Contracts Third Exam Casedigests

OBLIGATIONS & CONTRACTS
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order to avoid the payment of the penalty, the debtor has the burden of
proving an excuse - the failure of the performance was due to either
force majeure or the acts of the creditor himself.30
Here, petitioners defaulted in the payment of their loan obligation with
respondent bank and their contract provided for the payment of 12%
p.a. penalty charge, and since there was no showing that petitioners'
failure to perform their obligation was due to force majeure or to
respondent bank's acts, petitioners cannot now back out on their
obligation to pay the penalty charge. A contract is the law between the
parties and they are bound by the stipulations therein.
ART. 1306
AUTONOMY OF CONTRACTS
The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
GOLANGCO V. PCIB
HEIRS OF EK LIONG V. CASTILLO
The controversy pivots on a provision in the construction contract

referred to as the defects liability period: Obligations arising from
contracts have the force of law between the parties and should be
complied with in good faith.10 In characterizing the contract as having
the force of law between the parties, the law stresses the obligatory
nature of a binding and valid agreement.
Viewed in the light of the autonomous nature of contracts enunciated

under Article 130650 of the Civil Code, on the other hand, we find that
the Kasunduan was correctly found by the RTC to be a valid and
binding contract between the parties. Already partially executed with
respondents receipt of P1,000.00 from Manuel upon the execution
thereof, the Kasunduan simply concerned the sale of the formers 60%
share in the subject parcel, less the 1,750-square meter portion to be
retained, for the agreed consideration of P180,000.00. As a notarized
document that carries the evidentiary weight conferred upon it with
respect to its due execution,51 the Kasunduan was shown to have been
signed by respondents with full knowledge of its contents, as may be
gleaned from the testimonies elicited from Philip52 and Leovina.
The provision in the construction contract providing for a defects

liability period was not shown as contrary to law, morals, good
customs, pubic order or public policy. By the nature of the obligation in
such contract, the provision limiting liability for defects and fixing
specific guaranty periods was not only fair and equitable; it was also
necessary. Without such limitation, the contractor would be expected to
make a perpetual guarantee on all materials and workmanship.
The adoption of a one-year guarantee, as done by WGCC and PCIB, is
established usage in the Philippines for private and government
construction contracts.11 The contract did not specify a different period
for defects in the granitite wash-out finish; hence, any defect therein
should have been brought to WGCCs attention within the one-year
defects liability period in the contract.
In the absence of any showing, however, that the parties were able to
agree on new stipulations that would modify their agreement, we find
that petitioners and respondents are bound by the original terms
embodied in the Kasunduan. Obligations arising from contracts, after
all, have the force of law between the contracting parties 60who are
expected to abide in good faith with their contractual commitments,
not weasel out of them.61 Moreover, when the terms of the contract are
clear and leave no doubt as to the intention of the contracting parties,
the rule is settled that the literal meaning of its stipulations should
govern. In such cases, courts have no authority to alter a contract by
construction or to make a new contract for the parties. Since their duty
is confined to the interpretation of the one which the parties have
made for themselves without regard to its wisdom or folly, it has been
ruled that courts cannot supply material stipulations or read into the
contract words it does not contain.62 Indeed, courts will not relieve a
party from the adverse effects of an unwise or unfavorable contract
freely entered into
MALLARI V. PRUDENTIAL BANK

Whether the 23% p.a. interest rate and the 12% p.a. penalty charge on
Mallaris P1.7M loan to Prudential Bank which they agreed upon is
excessive or unconscionable under the circumstances.NO.
See 1306. Hence, if the stipulations in the contract are valid, the parties
thereto are bound to comply with them, since such contract is the law
between the parties. In this case, petitioners and respondent bank
agreed upon on a 23% p.a. interest rate on the P1.7 million loan.
However, petitioners now contend that the interest rate of 23% p.a.
imposed by respondent bank is excessive or unconscionable. We also
do not find the stipulated 12% p.a. penalty charge excessive or
unconscionable.
In Ruiz v. CA,27 we held:
The 1% surcharge on the principal loan for every month of default is
valid. This surcharge or penalty stipulated in a loan agreement in case
of default partakes of the nature of liquidated damages under Art. 2227
of the New Civil Code, and is separate and distinct from interest
payment. Also referred to as a penalty clause, it is expressly recognized
by law. It is an accessory undertaking to assume greater liability on the
part of an obligor in case of breach of an obligation. The obligor would
then be bound to pay the stipulated amount of indemnity without the
necessity of proof on the existence and on the measure of damages
caused by the breach. x x x28 And in Development Bank of the
Philippines v. Family Foods Manufacturing Co., Ltd.,29 we held that:
x x x The enforcement of the penalty can be demanded by the creditor
only when the non-performance is due to the fault or fraud of the
debtor. The non-performance gives rise to the presumption of fault; in
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by the contract while leaving the other free therefrom. The ultimate
purpose is to render void a contract containing a condition which
makes its fulfillment dependent solely upon the uncontrolled will of one
of the contracting parties.
ART. 1308
MUTUALITY OF CONTRACTS
The contract must bind both contracting parties; its validity or compliance cannot be
left to the will of one of them.
An express agreement which gives the lessee the sole option to renew
the lease is frequent and subject to statutory restrictions, valid and
binding on the parties. This option, which is provided in the same lease
agreement, is fundamentally part of the consideration in the contract
and is no different from any other provision of the lease carrying an
undertaking on the part of the lessor to act conditioned on the
performance by the lessee. It is a purely executory contract and at most
confers a right to obtain a renewal if there is compliance with the
conditions on which the right is made to depend. The right of renewal
constitutes a part of the lessees interest in the land and forms a
substantial and integral part of the agreement.
PNB V. CA
P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting
parties to stipulate freely regarding any subsequent adjustment in the
interest rate that shall accrue on a loan or forbearance of money, goods
or credits. In fine, they can agree to adjust, upward or downward, the
interest previously stipulated. However, contrary to the stubborn
insistence of petitioner bank, the said law and circular did not authorize
either party to unilaterally raise the interest rate without the other's
consent.
The fact that such option is binding only on the lessor and can be
exercised only by the lessee does not render it void for lack of
mutuality. After all, the lessor is free to give or not to give the option to
the lessee. And while the lessee has a right to elect whether to continue
with the lease or not, once he exercises his option to continue and the
lessor accepts, both parties are thereafter bound by the new lease
agreement. Their rights and obligations become mutually fixed, and the
lessee is entitled to retain possession of the property for the duration of
the new lease, and the lessor may hold him liable for the rent therefor.
The lessee cannot thereafter escape liability even if he
should subsequently decide to abandon the premises. Mutuality
obtains in such a contract and equality exists between the lessor and
the lessee since they remain with the same faculties in respect to
fulfillment.
It is basic that there can be no contract in the true sense in the absence
of the element of agreement, or of mutual assent of the parties. If this
assent is wanting on the part of the one who contracts, his act has no
more efficacy than if it had been done under duress or by a person of
unsound mind. Similarly, contract changes must be made with the
consent of the contracting parties. The minds of all the parties must
meet as to the proposed modification, especially when it affects an
important aspect of the agreement. In the case of loan contracts, it
cannot be gainsaid that the rate of interest is always a vital component,
for it can make or break a capital venture. Thus, any change must
be mutually agreed upon, otherwise, it is bereft of any binding effect.
We cannot countenance petitioner bank's posturing that the escalation
clause at bench gives it unbridled right to unilaterally upwardly adjust
the interest on private respondents' loan. That would completely take
away from private respondents the right to assent to an important
modification in their agreement, and would negate the element of
mutuality in contracts. Private respondents are not also estopped from
assailing the unilateral increases in interest rate made by petitioner
bank. No one receiving a proposal to change a contract to which he is a
party, is obliged to answer the proposal, and his silence per se cannot be
construed as an acceptance. 7 In the case at bench, the circumstances
do not show that private respondents implicitly agreed to the proposed
increases in interest rate which by any standard were too sudden and
too stiff.
if we were to adopt the contrary theory that the terms and conditions
to be embodied in the renewed contract were still subject to mutual
agreement by and between the parties, then the option - which is an
integral part of the consideration for the contract - would be rendered
worthless. For then, the lessor could easily defeat the lessee's right of
renewal by simply imposing unreasonable and onerous conditions to
prevent the parties from reaching an agreement, as in the case at
bar. As in a statute no word, clause, sentence, provision or part of a
contract shall be considered surplusage or superfluous, meaningless,
void, insignificant or nugatory, if that can be reasonably avoided. To this
end, a construction which will render every word operative is to be
preferred over that which would make some words idle and nugatory.
Finally, ALLIED cannot assail the validity of the deed of donation, not
being a party thereto. A person who is not principally or
subsidiarily bound has no legal capacity to challenge the validity of the
contract as he has no material interest over it.
ALLIED BANKING V. CA
Q: whether a stipulation in a contract of lease to the effect that the
contract "may be renewed for a like term at the option of the lessee" is
void for being potestative or violative of the principle of mutuality of
contracts under Art. 1308 of the Civil Code and, corollarily, what is the
meaning of the clause "may be renewed for a like term at the option of
the lessee;" and, (b) whether a lessee has the legal personality to assail
the validity of a deed of donation executed by the lessor over the leased
premises.
JUICO V. CHINA BANKING

The binding effect of any agreement between parties to a contract is
premised on two settled principles: (1) that any obligation arising from
contract has the force of law between the parties; and (2) that there
must be mutuality between the parties based on their essential
equality. Any contract which appears to be heavily weighed in favor of
one of the parties so as to lead to an unconscionable result is void. Any
stipulation regarding the validity or compliance of the contract which is
left solely to the will of one of the parties, is likewise, invalid.
A: Article 1308 of the Civil Code expresses what is known in law as the
principle of mutuality of contracts. This binding effect of a contract on
both parties is based on the principle that the obligations arising from
contracts have the force of law between the contracting parties, and
there must be mutuality between them based essentially on their
equality under which it is repugnant to have one party bound
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Escalation clauses refer to stipulations allowing an increase in the
interest rate agreed upon by the contracting parties. This Court has
long recognized that there is nothing inherently wrong with escalation
clauses which are valid stipulations in commercial contracts to
maintain fiscal stability and to retain the value of money in long term
contracts. Hence, such stipulations are not void per se.
does not require the conformity of the maker before a new interest rate
could be enforced. Any contract which appears to be heavily weighed in
favor of one of the parties so as to lead to an unconscionable result,
thus partaking of the nature of a contract of adhesion, is void. Any
stipulation regarding the validity or compliance of the contract left
solely to the will of one of the parties is likewise invalid. Furthermore, a
borrower is not estopped from assailing the unilateral increase in the
interest made by the lender since no one who receives a proposal to
change a contract, to which he is a party, is obliged to answer the same
and said partys silence cannot be construed as an acceptance thereof.
The credit agreements had explicitly provided that prior notice would be
necessary before PNB could increase the interest rates. In failing to
notify the Spouses Manalo before imposing the increased rates of
interest, therefore, PNB violated the stipulations of the very contract
that it had prepared. Hence, the varying interest rates imposed by PNB
have to be vacated and declared null and void, and in their place an
interest rate of 12% per annum computed from their default is fixed
pursuant to the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals
Nevertheless, an escalation clause "which grants the creditor an

unbridled right to adjust the interest independently and upwardly,
completely depriving the debtor of the right to assent to an important
modification in the agreement" is void. A stipulation of such nature
violates the principle of mutuality of contracts.24 Thus, this Court has
previously nullified the unilateral determination and imposition by
creditor banks of increases in the rate of interest provided in loan
contracts. While a ceiling on interest rates under the Usury Law was
already lifted under Central Bank Circular No. 905, nothing therein
"grants lenders carte blanche authority to raise interest rates to levels
which will either enslave their borrowers or lead to a hemorrhaging of
their assets.
There is no indication that petitioners were coerced into agreeing with
the foregoing provisions of the promissory notes. In fact, petitioner
Ignacio, a physician engaged in the medical supply business, admitted
having understood his obligations before signing them. At no time did
petitioners protest the new rates imposed on their loan even when their
property was foreclosed by respondent.
This notwithstanding, we hold that the escalation clause is still void
because it grants respondent the power to impose an increased rate of
interest without a written notice to petitioners and their written consent.
Respondents monthly telephone calls to petitioners advising them of
the prevailing interest rates would not suffice. A detailed billing
statement based on the new imposed interest with corresponding
computation of the total debt should have been provided by the
respondent to enable petitioners to make an informed decision. An
appropriate form must also be signed by the petitioners to indicate their
conformity to the new rates. Compliance with these requisites is
essential to preserve the mutuality of contracts. For indeed, one-sided
impositions do not have the force of law between the parties, because
such impositions are not based on the parties essential equality.
ART. 1311
RELATIVITY OF CONTRACTS
Contracts take effect only between the parties, their assigns and heirs, except in case
where the rights and obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law. The heir is not liable beyond the
value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a third
person.
BALUYOT V. CA
A cause of action exists if the following elements are present,
namely:(1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the
defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant in violation of the right of the
plaintiff or constituting a breach of the obligations of the defendant to
the plaintiff for which the latter may maintain an action for recovery of
damages.[14]
PNB V. MANALO
RE: ALL PURPOSE CREDIT FACILITY TO FINANCE CONSTRUCTION OF
HOUSE; REM OF PROPERTY. The credit agreement executed succinctly
stipulated that the loan would be subjected to interest at a rate
"determined by the Bank to be its prime rate plus applicable spread,
prevailing at the current month."31 This stipulation was carried over to or
adopted by the subsequent renewals of the credit agreement. PNB
thereby arrogated unto itself the sole prerogative to determine and
increase the interest rates imposed on the Spouses Manalo. Such a
unilateral determination of the interest rates contravened the principle
of mutuality of contracts embodied in Article 1308. A contract where
there is no mutuality between the parties partakes of the nature of a
contract of adhesion,33 and any obscurity will be construed against the
party who prepared the contract, the latter being presumed the stronger
party to the agreement, and who caused the obscurity.34 PNB should
then suffer the consequences of its failure to specifically indicate the
rates of interest in the credit agreement.
We find all the elements of a cause of action contained in the amended

complaint of petitioners. While, admittedly, petitioners were not parties
to the deed of donation, they anchor their right to seek its enforcement
upon their allegation that they are intended beneficiaries of the
donation to the Quezon City government. Art. 1311, second paragraph,
of the Civil Code provides:
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person.
Under this provision of the Civil Code, the following requisites must be
present in order to have a STIPULATIONPOUR AUTRUI:[15] SCALP
A perusal of the Promissory Note will readily show that the increase or
decrease of interest rates hinges solely on the discretion of petitioner. It
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(1)
(2)
there must be a stipulation in favor of a third person; S

the stipulation must be a part, not the whole of the contract;
P
(3) the contracting parties must have clearly and deliberately
conferred a favor upon a third person, not a mere incidental
benefit or interest; C
(4) the third person must have communicated his acceptance to
the obligor before its revocation; and A
(5) neither of the contracting parties bears the legal
representation or authorization of the third party. L:
The allegations in the following paragraphs of the amended complaint
are sufficient to bring petitioners action within the purview of the
second paragraph of Art. 1311 on stipulations pour autrui:
1. Paragraph 17, that the deed of donation contains a
stipulation that the Quezon City government, as donee, is
required to transfer to qualified residents of Cruz-na-Ligas, by
way of donations, the lots occupied by them;
2. The same paragraph, that this stipulation is part of conditions
and obligations imposed by UP, as donor, upon the Quezon
City government, as donee;
3. Paragraphs 15 and 16, that the intent of the parties to the
deed of donation was to confer a favor upon petitioners by
transferring to the latter the lots occupied by them;
4. Paragraph 19, that conferences were held between the
parties to convince UP to surrender the certificates of title to
the city government, implying that the donation had been
accepted by petitioners by demanding fulfillment
thereof[16] and that private respondents were aware of such
acceptance; and
5. All the allegations considered together from which it can be
fairly inferred that neither of private respondents acted in
representation of the other; each of the private respondents
had its own obligations, in view of conferring a favor upon
petitioners.
REMANDED for trial of the merits.
A & C MINIMART V. VILLAREAL

It is a well-known rule that a contractual obligation or liability, or an
action ex-contractu, must be founded upon a contract, oral or written,
either express or implied. If there is no contract, there is no
corresponding liability and no cause of action may arise
therefrom.22 This is provided for in Article 1311 of the Civil Code: The
Lease Contract was executed between the spouses Bonifacio and
petitioner A & C. It is undisputed that none of the respondents had
taken part, directly or indirectly, in the contract in question.
Respondents also did not enter into contract with either the lessee or
the lessor, as to an assignment of any right under the Lease Contract in
question. The Lease Contract, including the stipulation for the 3%
penalty interest, was bilateral between petitioner and Teresita Bonifacio.
Respondents claim ownership over the subject property, but not as a
successor-in-interest of the spouses Bonifacios. They purchased the
property in an execution sale from the spouses Sevilla. Thus,
respondents cannot succeed to any contractual rights which may
accrue to the spouses Bonifacio.
Contracts produce an effect as between the parties who execute them.
A contract cannot be binding upon and cannot be enforced by one who
is not party to it. Although the respondents were adjudged to be entitled
to rentals accruing from 2 March 1999, until the time the petitioner
vacated the premises, the obligation to pay rent was not derived from
the Lease Contract but from a quasi-contract. Article 2142 of the Civil
Code reads:
Art. 2142. Certain lawful, voluntary and unilateral acts give rise
to the juridical relation of quasi-contract to the end that no one
shall be unjustly enriched or benefited at the expense of another.
BORROMEO V. CA
The right of foreclosure cannot be exercised against the petitioners by
any person other than the creditor-mortgagee or its assigns. An
extrajudicial foreclosure instituted by a third party to the Loan
Agreement and the REM would, therefore, be a violation of petitioners
rights over their property. Since a contract may be violated only by the
parties thereto as against each other, a party who has not taken part in
it cannot sue for performance, unless he shows that he has a real
interest affected thereby. Respondent, although a wholly-owned
subsidiary of EPCIB, has an independent and separate juridical
personality from its parent company. The fact that a corporation owns
all of the stocks of another corporation, taken alone, is not sufficient to
justify their being treated as one entity. Any claim or suit of the parent
corporation cannot be pursued by the subsidiary based solely on the
reason that the former owns the majority or even the entire stock of the
latter.
INTEGRATED PACKAGING V. CA
Whether or not private respondent is liable for petitioner IPCs breach of
contract with Philacor? No, private respondent cannot be held liable
under the contracts entered into by petitioner with Philacor. Private
respondent is not a party to said agreements. It is also not a
contract pour autrui. Aforesaid contracts could not affect third persons
like private respondent because of the basic civil law principle of
relativity of contracts which provides that contracts can only bind the
parties who entered into it, and it cannot favor or prejudice a third
person,[10] even if he is aware of such contract and has acted with
knowledge thereof.[11] Indeed, the order agreement entered into by
petitioner and private respondent has not been shown as having a
direct bearing on the contracts of petitioner with Philacor. As pointed
out by private respondent and not refuted by petitioner, the paper
specified in the order agreement between petitioner and private
respondent are markedly different from the paper involved in the
contracts of petitioner with Philacor.[12] Furthermore, the demand made
by Philacor upon petitioner for the latter to comply with its printing
contract is dated February 15, 1984, which is clearly made long after
private respondent had filed its complaint on August 14, 1981. This
demand relates to contracts with Philacor dated April 12, 1983 and May
13, 1983, which were entered into by petitioner after private respondent
filed the instant case.
From a perusal of the records, petitioners did not enter into a Loan
Agreement and REM with respondent. Respondent, therefore, has no
right to foreclose the subject property even after default, since this right
can only be claimed by the creditor-mortgagor, EPCIB; and,
consequently, the extrajudicial foreclosure of the REM by respondent
would be in violation of petitioners property rights.
HEIRS OF LLENADO V. LLENADO

It is not disputed that the lease agreement contained an option to
renew and a prohibition on the sale of the subject lot in favor of third
persons while the lease is in force. Petitioner claims that when Cornelio
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sold the subject lot to respondents Eduardo and Jorge the lease was in
full force and effect, thus, the sale violated the prohibitory clause
rendering it invalid. In resolving this issue, it is necessary to determine
whether the lease agreement was in force at the time of the subject
sale and, if it was in force, whether the violation of the prohibitory
clause invalidated the sale.
between the respondents is protected by P.D. No. 957, a social justice

measure enacted primarily to protect innocent lot buyers.
Under Article 1311 of the Civil Code, the heirs are bound by the
contracts entered into by their predecessors-in-interest except when
the rights and obligations therein are not transmissible by their nature,
by stipulation or by provision of law. A contract of lease is, therefore,
generally transmissible to the heirs of the lessor or lessee. It involves a
property right and, as such, the death of a party does not excuse nonperformance of the contract.[29] The rights and obligations pass to the
heirs of the deceased and the heir of the deceased lessor is bound to
respect the period of the lease.[30] The same principle applies to the
option to renew the lease. As a general rule, covenants to renew a lease
are not personal but will run with the land.[31] Consequently, the
successors-in-interest of the lessee are entitled to the benefits, while
that of the lessor are burdened with the duties and obligations, which
said covenants conferred and imposed on the original parties. However,
while the option to renew is an enforceable right, it must necessarily be
first exercised to be given effect.
ART. 1315-1319
PERFECTION/STAGES/CONSENSUAL/REAL
& ESSENTIAL REQUISITES
OF CONTRACTS
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.
1316. Real contracts, such as deposit, pledge and Commodatum, are not perfected
until the delivery of the object of the obligation. (n)
1317. No one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it
is ratified, expressly or impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
PNB V. DEE
PNB correct in arguing that it is not obliged to perform any of the
undertaking of respondent PEPI and AFPRSBS in its transactions with
Dee because it is not a privy thereto. The basic principle of relativity of
contracts is that contracts can only bind the parties who entered into
it,23 and cannot favor or prejudice a third person, even if he is aware of
such contract and has acted with knowledge thereof.24Where there is
no privity of contract, there is likewise no obligation or liability to speak
about. The petitioner, however, is not being tasked to undertake the
obligations of PEPI and AFPRSBS. In this case, there are two phases
involved in the transactions between respondents PEPI and Dee the
first phase is the contract to sell, which eventually became the second
phase, the absolute sale, after Dees full payment of the purchase price.
In a contract of sale, the parties obligations are plain and simple. The
law obliges the vendor to transfer the ownership of and to deliver the
thing that is the object of sale.26 On the other hand, the principal
obligation of a vendee is to pay the full purchase price at the agreed
time.27Based on the final contract of sale between them, the obligation
of PEPI, as owners and vendors is to transfer the ownership of and to
deliver Lot to Dee, who, in turn, shall pay, and has in fact paid, the full
purchase price of the property. Note that at the time PEPI mortgaged
the property to the petitioner, the prevailing contract between
respondents PEPI and Dee was still the Contract to Sell, as Dee was yet
to fully pay the purchase price of the property. On this point, PEPI was
acting fully well within its right when it mortgaged the property to the
petitioner, for in a contract to sell, ownership is retained by the seller
and is not to pass until full payment of the purchase price.
1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261)
1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and
the acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time
it came to his knowledge. The contract, in such a case, is presumed to have been
entered into in the place where the offer was made.
JARDINE DAVIES V. CA
CONTRACT DEFINED.A contract is defined as "a juridical convention
manifested in legal form, by virtue of which one or more persons bind
themselves in favor of another or others, or reciprocally, to the
fulfillment of a prestation to give, to do, or not to do. There can be no
contract unless the following REQUISITES concur: (a) consent of the
contracting parties; (b) object certain which is the subject matter of the
contract; and, (c) cause of the obligation which is established.[5] A
contract binds both contracting parties and has the force of law
between them.
Despite the apparent validity of the mortgage between the petitioner

and PEPI, the former is still bound to respect the transactions between
respondents PEPI and Dee. The petitioner was well aware that the
properties mortgaged by PEPI were also the subject of existing
contracts to sell with other buyers. While it may be that the petitioner is
protected by Act No. 3135, as amended, it cannot claim any superior
right as against the installment buyers. This is because the contract
CONTRACTS ARE PERFECTED BY MERE CONSENT, upon the

acceptance by the offeree of the offer made by the offeror. 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. To produce a contract, the acceptance must not qualify the terms
of the offer. However, the acceptance may be express or implied. For a
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contract to arise, the acceptance must be made known to the offeror.
Accordingly, the acceptance can be withdrawn or revoked before it is
made known to the offeror.
It is familiar doctrine that if a corporation knowingly permits one of its

officers, or any other agent, to act within the scope of an apparent
authority, it holds him out to the public as possessing the power to do
those acts; and thus, the corporation will, as against anyone who has in
good faith dealt with it through such agent, be estopped from denying
the agents authority.
In the instant case, there is no issue as regards the subject matter of the
contract and the cause of the obligation. The controversy lies in the
consent - whether there was an acceptance of the offer, and if so, if it
was communicated, thereby perfecting the contract.To resolve the
dispute, there is a need to determine what constituted the offer and the
acceptance. Since petitioner PUREFOODS started the process of
entering into the contract by conducting a bidding,
Art. 1326 of the Civil Code, which provides that
"[a]dvertisements for bidders are simply invitations to make
proposals," applies. Accordingly, the Terms and Conditions of
the Bidding disseminated by petitioner PUREFOODS
constitutes the "advertisement" to bid on the project. The bid
proposals or quotations submitted by the prospective
suppliers including respondent FEMSCO, are the offers. And,
the reply of petitioner PUREFOODS, the acceptance or
rejection of the respective offers.
Quite obviously, the letter of petitioner PUREFOODS to FEMSCO
constituted acceptance of respondent FEMSCOs offer as contemplated
by law. The tenor of the letter, i.e., "This will confirm that Pure Foods has
awarded to your firm (FEMSCO) the project," could not be more
categorical. While the same letter enumerated certain "basic terms and
conditions," these conditions were imposed on the performance of the
obligation rather than on the perfection of the contract. In fine, the
enumerated "basic terms and conditions" were prescriptions on how
the obligation was to be performed and implemented. They were far
from being conditions imposed on the perfection of the contract.
Also, petitioner may be paid on the basis of quantum meruit. It is

essential for the proper operation of the principle that there is an
acceptance of the benefits (the designs were used and were not
returned) by one sought to be charged for the services rendered under
circumstances as reasonably to notify him that the lawyer performing
the task was expecting to be paid compensationtherefor. The doctrine
of quantum meruit is a device to prevent undue enrichment based on the
equitable postulate that it is unjust for a person to retain benefit without
paying for it.
PROVINCE OF CEBU V. MORALES

A contract of sale is a consensual contract that is perfected upon a
meeting of minds as to the object of the contract and its price. Subject
to the provisions of the Statute of Frauds, a formal document is not
necessary for the sale transaction to acquire binding effect.24 For as
long as the essential elements of a contract of sale are proved to exist
in a given transaction, the contract is deemed perfected regardless of
the absence of a formal deed evidencing the same.
Failure to pay the balance of the purchase price did not render the sale
inexistent or invalid, but merely gave rise to a right in favor of the vendor
to either demand specific performance or rescission of the contract of
sale.25 It did not abolish the contract of sale or result in its automatic
invalidation. The stages of a contract of sale are as follows:
(1) negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the
contract is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale which are the
meeting of the minds of the parties as to the object of the contract and
upon the price; and (3) consummation, which begins when the parties
perform their respective undertakings under the contract of sale,
culminating in the extinguishment thereof.27 In this case, respondents
predecessor had undoubtedly commenced performing her obligation by
making a down payment on the purchase price. Unfortunately, however,
she was not able to complete the payments due to legal complications
between petitioner and the city.
But even granting arguendo that the letter of petitioner PUREFOODS

constituted a "conditional counter-offer," respondent FEMCO's
submission of the performance bond and contractor's all-risk insurance
was an implied acceptance, if not a clear indication of its acquiescence
to, the "conditional counter-offer," which expressly stated that the
performance bond and the contractor's all-risk insurance should be
given upon the commencement of the contract.
SOLER V. CA
A contract undergoes three stages:
(a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of
agreement of the parties;
(b) perfection or birth of the contract, which is the moment when
the parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or
performance of the terms agreed upon in the contract.
In the case at bar, there was a perfected oral contract. When Ms. Lopez
and petitioner met in November 1986, and discussed the details of the
work, the first stage of the contract commenced. When they agreed to
the payment of the ten thousand pesos (P10,000.00) as professional
fees of petitioner and that she should give the designs before the
December 1986 board meeting of the bank, the second stage of the
contract proceeded, and when finally petitioner gave the designs to Ms.
Lopez, the contract was consummated. Petitioner believed that once
she submitted the designs she would be paid her professional fees. Ms.
Lopez assured petitioner that she would be paid.
Thus, the City of Cebu could no longer dispose of the lot in question
when it was included as among those returned to petitioner pursuant to
the compromise agreement in Civil Case No. 238-BC. The City of Cebu
had sold the property to Morales even though there remained a balance
on the purchase price and a formal contract of sale had yet to be
executed. Incidentally, the failure of respondents to pay the balance on
the purchase price and the non-execution of a formal agreement was
sufficiently explained by the fact that the trial court, in Civil Case No.
238-BC, issued a writ of preliminary injunction enjoining the city from
further disposing the donated lots. According to respondents, there was
confusion as to the circumstances of payment considering that both
the city and petitioner had refused to accept payment by virtue of the
injunction.28 It appears that the parties simply mistook Lot 646-A-3 as
among those not yet sold by the city.

KC
The City of Cebu was no longer the owner of Lot 646-A-3 when it ceded
the same to petitioner under the compromise agreement in Civil Case
No. 238-BC. At that time, the city merely retained rights as an unpaid
seller but had effectively transferred ownership of the lot to Morales. As
successor-in-interest of the city, petitioner could only acquire rights that
its predecessor had over the lot. These rights include the right to seek
rescission or fulfillment of the terms of the contract and the right to
damages in either case
for its perfection and validity. In this case, the contract was perfected
the moment the petitioner and the respondent agreed on the object of
the sale the two-hectare parcel of land, and the price Three
Thousand Pesos (P3,000.00). Non-payment of the purchase price
merely gave rise to a right in favor of the petitioner to either demand
specific performance or rescission of the contract of sale.
AKANG V. MUN of ISULAN
GARCIA V. THIO
The petitioner alleges that the Deed of Sale is merely an agreement to

sell, which was not perfected due to non-payment of the stipulated
consideration.
A contract of sale is defined under Article 1458 of the Civil Code:
By the contract of sale, one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefore a price certain in money or
its equivalent.
The elements of a contract of sale are: (a) consent or meeting of the
minds, that is, consent to transfer ownership in exchange for the price;
(b) determinate subject matter; and (c) price certain in money or its
equivalent.34
A loan is a real contract, not consensual, and as such is perfected only

upon the delivery of the object of the contract. Upon delivery of the
object of the contract of loan (in this case the money received by the
debtor when the checks were encashed) the debtor acquires ownership
of such money or loan proceeds and is bound to pay the creditor an
equal amount. It is undisputed that the checks were delivered to
respondent. However, these checks were crossed and payable not to
the order of respondent but to the order of a certain Marilou Santiago.
Thus the main question to be answered is: who borrowed money from
petitioner respondent or Santiago?
Delivery is the act by which the res or substance thereof is placed within
the actual or constructive possession or control of another. Although
respondent did not physically receive the proceeds of the checks, these
instruments were placed in her control and possession under an
arrangement whereby she actually re-lent the amounts to Santiago.
A contract to sell, on the other hand, is defined by Article 1479 of the

Civil Code:
A bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite
delivery thereof to the prospective buyer, binds himself to sell the
said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of
the purchase price.
PANGAN V. PERRERAS
There was a perfected contract between the parties since all the essential
requisites of a contract were present
In a contract of sale, the title to the property passes to the buyer upon
the delivery of the thing sold, whereas in a contract to sell, the
ownership is, by agreement, retained by the seller and is not to pass to
the vendee until full payment of the purchase price. 35 The Deed of Sale
executed by the petitioner and the respondent is a perfected contract of
sale, all its elements being present. There was mutual agreement
between them to enter into the sale, as shown by their free and
voluntary signing of the contract. There was also an absolute transfer
of ownership of the property by the petitioner to the respondent as
shown in the stipulation: "x x x I petitioner hereby sell, transfer, cede,
convey and assign as by these presents do have sold, transferred,
ceded, conveyed and assigned, x x x."36 There was also a determine
subject matter, that is, the two-hectare parcel of land as described in
the Deed of Sale. Lastly, the price or consideration is at Three Thousand
Pesos (P3,000.00), which was to be paid after the execution of the
contract. The fact that no express reservation of ownership or title to
the property can be found in the Deed of Sale bolsters the absence of
such intent, and the contract, therefore, could not be one to sell. Had
the intention of the petitioner been otherwise, he could have: (1)
immediately sought judicial recourse to prevent further construction
of the municipal building; or (2) taken legal action to contest the
agreement.37 The petitioner did not opt to undertake any of such
recourses.
Article 1318 of the Civil Code declares that no contract exists unless the
following requisites concur: (1) consent of the contracting parties; (2)
object certain which is the subject matter of the contract; and (3) cause
of the obligation established. Since the object of the parties agreement
involves properties co-owned by Consuelo and her children, the
petitioners-heirs insist that their approval of the sale initiated by their
mother, Consuelo, was essential to its perfection. Accordingly, their
refusal amounted to the absence of the required element of consent.
That a thing is sold without the consent of all the co-owners does not
invalidate the sale or render it void.Article 493 of the Civil
Code[8] recognizes the absolute right of a co-owner to freely dispose of
his pro indiviso share as well as the fruits and other benefits arising
from that share, independently of the other co-owners. Thus, when
Consuelo agreed to sell to the respondents the subject properties, what
she in fact sold was her undivided interest that, as quantified by the
RTC, consisted of one-half interest, representing her conjugal share,
and one-sixth interest, representing her hereditary share.
The petitioners-heirs nevertheless argue that Consuelos consent was
predicated on their consent to the sale, and that their disapproval
resulted in the withdrawal of Consuelos consent. Yet, we find nothing in
the parties agreement or even conduct save Consuelos self-serving
testimony that would indicate or from which we can infer that
Consuelos consent depended on her childrens approval of the sale. The
explicit terms of the June 8, 1989 receipt[9] provide no occasion for any
reading that the agreement is subject to the petitioners-heirs favorable
consent to the sale.
The petitioners allegation of non-payment is of no consequence taking

into account the Municipal Voucher presented before the RTC. Even so,
non-payment would be immaterial and has no effect on the validity of
the contract of sale. A contract of sale is a consensual contract and
what is required is the meeting of the minds on the object and the price
7

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until a contract is perfected, are not considered binding commitments.
Thus, at any time prior to the perfection of the contract, either
negotiating party may stop the negotiation. The offer, at this stage, may
be withdrawn; the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily when the
offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where
a period is given to the offeree within which to accept the offer, the
following rules generally govern:
The presence of Consuelos consent and, corollarily, the existence of a

perfected contract between the parties are further evidenced by the
payment and receipt of P20,000.00, an earnest money by the
contracting parties common usage. The law on sales, specifically
Article 1482 of the Civil Code, provides that whenever earnest money is
given in a contract of sale, it shall be considered as part of the price and
proof of the perfection of the contract. Although the presumption is not
conclusive, as the parties may treat the earnest money differently, there
is nothing alleged in the present case that would give rise to a contrary
presumption.In cases where the Court reached a conclusion contrary to
the presumption declared in Article 1482, we found that the money
initially paid was given to guarantee that the buyer would not back out
from the sale, considering that the parties to the sale have yet to arrive at a
definite agreement as to its terms that is, a situation where the contract has
not yet been perfected.[10] These situations do not obtain in the present
case, as neither of the parties claimed that the P20,000.00 was given
merely as guarantee by the respondents, as vendees, that they would
not back out from the sale. As we have pointed out, the terms of the
parties agreement are clear and explicit; indeed, all the essential
elements of a perfected contract are present in this case. While the
respondents required that the occupants vacate the subject properties
prior to the payment of the second installment, the stipulation does not
affect the perfection of the contract, but only its execution.
(1)
(2)
In sum, the case contains no element, factual or legal, that negates the
existence of a perfected contract between the parties.
ART. 1324
OPTION CONTRACT
When the offerer has allowed the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by communicating such withdrawal, except
when the option is founded upon a consideration, as something paid or promised.
ANG YU ASUNCION V. CA
If the period is not itself founded upon or supported by a

consideration, the offeror is still free and has the right to
withdraw the offer before its acceptance, or, if an acceptance
has been made, before the offeror's coming to know of such
fact, by communicating that withdrawal to the offeree. The
right to withdraw, however, must not be exercised
whimsically or arbitrarily; otherwise, it could give rise to a
damage claim under Article 19 of the Civil Code which
ordains that "every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith."
If the period has a separate consideration, a contract of
"option" is deemed perfected, and it would be a breach of that
contract to withdraw the offer during the agreed period. The
option, however, is an independent contract by itself, and it is
to be distinguished from the projected main agreement
(subject matter of the option) which is obviously yet to be
concluded. If, in fact, the optioner-offeror withdraws the offer
before its acceptance (exercise of the option) by the optioneeofferee, the latter may not sue for specific performance on the
proposed contract ("object" of the option) since it has failed
to reach its own stage of perfection. The optioner-offeror,
however, renders himself liable for damages for breach of the
option. In these cases, care should be taken of the real nature
of theconsideration given, for if, in fact, it has been intended to
be part of the consideration for the main contract with a right
of withdrawal on the part of the optionee, the main contract
could be deemed perfected; a similar instance would be an
"earnest money" in a contract of sale that can evidence its
perfection
Even on the premise that such right of first refusal has been decreed
under a final judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of execution under a judgment
that merely recognizes its existence, nor would it sanction an action for
specific performance without thereby negating the indispensable
element of consensuality in the perfection of contracts. 11 It is not to
say, however, that the right of first refusal would be inconsequential for,
such as already intimated above, an unjustified disregard thereof, given,
for instance, the circumstances expressed in Article 19 12 of the Civil
Code, can warrant a recovery for damages.
An accepted unilateral promise which specifies the thing to be sold and the
price to be paid, when coupled with a valuable consideration
distinct and separate from the price, is what may properly be termed a
perfected contract ofoption. This contract is legally binding, and in sales,
it conforms with the second paragraph of Article 1479 of the Civil Code,
viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is supported
by a consideration distinct from the price. (1451a) 6
Observe, however, that the option is not the contract of sale itself. 7 The
optionee has the right, but not the obligation, to buy. Once the option is
exercised timely, i.e., the offer is accepted before a breach of the option,
a bilateral promise to sell and to buy ensues and both parties are then
reciprocally bound to comply with their respective undertakings. 8
LIMSON V. CA
A mere CONTRACT OF OPTION, not of contract to sell. An option, as
used in the law of sales, is a continuing offer or contract by which the
owner stipulates with another that the latter shall have the right to buy
the property at a fixed price within a time certain, or under, or in
compliance with, certain terms and conditions, or which gives to the
owner of the property the right to sell or demand a sale. It is also
sometimes called an "unaccepted offer." An option is not of itself a
Let us elucidate a little. A negotiation is formally initiated by an offer. An

imperfect
promise (policitacion) is
merely
an
offer.
Public
advertisements or solicitations and the like are ordinarily construed as
mere invitations to make offers or only as proposals. These relations,
8

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purchase, but merely secures the privilege to buy. [8] It is not a sale of
property but a sale of the right to purchase.[9] It is simply a contract by
which the owner of property agrees with another person that he shall
have the right to buy his property at a fixed price within a certain
time. He does not sell his land; he does not then agree to sell it; but he
does sell something, i.e., the right or privilege to buy at the election or
option of the other party.[10] Its distinguishing characteristic is that it
imposes no binding obligation on the person holding the option, aside
from the consideration for the offer. Until acceptance, it is not, properly
speaking, a contract, and does not vest, transfer, or agree to transfer,
any title to, or any interest or right in the subject matter, but is merely a
contract by which the owner of the property gives the optionee the right
or privilege of accepting the offer and buying the property on certain
terms.[11]
On the other hand, a contract, like a contract to sell, involves the
meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some
service.[12] Contracts, in general, are perfected by mere consent, [13] which
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.
We do not agree with the contention of the petitioner that the deeds of
assignment executed by the defendants-tenants are perfected option
contracts. n this case, the defendants-tenants-subtenants, under the
deeds of assignment, granted to the petitioner not only an option but
the exclusive right to buy the landholding. But the grantors were merely
the defendants-tenants, and not the respondents, the registered owners
of the property. Not being the registered owners of the property, the
defendants-tenants could not legally grant to the petitioner the option,
much less the exclusive right to buy the property.
EULOGIO V. APELES
There is no dispute that what Enrico sought to enforce in Civil Case No.
Q-99-36834 was his purported right to acquire ownership of the subject
property in the exercise of his option to purchase the same under the
Contract of Lease with Option to Purchase. He ultimately wants to
compel the spouses Apeles to already execute the Deed of Sale over the
subject property in his favor.
An option is a contract by which the owner of the property agrees with
another person that the latter shall have the right to buy the formers
property at a fixed price within a certain time. It is a condition offered or
contract by which the owner stipulates with another that the latter shall
have the right to buy the property at a fixed price within a certain time,
or under, or in compliance with certain terms and conditions; or which
gives to the owner of the property the right to sell or demand a sale. An
option is not of itself a purchase, but merely secures the privilege to
buy. It is not a sale of property but a sale of the right to purchase. It is
simply a contract by which the owner of the property agrees with
another person that he shall have the right to buy his property at a fixed
price within a certain time. He does not sell his land; he does not then
agree to sell it; but he does sell something, i.e., the right or privilege to
buy at the election or option of the other party. Its distinguishing
characteristic is that it imposes no binding obligation on the person
holding the option, aside from the consideration for the offer. For an
option contract to be valid and enforceable against the promissor, there
must be a separate and distinct consideration that supports it.
Receipt readily shows that respondent spouses and petitioner only

entered into a contract of option; a contract by which respondent
spouses agreed with petitioner that the latter shall have the right to buy
the formers property at a fixed price of P34.00 per square meter within
ten (10) days from 31 July 1978. The consideration of P20,000.00 paid
by petitioner to respondent spouses was referred to as "earnest
money."
EARNEST MONEY V. OPTION MONEY
However, a careful examination of the words used indicates that the
money is not earnest money but option money."Earnest money" and
"option money" are not the same but distinguished thus: (a) earnest
money is part of the purchase price, while option money is the money
given as a distinct consideration for an option contract; (b) earnest
money is given only where there is already a sale, while option money
applies to a sale not yet perfected; and, (c) when earnest money is
given, the buyer is bound to pay the balance, while when the would-be
buyer gives option money, he is not required to buy, [18] but may even
forfeit it depending on the terms of the option.
Without consideration that is separate and distinct from the purchase

price, an option contract cannot be enforced; that holds true even if the
unilateral promise is already accepted by the optionee.
That the contract between the parties is one of option is buttressed by

the provision therein that should the transaction of the property not
materialize without fault of petitioner as buyer, respondent Lorenzo de
Vera obligates himself to return the full amount of P20,000.00 "earnest
money" with option to buy or forfeit the same on the fault of
petitioner. It is further bolstered by the provision therein that guarantees
petitioner that she or her representative would be notified in case the
subject property was sold or encumbered to a third person. Finally,
the Receipt provided for a period within which the option to buy was to
be exercised, i.e., "within ten (10) days" from 31 July 1978. During the
option period the agreement was not converted into a bilateral promise
to sell and to buy where both respondent spouses and petitioner were
then reciprocally bound to comply with their respective undertakings as
petitioner did not timely, affirmatively and clearly accept the offer of
respondent spouses.
CONSIDERATION.The consideration is the why of the contracts, the

essential reason which moves the contracting parties to enter into the
contract. This definition illustrates that the consideration contemplated
to support an option contract need not be monetary. Actual cash need
not be exchanged for the option. However, by the very nature of an
option contract, as defined in Article 1479, the same is an onerous
contract for which the consideration must be something of value,
although its kind may vary.
The only consideration agreed upon by the parties in the said Contract
is the supposed purchase price for the subject property in the amount
not exceeding P1.5 Million, which could not be deemed to be the same
consideration for the option contract since the law and jurisprudence
explicitly dictate that for the option contract to be valid, it must be
supported by a consideration separate and distinct from the price.
TAYAG V. LACSON
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voidable.The Civil Code clarifies the nature of mistake that vitiates
consent.
ART. 1330-1332
DEFECTS OF THE WILL
For mistake as to the qualification of one of the parties to vitiate

consent, two REQUISITES must concur:
1.
the mistake must be either with regard to the identity or with
regard to the qualification of one of the contracting parties;
and
2.
the identity or qualification must have been the principal
consideration for the celebration of the contract.
1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable. (1265a)
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. (1266a)
In the present case, the Church contends that its consent to sell the lot
was given on the mistaken impression arising from Pantes fraudulent
misrepresentation that he had been the actual occupant of the lot.
Willful misrepresentation existed because of its policy to sell its lands
only to their actual occupants or residents. Thus, it considers the
buyers actual occupancy or residence over the subject lot a
qualification
necessary
to induce
it
to
sell
the
lot.
Contrary to the Churchs contention, the actual occupancy or residency
of a buyer over the land does not appear to be a necessary qualification
that the Church requires before it could sell its land. Had this been
indeed its policy, then neither Pante nor the spouses Rubi would qualify
as buyers of the 32-square meter lot, as none of them actually occupied
or resided on the lot. We note in this regard that the lot was only a 2x16meter strip of rural land used as a passageway from Pantes house to
the municipal road.
We find well-taken Pantes argument that, given the size of the lot, it
could serve no other purpose than as a mere passageway; it is
unthinkable to consider that a 2x16-meter strip of land could be
mistaken as anyones residence. In fact, the spouses Rubi were in
possession of the adjacent lot, but they never asserted possession over
the 2x16-meter lot when the 1994 sale was made in their favor; it was
only then that they constructed the concrete fence blocking the
passageway.
1332. When one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing the contract
must show that the terms thereof have been fully explained to the former.
FONTANA RESORT V. TAN

whether or not petitioners committed fraud or defaulted on their
promises as would justify the annulment or rescission of their contract
of sale? There is fraud when one party is induced by the other to enter
into a contract, through and solely because of the latters insidious
words or machinations. But not all forms of fraud can vitiate
consent. Under Article 1330, fraud refers to dolo causante or causal
fraud, in which, prior to or simultaneous with the execution of a
contract, one party secures the consent of the other by using deception,
without which such consent would not have been given. Simply stated,
the fraud must be the determining cause of the contract, or must have
caused the consent to be given.
T]he general rule is that he who alleges fraud or mistake in a
transaction must substantiate his allegation as the presumption is that
a person takes ordinary care for his concerns and that private dealings
have been entered into fairly and regularly. One who alleges defect or
lack of valid consent to a contract by reason of fraud or undue influence
must establish by full, clear and convincing evidence such specific acts
that vitiated a partys consent, otherwise, the latters presumed consent
to the contract prevails.
We find it unlikely that Pante could successfully misrepresent himself

as the actual occupant of the lot; this was a fact that the Church (which
has a parish chapel in the same barangay where the lot was located)
could easily verify had it conducted an ocular inspection of its own
property. The surrounding circumstances actually indicate that the
Church was aware that Pante was using the lot merely as a
passageway.
In this case, respondents have miserably failed to prove how petitioners

employed fraud to induce respondents to buy FRCCI shares. It can only
be expected that petitioners presented the FLP and the country club in
the most positive light in order to attract investor-members. There is no
showing that in their sales talk to respondents, petitioners actually used
insidious words or machinations, without which, respondents would not
have bought the FRCCI shares.
DELA CRUZ V. DELA CRUZ

For Article 1332 to apply, it must first be convincingly established that
the illiterate or disadvantaged party could not read or understand the
language in which the contract was written, [21] or that the contract was
left unexplained to said party. Petitioners failed to discharge this
burden.
THE ROMAN CATHOLIC CHURCH V. PANTE

No misrepresentation existed vitiating the sellers consent and invalidating
the contract. Consent is an essential requisite in contracts as it pertains
to the meeting of the offer and the acceptance upon the thing and the
cause which constitutes the contract. To create a valid contract, the
meeting of the minds must be free, voluntary, willful and with a
reasonable understanding of the various obligations the parties
assumed for themselves. Where consent, however, is given through
mistake, violence, intimidation, undue influence, or fraud, the contract is
deemed voidable. However, not every mistake renders a contract
The DAS dated September 25, 1980 was duly acknowledged before a
notary public. As a notarized document, it has in its favor the
presumption of regularity and it carries the evidentiary weight conferred
upon it with respect to its due execution. It is admissible in evidence
without further proof of its authenticity and is entitled to full faith and
credit upon its face
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1346. An absolutely simulated or fictitious contract is void. A relative simulation, when
it does not prejudice a third person and is not intended for any purpose contrary to law,
morals, good customs, public order or public policy binds the parties to their real
agreement.
FELICIANO V. ZALDIVAR
On this point, Article 1332 of the Civil Code is relevant:
ART.1332. When one of the parties is unable to read, or if the contract is
in a language not understood by him, and mistake or fraud is alleged,
the person enforcing the contract must show that the terms thereof
have been fully explained to the former.
VILLEGAS V. RURAL BANK OF TANJAY

petitioners admit that the loan (and mortgage) contracts were made to
appear as several sugar crop loans not exceeding P50,000.00 each
even if they were not just so the respondent rural bank could grant and
approve the same pursuant to Republic Act (R.A.) No. 720, the Rural
Banks Act. petitioners aver that the sugar crop loans were merely
simulated contracts and, therefore, without any force and effect.
The principle that a party is presumed to know the import of a

document to which he affixes his signature is modified by the foregoing
article. Where a party is unable to read or when the contract is in a
language not understood by the party and mistake or fraud is alleged,
the obligation to show that the terms of the contract had been fully
explained to said party who is unable to read or understand the
language of the contract devolves on the party seeking to enforce the
contract to show that the other party fully understood the contents of
the document. If he fails to discharge this burden, the presumption of
mistake, if not, fraud, stands unrebutted and controlling
Given the factual antecedents of this case, it is obvious that the sugar
crop loans were RELATIVELY SIMULATED contracts and that both
parties intended to be bound thereby. There are two juridical acts
involved in relative simulation the ostensible act and the hidden act.
The ostensible act is the contract that the parties pretend to have
executed while the hidden act is the true agreement between the parties.
To determine the enforceability of the actual agreement between the
parties, we must discern whether the concealed or hidden act is lawful
and the essential requisites of a valid contract are present.
Applying the foregoing principles, the presumption is that Remegia,

considering her limited educational attainment, did not understand the
full import of the joint affidavit of confirmation of sale and,
consequently, fraud or mistake attended its execution. The burden is on
respondents, the spouses Zaldivar, to rebut this presumption. They tried
to discharge this onus by presenting Atty. Francisco Velez (later RTC
Judge) who notarized the said document. Atty. Velez testified that he
"read and interpreted" the document to the affiants and he asked them
whether the contents were correct before requiring them to affix their
signatures thereon.21 The bare statement of Atty. Velez that he "read
and interpreted" the document to the affiants and that he asked them
as to the correctness of its contents does not necessarily establish that
Remegia actually comprehended or understood the import of the joint
affidavit of confirmation of sale. Nowhere is it stated in the affidavit
itself that its contents were fully explained to Remegia in the language
that she understood before she signed the same. Thus, to the mind of
the Court, the presumption of fraud or mistake attending the execution
of the joint affidavit of confirmation of sale was not sufficiently
overcome.
In this case, the juridical act which binds the parties are the loan and
mortgage contracts, i.e., petitioners procurement of a loan from
respondent. Although these loan and mortgage contracts were
concealed and made to appear as sugar crop loans to make them fall
within the purview of the Rural Banks Act, all the essential requisites of
a contract were present. However, the purpose thereof is illicit, intended
to circumvent the Rural Banks Act requirement in the procurement of
loans. Consequently, while the parties intended to be bound thereby, the
agreement is void and inexistent under Article 1409 of the Civil Code. In
this case, Clearly, both petitioners and respondent are in pari delicto, and
neither should be accorded affirmative relief as against the other.
VILLACERAN V. DE GUZMAN
Article 1345[19] of the Civil Code provides that the simulation of a
contract may either be absolute or relative. In absolute simulation, there
is a colorable contract but it has no substance as the parties have no
intention to be bound by it. The main characteristic of an absolute
simulation is that the apparent contract is not really desired or intended
to produce legal effect or in any way alter the juridical situation of the
parties. As a result, an absolutely simulated or fictitious contract is void,
and the parties may recover from each other what they may have given
under the contract. However, if the parties state a false cause in the
contract to conceal their real agreement, the contract is only relatively
simulated and the parties are still bound by their real agreement. Hence,
where the essential requisites of a contract are present and the
simulation refers only to the content or terms of the contract, the
agreement is absolutely binding and enforceable between the parties
and their successors in interest.
Moreover, the purported joint affidavit of confirmation of sale failed to

state certain important information. For example, it did not mention the
consideration or price for the alleged sale by Remegia of the subject lot
to Ignacio Gil. Also, while it stated that the subject lot was conveyed by
Ignacio Gil to Pio Dalman, it did not say whether the conveyance was by
sale, donation or any other mode of transfer. Finally, it did not also state
how the ownership of the subject lot was transferred from Pio Dalman
to respondent Aurelio or respondents.
ART. 1345-1346
SIMULATION OF CONTRACTS
CABALU V. TABU
Not in conformity, both parties appealed to the CA. Petitioners
contended that the RTC erred in declaring void the Deed of Absolute
Sale, dated March 5, 1975. They claimed that Domingo owned the
property, when it was sold to Laureano Cabalu, because he inherited it
from his father, Benjamin, who was one of the heirs of Faustina. Being a
1345. Simulation of a contract may be absolute or relative. The former takes place
when the parties do not intend to be bound at all; the latter, when the parties conceal
their true agreement. (n)
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co-owner of the property left by Benjamin, Domingo could dispose of
the portion he owned, notwithstanding the will of Faustina not being
probated.
contract was already dead at the time of its execution, such contract is
undoubtedly simulated and false and, therefore, null and void by reason
of its having been made after the death of the party who appears as
one of the contracting parties therein. The death of a person terminates
contractual capacity.19
Respondent spouses, on the other hand, asserted that the Deed of Sale,
dated March 5, 1975, was spurious and simulated as the signature, PTR
and the document number of the Notary Public were different from the
latters notarized documents. They added that the deed was without
consent, Domingo being of unsound mind at the time of its execution.
Further, they claimed that the RTC erred in canceling TCT No. 266583
and insisted that the same should be restored to its validity because
Benjamin and Domingo were declared heirs of Faustina.
HEIRS OF INTAC V. CA
In this case, the CA ruled that the deed of sale executed by Ireneo and
Salvacion was absolutely simulated for lack of consideration and cause
and, therefore, void. Articles 1345 and 1346 of the Civil Code provide:
If the parties state a false cause in the contract to conceal their real
agreement, the contract is only relatively simulated and the parties are
still bound by their real agreement. Hence, where the essential
requisites of a contract are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding
and enforceable between the parties and their successors in interest
It is well to note that both the RTC and the CA found that the evidence
established that the March 5, 1975 Deed of Sale of Undivided Parcel of
Land executed by Domingo in favor of Laureano Cabalu was a fictitious
and simulated document. As expounded by the CA, viz:
Nevertheless, since there are discrepancies in the signature
of the notary public, his PTR and the document number on
the lower-most portion of the document, as well as the said
deed of sale being found only after the plaintiffs-appellants
were ejected by the defendants-appellants; that they were
allegedly not aware that the said property was bought by
their father, and that they never questioned the other half of
the property not occupied by them, it is apparent that the sale
dated March 5, 1975 had the earmarks of a simulated deed
written all over it. The lower court did not err in pronouncing
that it be declared null and void
Even on the assumption that the March 5, 1975 deed was not
simulated, still the sale cannot be deemed valid because, at that time,
Domingo was not yet the owner of the property. There is no dispute that
the original and registered owner of the subject property covered by
TCT No. 16776, from which the subject 9,000 square meter lot came
from, was Faustina, who during her lifetime had executed a will, dated
July 27, 1939. In the said will, the name of Benjamin, father of Domingo,
appeared as one of the heirs. Thus, and as correctly found by the RTC,
even if Benjamin died sometime in 1960, Domingo in 1975 could not yet
validly dispose of the whole or even a portion thereof for the reason that
he was not the sole heir of Benjamin, as his mother only died sometime
in 1980.
In absolute simulation, there is a colorable contract but it has no

substance as the parties have no intention to be bound by it. "The main
characteristic of an absolute simulation is that the apparent contract is
not really desired or intended to produce legal effect or in any way alter
the juridical situation of the parties."14 "As a result, an absolutely
simulated or fictitious contract is void, and the parties may recover
from each other what they may have given under the contract."
In the case at bench, the Court is one with the courts below that no
valid sale of the subject property actually took place between the
alleged vendors, Ireneo and Salvacion; and the alleged vendees,
Spouses Intac. There was simply no consideration and no intent to sell
it.
Critical is the testimony of Marietto, a witness to the execution of the
subject absolute deed of sale. He testified that Ireneo personally told
him that he was going to execute a document of sale because Spouses
Intac needed to borrow the title to the property and use it as collateral
for their loan application. Ireneo and Salvacion never intended to sell or
permanently transfer the full ownership of the subject property to
Spouses Intac. Marietto was characterized by the RTC as a credible
witness.
Aside from their plain denial, petitioners failed to present any concrete
evidence to disprove Mariettos testimony. They claimed that they
actually paid P150,000.00 for the subject property. They, however,
failed to adduce proof, even by circumstantial evidence, that they did, in
fact, pay it. Even for the consideration of P60,000.00 as stated in the
contract, petitioners could not show any tangible evidence of any
payment therefor. Their failure to prove their payment only
strengthened Mariettos story that there was no payment made
because Ireneo had no intention to sell the subject property.
Besides, under Article 1347 of the Civil Code, "No contract may be
entered into upon future inheritance except in cases expressly
authorized by law." Paragraph 2 of Article 1347, characterizes a
contract entered into upon future inheritance as void. The law applies
when the following requisites concur:
(1) the succession has not yet been opened;
(2) the object of the contract forms part of the inheritance; &
(3) the promissor has, with respect to the object, an expectancy
of a right which is purely hereditary in nature.
Angelinas story, except on the consideration, was consistent with that

of Marietto. Angelina testified that she and her husband mortgaged the
subject property sometime in July 1978 to finance the construction of a
small hospital in Sta. Cruz, Laguna. Angelina claimed that Ireneo offered
the property as he was in deep financial need.
Regarding the deed of sale covering the remaining 4,500 square meters
of the subject property executed in favor of Renato Tabu, it is evidently
null and void. The document itself, the Deed of Absolute Sale, dated
October 8, 1996, readily shows that it was executed on August 4, 1996
more than two months after the death of Domingo. Contracting parties
must be juristic entities at the time of the consummation of the
contract. Stated otherwise, to form a valid and legal agreement it is
necessary that there be a party capable of contracting and a party
capable of being contracted with. Hence, if any one party to a supposed
Granting that Ireneo was in financial straits, it does not prove that he
intended to sell the property to Angelina. Petitioners could not adduce
any proof that they lent money to Ireneo or that he shared in the
proceeds of the loan they had obtained. And, if their intention was to
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build a hospital, could they still afford to lend money to Ireneo? And if
Ireneo needed money, why would he lend the title to Spouses Intac
when he himself could use it to borrow money for his needs? If Spouses
Intac took care of him when he was terminally ill, it was not surprising
for Angelina to reciprocate as he took care of her since she was three
(3) years old until she got married. Their caring acts for him, while they
are deemed services of value, cannot be considered as consideration
for the subject property for lack of quantification and the Filipino culture
of taking care of their elders.
"true owner" of the property as well as innocent third parties with a right,
interest or claim thereon from a usurper who may have acquired a
fraudulent certificate of title thereto.23
In this case, while Philbank failed to exercise greater care in conducting
the ocular inspection of the properties offered for mortgage, 24 its
omission did not prejudice any innocent third parties. In particular, the
buyer did not pursue her cause and abandoned her claim on the
property. On the other hand, Sps. Delgado were parties to the simulated
sale in favor of the Dys which was intended to mislead Philbank into
granting the loan application. Thus, no amount of diligence in the
conduct of the ocular inspection could have led to the discovery of the
complicity between the ostensible mortgagors (the Dys) and the true
owners (Sps. Delgado).1wphi1 In fine, Philbank can hardly be deemed
negligent under the premises since the ultimate cause of the
mortgagors' (the Dys') defective title was the simulated sale to which
Sps. Delgado were privies.
Thus, the Court agrees with the courts below that the questioned
contract of sale was only for the purpose of lending the title of the
property to Spouses Intac to enable them to secure a loan. Their
arrangement was only temporary and could not give rise to a valid sale.
Where there is no consideration, the sale is null and void ab initio.
As heretofore shown, the contemporaneous and subsequent acts of
both parties in this case, point to the fact that the intention of Ireneo
was just to lend the title to the Spouses Intac to enable them to borrow
money and put up a hospital in Sta. Cruz, Laguna. Clearly, the subject
contract was absolutely simulated and, therefore, void.
Indeed, a finding of negligence must always be contextualized in line

with the attendant circumstances of a particular case. As aptly held in
Philippine National Bank v. Heirs of Estanislao Militar,25 "the diligence
with which the law requires the individual or a corporation at all times to
govern a particular conduct varies with the nature of the situation in
which one is placed, and the importance of the act which is to be
performed."26 Thus, without diminishing the time-honored principle that
nothing short of extraordinary diligence is required of banks whose
business is impressed with public interest, Philbank's inconsequential
oversight should not and cannot serve as a bastion for fraud and deceit.
PHIL. BANKING CORP. V. DY

The petition is meritorious.
At the outset, the Court takes note of the fact that the CA Decision
nullifying the questioned contracts of sale between Sps. Delgado and
the Dys had become final and executory. Accordingly, the Petition-inIntervention filed by Arturo Dy, which seeks to maintain the subject
contracts' validity, can no longer be entertained. The cancellation of the
Dys' certificates of title over the disputed properties and the issuance of
new TCTs in favor of Cipriana must therefore be upheld.
To be sure, fraud comprises "anything calculated to deceive, including

all acts, omissions, and concealment involving a breach of legal duty or
equitable duty, trust, or confidence justly reposed, resulting in damage
to another, or by which an undue and unconscientious advantage is
taken of another."27 In this light, the Dys' and Sps. Delgado's deliberate
simulation of the sale intended to obtain loan proceeds from and to
prejudice Philbank clearly constitutes fraudulent conduct. As such, Sps.
Delgado cannot now be allowed to deny the validity of the mortgage
executed by the Dys in favor of Philbank as to hold otherwise would
effectively sanction their blatant bad faith to Philbank's detriment
However, Philbank's mortgage rights over the subject properties shall

be maintained. While it is settled that a simulated deed of sale is null
and void and therefore, does not convey any right that could ripen into a
valid title,16it has been equally ruled that, for reasons of public
policy,17 the subsequent nullification of title to a property is not a ground
to annul the contractual right which may have been derived by a
purchaser, mortgagee or other transferee who acted in good faith. 18
Accordingly, in the interest of public policy, fair dealing, good faith and
justice, the Court accords Philbank the rights of a mortgagee in good
faith whose lien to the securities posted must be respected and
protected. In this regard, Philbank is entitled to have its mortgage
carried over or annotated on the titles of Cipriana Delgado over the said
properties.
The ascertainment of good faith or lack of it, and the determination of

whether due diligence and prudence were exercised or not, are
questions of fact19 which are generally improper in a petition for review
on certiorari under Rule 45 of the Rules of Court (Rules) where only
questions of law may be raised. A recognized exception to the rule is
when there are conflicting findings of fact by the CA and the RTC, 20 as
in this case.
Primarily, it bears noting that the doctrine of "mortgagee in good faith"
is based on the rule that all persons dealing with property covered by a
Torrens Certificate of Title are not required to go beyond what appears
on the face of the title. This is in deference to the public interest in
upholding the indefeasibility of a certificate of title as evidence of lawful
ownership of the land or of any encumbrance thereon.21 In the case of
banks and other financial institutions, however, greater care and due
diligence are required since they are imbued with public interest, failing
which renders the mortgagees in bad faith. Thus, before approving a
loan application, it is a standard operating practice for these institutions
to conduct an ocular inspection of the property offered for mortgage
and to verify the genuineness of the title to determine the real owner(s)
thereof.22 The apparent purpose of an ocular inspection is to protect the
ART. 1356-1358
FORMS OF CONTRACT
1356. Contracts shall be obligatory, in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. However, when the
law requires that a contract be in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain way, that requirement is absolute
and indispensable. In such cases, the right of the parties stated in the following article
cannot be exercised. (1278a)
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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 upon the contract. (1279a)
All other contracts where the amount involved exceeds five hundred
pesos must appear in writing, even a private one.But sales of goods,
chattels or things in action are governed by Articles 1403, No. 2, and
1405.
1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales of
real property or of an interest therein a governed by Articles 1403, No. 2, and
1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the
conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its object an
act appearing or which should appear in a public document, or should prejudice
a third person;
(4) The cession of actions or rights proceeding from an act appearing in a public
document.
Art. 1625. An assignment of a credit, right or action shall produce no

effect as against third person, unless it appears in a public instrument,
or the instrument is recorded in the Registry of Property in case the
assignment involves real property. (Underscoring supplied)
Would the exercise by the brothers Teoco of the right to redeem the
properties in question be precluded by the fact that the assignment of
right of redemption was not contained in a public document? We rule in
the negative.
Metrobank never challenged either the content, the due execution, or
the genuineness of the assignment of the right of
redemption. Consequently, Metrobank is deemed to have admitted the
same. Having impliedly admitted the content of the assignment of the
right of redemption, there is no necessity for a prima
facie evidence of the facts there stated. In the same manner, since
Metrobank has impliedly admitted the due execution and genuineness
of the assignment of the right of redemption, a private document
evidencing the same is admissible in evidence.[18]
All other contracts where the amount involved exceeds five hundred pesos must
appear in writing, even a private one. But sales of goods, chattels or things in action
are governed by Articles, 1403, No. 2 and 1405.
MARTINEZ V. CA
CA anchored its decision in favor of second vendees on the fact that the
sale between petitioner Martinez and private respondents De la Paz
was not notarized, as required by Arts. 1357 and 1358 of the Civil Code,
thus it cannot be said that the private respondents Veneracion had
knowledge of the first sale
True it is that the Civil Code requires certain transactions to appear in

public documents. However, the necessity of a public document for
contracts which transmit or extinguish real rights over immovable
property, as mandated by Article 1358 of the Civil Code, is only
for convenience; it is not essential for validity or enforceability.[19] Thus,
in Cenido v. Apacionado,[20] this Court ruled that the only effect of
noncompliance with the provisions of Article 1358 of the Civil Code is
that a party to such a contract embodied in a private document may be
compelled to execute a public document:
SC: Art. 1357[36] and Art. 1358,[37] in relation to Art. 1403(2)[38] of the Civil
Code, requires that the sale of real property must be in writing for it to
be enforceable. It need not be notarized. If the sale has not been put in
writing, either of the contracting parties can compel the other to
observe such requirement.[39] This is what petitioner did when he
repeatedly demanded that a Deed of Absolute Sale be executed in his
favor by private respondents De la Paz. There is nothing in the above
provisions which require that a contract of sale of realty must be
executed in a public document. In any event, it has been shown that
private respondents Veneracion had knowledge of facts which would
put them on inquiry as to the nature of petitioners occupancy of the
disputed lot.
Article 1358 does not require the accomplishment of the acts or

contracts in a public instrument in order to validate the act or contract
but only to insure its efficacy, so that after the existence of said
contract has been admitted, the party bound may be compelled to
execute the proper document. This is clear from Article 1357, viz.:
Art. 1357. If the law requires a document or other special
form, as in the acts and contracts enumerated in the
following article (Article 1358), 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 upon the contract.[21]
TEOCO V. METROBANK
the law may require that certain transactions appear in public
instruments, such as Articles 1358 and 1625 of the Civil Code, which
respectively provide:
On the other hand, Article 1625 of the Civil Code provides that [a]n
assignment of a credit, right or action shall produce no effect as against
third person, unless it appears in a public instrument, or the instrument
is recorded in the Registry of Property in case the assignment involves
real property.
Art. 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation,
transmission, modification or extinguishment of real rights
over immovable property; sales of real property or of an
interest therein governed by Articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights
or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power which
has for its object an act appearing or which should appear in
a public document, or should prejudice a third person;
(4) The cession of actions or rights proceeding from an act
appearing in a public document.
In Co v. Philippine National Bank,[22] the Court interpreted the phrase

effect as against a third person to be damage or prejudice to such third
person, thus:
x x x In Lichauco vs. Olegario, et al., 43 Phil. 540, this Court held that
whether or not x x x an execution debtor was legally authorized to sell
his right of redemption, is a question already decided by this Court in
the affirmative in numerous decisions on the precepts of Sections 463
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and 464 and other sections related thereto, of the Code of Civil
Procedure. (The mentioned provisions are carried over in Rule 39 of the
Revised Rules of Court.) That the transfers or conveyances in question
were not registered is of miniscule significance, there being no showing
that PNBwas damaged or could be damaged by such omission.When
CITADEL made its tender on May 5, 1976, PNB did not question the
personality of CITADEL at all. It is now too late and purely technical to
raise such innocuous failure to comply with Article 1625 of the Civil
Code.[23]
validity, enforcement, rescission or annulment of ordinary contracts,

there is a need to ascertain whether the Paknaan in question has
sufficiently complied with the requisites of validity in accordance with
Article 1318 of the Civil Code.
There is no question that there was meeting of the minds between the
contracting parties. In executing the Paknaan, the respondent undertook
to convey 1 hectare of land to petitioners who accepted. It appears that
while the Paknaan was prepared and signed by respondent Arjona,
petitioners acceded to the terms thereof by not disputing its contents
and are in fact now seeking its enforcement. The object is a 1-hectare
parcel of land representing petitioners inheritance from their deceased
grandmother. The cause of the contract is the delivery of petitioners
share in the inheritance. The inability of the municipal court to identify
the exact location of the inherited property did not negate the principal
object of the contract. This is an error occasioned by the failure of the
parties to describe the subject property, which is correctible by
reformation and does not indicate the absence of the principal object as
to render the contract void. It cannot be disputed that the object is
determinable as to its kind, i.e.1 hectare of land as inheritance, and can
be determined without need of a new contract or agreement. [6] Clearly,
the Paknaan has all the earmarks of a valid contract.
In Ansaldo v. Court of Appeals,[24] the Court held: In its Decision, the First
Division of the Appellate Tribunal, speaking through the Presiding
Justice at the time, Hon. Magno S. Gatmaitan, held as regards Arnaldos
contentions, that x x x x
2) there was no need that the assignment be in a public document this
being required only to produce x x x effect as against third persons
(Article 1625, Civil Code), i.e., to adversely affect 3rd persons, i.e., a 3rd
person with a right against original creditor, for example, an original
creditor of creditor, against whom surely such an assignment by his
debtor (creditor in the credit assigned) would be prejudicial, because he,
creditor of assigning creditor, would thus be deprived of an attachable
asset of his debtor x x x;
Although both parties agreed to transfer one-hectare real property, they

failed to include in the written document a sufficient description of the
property to convey. This error is not one for nullification of the
instrument but only for reformation.
Article 1359 of the Civil Code provides:
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.
Reformation is a remedy in equity whereby a written instrument is
made or construed so as to express or conform to the real intention of
the parties where some error or mistake has been committed. [7] In
granting reformation, the remedy in equity is not making a new contract
for the parties, but establishing and perpetuating the real contract
between the parties which, under the technical rules of law, could not
be enforced but for such reformation.
xxxx
Except for the question of the claimed lack of authority on the part of
TFCs president to execute the assignment of credit in favor of PCIB
improperly raised for the first time on appeal, as observed by the Court
of Appeals the issues raised by Ansaldo were set up by him in, and after
analysis and assessment rejected by, both the Trial Court and the
Appellate Tribunal. This court sees no error whatever in the appreciation
of the facts by either Court or their application of the relevant law and
jurisprudence to those facts, inclusive of the question posed anew by
Ansaldo relative to the alleged absence of authority on the part of TFCs
president to assign the corporations credit to PCIB.[25]
In the case at bar, Metrobank would not be prejudiced by the
assignment by the spouses Co of their right of redemption in favor of
the brothers Teoco. As conceded by Metrobank, the assignees, the
brothers Teoco, would merely step into the shoes of the assignors, the
spouses Co. The brothers Teoco would have to comply with all the
requirements imposed by law on the spouses Co. Metrobank would not
lose any security for the satisfaction of any loan obtained from it by the
spouses Co. In fact, the assignment would even prove to be beneficial
to Metrobank, as it can foreclose on the subject properties anew,
provided it proves that the subsequent loans entered into by the
spouses Co are covered by the mortgage contract.
REQUISITES
(1) there must have been a meeting of the minds of the parties to the
contract;
(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.[8]
ART. 1359-1369
REFORMATION OF INSTRUMENTS
When the terms of an agreement have been reduced to writing, it is

considered as containing all the terms agreed upon and there can be,
between the parties and their successors in interest, no evidence of
such terms other than the contents of the written agreement, except
when it fails to express the true intent and agreement of the parties
thereto, in which case, one of the parties may bring an action for the
VILLEGAS V. ARJONA
Since an amicable settlement, which partakes of the nature of a
contract, is subject to the same legal provisions providing for the
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reformation of the instrument to the end that such true intention may
be expressed.[9]
Both parties acknowledge that petitioners are entitled to their
inheritance, hence, the remedy of nullification, which invalidates
thePaknaan, would prejudice petitioners and deprive them of their just
share of the inheritance. Respondent cannot, as an afterthought, be
allowed to renege on his legal obligation to transfer the property to its
rightful heirs. A refusal to reform the Paknaan under such
circumstances would have the effect of penalizing one party for
negligent conduct, and at the same time permitting the other party to
escape the consequences of his negligence and profit thereby. No
person shall be unjustly enriched at the expense of another.
without the benefit of foreclosure proceedings, partakes of the nature of

a pactum commissorium,
ART. 1370-1379
INTERPRETATION OF CONTRACTS
SECURITY BANK V. CA
The more important question is whether the written letter of LIC,
rejecting SBCs claim for indemnity, satisfied this condition.
PISA claims that the condition "could not be recovered from the insurer"
requires a final judgment against SBCs claim for indemnity against LIC,
because only then would the non-recovery be "a final, immutable fact."
Since SBC has only just filed a case against LIC, and recovery is still
possible, the action against PISA is allegedly premature as the fact of
non-recovery is not yet in esse. 27 That SBC may be able to prove the
negligence of the other security guards of PISA in the event of the
acquittal of the two accused security guards is of no moment; PISA
posits that the condition requires that recovery from the insurer be
impossible, i.e., upon a final adjudication by a court, and not merely a
denial by LIC of the claim. Only in such event may suit be brought and
proof of the other guards negligence adduced, otherwise, paragraph
5(e) of the PRA would be rendered nugatory.28
MARTIRES V. CHUA
The CA reconsidered its findings and concluded that the Deed of
Transfer which, on its face, transfers ownership of the subject property
to petitioners, is, in fact, an equitable mortgage. The CA held that the
true intention of respondent was merely to provide security for her loan
and not to transfer ownership of the property to petitioners. The CA so
ruled on the basis of its findings that: (1) the consideration, amounting
to P150,000.00, for the alleged Deed of Transfer is unusually
inadequate, considering that the subject property consists of 24
memorial lots; (2) the Deed of Transfer was executed by reason of the
same loan extended by petitioners to respondent; (3) the Deed of
Transfer is incomplete and defective; and (4) the lots subject of the
Deed of Transfer are one and the same property used to secure
respondent's P150,000.00 loan from petitioners.
SC: Reading the clause as requiring a final judgment is a strained

interpretation and contrary to settled rules of interpretation of
contracts. Paragraph 5(e) only requires that the proceeds "could not be
recovered from the insurer," and does not state that it should be so
declared by a court, or even with finality. In determining the signification
of terms, words are presumed to have been used in their primary and
general acceptance, and there was no evidence presented to show that
the words used signified a judicial adjudication.29 Indeed, if the parties
had intended the non-recovery to be through a judicial and final
adjudication, they should have stated so. In its primary and general
meaning, paragraph 5(e) would cover LICs extrajudicial denial of SBCs
claim.
An equitable mortgage has been defined as one which, although lacking

in some formality, or form or words, or other requisites demanded by a
statute, nevertheless reveals the intention of the parties to charge real
property as security for a debt, there being no impossibility nor anything
contrary to law in this intent.30
One of the circumstances provided for under Article 1602 of the Civil
Code, where a contract shall be presumed to be an equitable mortgage,
is "where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the
performance of any other obligation." In the instant case, it has been
established that the intent of both petitioners and respondent is that the
subject property shall serve as security for the latter's obligation to the
former. As correctly pointed out by the CA, the circumstances
surrounding the execution of the disputed Deed of Transfer would show
that the said document was executed to circumvent the terms of the
original agreement and deprive respondent of her mortgaged property
without the requisite foreclosure.
In sustaining PISA, the Court of Appeals relied on the argument that

paragraph 5(e) of the PRA was intended to benefit PISA. The appellate
court held that the phrase "could not be recovered from the insurer"
gives rise to doubt as to the intention of the parties, as it is capable of
two interpretations: either (1) the insurer rejects the written demand for
indemnification by the insured; or (2) a court adjudges that the insurer
is not liable under the policy. The Court of Appeals then interpreted the
antecedent circumstances prior to the institution of Civil Case No. 923337 as manifesting SBCs agreement to suspend the filing of the suit
against PISA until after the case against LIC has been decisively
terminated.30
With respect to the foregoing discussions, it bears to point out that in

Misena v. Rongavilla,31 a case which involves a factual background
similar to the present case, this Court arrived at the same ruling. In the
said case, the respondent mortgaged a parcel of land to the petitioner
as security for the loan which the former obtained from the latter.
Subsequently, ownership of the property was conveyed to the petitioner
via a Deed of Absolute Sale. Applying Article 1602 of the Civil Code, this
Court ruled in favor of the respondent holding that the supposed sale of
the property was, in fact, an equitable mortgage as the real intention of
the respondent was to provide security for the loan and not to transfer
ownership over the property.
Since the original transaction between the parties was a mortgage, the
subsequent assignment of ownership of the subject lots to petitioners
We have gone over the records and are unable to agree with the Court
of Appeals findings on this matter. Even if we are to agree with the
Court of Appeals that paragraph 5(e) is susceptible of two
interpretations, the stipulations in the PRA and the parties acts
contemporaneous with and subsequent to the execution of the
PRA31 belie any intent of SBC to delay its suit against PISA until a
judicial declaration of non-recovery against LIC.
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It should be noted that the PRA was entered into as a result of the
robbery, in which two of PISAs security guards were implicated. The
PRA expressly stated that the agreement was entered into with respect
to certain facts, among which were that (a) PISA was providing security
guards for SBC pursuant to the CSS, the said contract being attached to
the PRA and forming an integral part thereof; 32 and (b) pursuant to
paragraph nine (9) of the CSS, PISA "shall be liable for any loss, damage
or injury suffered by [SBC], its officers, employees, clients, guests,
visitors and other persons allowed entry into [SBCs] premises where
such loss, damage or injury is due to the negligence or willful act of the
guards or representatives of [PISA]." Moreover, "if such loss, damage or
injury is caused by a party other than the guards or representatives of
[PISA], [PISA] shall be jointly and severally liable with said party if [PISA]
failed to exercise due diligence in preventing such loss, damage or
injury." 33
FORTUNE MEDICARE V. AMORIN

The petition is bereft of merit.
The Court finds no cogent reason to disturb the CAs finding that
Fortune Cares liability to Amorin under the subject Health Care
Contract should be based on the expenses for hospital and professional
fees which he actually incurred, and should not be limited by the
amount that he would have incurred had his emergency treatment been
performed in an accredited hospital in the Philippines.
We emphasize that for purposes of determining the liability of a health
care provider to its members, jurisprudence holds that a health care
agreement is in the nature of non-life insurance, which is primarily a
contract of indemnity. Once the member incurs hospital, medical or any
other expense arising from sickness, injury or other stipulated
contingent, the health care provider must pay for the same to the extent
agreed upon under the contract.18
The express inclusion of these provisionsparticularly those relating to

the liability of PISA for the willful or negligent acts of its guards, or its
failure to exercise diligence, and the right of SBC to hold PISA liable
speaks of SBCs diligence in ensuring that notwithstanding the PRA and
the partial payment by PISA, SBCs right of action against PISA for its
liabilities under the CSS is preserved. SBC may have agreed to delay the
suit against PISA until after the formers claim for indemnity against LIC
has been decided, but it is far-fetched to believe that SBC agreed to hold
such right of action in abeyance until after a legal claim against LIC had
been adjudicated. This conclusion is further bolstered by the following
material events:
1. The Taytay robbery was committed on March 12, 1992.
2. SBC made a written demand on April 10, 1992 against PISA for the
losses sustained by SBC from the robbery.
3. SBC and PISA executed the PRA on June 23, 1992.1awphi1.net
4. LIC rejected SBCs claim for indemnity under the insurance on August
5, 1992.
5. SBC protested the LIC rejection in a letter dated August 28, 1992.
6. On the same date, August 28, 1992, SBC informed PISA of the denial
by LIC of SBCs insurance claim, and demanded from PISA
indemnification based on paragraph 5(e) of the PRA.
7. On September 17, 1992, PISA denied the letter of demand of SBC.
8. On November 16, 1992, SBC sued LIC and PISA.
From the above events, it seems clear that SBCs suit against LIC was
not a mere afterthought after LIC had rejected its claim. Rather, SBC
exercised its right of action against PISA pursuant to paragraph 5(e) of
the PRA. This interpretion is consistent with settled canons of contract
interpretation, has the import that would make SBCs right of action
effectual, and would yield the greatest reciprocity of interests. Indeed,
we agree with SBC that PISAs interpretation of the clause would lead to
an effective waiver of SBCs right of action, because to await the judicial
determination of the LIC suit may lead to the prescription of SBCs right
of action against PISA.
To aid in the interpretation of health care agreements, the Court laid

down the following guidelines in Philamcare Health Systems v. CA19:
When the terms of insurance contract contain limitations on
liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation.
Being a contract of adhesion, the terms of an insurance
contract are to be construed strictly against the party which
prepared the contract the insurer. By reason of the
exclusive control of the insurance company over the terms
and phraseology of the insurance contract, ambiguity must
be strictly interpreted against the insurer and liberally in favor
of the insured, especially to avoid forfeiture. This is equally
applicable to Health Care Agreements. The phraseology used
in medical or hospital service contracts, such as the one at
bar, must be liberally construed in favor of the subscriber, and
if doubtful or reasonably susceptible of two interpretations
the construction conferring coverage is to be adopted, and
exclusionary clauses of doubtful import should be strictly
construed against the provider.
In the instant case, the extent of Fortune Cares liability to Amorin under
the attendant circumstances was governed by Section 3(B), Article V of
the subject Health Care Contract, considering that the appendectomy
which the member had to undergo qualified as an emergency care, but
the treatment was performed at St. Francis Medical Center in Honolulu,
Hawaii, U.S.A., a non-accredited hospital. We restate the pertinent
portions of Section 3(B):
B. EMERGENCY CARE IN NON-ACCREDITED HOSPITAL
1. Whether as an in-patient or out-patient, FortuneCare shall reimburse
the total hospitalization cost including the professional fee (based on
the total approved charges) to a member who receives emergency care
in a non-accredited hospital. The above coverage applies only to
Emergency confinement within Philippine Territory. However, if the
emergency confinement occurs in foreign territory, Fortune Care will be
obligated to reimburse or pay eighty (80%) percent of the approved
standard charges which shall cover the hospitalization costs and
professional fees. x x x23 (Emphasis supplied)
If some stipulations of any contract should admit of several meanings,

it shall be understood as bearing that import which is most adequate to
render it effectual.34 The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which
may result from all of them taken jointly. 35 When it is impossible to
settle doubts by the rules established in the preceding articles, and the
doubts refer to incidental circumstances of an onerous contract, the
doubt shall be settled in favor of the greatest reciprocity of interests. 36
We therefore hold that SBCs suit against PISA was not premature, and
the dismissal of the action as against PISA was improper.
The point of dispute now concerns the proper interpretation of the

phrase "approved standard charges", which shall be the base for the
allowable 80% benefit. The trial court ruled that the phrase should be
interpreted in light of the provisions of Section 3(A), i.e., to the extent
that may be allowed for treatments performed by accredited physicians
in accredited hospitals. As the appellate court however held, this must
17

KC
be interpreted in its literal sense, guided by the rule that any ambiguity
shall be strictly construed against Fortune Care, and liberally in favor of
Amorin.
agreement, the provision on emergency care in non-accredited

hospitals was modified to read as follows:
However, if the emergency confinement occurs in a foreign territory,
Fortunecare will be obligated to reimburse or pay one hundred (100%)
percent under approved Philippine Standard covered charges for
hospitalization costs and professional fees but not to exceed maximum
allowable coverage, payable in pesos at prevailing currency exchange
rate at the time of availment in said territory where he/she is confined. x
x x24
Settled is the rule that ambiguities in a contract are interpreted against
the party that caused the ambiguity. "Any ambiguity in a contract
whose terms are susceptible of different interpretations must be read
against the party who drafted it."25
The Court agrees with the CA. As may be gleaned from the Health Care
Contract, the parties thereto contemplated the possibility of emergency
care in a foreign country. As the contract recognized Fortune Cares
liability for emergency treatments even in foreign territories, it expressly
limited its liability only insofar as the percentage of hospitalization and
professional fees that must be paid or reimbursed was concerned,
pegged at a mere 80% of the approved standard charges.
The word "standard" as used in the cited stipulation was vague and
ambiguous, as it could be susceptible of different meanings. Plainly, the
term "standard charges" could be read as referring to the
"hospitalization costs and professional fees" which were specifically
cited as compensable even when incurred in a foreign country. Contrary
to Fortune Cares argument, from nowhere in the Health Care Contract
could it be reasonably deduced that these "standard charges" referred
to the "Philippine standard", or that cost which would have been
incurred if the medical services were performed in an accredited
hospital situated in the Philippines. The RTC ruling that the use of the
"Philippine standard" could be inferred from the provisions of Section
3(A), which covered emergency care in an accredited hospital, was
misplaced. Evidently, the parties to the Health Care Contract made a
clear distinction between emergency care in an accredited hospital, and
that obtained from a non-accredited hospital. The limitation on
payment based on "Philippine standard" for services of accredited
physicians was expressly made applicable only in the case of an
emergency care in an accredited hospital.
CALANASAN V. DOLORITO
Rules of contract govern the onerous portion of donation; rules of
donation only apply to the excess, if any.
We now come to the appreciation of the legal incidents of the donation
vis--vis the alleged ungrateful acts.
In Republic of the Phils. v. Silim,11 we classified donations according to
purpose. A pure/simple donation is the truest form of donation as it is
based on pure gratuity. The remuneratory/compensatory type has for
its purpose the rewarding of the donee for past services, which services
do not amount to a demandable debt. A conditional/modal donation, on
the other hand, is a consideration for future services; it also occurs
where the donor imposes certain conditions, limitations or charges
upon the donee, whose value is inferior to the donation given. Lastly, an
onerous donation imposes upon the donee a reciprocal obligation; this
is made for a valuable consideration whose cost is equal to or more
than the thing donated.12
The proper interpretation of the phrase "standard charges" could

instead be correlated with and reasonably inferred from the other
provisions of Section 3(B), considering that Amorins case fell under the
second case, i.e., emergency care in a non-accredited hospital. Rather
than a determination of Philippine or American standards, the first part
of the provision speaks of the full reimbursement of "the total
hospitalization cost including the professional fee (based on the total
approved charges) to a member who receives emergency care in a nonaccredited hospital" within the Philippines. Thus, for emergency care in
non-accredited hospitals, this cited clause declared the standard in the
determination of the amount to be paid, without any reference to and
regardless of the amounts that would have been payable if the
treatment was done by an affiliated physician or in an affiliated hospital.
For treatments in foreign territories, the only qualification was only as to
the percentage, or 80% of that payable for treatments performed in nonaccredited hospital.
In De Luna v. Judge Abrigo,13 we recognized the distinct, albeit old,

characterization of onerous donations when we declared: Under the old
Civil Code, it is a settled rule that donations with an onerous cause are
governed not by the law on donations but by the rules on contracts
Article 733. Donations with an onerous cause shall be governed by the
rules on contracts, and remuneratory donations by the provisions of the
present Title as regards that portion which exceeds the value of the
burden imposed. We agree with the CA that since the donation
imposed on the donee the burden of redeeming the property
forP15,000.00, the donation was onerous. As an endowment for a
valuable consideration, it partakes of the nature of an ordinary contract;
hence, the rules of contract will govern and Article 765 of the New Civil
Code finds no application with respect to the onerous portion of the
donation.
All told, in the absence of any qualifying word that clearly limited
Fortune Care's liability to costs that are applicable in the Philippines, the
amount payable by Fortune Care should not be limited to the cost of
treatment in the Philippines, as to do so would result in the clear
disadvantage of its member. If, as Fortune Care argued, the premium
and other charges in the Health Care Contract were merely computed
on assumption and risk under Philippine cost and, that the American
cost standard or any foreign country's cost was never considered, such
limitations should have been distinctly specified and clearly reflected in
the extent of coverage which the company voluntarily assumed. This
was what Fortune Care found appropriate when in its new health care
agreement with the House of Representatives, particularly in their 2006
Insofar as the value of the land exceeds the redemption price paid for
by the donee, a donation exists, and the legal provisions on donation
apply. Nevertheless, despite the applicability of the provisions on
donation to the gratuitous portion, the petitioner may not dissolve the
donation. She has no factual and legal basis for its revocation, as aptly
established by the RTC. First, the ungrateful acts were committed not
by the donee; it was her husband who committed them. Second, the
ungrateful acts were perpetrated not against the donor; it was the
petitioner's sister who received the alleged ill treatments. These twin
considerations place the case out of the purview of Article 765 of the
New Civil Code.
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OBLIGATIONS & CONTRACTS

The controversy pivots on a provision in the construction contract

Viewed in the light of the autonomous nature of contracts enunciated

The provision in the construction contract providing for a defects

MALLARI V. PRUDENTIAL BANK

OBLIGATIONS & CONTRACTS

JUICO V. CHINA BANKING

OBLIGATIONS & CONTRACTS

Nevertheless, an escalation clause "which grants the creditor an

We find all the elements of a cause of action contained in the amended

OBLIGATIONS & CONTRACTS

there must be a stipulation in favor of a third person; S

A & C MINIMART V. VILLAREAL

HEIRS OF LLENADO V. LLENADO

OBLIGATIONS & CONTRACTS

between the respondents is protected by P.D. No. 957, a social justice

1318. There is no contract unless the following requisites concur:

Despite the apparent validity of the mortgage between the petitioner

CONTRACTS ARE PERFECTED BY MERE CONSENT, upon the

OBLIGATIONS & CONTRACTS

It is familiar doctrine that if a corporation knowingly permits one of its

Also, petitioner may be paid on the basis of quantum meruit. It is

PROVINCE OF CEBU V. MORALES

But even granting arguendo that the letter of petitioner PUREFOODS

OBLIGATIONS & CONTRACTS

AKANG V. MUN of ISULAN

The petitioner alleges that the Deed of Sale is merely an agreement to

A loan is a real contract, not consensual, and as such is perfected only

A contract to sell, on the other hand, is defined by Article 1479 of the

The petitioners allegation of non-payment is of no consequence taking

OBLIGATIONS & CONTRACTS

The presence of Consuelos consent and, corollarily, the existence of a

If the period is not itself founded upon or supported by a

Let us elucidate a little. A negotiation is formally initiated by an offer. An

OBLIGATIONS & CONTRACTS

Receipt readily shows that respondent spouses and petitioner only

Without consideration that is separate and distinct from the purchase

That the contract between the parties is one of option is buttressed by

CONSIDERATION.The consideration is the why of the contracts, the

OBLIGATIONS & CONTRACTS

For mistake as to the qualification of one of the parties to vitiate

FONTANA RESORT V. TAN

We find it unlikely that Pante could successfully misrepresent himself

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

DELA CRUZ V. DELA CRUZ

THE ROMAN CATHOLIC CHURCH V. PANTE

OBLIGATIONS & CONTRACTS

VILLEGAS V. RURAL BANK OF TANJAY

The principle that a party is presumed to know the import of a

Applying the foregoing principles, the presumption is that Remegia,

Moreover, the purported joint affidavit of confirmation of sale failed to

OBLIGATIONS & CONTRACTS

In absolute simulation, there is a colorable contract but it has no

Angelinas story, except on the consideration, was consistent with that

OBLIGATIONS & CONTRACTS

Indeed, a finding of negligence must always be contextualized in line

PHIL. BANKING CORP. V. DY

To be sure, fraud comprises "anything calculated to deceive, including

However, Philbank's mortgage rights over the subject properties shall

The ascertainment of good faith or lack of it, and the determination of

OBLIGATIONS & CONTRACTS

1358. The following must appear in a public document:

Art. 1625. An assignment of a credit, right or action shall produce no