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Case 52

DIZON V GABORRO
GUERRERO; 2002
NATURE
Petition for review on certiorari of the decision of the CA
FACTS
- Jose Dizon owned three parcels of land totaling 130.58
hectares which were mortgaged to DBP as security for a loan
amounting to P38,000 with a second mortgage lien in favor of
PNB to secure another indebtedness amounting to
P93,831.91. Dizon failed to pay the amortizations to DBP
causing the latter to foreclose on the mortgage. The said lots
were sold subsequently to DBP through an auction conducted
by the sheriff. Dizon executed a deed of sale in favor of DBP
through an auction. Dizon himself executed a deed of sale in
favor of DBP on November 12, 1959 which deed was recorded
in the office of the Register of Deeds on October 6, 1960.
- Alfredo Garborro, who was initially interested in leasing the
properties as they were then idle, met with Dizon sometime
prior to October 6, 1959. As the mortgage was already
foreclosed by DBP, the leasing project was abandoned.
Instead, they entered into a deed of sale with assumption of
mortgage conveyed ownership of the properties to Gaborro.
In addition, the parties executed anoher agreement which
granted Dizon the option to repurchase the properties at the
price of P131,831.91 which represented the total principal
amounts due to both the DBP and PNB. It should likewise be
mentioned that the consideration for the sale is also the same
amount as the loans outstanding to both DBP and PNB.
- Upon execution of the documents, Gaborro took possession f
the properties and wrote a letter to DBP advising them of his
purchase of the property of Dizon and offering to pay the
obligations under the same terms and conditions within ten
years. The Bank agreed provided only that the initial payment
be 20% of the loan amount.. Accordingly, DBP and Gaborro
executed a Deed of Conditional sale over the propertied for
P136,090.95, payble 20% downpayment and the balance over
ten years. In addition, Dizon also executed an assignment of
his right of redemption and assumption of obligation in favor
of Gaborro.
- On July 5, 1961, Dizon, through his lawyer, wrote a letter to
Gaborro offering to reimburse him of what he paid to the bnks
contending the the transaction entered between them was
one of antichresis.When Gaborro did not agree, Dizon filed suit
alleging that the documents xecuted did not express the true
intention and agreement between the parties and as the real
agreement was not for an absolute deed of sale but for an
equitable mortgage or conveyance by way of security for the
reimbursement or refund by Dizon to Gaborro of any and all
sums which the latter may have paid on account of the debts
from both DBP and PNB.

ISSUE
WON the original agreement may be properly reformed
HELD
YES
- The Deed of Sale with Assumption cannot be considered as a
real and unconditional sale of the parcels of land on the
grounds that there was no money consideration, it being
admitted that the consideration mentioned in the agreement
was not actually paid. Besides, the propert in question at the
time of the execution of the said instrument was already sold

by auction to DBP. The only legal effect is with regard the


option Deed which granted Petitioner the right to recover the
properties upon reimbursing Gaborro the sums of money the
he may have paid to both the DBP and PNB as amortization on
the mortgage.
- The findings of the trial court and the Court of Appeals that
the true intention of the parties is that Gaborro will assume
and pay the indebtness of Dizon and in return Gaborro shall
enjoy possession, enjoyment and the use of the properties
until Dizon fully reimbursed him of the amounts paid to the
said financial institutions. As noted by the SC, the agreement
is one of those innominate contracts under Article 1307 of the
Civil Code ehereby the petitioner and respondent agree to
give and to do certain rights and obligations respecting the
lands and the mortgage debts of the petitioner which would
be acceptable to the bank but partaking of the nature of the
antichresis.
- Mistake is a ground for the reformation of an instrument
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. It was a
mistake for the parties to execute the deed of sale with
assumption of mortgage & the option to purchase real estate.
Hence these must be reformed in accordance with the
intention and legal righs and obligations of the parties.

Case 53
PAKISTAN INTERNATIONAL AIRLINES CORPORATION v.
OPLE
FELICIANO; September 28, 1990
NATURE
Petition for certiorari to review the order of the Minister of
Labor
FACTS
- On 2 December 1978, petitioner Pakistan International
Airlines Corporation (PIA), a foreign corporation licensed to do
business in the Philippines, executed in Manila two separate
contracts of employment, one with private respondent
Farrales and the other with private respondent Mamasig. The
contracts provided in pertinent portion as follows:
"5. DURATION OF EMPLOYMENTAND PENALTY
This agreement is for a period of three years, but can be
extended by the mutual consent of the parties.
xxxxxxxxx
6. TERMINATION
xxxxxxxxx
Notwithstanding anything to contrary as herein provided,
PIA reserves the right to terminate this agreement at any
time by giving the EMPLOYEE notice in writing in advance
one month before the intended termination or in lieu
thereof, by paying the EMPLOYEE wages equivalent to
one month's salary.
xxxxxxxxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under
and by the laws of Pakistan, and only the Courts of
Karachi, Pakistan shall have the jurisdiction to consider
any matter arising out of or under this agreement.
- Respondents then commenced training in Pakistan. After
their training period, they began discharging their job
functions as flight attendants, with base station in Manila and
flying assignments to different parts of the Middle East and
Europe.

- On 2 August 1980, roughly one year and four months prior to


the expiration of the contracts of employment, PIA sent
separate letters both dated 1 August 1980 to private
respondents Farrales and Mamasig advising both that their
services as flight attendants would be terminated "effective 1
September 1980, conformably to clause 6 (b) of the
employment agreement [they had] executed with [PIA]."
- On 9 September 1980, private respondents Farrales and
Mamasig jointly instituted a complaint for illegal dismissal and
non-payment of company benefits and bonuses, against PIA
with the then Ministry of Labor and Employment (MOLE). After
several unfruitful attempts at conciliation, both parties were
ordered to submit their position papers and evidence
supporting their respective positions. The PIA submitted its
position paper, but no evidence, and there claimed that both
private respondents were habitually absent and bringing in
from abroad sizeable quantities of "personal effects"; and that
PIA personnel at the Manila International Airport had been
discreetly warned by customs officials to advise private
respondents to discontinue that practice. PIA further claimed
that the services of both private respondents were terminated
pursuant to the provisions of the employment contract.
- In his Order dated 22 January 1981, Regional Director
Estrella ordered the reinstatement of private respondents with
full backwages or, in the alternative, the payment to them of
the amounts equivalent to their salaries for the remainder of
the fixed three-year period of their employment contracts; the
payment to private respondent Mamasig of an amount
equivalent to the value of a round trip ticket Manila-USAManila; and payment of a bonus to each of the private
respondents equivalent to their one-month salary. The Order
stated that 1) private respondents had attained the status of
regular employees after they had rendered more than a year
of continued service; 2) the stipulation limiting the period of
the employment contract to three years was null and void as
violative of the provisions of the Labor Code and its
implementing rules and regulations on regular and casual
employment and, 3) the dismissal, having been carried out
without the requisite clearance from the MOLE, was illegal and
entitled private respondents to reinstatement with full
backwages.
- On appeal, in an Order dated 12 August 1982, Hon.
Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of
fact and conclusions of the Regional Director and affirmed the
latter's award save for the portion thereof giving PIA the
option, in lieu of reinstatement, "to pay each of the
complainants
[private
respondents]
their
salaries
corresponding to the unexpired portion of the contract[s] [of
employment] x ''.
- In the instant Petition for Certiorari, PIA assails the award of
the Regional Director and the Order of the Deputy Minister for
having been issued in disregard and in violation of Petitioner's
rights under the employment contracts with private
respondents. PIA invokes paragraphs 5 and 6 of its contract of
employment with private respondents Farrales and Mamasig,
arguing that its relationship with them was governed by the
provisions of its contract rather than by the general provisions
of the Labor Code. Paragraph 5 of that contract set a term of
three years for that relationship, extendible by agreement
between the parties; while paragraph 6 provided that,
notwithstanding any other provision in the contract, PIA had
the right to terminate the employment agreement at any time
by giving one-month's notice to the employee or, in lieu of
such notice, one-month's salary.
ISSUE
WON the principle of party autonomy in contracts is absolute

HELD
NO
- A contract freely entered into should, of course, be respected
since a contract is the law between the parties. The principle
of party autonomy in contracts is not, however, an absolute
principle. The rule in Article 1306, of our Civil Code is that the
contracting parties may establish such stipulations as they
may deem convenient, "provided they are not contrary to law,
morals, good customs, public order or public policy." Thus,
counter-balancing the principle of autonomy of contracting
parties is the equally general rule that provisions of applicable
law, especially provisions relating to matters affected with
public policy, are deemed written into the contract. Put a little
differently, the governing principle is that parties may not
contract away applicable provisions of law especially
peremptory provisions dealing with matters heavily impressed
with public interest. The law relating to labor and employment
is clearly such an area and parties are not at liberty to
insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each
other. It is thus necessary to appraise the contractual
provisions invoked by petitioner PIA in terms of their
consistency with applicable Philippine law and regulations.
- Both the Labor Arbiter and the Deputy Minister, MOLE, in
effect held that paragraph 5 of that employment contract was
inconsistent with Articles 280 and 281 of the Labor Code as
they existed at the time the contract of employment was
entered into, and hence refused to give effect to said
paragraph 5. These Articles are as follows:
"Art. 280. Security of Tenure.-In cases of regular employment,
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and
to his backwages computed from the time his compensation
was withheld from him up to the time his reinstatement.
Article 281. Regular and Casual Employment.-The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or services to
be performed is seasonal in nature and the employment is for
the duration of the season.
- An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: provided, that, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered as regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.'' (Italics supplied)
- In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al.,
the Court had occasion to examine in detail the question of
whether employment for a fixed term has been outlawed
under the above quoted provisions of the Labor Code. After an
extensive examination of the history and development of
Articles 280 and 281, the Court reached the conclusion that a
contract providing for employment with a fixed period was not
necessarily unlawful. The critical consideration is the presence
or absence of a substantial indication that the period specified
in an employment agreement was designed to circumvent the
security of tenure of regular employees which is provided for

in Articles 280 and 281 of the Labor Code. This indication


must ordinarily rest upon some aspect of the agreement other
than the mere specification of a fixed term of the employment
agreement, or upon evidence aliunde of the intent to evade.
- Examining the provisions of paragraphs 5 and 6 of the
employment
agreement
between
PIA
and
private
respondents, we consider that those provisions must be read
together and when so read, the fixed period of three years
specified in paragraph 5 will be seen to have been effectively
neutralized by the provisions of paragraph 6 of that
agreement. Paragraph 6 in effect took back from the
employee the fixed three-year period ostensibly granted by
paragraph 5 by rendering such period in effect a facultative
one at the option of the employer PIA. For PIA claims to be
authorized to shorten that term, at any time and for any
cause satisfactory to itself, to a one-month period, or even
less by simply paying the employee a month's salary. Because
the net effect of paragraphs 5 and 6 of the agreement here
involved is to render the employment of private respondents
Farrales and Mamasig basically employment at the pleasure of
PIA, the Court considers that paragraphs 5 and 6 were
intended to prevent any security of tenure from accruing in
favor of private respondents even during the limited period of
three years, and thus to escape completely the thrust of
Articles 280 and 281 of the Labor Code.
- PIA cannot take refuge in paragraph 10 of its employment
agreement which specifies, firstly; the law of Pakistan as the
applicable law of the agreement and, secondly, lays the venue
for settlement of any dispute arising out of or in connection
with the agreement "only [in] courts of Karachi, Pakistan". The
first clause of paragraph 10 cannot be invoked to prevent the
application of Philippine labor laws and regulations to the
subject matter of this case, i.e., the employer-employee
relationship between petitioner PIA and private respondents.
We have already pointed out that that relationship is much
affected with public interest and that the otherwise applicable
Philippine laws and regulations cannot be rendered illusory by
the parties agreeing upon some other law to govern their
relationship.
- Neither may PIA invoke the second clause of paragraph 10,
specifying the Karachi courts as the sole venue for the
settlement of disputes between the contracting parties. Even
a cursory scrutiny of the relevant circumstances of this case
will show the multiple and substantive contacts between
Philippine law and Philippine courts, on the one hand, and the
relationship between the parties, upon the other: the contract
was not only executed in the Philippines, it was also
performed here, at least partially; private respondents are
Philippine citizens and residents, while petitioner, although a
foreign corporation, is licensed to do business (and actually
doing business) and hence resident in the Philippines; lastly,
private respondents were based in the Philippines in between
their assigned flights to the Middle East and Europe. All the
above contracts point to the Philippine courts and
administrative agencies as a proper forum for the resolution
of contractual disputes between the parties. Under these
circumstances, paragraph 10 of the employment agreement
cannot be given effect so as to oust Philippine agencies and
courts of the jurisdiction vested upon them by Philippine law.
Finally, and in any event, the petitioner PIA did not undertake
to plead and prove the contents of Pakistan law on the matter;
it must therefore be presumed that the applicable provisions
of the law of Pakistan are the same as the applicable
provisions of Philippine law.

Case 54
BUSTAMANTE V ROSEL
PARDO; November 29, 1999
NATURE
Petition for review on certiorari to annul the decision of CA
reversiong and setting aside the decision of the RTC of QC
FACTS
- March 8, 1987 Norma Rosel entered into a loan agreement
with Natalia Bustamante and her late husband Ismael. The
contract indicated that the Bustamantes wanted to borrow
P100,000 for a period of 2 years conted from March 1, 1987
with an interest of 18% per annum. This was guaranteed by a
collateral 79 sqm parcel of land inclusive of the apartment
built on it. In the event that the borrowers fail to pay, the
lender has the option to buy or purchase the collateral for
P200,000 inclusive of the borrowed money and interest.
- When the loan was about to mature, Rosel proposed to buy
the land at the set price in the loan agreement. The
Bustamantes refused to sell and requested for extension of
time and offered to sell another residential lot in Proj 8, QC
with the principal loan and interest to be paid as down
payment. Rosel refused to extend the payment of the loan
and to accept the other lot offered as it was occupied by
squatters and that the Bustamantes were not the owners of
the land but were mere land developers entitled to the
subdivision shares or commission if and when they developed
at least of the subdivision area.
- March 1, 1989 petitioners tendered payment of the loan to
respondents, which the latter refused to accept, insisting on
petitioners signing of a prepared deed of absolute sale of the
collateral.
- February 28, 1990 the respondents filed with the RTC of QC
for specific performance with consignation against petitioner
and her spouse
- March 4, 1990 respondents sent a demand letter asking
petitioner to sell the collateral pursuant to the option to buy in
the loan agreement.
- March 5, 1990 petitioner filed in the RTC a petition for
consignation and deposited P153,000 with the City Treasurer
of QC on August 10, 1990
- When petitioner refused to sell the collateral and barangay
conciliation failed, respondents consigned the amount of
P47,500.00 with the trial court. Respondents considered the
principal loan of P100,000.00 and 18% interest per annum
thereon, which amounted to P52,500.00. The principal loan
and the interest taken together amounted to P152,500.00,
leaving a balance of P 47,500.00.10
- TC denied the plaintiffs prayer for the defendants execution
of the Deed of Sale to convey the collateral in the plaintiffs
favor. It also ordered the defendants to pay the loan with
interest at 18% per annum commencing on March 2, 1989 up
to and until August 10, 1990, when defendants deposited the
amount with the Office of the City Treasurer.
- July 8, 1996 CA reversed the ruling of the RTC
- January 20, 1997 Court required respondents to comment
on the petition, which the respondents filed February 27.
- February 9, 1998 SC resolved to deny the petition on the
ground that there was no reversible error in the decision of
the CA in ordering the execution of the necessary deed of
sale in conformity with the stipulated agreement.
- The petitioner filed a motion for reconsideration of the denial
alleging that the real intention of the parties to the loan was

to put up the collateral as guarantee similar to an equitable


mortgage according to Article 1602 of the Civil Code.
- Respondents filed an opposition to petitioner's motion for
reconsideration. They contend that the agreement between
the parties was not a sale with right of re-purchase, but a loan
with interest at 18% per annum for a period of two years and
if petitioner fails to pay, the respondent was given the right to
purchase the property or apartment for P200,000.00, which is
not contrary to law, morals, good customs, public order or
public policy.
ISSUES
1. WON petitioner failed to pay the loan at its maturity date
2. WON the stipulation in the loan contract was valid and
enforceable.
HELD
1. NO, the petitioner did not fail to pay the loan.
Reasoning The petitioner tendered payment to settle the
loan which respondents refused to accept, insisting that
petitioner sell to them the collateral of the loan.
2. NO, the stipulation in the loan is void as it constitutes
pactum commisorium.
Reasoning We note the eagerness of respondents to acquire
the property given as collateral to guarantee the loan. The
sale of the collateral is an obligation with a suspensive
condition. It is dependent upon the happening of an event,
without which the obligation to sell does not arise. Since the
event did not occur, respondents do not have the right to
demand fulfillment of petitioner's obligation, especially where
the same would not only be disadvantageous to petitioner but
would also unjustly enrich respondents considering the
inadequate consideration (P200,000.00) for a 70 square meter
property.
- Although the contract has the force of law, an exception is
Art 13061. There revealed a subtle intention of the creditor to
acquire the property given as security for the loan, which is
embraced in the concept of pactum commissorium.
- Elements of pactum commissorium: (1) there should be a
property mortgaged by way of security for the payment of the
principal obligation, and (2) there should be a stipulation for
automatic appropriation by the creditor of the thing
mortgaged in case of non-payment of the principal obligation
within the stipulated period.
Disposition WHEREFORE, we GRANT petitioner's motion for
reconsideration and SET ASIDE the Court's resolution of
February 9, 1998. We REVERSE the decision of the Court of
Appeals

Case 55
DKC HOLDINGS CORP. V CA
YNARES-SANTIAGO; April 5, 2000
NATURE
- Petition for review on certiorari seeking reversal of
December 5, 1994 Decision of the CA entitled "DKC Holdings
Corporation vs. Victor U. Bartolome, et al.", affirming in toto
the January 4, 1993 Decision of RTC Valenzuela which

1 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

dismissed the civil case and ordered petitioner to pay


P30,000.00 as attorneys fees.
FACTS
- March 16, 1988 a 14,021 sq mtr parcel of land in Malinta,
Valenzuela originally owned by Victor Bartolomes deceased
mother, Encarnacion Bartolome, a lot in front of one of the
textile plants of DKC Holdings Corp. and a potential
warehouse site, was subject to a Contract of Lease with
Option to Buy between DKC and Encarnacion Bartolome which
option must be exercised within a period of two years counted
from the signing of the Contract
> DKC to pay P3,000.00 a month as consideration for the
reservation of its option and within the two-year period
> DKC shall serve formal written notice upon Encarnacion
Bartolome of its desire to exercise its option. > in case DKC
chose to lease the property, it may take actual possession of
the premises
> the lease shall be for a period of six years, renewable for
another six years, and the monthly rental fee shall be
P15,000.00 for the first six years and P18,000.00 for the next
six years, in case of renewal
- DKC regularly paid the monthly P3,000.00 provided for by
the Contract to Encarnacion until her death in January 1990
and thereafter, coursed its payment to Victor Bartolome,
being the sole heir of Encarnacion, however, he refused to
accept these payments
- January 10, 1990 - Victor executed an Affidavit of SelfAdjudication over all the properties of Encarnacion, including
the subject lot.
- March 14, 1990 DKC served upon Victor, via registered
mail, notice that it was exercising its option to lease the
property, tendering the amount of P15,000.00 as rent for the
month of March but Victor refused to accept the tendered
rental fee and to surrender possession of the property to DKC
- DKC thus opened a savings account with the China Banking
Corporation, Cubao, in the name of Victor Bartolome and
deposited therein the P15,000.00 rental fee for March as well
as P6,000.00 reservation fees for February and March
- DKC also tried to register and annotate the Contract on the
title of Victor to the property but the Register of Deeds, only
accepting the required fees, refused to register or annotate or
even enter it in the day book or primary register
- April 23, 1990 DKC filed complaint for specific performance
and damages against Victor and the Register of Deeds and
prayed for
> surrender and delivery of possession of the subject land in
accordance with the Contract terms
> surrender of title for registration and annotation thereon of
the Contract
> payment of P500,000.00 as actual damages, P500,000.00
as moral damages, P500,000.00 as exemplary damages and
P300,000.00 as attorneys fees.
- May 8, 1990 - Andres Lanozo claimed that he is a tenanttiller of the subject property, which was agricultural riceland,
for forty-five years and questioned the jurisdiction of the lower
court over the property and invoked the Comprehensive
Agrarian Reform Law to protect his rights that would be
affected by the dispute between the original parties to the
case
- January 4, 1993 - RTC Valenzuela dismissed the complaint
and ordered petitioner to pay Victor P30,000.00 as attorneys
fees
- CA affirmed the decision in toto
- Petitioners Claim
CA erred in Ruling that:

1. provision on the notice to exercise option was not


transmissible
2. notice of option must be served by DKC upon Encarnacion
Bartolome personally
3. contract was one-sided and onerous in favor of DKC
4. existence of a registered tenancy was fatal to the validity of
the contract
5. Victor Bartolome was liable to DKC Holdings for attorneys
fees
ISSUES
1. WON Contract of Lease with Option to Buy entered into by
the late Encarnacion Bartolome with DKC Holdings was
terminated upon her death
2. WON DKC Holdings had complied with its obligations under
the contract and with the requisites to exercise its option
HELD
1. NO, It binds her sole heir, Victor, even after her demise.
- A1311 CC provides
Contracts take effect only between the parties, their assigns
and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law. The heir is not
liable beyond the value of the property he received from the
decedent.
- General Rule: heirs are bound by contracts entered into by
their predecessors-in-interest
Exception: when the rights and obligations arising therefrom
are not transmissible by
(1) their nature
(2) stipulation or
(3) provision of law
- there is neither contractual stipulation nor legal provision
making the rights and obligations under the contract
intransmissible; moreover, the nature of the rights and
obligations are, by their nature, transmissible.
- Nature of Intransmissible Rights as explained by Arturo
Tolentino
Among contracts which are intransmissible are those which
are purely personal, either by provision of law, such as in
cases of partnerships and agency, or by the very nature of
the obligations arising therefrom, such as those requiring
special personal qualifications of the obligor. It may also be
stated that contracts for the payment of money debts are not
transmitted to the heirs of a party, but constitute a charge
against his estate. Thus, where the client in a contract for
professional services of a lawyer died, leaving minor heirs,
and the lawyer, instead of presenting his claim for
professional services under the contract to the probate court,
substituted the minors as parties for his client, it was held
that the contract could not be enforced against the minors;
the lawyer was limited to a recovery on the basis of quantum
meruit.
- In American jurisprudence
(W)here acts stipulated in a contract require the exercise of
special knowledge, genius, skill, taste, ability, experience,
judgment, discretion, integrity, or other personal qualification
of one or both parties, the agreement is of a personal nature,
and terminates on the death of the party who is required to
render such service
- Contracts to perform personal acts which cannot be as well
performed by others are discharged by the death of the
promissor. Conversely, where the service or act is of such a
character that it may as well be performed by another, or
where the contract, by its terms, shows that performance by
others was contemplated, death does not terminate the

contract or excuse nonperformance. Here, no personal act is


required from the late Encarnacion Bartolome and the
obligation of Encarnacion in the contract to deliver possession
of the subject property to petitioner upon the exercise by the
latter of its option to lease the same may very well be
performed by her heir Victor.
- heirs cannot escape the legal consequence of a transaction
entered into by their predecessor-in-interest because they
have inherited the property subject to the liability affecting
their common ancestor.
> 1903, it was held that "(H)e who contracts does so for
himself and his heirs."
> 1952, predecessor was duty-bound to reconvey land to
another, and at his death the reconveyance had not been
made, the heirs can be compelled to execute the proper deed
for reconveyance
- In Paraaque Kings Enterprises vs. Court of Appeals where
Raymundo alleged that he is not privy to the lease contract,
not being the lessor nor the lessee referred to therein, SC
ruled he is nevertheless a proper party because he stepped
into the shoes of the owner-lessor of the land as, by virtue of
his purchase. He assumed all the obligations of the lessor
under the lease contract. And he received benefits in the form
of rental payments. Here the subject matter is also a lease,
which is a property right and death of a party does not excuse
nonperformance of a contract which involves a property right,
and the rights and obligations thereunder pass to the personal
representatives of the deceased.
2. YES, the payment by DKC of the reservation fees during the
two-year period within which it had the option to lease or
purchase the property is not disputed and it was also proper
to address notice to exercise option to Victor as heir of
Encarnacion.
- payment of such reservation fees, except those for February
and March, 1990 were admitted by Victor
- DKC followed the requirements by
> paying the P15,000.00 monthly rental fee on the subject
property by depositing the same in China Bank Savings
Account in the name of Victor as the sole heir of Encarnacion
Bartolome, for the months of March to July 30, 1990, or a total
of 5 months, despite the refusal of Victor to turn over the
subject property
> informed other party of its intention to exercise its option to
lease through its letter dated Match 12, 1990, well within the
two-year period for it to exercise its option
Disposition
Instant Petition for Review is GRANTED. The
Decision of the Court of Appeals and RTC Valenzuela are both
SET ASIDE and a new one rendered ordering private
respondent Victor Bartolome to:
(a) surrender and deliver possession of that parcel of land by
way of lease to petitioner and to perform all obligations of his
predecessor-in-interest, Encarnacion Bartolome, under the
subject Contract of Lease with Option to Buy;
(b) surrender and deliver his copy of Transfer Certificate of
Title to Register of Deeds for registration and annotation
thereon of the subject Contract of Lease with Option to Buy;
(c) pay costs of suit.
Respondent Register of Deeds is ordered to register and
annotate the subject Contract of Lease with Option to Buy at
the back of Transfer Certificate of Title upon submission by
DKC of a copy thereof to his office.

Case 58
GUTIERREZ HERMANOS V ORENSE

TORRES; December 4, 1914


NATURE
Appeal from a judgment of CFI Albay ruling in favor of plaintiff
FACTS
- ORENSE is the owner a parcel of land (with masonry house,
and with the nipa roof erected) situated in the pueblo of
Guinobatan, Albay. This property has been recorded in the
new property registry in his name.
- Feb 14, 1907 - Jose DURAN, a nephew of Orense, executed
before a notary a public instrument that he sold and conveyed
to the plaintiff company the said property for P1,500 and that
the vendor Duran reserved to himself the right to repurchase
it for the same price within a period of four years.
- Gutierrez Hermanos had not entered into possession of the
purchased property, because of its continued occupancy by
ORENSE and DURAN by virtue of a contract of lease executed
by the plaintiff to Duran, effective up to February 14, 1911.
- After the lapse of the four years stipulated for the
redemption, the defendant refused to deliver the property to
the purchaser. Gutierrez Hermanos then charged DURAN with
estafa, for having represented himself in the said deed of sale
to be the absolute owner of the land.
- During that trial, when ORENSE was called as a witness, he
admitted that he consented to Durans selling of property
under right of redemption. Because of this, the court
acquitted DURAN for charge of estafa.
- Mar 5, 1913 Gutierrez Hermanos then filed a complaint in
the CFI Albay against Engracio ORENSE.
Petitioners' Claim
- The instrument of sale of the property, executed by Jose
Duran, was publicly and freely confirmed and ratified by
ORENSE. In order to perfect the title to the said property, all
plaintiff had to do was demand of Orense to execute in legal
form a deed of conveyance. But Orense refused to do so,
without any justifiable cause or reason, and so he should be
compelled to execute the said deed by an express order of the
court.
- Jose DURAN is notoriously insolvent and cannot reimburse
the plaintiff company for the price of the sale which he
received, nor pay any sum for the losses and damages
occasioned by the sale. Also, Duran had been occupying the
said property since February 14, 1911, and refused to pay the
rental notwithstanding the demand made upon him at the
rate of P30 per month.
- Plaintiff prays that the land and improvements be declared
as belonging legitimately and exclusively to him, and that
defendant be ordered to execute in the plaintiff's behalf the
said instrument of transfer and conveyance of the property
and of all the right, interest, title and share which the
defendant has.
Respondents' Comments
- Facts in the complaint did not constitute a cause of action.
- He is the lawful owner of the property claimed in the
complaint, and since his ownership was recorded in the
property registry, this was conclusive against the plaintiff.
- He had not executed any written power of attorney nor given
any verbal authority to Jose DURAN to sell the property to
Gutierrez Hermanos.
- His knowledge of the sale was acquired long after the
execution of the contract of sale between Duran and Gutierrez
Hermanos, and he did not intentionally and deliberately
perform any act such as might have induced the plaintiff
company to believe that Duran was empowered and
authorized by the defendant.

ISSUES
1. WON Orense is bound by Durans act of selling plaintiffs
property
2. WON contract of sale is valid
HELD
1. YES
Ratio It having been proven at the trial that he gave his
consent to the said sale, it follows that the defendant
conferred verbal, or at least implied, power of agency upon
his nephew Duran, who accepted it in the same way by selling
the said property. The principal must therefore fulfill all the
obligations contracted by the agent, who acted within the
scope of his authority. (Civil Code, arts. 1709, 1710 and 1727)
Reasoning Article 1259 of the Civil Code prescribes: "No one
can contract in the name of another without being authorized
by him or without his legal representation according to law. A
contract executed in the name of another by one who has
neither his authorization nor legal representation shall be
void, unless it should be ratified by the person in whose name
it was executed before being revoked by the other contracting
party.
- The sworn statement made by the defendant, Orense, while
testifying as a witness at the trial of Duran for estafa, virtually
confirms and ratifies the sale of his property effected by his
nephew, Duran, and, pursuant to article 1313 of the Civil
Code, remedies all defects which the contract may have
contained from the moment of its execution.
2. YES
Ratio Even if the sale of the property was null and void in the
beginning, it became perfectly valid and cured of the defect of
nullity it bore at its execution by the owners confirmation of
the said contract of sale and consent to its execution.
Reasoning The contract of sale of the said property
contained in the notarial instrument of Feb 14, 1907, is
alleged to be invalid, null and void under the provisions of par
5 of sec 335 of the Code of Civil Procedure, because the
authority which Orense may have given to Duran to make the
said contract of sale is not shown to have been in writing and
signed by Orense. But record shows that he gave his consent
as proven in his own sworn testimony. This meets the
requirements of the law and legally excuses the lack of
written authority. As they are a full ratification of the acts
executed by his nephew Jose Duran, they produce the effects
of an express power of agency.
- Also, pursuant to article 1309 of the Code, the right of action
for nullification that could have been brought became legally
extinguished from the moment the contract was validly
confirmed and ratified.
- If the defendant Orense acknowledged and admitted under
oath that he had consented to Jose Duran's selling the
property in litigation to Gutierrez Hermanos, it is not just nor
is it permissible for him afterward to deny that admission, to
the prejudice of the purchaser, who gave P1,500 for the said
property.
Disposition Judgment appealed from is affirmed.

Case 60
SANCHEZ V RIGOS
CONCEPCION; June 14, 1972
NATURE
- Appeal from a decision of the Court of First Instance of
Nueva Ecija to the Court of Appeals

FACTS
- April 3, 1961 Sanchez and Rigos executed an instrument
called Option to Purchase
- Rigos committed to sell to Sanchez a parcel of land in Nueva
Ecija for the sum of P1,510.00.
- Within two years from the said date, if Sanchez shall not
exercise his right to buy the property, the option shall be
terminated
- Within the said period, Sanchez made several attempts to
pay P1,510.00 to Rigos but Rigos rejected these payments
- March 12, 1963 Sanchez deposited the amount in the Court
of First Instance in Nueva Ecija
- Feb. 28, 1964 Rigos ordered by the lower court to accept
the payments of Sanchez and to execute in Sanchezs favor
the deed of conveyance for the property.
Petitioners Claim
- By virtue of the document executed, Rigos had agreed and
committed to sell the property and he, in turn, agreed and
committed to buy.
- Thus the promise contained in the contract is reciprocally
demandable.
Respondents Comments
- The contract is a unilateral promise to sell.
- The contract was unsupported by any valuable consideration
and is thus null and void when viewed in the light of the Civil
Code.
ISSUE
WON a promise to buy and sell existed between the parties
involved
HELD
YES
Ratio An accepted unilateral promise' can only have a binding
effect if supported by a consideration, which means that the
option can still be withdrawn, even if accepted, if the same is

not supported by any consideration. Since there may be no


valid contract without a cause or consideration, the promisor
is not bound by his promise and may, accordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise
partakes, however, of the nature of an offer to sell which, if
accepted, results in a perfected contract of sale.
Reasoning
- The case is dependent on A1479 of the Civil Code which
states that: An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration
distinct from the price.
- The document drawn between Rigos and Sanchez does not
require Sanchez to purchase the property. It is not a contract
to buy and sell.
- Rigos committed to sell the property to Sanchez but the
document does not state that the promise or undertaking is
supported by consideration distinct from the price stipulated.
- The lower court relied on A1354. The Supreme Court
however makes the following notes with regard to the use of
that provision vis--vis A1479:
- A1354 applies to contracts in general whereas A1479 refers
to sales in particular (specifically to a unilateral promise to
buy and sell), making A1479 the controlling provision.
- For the unilateral promise to be binding, there must be a
concurrence of a condition, that it be supported by a
consideration distinct from price. The promise cannot compel
the promisor to comply with the promise unless there is the
existence of that distinct consideration. In this case, this was
not alleged by Sanchez.
- Rigos stated that there was indeed the absence of that
consideration which Sanchez did not oppose
- Despite this differences, later jurisprudence states that
A1354 and A1479 have no differences and can actually be
harmonized.