from August 9, 1930 to its
complete payment. Villaroel appealed.
ISSUE
WON Villaroel should pay the amount despite the prescription of the original debt
HELD
The present action is not based on the original obligation contracted by the mother Villaroel,
which has prescribed, but on that which he contracted on August 9, 1930 when assuming the
fulfillment of that obligation. Being the sole heir of the indebted one, with right her
inheritance, that debt which was contracted by his mother legally, although no longer
effective by prescription, now is, nevertheless, a moral obligation. That consideration is
sufficient to create and to make his obligation voluntarily contracted, effective August of
1930. The rule in which a new promise to pay a prescribed debt must be done only by the
same person or another who is legally authorized by her, is not applicable to the present
case, because Villaroel voluntarily wanted to assume this obligation.
Disposition The appealed sentence is confirmed, with costs to the apellant.
72. FISHER V ROBB
VILLAREAL; November 2, 1939
NATURE
Appeal from a judgment of the CFI of Manila, which ordered defendant Robb to pay
plaintiff Fisher the sum of P 2,000 with interest
FACTS
On Sept. 1935, defendant-appellant John Robb was asked by the board of directors of the
Philippine Greyhound Club Inc. (PGCI) to study the operation of a dog racing course in
Shanghai. In Shanghai, he met plaintiff-appellee, A.O. Fisher who happened to be the
manager of the dog racing course. During their time together, Plaintiff became interested in
the PGCI and asked to become a stockholder. He later on subscribed to PGCI and sent a
payment of P 3,000 for the 1st installment of his subscription. Robb returned to Manila from
Shanghai shortly thereafter. After a few months, the PGCI Board issued a call for the 2nd
installment of Fisher’s subscription, hence, defendant-appellant Robb sent a radiogram
requesting payment of the 2nd installment. Fisher duly complied and sent P 2,000 directly to
PGCI. The PGCI however, due to the manipulations of some of its members, crumbled not too
long after.
Defendant-appellant Robb, who was organizing a new company called the Philippine Racing
Club, immediately endeavored to save the investment of those who had subscribed to the
PGCI, by having the Philippine Racing Club acquire the remaining assets of the PGCI. Robb
wrote a letter to Fisher explaining in detail the critical condition of the PGCI, and outlining his
plans to save the properties and assets of the plaintiff-appellee and that he felt morally
responsible to the stockholders who had paid their second installment. In answer to said
letter, the plaintiff-appellee wrote the defendant-appellant requiring him to return the entire
amount paid by him to the PGCI. Upon receiving this letter, the defendant-appellant
50
answered the plaintiff-appellee on March 16, 1936, to the effect that it was not his duty
under the law to reimburse the plaintiffappellee for any loss which he might have suffered in
connection with the PGCI in the same way that he could not expect anyone to reimburse him
for his own losses which were much more than those of the plaintiff-appellee.
In his letter dated March 16, 1936, defendant-appellant stated that he felt a moral
responsibility for the 2nd payments which were made to carry out his plan and that he, along
with a certain Mr. Hilscher, would see to it that the stockholders who made 2nd payments
will be paid back as soon as possible out of their very own personal funds. He stressed that
they were doing so not because of any obligation but simply because they had taken it upon
themselves to do it; they felt they had a personal responsibility to those who made their 2nd
payments.
Finally, in the same letter, Robb stated that he was to receive certain shares for his services
as promoter of the new Philippine Racing Club & as soon as he receives it, he will be in a
position to compensate the few others who made the 2nd payment. He restated that the
payments will come from his personal funds in an effort to make things easier for those who
were sport enough to try to save the Greyhound org. by making 2nd payments.
ISSUE
WON the promise made by defendant-appellant is the sufficient consideration contemplated
under Art. 1261 (as an essential element for the legal existence of an onerous contract which
would bind the promisor to comply with his promise)
HELD
NO
Ratio A mere moral obligation or conscientious duty arising wholly from ethical motives or a
mere conscientious duty unconnected with any legal obligation, will not furnish a
consideration for executory promise.
Reasoning The promise made by an organizer of a dog racing course to a stockholder to
return to him certain amounts paid by the latter in satisfaction of his subscription upon the
belief of said organizer that he was morally responsible because of the failure of the
enterprise, is not the consideration required by article 1261 of the Civil Code as an essential
element for the legal existence of an onerous contract which would bind the promisor to
comply with his promise. The promise which defendant-appellant made to the plaintiff-
appellee was prompted by a feeling of pity, resulting from the loss which the latter had
suffered because of the failure of the enterprise. The obligation which said
defendantappellant had contracted with the plaintiff-appellee is, therefore, purely moral
and, as such, not demandable in law but only in conscience, over which human judges have
no jurisdiction.
Disposition The appealed judgment is reversed and the defendant is absolved from the
complaint with costs to the plaintiff.
73. KALALO V LUZ
ObliCon Case Digests 2017
ZALDIVAR; July 31, 1970
FACTS
On November 17, 1959, plaintiff-appellee Octavio A. Kalalo hereinafter referred to as
appellee), a licensed civil engineer doing business under the firm name of O. A. Kalalo and
Associates, entered into an agreement (Exhibit A ) 1 with defendantappellant Alfredo J . Luz
(hereinafter referred to as appellant), a licensed architect, doing business under firm name of
A. J. Luz and Associates, whereby the former was to render engineering design services to
the latter for fees, as stipulated in the agreement. The services included design computation
and sketches, contract drawing and technical specifications of all engineering phases of the
project designed by O. A. Kalalo and Associates bill of quantities and cost estimate, and
consultation and advice during construction relative to the work. The fees agreed upon were
percentages of the architect's fee, to wit: structural engineering, 12-½%; electrical
engineering, 2-%.
On December 1 1, '1961, appellee sent to appellant a statement of account (Exhibit "1"), 3 to
which was attached an itemized statement of defendantappellant's account (Exh. "1-A"),
according to which the total engineering fee asked by appellee for services rendered
amounted to P116,565.00 from which sum was to be deducted the previous payments made
in the amount of P57,000.00, thus leaving a balance due in the amount of P59,565.00. On
May 18, 1962 appellant sent appellee a resume of fees due to the latter. Said fees, according
to appellant. amounted to P10,861.08 instead of the amount claimed by the appellee. On
June 14, 1962 appellant sent appellee a check for said amount, which appellee refused to
accept as full payment of the balance of the fees due him.
Defendant Lus sent to plaintiff a resume of fees due to the latter by virtue of service
agreement done by plaintiff Kalalo. Said fees, according to appellantdefendant amounted to
P10,861.08, instead of the amount claimed by the plaintiff which is P59,565.00, a balance
due of the service rendered. A check for P10,861.08 was sent by defendant, which appellee-
plaintiff refused to accept as full payment of the balance of the fees due him. On August 10,
1962, appellee filed a complaint against appellant, containing four causes of action. In the
first cause of action, appellee alleged that for services rendered in connection with the
different projects therein mentioned there was due him fees in sum s consisting of $28,000
(U.S.) and P100,204.46, excluding interests, of which sums only P69,323.21 had been paid,
thus leaving unpaid the $28,000.00 and the balance of P30,881.25. In the second cause of
action, appellee claimed P17,000.00 as consequential and moral damages; in the third cause
of action claimed P55,000.00 as moral damages, attorney's fees and expenses of litigation;
and in the fourth cause of action he claimed P25,000.00 as actual damages, and also for
attorney's fees and expenses of litigation. - Trial Court held in favor of plaintiff that the
defendant pay the sums of money demanded. Defendant appealed to the SC.
ISSUE
WON the payment for the project rendered must be on the basis of the rate of exchange of
the U.S. dollar to the Philippine peso at the time of payment of the judgment
HELD
51
We have taken note of the fact that on August 25, 1961, the date when appellant said his
obligation to pay appellee's fees became due, there was two rates of exchange, to wit: the
preferred rate of P2.00 to $1.00, and the free market rate. It was so provided in Circular No.
121 of the Central Bank of the Philippines, dated March 2, 1961. amending an earlier Circular
No. 117, and in force until January 21, 1962 when it was amended by Circular No. 133. Under
the agreement, Exhibit A, appellee was entitled to 20% of $140,000.00, or the amount of
$28,000.00. Appellee, however, cannot oblige the appellant to pay him in dollars, even if
appellant himself had received his fee for the IRRI project in dollars. This payment in dollars is
prohibited by Republic Act 529 which was enacted on June 16, 1950. Under the above-
quoted provision of Republic Act 529, if the obligation was incurred prior to the enactment of
the Act and require payment in a particular kind of coin or currency other than the Philippine
currency the same shall be discharged in Philippine currency measured at the prevailing rate
of exchange at the time the obligation was incurred. As We have adverted to, Republic Act
529 was enacted on June 16, 1950. In the case now before Us the obligation of appellant to
pay appellee the 20% of $140,000.00, or the sum of $28,000.00, accrued on August 25, 1961,
or after the enactment of Republic Act 529. It follows that the provision of Republic Act 529
which requires payment at the prevailing rate of exchange when the obligation was incurred
cannot be applied. Republic Act 529 does not provide for the rate of exchange for the
payment of obligation incurred after the enactment of said Act. The logical Conclusion,
therefore, is that the rate of exchange should be that prevailing at the time of payment. It is
our considered view, therefore, that appellant should pay the appellee the equivalent in
pesos of the $28,000.00 at the free market rate of exchange at the time of payment.
74. MANILA LODGE NO. 761 BENEVELONT & PROTECTIVE ORDER OF THE ELKS V CA
CASTRO; September 30, 1976
NATURE
Petitions for review on certiorari of the decision of the Court of Appeals
FACTS
On June 26, 1905 the Philippine Commission enacted Act No. 1360 which authorized the City
of Manila to reclaim a portion of Manila Bay. The reclaimed area was to form part of the
Luneta extension. The Act provided that the reclaimed area "shall be the property of the City
of Manila" and that the City of Manila is authorized to set aside a tract of the reclaimed land
formed by the Luneta extension at the north end for a hotel site, and to lease the same, with
the approval of the Governor General, to a responsible person or corporation for a term not
to exceed 99 years. Subsequently, the Philippine Commission passed on May 18, 1907 Act
No. 1657, amending Act No. 1360, so as to authorize the City of Manila either to lease or to
sell the portion set aside as a hotel site. The total area reclaimed was a little over 25
hectares. The City of Manila applied for the registration of the reclaimed area, and on
January 20, 1911, original certificate of title was issued in the name of the City of Manila. The
title described the registered land as "un terreno conocido con el nombre de Luneta
Extension, situado en el distrito de la Ermita." [Translation: A land known under the name o
Luneta Extension, situated in the district of Ermita.] The registration was subject, however, to
the encumbrances mentioned in Article 39 of the Land Registration Act as may be subsisting
and "sujeto a las disposiciones y condiciones inipuestas en la Ley No. 1360; y sujeto tambien
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a los contratos de venta, celebratlos y oborgados por ta Ciudad de Manila a favor del Army
and Navy Club y la Manila Lodge No. 761. Benevolent and Protective Order of Elks, fechados
en 29 de Diciembre de 1908 y 16 de Enero de 1909." [Translation: Subject to the dispositions
and conditions provided by Act No. 1360; and subject also to contracts of sale celebrated and
entered into by the City of Manila in favor of the Army and Navy Club and Manila Lodge No.
761 Benevolent and Protective Order of Elks (BPOE for short), dated 29th of December 1908
and 16th of January 1909.]
On July 13, 1911, the City of Manila conveyed 5,543.07 square meters of the reclaimed area
to the Manila Lodge No. 761, BPOE on the basis of which a transfer certificate of title was
issued to the latter over the "parcela de terreno que es parte de la Luneta Extension, Situada
en el Distrito de la Ermita." [Translation: Parcel of land which is part of the Luneta Extension,
situated in the District of Ermita] At the back of this title was an annotated document which
in part reads as follows: "que la citada ciudad de Manila tendra derecho a su opcion de
recompray la expresada propiedad para fines puldicos solamente, en cualquier tiempo
despues de cincuenta anos desde el 13 de Julio de 1911, previo pago a la entidad
compradora, o a sus sucesores del precio de la venta de la misma propiedad, mas el valor
que entoces tengan las mejores." [Attempted Translation: That the said city of Manila has the
legal option to repurchase the said property solely for public purposes, at any time after fifty
years from the 13th of July 1911, at the price previously paid to the buying entity or the
future market price of the property, whichever value is higher.]
In January 1963 the BPOE petitioned the CFI of Manila, Branch IV, for the cancellation of the
right of the City Manila to repurchase the property. This petition was granted on February 15,
1963. On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land together
with all the improvements thereon to the Tarlac Development Corporation (TDC, for short)
which paid P1,700,000 as down payment and mortgaged to the vendor the same realty to
secure the payment of the balance to be paid in quarterly installments. At the time of the
sale, there was no annotation of any subsisting lien on the title to the property. On
December 12, 1963 TCT No. 73444 was issued to TDC over the subject land still described as
"Una parcela de terreno, que es parte de la Luneta Extension, situada en el Distrito de
Ermita." In June 1964 the City of Manila filed with the CFI of Manila a petition for the
reannotation of its right to repurchase. The court, after hearing, issued an order, dated
November 19, 1964, directing the Regrister of Deeds of the City of Manila to reannotate in
toto the entry regarding the right of the City of Manila to repurchase the property after fifty
years. From this order TDC and BPOE appealed to this Court which on July 31, 1968 affirmed
the trial court's order of reannotation, but reserved to TDC the right to bring another action
for the clarification of its rights.
After trial the court a quo rendered on July 14, 1972 its decision finding the subject land to
be part of the "public park or plaza" and, therefore, part of the public domain. The court
consequently declared that the sale of the subject land by the
City of Manila to Manila Lodge No. 761, BPOE, was null and void; that plaintiff TDC was a
purchaser thereof in good faith and for value from BPOE and can enforce its rights against
the latter; and that BPOE is entitled to recover from the City of Manila whatever
52
consideration it had paid the latter. In its decision promulgated on June 30, 1975, the CA
concurred in the findings and conclusions of the lower court.
ISSUES
WON the City of Manila is estopped from questioning the validity of the sale it executed on
July 13, 1911 conveying the subject property to the Manila Lodge No. 761, BPOE
HELD
NO
Ratio The Government is never estopped by mistakes or errors on the part of its agents and
estoppel does not apply to a municipal corporation to validate a contract that is prohibited
by law or its against public policy. Reasoning The sale of July 13, 1911 executed by the City of
Manila to Manila Lodge was certainly a contract prohibited by law. Estoppel cannot be urged
even if the City of Manila accepted the benefits of such contract of sale and the Manila Lodge
No. 761 had performed its part of the agreement, for to apply the doctrine of estoppel
against the City of Manila in this case would be tantamount to enabling it to do indirectly
what it could not do directly. The sale of the subject property executed by the City of Manila
to the Manila Lodge No. 761, BPOE, was void and inexistent for lack of subject matter. [a park
is outside the commerce of man] It suffered from an incurable defect that could not be
ratified either by lapse of time or by express ratification. The Manila Lodge No. 761 therefore
acquired no right by virtue of the said sale. Hence to consider now the contract inexistent as
it always has been, cannot be an impairment of the obligations of contracts, for there was in
contemplation of law, no contract at all. The inexistence of said sale can be set up against
anyone who asserts a right arising from it, not only against the first vendee, the Manila Lodge
No. 761, BPOE, but also against all its Successors, including the TDC, which are not protected
by law. The doctrine of bone fide purchaser without notice, being claimed by the TDC, does
not apply where there is a total absence of title in the vendor, and the good faith of the
purchaser TDC cannot create title where none exists. The restoration or restitution of what
has been given is in order.
75. MIGUEL V CATALINO
REYES; November 29, 1968
NATURE
An Appeal from the judgment of the CFI of Baguio dismissing the plaintiff’s complaint for
recovery of possession of a parcel of land and declaring the defendant the true owner
thereof.
FACTS
The land in dispute is located in Benguet, Mountain Province and is covered by Original
Certificate of Title No. 31 issued on Dec. 27, 1927 in the name of Bacaquio (Bakekew), a
widower, with no annotated encumbrances or sales. Plaintiff Grace Ventura is the only child
of Bacaquio by his first wife, Debsay, and the other appellants Simeon, Emilia and Marcelina
Miguel are his children by his 3rd wife, Cosamang. . The 3 successive wives have all died.
Bacaquio, who died in 1943, acquired the land from his 2nd wife and sold it to Catalino
Agyapao, father of the defendant, Florendo Catalino, for P300 in 1928. No formal deed of
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sale was executed but for more than 30 years since 1928, Florendo and his father had been
in possession of the land in the concept of owner, paying taxes and adding improvements. In
1949, Grace Ventura, alone, ‘sold’ the land anew for P300 to Agyapao who in turn sold it to
his son, the defendant.
On Jan. 22, 1962, appellants brought suit to the TC against Catalino for recovery of said land,
claiming to be the children and heirs of the original registered owner, averring that
defendant took the land and gathered its produce unlawfully w/o their consent. The
defendant pleaded ownership and adverse possession for 30 years, and counterclaimed for
attorney’s fees. The court dismissed the complaint, ordering the Register of Deeds to issue a
transfer certificate. Hence this appeal assailing the TC’s findings of fact and law. However,
since this is a direct appeal from the TC, where the property’s value does not exceed
P200,000, only issues of law are reviewable by the SC.
ISSUE
WON the TC erred in awarding the land in dispute to Catalino
HELD
NO, The appellants assail the admission of evidence of an exhibit with a decision in favor of
the defendant by the council of Barrio of San Pascual. The Court concurs that the decision is
ultra vires since barrio councils have no judicial powers (AVIII S1, Constitution; S12 Barrio
Charter). The sale by Bacaquio to Catalino Agyapao is null and void for lack of executive
approval, hence, in law, Bacaquio remained the owner until it was passed on to his heirs by
succession upon his death. Notwithstanding these errors, the Court believes that the
judgment in favor of Agyapao should be sustained. Despite the invalidity of the sale,
Bacaquio suffered Agyapao to enter, posses and enjoy the land without protest from 1928-
1943, and the appellants in turn took no steps to reivindicate the lot from 1944-1962. As held
in Mejia de Lucas v. Gamponia, even granting that the title does not prescribe, their inaction
of 34 years justifies the defendant’s equitable defense of laches, wherein the original
owner’s right to recover the property has been converted into a stale demand.
As in the Gamponia case, the four elements of laches are present in the case at bar, namely:
(a) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made and for which the complaint seeks a remedy; (b) delay
in asserting the complainant's rights, the complainant having had knowledge or notice, of the
defendant's conduct and having been afforded an opportunity to institute a suit; (c) lack of
knowledge or notice on the part of the defendant that the complainant would assert the
right on which he bases his suit; and (d) injury or prejudice to the defendant in the event
relief is accorded to the complainant, or the suit is not held to be barred. In the present case,
the appellants knew the 1928 sale was invalid and did not have to wait for 34 years to
institute a suit, clearly bringing prejudice to the defendant who was made to feel secure of
his ownership over the lot As held in Nielson & Co. v. Lepanto Consolidated Mining Co.,
prescription is concerned with the fact of delay (matter of time), while laches with the effect
of delay (a question of inequity), and thus both apply independently of each other. Since the
appellants are barred from recovery, the Court was justified in ordering that Bacaquio’s
53
certificate be cancelled and the new transfer certificate in defendant’s name be issued by the
Register of Deeds.
Disposition FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with
costs against the plaintiffs-appellants.
76. ANNOTATION 32 SCRA 542
The Annotation is about the "Significant Applications of Extinctive Prescription." It starts at
32 SCRA 526. For our puposes, what is significant is the part that is discussed from 32 SCRA
542. Limitation of Actions in Implied or Constructive Trust In a long line of cases, the
Supreme Court used to adopt the view that the right of action of a cestui que trust against
the trustee in an implied or constructive trust does not prescribe. But as early as 1956 a
minority in the SC viewed with doubt the continued validity of the principle of
imprescriptibility of actions based on constructive or implied trusts.
In a 1958 case, SC through JBL Reyes, expressed the view that in a constructive trust,
imposed as it is by law, where no promise or fiduciary relation exists, the socalled trustee
does not recognize any trust and has no interest to hold for the beneficiary; thus, the
beneficiary can be barred to enforce the trust, unless there's concealment of the facts giving
rise to the trust. Despite SC view in Diaz v Gorricho and reiterated in subsequent cases, to the
effect that an action upon a constructive trust is subject to prescription, a contrary view
appeared to have been adopted in at least 3 cases decided subsequent to the
Diaz doctrine In Juan et al v Zuñiga: When an heir through fraudulent representation, or by
pretending to be the sole heir of the deceased, succeeded in having the title over a real
property registered in his name to the exclusion of the other heirs, a constructive trust is
created in favor of the defrauded heir and grants to the latter the right to vindicate the
property regardless of the lapse of time.
In Caladiao v Vda de Blas: SC declared that an action to compel reconveyance of property
with Torrens Title does not prescribe if the registered owner had obtained registration in bad
faith and the property is still in the latter's name., bec the registration is in the nature of a
continuing and subsisting trust The consensus of opinion: The prescription of action for
recvonveyance based on implied or constructive trust is now a settled question in our
jurisdiction. Correspondingly, where implied trust is present, the action to recover the
propertyprescribes after the lapse of 10 years unless a fiduciary relation exists and the
trustee recognizes the trust.
77. Salao V Salao
Facts: Manuel Salao and Valentina Ignacio begot 4 children, Patricio, Alejandra, Juan (Banli)
and Ambrosia. Manuel died in 1885. Patricio died in 1886 and was survived by his son
Valentin. After Valentina’s death, her estate was administered by her daughter Ambrosia.
The documentary evidence proves that in 1911 or prior to the death of Valentina Ignacio her
two children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens title, OCT No. 185 of
the Registry of Deeds of Pampanga, in their names
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The property in question is the forty-seven-hectare fishpond located at Sitio Calunuran,
Lubao, Pampanga, wherein Benita Salao-Marcelo daughter of Valentin Salao claimed 1/3
interest on the said fishpond.
The defendant Juan Y. Salao Jr. inherited from his father Juan Y. Salao, Sr. ½ of the fishpond
and the other half from the donation of his auntie Ambrosia Salao.
It was alleged in the said case that Juan Y. Salao, Sr and Ambrosia Salao had engaged in the
fishpond business. Where they obtained the capital and that Valentin Salao and Alejandra
Salao were included in that joint venture, that the funds used were the earnings of the
properties supposedly inherited from Manuel Salao, and that those earnings were used in
the acquisition of the Calunuran fishpond. There is no documentary evidence to support that
theory.
The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated January 26,
1951 informed Juan S. Salao, Jr. that his clients had a one-third share in the two fishponds
and that when Juani took possession thereof in 1945, in which he refused to give Benita and
Victorina’s children their one-third share of the net fruits which allegedly amounted to
P200,000. However, there was no mention on the deeds as to the share of Valentin and
Alejandra.
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that Valentin Salao
did not have any interest in the two fishponds and that the sole owners thereof his father
Banli and his aunt Ambrosia, as shown in the Torrens titles issued in 1911 and 1917, and that
he Juani was the donee of Ambrosia’s one-half share.
Benita Salao and her nephews and niece asked for the annulment of the donation to Juan S.
Salao, Jr. and for the reconveyance to them of the Calunuran fishpond as Valentin Salao’s
supposed one-third share in the 145 hectares of fishpond registered in the names of Juan Y.
Salao, Sr. and Ambrosia Salao.
Issue : WON the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr.
and Ambrosia Salao.
Held: NO. There was no resulting trust in this case because there never was any intention on
the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There
was no constructive trust because the registration of the two fishponds in the names of Juan
and Ambrosia was not vitiated by fraud or mistake. This is not a case where to satisfy the
demands of justice it is necessary to consider the Calunuran fishpond ” being held in trust by
the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.
The plaintiffs utterly failed to prove by clear, satisfactory and convincing evidence. It cannot
rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations.Trust
and trustee; establishment of trust by parol evidence; certainty of proof. — Where a trust is
to be established by oral proof, the testimony supporting it must be sufficiently strong to
prove the right of the alleged beneficiary with as much certainty as if a document proving the
54
trust were shown. A trust cannot be established, contrary to the recitals of a Torrens title,
upon vague and inconclusive proof.
78. Fabian v Fabian
Facts: Pablo Fabian bought from the Philippine Government lot 164 of the Friar Lands Estate
in Muntinlupa, Rizal. By virtue of this purchase, he was issued sale certificate 547. He died on
August 2, 1928, survived by four children, namely, Esperanza, Benita I, Benita II, and Silbina.
On October 5, 1928 Silbina Fabian and Teodora Fabian, niece of the deceased, executed an
affidavit. On the strength of this affidavit, sale certificate 547 was assigned to them.
The acting Director of Lands, on behalf of the Government, sold lot 164 to Silbina Fabian
Teodora Fabian. The vendees spouses forthwith took physical possession thereof, cultivated
it, and appropriated the produce. In that same year, they declared the lot in their names for
taxation purposes. In 1937 the RD of Rizal issued a TCT over lot 164 in their names. They later
subdivided the lot into 2 equal parts.
The plaintiffs filed the present action for reconveyance against the defendants spouses,
averring that Silbina and Teodora, through fraud perpetrated in their affidavit aforesaid. That
by virtue of this affidavit, the said defendants succeeded in having the sale certificate
assigned to them and thereafter in having lot 164 covered by said certificate transferred in
their names; and that by virtue also of these assignment and transfer, the defendants
succeeded fraudulently in having lot 164 registered in their names. They further allege that
the land has not been transferred to an innocent purchaser for value. A reconveyance
thereof is prayed for.
In their answer, the defendants spouses claim that Pablo Fabian was not the owner of lot 164
at the time of his death on August 2, 1928 because he had not paid in full the amortizations
on the lot; that they are the absolute owners thereof, having purchased it from the
Government, and from that year having exercised all the attributes of ownership thereof up
to the present; and that the present action for reconveyance has already prescribed. The
dismissal of the complaint is prayed for.
The lower court rendered judgment declaring that the defendants spouses had acquired a
valid and complete title to the property by acquisitive prescription, and accordingly dismissed
the complaint. The latter’s motion for reconsideration was thereafter denied. Hence, the
present recourse
Issue: WON laches constitute a bar to an action to enforce a constructive trust?
Held: NO Article 1456 of the new Civil Code, while not retroactive in character, merely
expresses a rule already recognized by our courts prior to the Code's promulgation (see
Gayondato vs. Insular Treasurer, 49 Phil. 244). Appellants are, however, in error in believing
that like express trust, such constructive trusts may not be barred by lapse of time. The
American law on trusts has always maintained a distinction between express trusts created
by the intention of the parties, and the implied or constructive trusts that are exclusively
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created by law, the latter not being trusts in their technical sense (Gayondato vs. Insular
Treasurer, supra). The express trusts disable the trustee from acquiring for his own benefit
the property committed to his management or custody, at least while he does not openly
repudiate the trust, and makes such repudiation known to the beneficiary or cestui que trust.
For this reason, the old Code of Civil Procedure (Act 190) declared that the rules on adverse
possession does not apply to "continuing and subsisting" (i.e., unrepudiated) trusts.
But in constructive trusts, . . . the rule is that laches constitutes a bar to actions to enforce
the trust, and repudiation is not required, unless there is a concealment of the facts giving
rise to the trust
The assignment of sale certificate 547 was effected on October 5, 1928; and the actual
transfer of lot 164 was made on the following November 14. It was only on July 8, 1960, 32
big years later, that the appellants for the first time came forward with their claim to the
land. The record does not reveal, and it is not seriously asserted, that the appellees
concealed the facts giving rise to the trust. Upon the contrary, paragraph 13 of the
stipulation of facts of the parties states with striking clarity "that defendants herein have
been in possession of the land in question since 1928 up to the present publicly and
continuously under claim of ownership; they have cultivated it, harvested and appropriated
the fruits for themselves."
79. Bueno v Reyes
Facts: In January 1936, FRANCISO REYES filed an answer in a cadastral case claiming LOT NO.
2357 to be his and his 2 brothers Juan and Mateo.
23 yrs. later the plaintiffs in this case filrd an action of reconveyance of Lot 2357. They said
that the land did not belong to Reyes and his brothers
the land was originally owned by Jorge Bueno. When he died, his 3 children inherited it:
Brigida, Eugenia and Rufino. BRigida and Eugenia then died leavingthe land to their
respective children and Rufino who are now the plaintiffs in this case. Francisco was
Eugenia’s husband. Thus, it is claimed that the land should belong to his children and his
wife’s siblings, Brigida nd Rufino
The defendants Juan and Mateo Reyes filed their answer (Francisco died already) , in which
they raised a number of defenses, including laches, imprescriptibility of title, and prescription
of action. The last defense was upheld by the court and now subject of this appeal
Upon appeal, the appellants/plaintiffs assigned the ff. errors: (1) in the dismissal of the
complaint on the ground of prescription; and (2) in the dismissal of the complaint "even in
relation to appellants surnamed Reyes, the children of Francisco Reyes
Both the appellees and the court below proceeded on the theory that the action for
reconveyance was predicated on the existence of an implied trust, and that such an action
prescribes in 10 years. The appellants counter, in this appeal, that the trust was not implied
but express, and that in any case even an implied trust, according to some decisions of this
55
Court, is imprescriptible. On the other hand, the appellants counter by saying that the trust
was not implied but express, and is in any case imprescriptible
Held: WON the action for reconveyance prescribes in 10 years
Issue: NO. If any trust can be deduced at all from the foregoing facts it was an implied one,
arising by operation of law not from any presumed intention of the parties but to satisfy the
demands of justice and equity and as a protection against unfair dealing or downright fraud.
Indeed, in this kind of implied trust, commonly denominated constructive, as distinguished
from resulting, trust, there exists a certain antagonism between the cestui que trust and the
trustee. Thus, for instance, under Article 1456 of the Civil Code:
While there are some decisions which hold that an action upon a trust is imprescriptible,
without distinguishing between express and implied trusts, the better rule, as laid down by
this Court in other decisions, is that prescription does supervene where the trust is merely an
implied one.
80. Tamayo v Calleho
Facts: - This action was brought by Aurelio Callejo, originally against Mariano Tamayo only,
and, later, against his brother Marcos Tamayo, also, for the reconveyance of the northern
portion of a parcel of land in the names of said brothers. CFI dismissed the complaint. Court
of Appeals reversed and the land was declared reconveyed unto him
- It appears that the spouses Vicente Tamayo and Cirila Velasco Tamayo owned a parcel of
land in the barrio of Oalsic or Gualsic. Prior to Feb. 1, 1912, said spouses sold part of the
northern portion of said land to Fernando Domantay, who took possession thereof.
- Sometime after this sale, but before said date, Vicente Tamayo died. His widow having
waived her rights to the remaining portion of their original property in favor of her children
Mariano Tamayo and Marcos Tamayo, these brothers were, on February 1, 1912, declared
sole heirs of the deceased. The brothers applied for the registration in their names, of a tract
of land of about 383,509 square meters, alleging that they had thus inherited the same from
their deceased father.
- judgment was rendered, directing the registration, in the name of Mariano Tamayo and
Marcos Tamayo, of 205,421 sqm only of the land applied for, said applicants having
acknowledged that the remaining portion thereot belonged to the estate of Gregorio Flor
Mata, deceased.
- Not long after Fernando Domantay sold his above-mentioned land of 22,125-1/3 square
meters to Aurelio Callejo, who took possession thereof since then.
- Subsequently, Marcos Tamayo sold his undivided share in the property (the 200k sqm land)
to his brother Mariano Tamayo. Then, Mariano sold 70,000 sqm to Proceso Estacio, upon
whose request surveyor Fidel Diaz went to the land for the purpose of preparing a
subdivision plan and segregating the 7 hectares thus conveyed by Mariano Tamayo, but Diaz
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did not accomplish his purpose, for he was not allowed by Callejo to enter the portion held
by the latter.
- Callejo asked Mariano Tamayo to cause to be excluded the land held by the former, but the
latter refused to do so.
- Then Callejo filed his present complaint for reconveyance and damages
- Having failed to answer the amended complaint, defendant Marcos Tamayo was declared in
default, whereas defendant Mariano Tamayo filed his answer with counterclaim. His main
defense was that the land claimed by Callejo is outside the perimeter of the area covered by
the aforementioned certificates of title.
- Mariano Tamayo pleaded also the statute of limitations.
- CFI rendered a decision dismissing the complaint, upon the ground that the land Purchased
by Fernando Domantay from the parents of Mariano and Marcos Tamayo is not included in
said titles
- this decision was reversed by CA which found that the land claimed by Callejo is part of the
land covered by the aforementioned certificates of title held by Tamayo, and overruled the
plea of prescription set up by Mariano Tamayo, upon the theory that the title to said portion
of land now claimed by Callejo, and, before, by Fernando Domantay, is held in trust by the
Tamayos and that the action to enforce said trust does not prescribe.
- Tamayo maintains that the Court of Appeals has erred: (1) "in not holding that the
respondent Aurelio Callejo's cause of action, if any, had already prescribed"; (2) "in holding
that the petitioner's failure to appeal from the decision that did not grant him affirmative
relief on the matter of possession, constituted res adjudicata thereon"; (3) "in disregarding
the judicial admission made by the respondent Callejo and his counsel"; (4) "in making
conclusions not supported by the facts on record", (5) "in not affirming the decision rendered
by the trial court."
Issue: WON Callejo’s cause of action had already prescribed
Held: NO. Where an implied trust was created in favor of Domantay by the erroneous
inclusion in the Tamayo brothers' certificate of title of the parcel of land formerly sold by
their parents to Domantay (who in turn sold it to Aurelio Callejo) and on June 28, 1918,
Mariano Tamayo, on his behalf and that of his brother Marcos, expressly recognized the said
previous sale by their parents to Domantay, such express recognition had the effect of
imparting to the aforementioned trust the nature of an express trust which is not subject to
the statute of limitations, at least, until repudiated, in which event the period of prescription
begins to run only from the time of the repudiation. In the instant case, repudiation took
place only in early June, 1952, when Mariano Tamayo rejected Callejo's demand that the
disputed portion be excluded from TCT No. 5486 in the former's name. When the instant
case for reconveyance was filed on June 25, 1952, the period of prescription had barely
begun to run.
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It should be noted that although the trust created by the application for registration filed by
Mariano and Marcos Tamayo, on or about September 29, 1913, and the inclusion in OCT No.
2612, issued in their names, on November 15, 1915, of the tract of land previously sold by
their parents to Fernando Domantay - and later conveyed by him to Aurelio Callejo - may
have had a constructive or implied nature, its status was substantially affected on June 28,
1918, by the following facts, namely: On the date last mentioned, Fernando Domantay and
petitioner Mariano Tamayo executed the public instrument whereby Mariano explicitly
acknowledged that his deceased parents had sold to Domantay the parcel of land of about
22,125/13 square meters. then held by the latter, and stipulating that Domantay is the
absolute owner of said land, free from any lien or encumbrance thereon. This express
recognition by Mariano Tamayo of the previous sale, made by their parents, to Fernando
Domantay had the effect of imparting to the aforementioned trust the nature of an express
trust - it having been created by the will of the parties, "no particular words" being "required
for the creation of an express trust, it being sufficient that a trust is clearly intended" - which
express trust is a "Continuing and subsisting" trust, not subject to the statute of limitations,
at least, until repudiated, in which event the period of prescription begins to run only from
the time of the repudiation. The latter did not take place until early in June, 1952, when
Mariano Tamayo rejected Aurelio Callejo's demand. But, then, the case at bar was filed
weeks later when the period of prescription had barely begun to run.

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ObliCon Case Digests 2017