BLAS V SANTOS

LABRADOR; March 29, 1961

Appeal from a judgement of the Court of the First Instance of Rizal

FACTS
- Simeon Blas married twice. His first marriage was with Marta Cruz. They had 3 children only one of whom, Eulalia left children namely Maria,
Marta and Lazaro. Lazaro laft 3 legitimate children. Maria and Lazaros children are plaintiffs herein.

Simeon Blas contracted another marriage with Maxima Santos when Marta Cruz died. Ti should be noted that when Marta Cruz died, there
was no liquidation of the couples property. A week before the death of Simeon Blas, he executed a will which stated that half of their property
(with Maxima) is the share of his wife.another document (exibit A) was executed by Maxima Santos which states that one-half of her share of
the properties left to her by her husband, she would give to the heirs and legatees or the beneficiaries (plaintiffs) named in the will of her
husband.

- This action was instituted by plaintiffs against the administratrix of the estate of Maxima Santos, to secure a judicial declaration that one-half
of the properties left by said Maxima Santos Vda. de Blas and requesting that the said properties so promised be adjudicated to the plaintiffs.

- Trial court held that said Exhibit "A" has not created any right in favor of plaintiffs which can serve as a basis of the complaint; that neither can
it be considered as a valid and enforceable contract for lack of consideration and because it deals with future inheritance. The court also
declared that Exhibit "A" is not a will because it does not comply with the requisites for the execution of a will; nor could it be considered as a
donation.

- Both the court below in its decision and the appellees in their brief before us, argue vehemently that the heirs of Simeon Blas and his wife
Marta Cruz can no longer make any claim for the unliquidated conjugal properties acquired during said first marriage, because the same were
already included in the mass of properties constituting the estate of the deceased Simeon Blas and in the adjudications made by virtue of his
will, and that the action to recover the same has prescribed.

ISSUE
WON plaintiffs can make a claim for half of the properties received by Maxima Santos after the death of Simeon Blas

HELD
YES

Ratio The principal basis for the plaintiffs' action in the case at bar is the document Exhibit "A". Plaintiffs-appellants argue before the Court that
Exhibit "A" is both a trust agreement and a contract in the nature of a compromise to avoid litigation.

Defendants-appellees, in answer, claim that it is neither a trust agreement nor a compromise agreement. The Court finds that the preparation
and execution of Exhibit "A" was ordered by Simeon Blas evidently to prevent his heirs by his first marriage from contesting his will and
demanding liquidation of the conjugal properties acquired during his -first marriage, and an accounting of the fruits and proceeds thereof from
the time of the death of his first wife.Exhibit "A", therefore, appears to be the compromise defined in Article 1809 of the Civil Code of Spain, in
force at the time of the execution of Exhibit "A", which provides as follows:
"Compromise is a contract by which each of the parties in interest, by giving, promising, or retaining something avoids the provocation of a suit
or terminates one which has already been instituted."

The agreement or promise that Maxima Santos makes in Exhibit "A" is to hold one- half of her said share in the conjugal assets in trust for the
heirs and legatees of her husband in his will, with the obligation of conveying, the same to such of his heirs or legatees as she may choose in
her last will and testament. Under Exhibit "A", therefore, Maxima Santos contracted the obligation and promised to give one-half of the above
indicated properties to the heirs and legatees of Simeon Blas*this case is under future inheritance so this next paragraph is important- The
Court also rejects the defendants contention that Exibit A is a contract on future inheritance.

It is an obligation or promise made by the maker to transmit one-half of her share in the conjugal properties acquired with her husband, which
properties are stated or declared to be conjugal properties in the will of the husband. The conjugal properties were in existence at the time of
the execution of Exhibit "A" on December 26, 1936. The properties mentioned were even included by Maxima in the inventory of her husbands
property. The document refers to existing properties which she will receive by operation of law on the death of her husband, because it is her
share in the conjugal assets.

- It will be noted that what is prohibited to be the subject matter of a contract under Article 1271 of the Civil Code is "future inheritance." To us
future inheritance is any property or right not in existence or capable of determination at the time of the contract, that a person may in the
future acquire by succession. The properties subject of the contract Exhibit "A" are well-defined properties, existing at the time of the
agreement, which Simeon Blas declares in his testament as belonging to his wife as her share in the conjugal partnership.

- It is also claimed that the case at bar are concluded by the judgment rendered in the proceedings for the settlement of the estate of Simeon
Blas for the reason that the properties left by him be longed to himself and his wife Maxima Santos; that the project of partition in the said case.
But the main ground upon which plaintiffs base their present action is the document Exhibit "A", already fully considered above. As this private
document contains the express promise made by Maxima Santos to convey in her testament, upon her death, one-half of the conjugal
properties she would receive as her share in the conjugal properties, the action to enforce the said promise did not arise until and after her
death when it was found that she did not comply with her above-mentioned promise. It may be added that plaintiffs- appellants did not question
the validity of the project of partition precisely because of the promise made by Maxima Santos in the compromise Exhibit "A".

Disposition The defendant-appellee, administratrix of the estate of Maxima Santos, is ordered to convey and deliver one-half of the properties
adjudicated to Maxima Santos as her share in the conjugal properties to the heirs and the legatees of her husband Simeon Blas.
 J.L.T. AGRO, INC. v. BALANSAG
G.R. No. 141882, March 11, 2005

Don Julian Teves contracted two marriages, first with Antonia Baena and had two kids namely Josefa and Emilio. After her death, he married
Milagros Teves and they had four children namely: Maria Teves, Jose Teves, Milagros Teves and Pedro Teves. Thereafter, the parties to the
case entered into a Compromise Agreement.

When Antonia died an action for partition was instituted where the parties entered into a Compromise Agreement which embodied the partition
of all the properties of Don Julian. On the basis of the compromise agreement, the CFI declared a tract of land known as Hacienda Medalla
Milagrosa as property owned in co
Don Julian and his two children of the first marriage. The property was to remain undivided during the lifetime of Don Julian. Josefa and Emilio
likewise were given other properties at Bais, including the electric plant, the movie property, the commercial areas, and the house where Don
Julian was living. The remainder of the properties was retained by Don Julian.

On 16 November 1972, Don Julian, Emilio and Josefa executed a Deed of Assignment of Assets with Assumption of Liabilities in favor of J.L.T.
Agro, Inc.(petitioner). Later, Don Julian, Josefa and Emilio also executed an instrument entitled Supplemental to the Deed of Assignment of
Assets with the Assumption of
Liabilities (Supplemental Deed) dated 31 July 1973. This instrument transferred ownership over Lot No. 63, among other properties, in favor of
petitioner. The appellate court ruled that the supplemental deed, conveying ownership to JLT agro is not valid because the Compromise
Agreement reserved the properties to Don Julians two sets of heirs their future legitimes. The two sets of heirs acquired full ownership and
possession of the properties respectively adjudicated to them and Don Julian himself could no longer dispose of the same. The appellate court
in holding that the Supplemental Deed is not valid, added that it contained a prohibited preterition of Don Julians heirs from the second
marriage.

Issue:
Whether or not the future legitime can be determined, adjudicated and reserved prior to the death of Don Julian.

Ruling:
As a general rule, No. Well-entrenched is the rule that all things, even future ones, which are not outside the commerce of man may be the
object of a contract. The exception is that no contract may be entered into with respect to future inheritance, and the exception to the exception
is partition inter vivos referred to in Article 1080.

The partition inter vivos of the properties of Don Julian is undoubtedly valid pursuant to Article 1347. However, considering that it would
become legally operative only upon the death of Don Julian, the right of his heirs from the second marriage to the properties adjudicated to him
under the compromise agreement was but a mere expectancy.

It was a bare hope of succession to the property of their father. Being the prospect of a future acquisition, the interest by its nature was
inchoate. Evidently, at the time of the execution of the supplemental deed in favor of petitioner, Don Julian remained the owner of the property
since ownership over the subject lot would only pass to his heirs from the second marriage at the time of his death.

LIGUEZ V COURT OF APPEALS

REYES; December 18, 1957

NATURE
Petition for review by certiorari of a decision of the CA, affirming the CFI Davaos decision dismissing Liguez complaint for recovery of land

FACTS
- Conchita LIGUEZ filed a complaint against the widow and heirs of the late Salvador LOPEZ so as to recover a parcel of 51.84 hectares of
land, situated in barrio Bogac- Linot, in Mati, Davao. She claimed to be its legal owner, pursuant to a deed of donation of said land, executed in
her favor by the owner, Salvador Lopez, on 18 May 1943.

- The defense interposed was that the donation was null and void for having an illicit causa or consideration, which was the plaintiff's entering
into marital relations with Salvador Lopez, a married man. Also, the property had already been adjudicated to the appellees as heirs of Lopez.

> Findings of the Court of Appeals:

- The deed of donation was prepared by the Justice of the Peace of Mati, Davao, before whom it was signed and ratified on the said date. At
that time, Liguez was a minor and only 16 years of age. When the donation was made, Lopez had been living with the parents of Liguez for
barely a month.

The donation was made in view of the desire of Lopez to have sexual relations with Liguez. Lopez had confessed to his love for appellant to
the instrumental witnesses, with the remark that her parents would not allow Lopez to live with her unless he first donated the land in question.
After the donation, Conchita Liguez and Salvador Lopez lived together in the house that was built upon the latter's orders, until Lopez was
killed on July 1, 1943.

- The donated land originally belonged to the conjugal partnership of Salvador Lopez and his wife, Maria Ngo. The widow and children of
Lopez were in possession of the land and made improvements. The deed of donation was never recorded. Court of Appeals Ruling

- The deed of donation was inoperative, and null and void

(1) because the husband, Lopez, had no right to donate conjugal property to the plaintiff appellant; and
(2) because the donation was tainted with illegal cause or consideration, of which donor and donee were participants.

6
- CA rejected appellant's claim on the basis of "in pari delicto non oritur actio" rule as embodied in Art.1412 of the New Civil Code.

Petitioners' Claim- CFI and CA erred in holding the donation void for having an illicit cause or consideration. Under Art 1274 of the Civil Code
of 1889, "in contracts of pure beneficence the consideration is the liberality of the donor", and that liberality can never be illegal, since it is
neither against law or morals or public policy.

ISSUES
1. WON donation was predicated upon an illicit causa
2. WON the in pare delicto rule is applicable to the case
3. WON heirs of Lopez can plead illegality of deed of donation
4. WON Liguez is entitled to the land donated by Lopez

HELD
1. YES

Ratio The motive may be regarded as causa when it predetermines the purpose of the contract. The cohabitation was an implied
condition to the donation, and being unlawful, it necessarily tainted the donation itself.

Reasoning Art 1274 is not applicable because liberality of the donor therein is deemed causa in those contracts that are of "pure"
beneficence. These are contracts designed solely and exclusively to procure the welfare of the beneficiary, without any intent of
producing any satisfaction for the donor. Art 1274 also provides that in remuneratory contracts, the consideration is the service or
benefit for which the remuneration is given; causa is not liberality in these cases because the contract or conveyance is not made out
of pure beneficence, but "solvendi animo."

- In making the donation, the late Lopez was not moved exclusively by the desire to benefit Conchita Liguez, but also to secure her
cohabiting with him, so that he could gratify his sexual impulses. This is clear from the confession of Lopez to the witnesses
Rodriguez and Ragay, that he was in love with appellant, but her parents would not agree unless he donated the land in question to
her. Therefore, the donation was but one part of an onerous transaction (at least with appellant's parents) that must be viewed in its
totality.

- Appellant sought to differentiate between the alleged liberality of Lopez, as causa for the donation in her favor, and his desire for
cohabiting with appellant, as motives that impelled him to make the donation. She quoted from Manresa and the jurisprudence of this
Court on the distinction that must be maintained between causa and motives. However, Manresa himself expressly exempted from
the rule those contracts that are conditioned upon the attainment of the motives of either party.

2. NO

Reasoning It cannot be said that both parties had equal guilt when we consider that as against Lopez, who was a man advanced in
years and mature experience, the appellant was a mere minor, 16 years of age, when the donation was made.

There is no finding made by the Court of Appeals that she was fully aware of the terms of the bargain entered into by and Lopez and
her parents. Her acceptance in the deed of donation did not necessarily imply knowledge of conditions and terms not set forth therein.
The facts are of the case are actually more suggestive of seduction than of immoral bargaining on the part of appellant.

- Memo auditor propriam turpitudinem allegans. The rule that parties to an illegal contract, if equally guilty, will not be aided by the law
but will both be left where it finds them, has been interpreted by this Court as barring the party from pleading the illegality of the
bargain either as a cause of action or as a defense.

3. NO
Reasoning The deed of donation is regular on its face, and to defeat its effect, the appellees must plead and prove that it is illegal.
But such plea on the part of the Lopez heirs is not receivable, since Lopez, himself, if living, would be barred from setting up that plea;
and his heirs can have no better rights than Lopez himself.

4. YES

Ratio The prima facie donation inter vivos and its acceptance by the donees having been proved by means of a public instrument,
and the donor having been duly notified of said acceptance, the contract is perfect and obligatory, unless an exception is proved
which is based on some legal reason opportunely alleged by the donor or his heirs. (Lopez v. Olbes)

- The donation made by the husband in contravention of law is not void in its entirety, but only in so far as it prejudices the interest of
the wife, because said property was conjugal in character and the right of the husband to donate community property is strictly limited
7
by law (Civil Code of 1889, Arts. 1409, 1415, 1413)

Reasoning Only the court of origin that settled the estate of the late Salvador Lopez. has the requisite data to determine whether the
donation is inofficious or not. To determine the prejudice to the widow, it must be shown that the value of her share in the property
donated can not be paid out of the husband's share of the community profits.

- The situation of the children and forced heirs of Lopez approximates that of the widow. As privies of their parent, they are barred
from invoking the illegality of the donation. But their right to a legitime out of his estate is not thereby affected, since the legitime is
granted them by the law itself. The forced heirs are then entitled to have the donation set aside in so far as in officious: i.e., in excess
of the portion of free disposal. In computing the legitimes, the value of the property to Liguez, should be considered part of the donor's
estate.

- With regard to the improvements in the land in question, the same should be governed by the rules of accession and possession in
good faith, it being undisputed that the widow and heirs of Lopez were unaware of the donation in favor of the appellant when the
improvements were made.

Disposition Decisions appealed from are reversed and set aside, and the appellant Conchita LIGUEZ declared entitled to so much of the
donated property as may be found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership with
Salvador P. Lopez or the legitimes of the forced heirs of the latter. The records are ordered remanded to the court of origin for further
proceedings in accordance with this opinion.
 CARANTES V COURT OF APPEALS
CASTRO; April 25, 1977

Nature:
Appeal by certiorari from the decision of the Court of Appeals.

Facts:
- Mateo Carantes was the original owner of Lot No. 44 situated at Loakan, Baguio City. In 1913 he died and was survived by his widow Ogasia
and six children, namely, Bilad Lauro, Crispino, Maximino, Apung and Sianang, all surnamed Crantes.

- In 1930, construction of the Loakan airport was commenced by the Government. Because a portion of Lot No. 44 was needed for the landing
field, the Government instituted proceedings for its expropriation. For this purpose, Lot No. 44 was subdivided into Lot Nos. 44-A, 44-B, 44-C,
44-D and 44-E. The Government expropriated Lot No. 44-A.

- In 1933, special proceedings were filed to settle the estate of Mateo Carantes where his son, herein petitioner Maximino Carantes was
appointed judicial administrator. On June 20, 1939, Maximino, as administrator, filed a project of partition wherein he listed himself, and his
brothers and sisters, or the latters surviving children as the heirs of Mateo Carantes. At that time, negotiations were under way for the
Governments purchase of Lot Nos. 44-B and 44-C, so Maximino only listed Lot Nos. 44-D and 44-E as the properties to be divided.

- On October 23, 1939 a deed denominated Assignment of Right to Inheritance was executed by four of Mateo Carantes children, namely,
Bilad, Sianang, Lauro and Crispino, and the heirs of Apung Carantes, Namely, Pitag, Bill, Alson, Eduardo and Juan, assigning to Maximino
Carantes their rights to inheritance in Lot No. 44. The stated monetary considerato]ion for the assignment was P1.00.

However, the document contains a recital to the effect that the said lots, by agreement of all the direct heirs and heirs by representation of the
deceased Mateo Carntes as expressed and conveyed verbally by him during his lifetime, rightly and exclusively belong to the particular heir,
Maximino Carantes, now and in the past in the exclusive, continuous, peaceful and notorious possession of the same for more than ten years.
On the same date Maximino sold to the Government Lot Nos. 44-B and 44-C and divided the proceeds of the sale among himself and the
other heirs of Mateo.

- On February 6, 1940, the heirs of Mateo petitioned for the cancellation of the Original Certificate of Title of Lot No.44 and had it replaced with
Transfer Certificate of Title 2533 declaring the five children of Mateo and the children of Apung Carantes (representing their deceased father)
as co-owners of Lot No. 44.

- On March 16, 1940, Maximino registered the deed of Assignment of Right to Inheritance and accordingly, TCT 2533 was cancelled and was
replaced with TCT 2540 in the name of Maximino Carantes.

- On February 21, 1947, pursuant to the deed of sale executed by Maximino in favor of the Government, TCT 2540 was cancelled and
replaced with TCT T-98 (covering Lot Nos. 44-A, 44-B and 44-C) in the Governments name and TCT T-99 (covering Lot Nos. 44-D and 44-E)
in Maximinos name, who has up to the present remained the registered owner of said lots.

- On September 4, 1958 a complaint was filed by Bilad, Lauro and Crispino and some of the heirs of Apung and of Sianang against Maximino.
They alleged that they only executed the deed of Assignment of Right to Inheritance because they were made to believe that it merely
authorized Maximino to convey portions of Lot No. 44 to the Government in their behalf to minimize expenses and facilitate the transaction;
and that it was only on February 18, 1958, when the plaintiffs secured a copy of the deed, that they came to know that the same assigned in
favor of Maximino their rights to inheritance from Mateo Carantes.

- On September 10, 1958 the defendant filed a motion to dismiss on the grounds
1) that plaintiffs cause of action was barred by the statute of limitation because the deed of assignment was recorded in the Registry
of Property at the latest on February 21, 1947, hence cause of action accrued from said date, and pursuant to Art. 1144 of the New
Civil Code, it must be brought within ten years so plaintiffs right to file the complaint had already prescribed on September 4, 1958;
and

2) the complaint states no cause of action because ownership of the property became vested in Maximino by acquisitive prescription
ten years from its registration in his name on February 21, 1947.

- On January 28, 1965, the RTC decided that since an action on fraud prescribes after 4 years from discovery, the discovery deemed to have
been on March 16, 1940 when Maximino registered the deed of assignment, the plaintiffs cause of action had prescribed. The plaintiffs motion
for reconsideration was denied. And so they appealed in the CA and it reversed the RTCs ruling.
ISSUE
WON respondent court is correct in reversing the RTCs decision

HELD

Ratio Total absence of consideration is what renders a contract absolutely void and inexistent.

Reasoning The CA points out that the deed of assignment is void ab initio and inexistent on the grounds that real consent was
wanting and the consideration of P1.00 is so shocking to the conscience that there was in fact no consideration, hence the action for
declaration of its inexistence does not prescribe.

BUT the sum of P1.00 is clear evidence that there was no absence of consideration. In addition, the document recites that the
decedent Mateo Carantes had, during his lifetime, expressed to the signatories to the contract that the property subject- matter
thereof rightly and exclusively belonged to petitioner Maximino Carantes. This acknowledgment by the signatories definitely
constitutes valuable consideration for the contract.

As for fraud and the prescription of action, the Court agrees with the RTC. Disposition ACCORDINGLY, the judgment of the Court of
Appeals appealed from is set aside, and another entered dismissing the complaint in Civil Case No. 804 of the Court of First Instance
of Baguio. No costs.Voting Makasiar, Munoz Palma and Martin, JJ., concur.Teehankee, J., concur on the ground that respondents
action based on constructive trust prescribed after ten years.
 BUENAVENTURA V CA
CARPIO; Novermber 20, 2003

Petition for review on certiorari of a decision of the Court of Appeals

FACTS
- Respondent spouses Leonardo Joaquin and Feliciana Landrito are the parents of petitioners Consolacion, Nora, Emma and Natividad as well
as of respondents Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed Joaquin. The married Joaquin children are joined in
this action by their respective spouses.

- Sought to be declared null and void ab initio are six deeds of sale of real property executed by respondent parents in favor of their
respondent children and the corresponding certificates of title issued in their names. In seeking the declaration of nullity of the said deeds of
sale and certificates of title, petitioners, in their complaint, aver that the deeds of sale are simulated as they are, are null and void ab initio
because

(1) there was no actual valid consideration for the deeds of sale x x x over the properties in litis;
(2) assuming that there was consideration in the sums reflected in the questioned deeds, the properties are more than three-fold
times more valuable than the measly sums appearing therein; (3) the deeds of sale do not reflect and express the true intent of the
parties (vendors and vendees); and
(4) the purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the
compulsory heirs (petitioner children) of their legitime.

- Respondents aver that:

(1) petitioner siblings do not have a cause of action against them as well as the requisite standing and interest to assail their titles
over the properties in litIs;
(2) the sales were with sufficient considerations and made by respondent parents voluntarily, in good faith, and with full knowledge of
the consequences of their deeds of sale; and
(3) the certificates of title were issued with sufficient factual and legal basis.

- The trial court ruled in favor of the respondents and dismissed the complaint.

The Court of Appeals affirmed the decision of the trial court. Hence, this petition. Petitioners assert that their respondent siblings did not
actually pay the prices stated in the Deeds of sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void.
Petitioners also ask that assuming that there is consideration, the same is grossly inadequate as to invalidate the Deeds of Sale.

ISSUES
1. WON the Deeds of Sale are void for lack of consideration
2. WON the Deeds of Sale are void for gross inadequacy of price

HELD
1. NO
- It is not the payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the
perfection of the contract. Payment of the price goes into the perfection of the contract. Failure to pay the consideration is different
from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing
valid contract while the latter prevents the existence of a valid contract.

- Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation, petitioners presented
Emma Joaquin Valdozs testimony stating that their father, respondent Leonardo Joaquin, told her that he would transfer a lot to her
through a deed of sale without need for her payment of the purchase price. The trial court did not find the allegation of absolute
simulation of price credible.

Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings financial
capacity to buy the questioned lots. On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the
cost of each lot sold. Not only did respondents minds meet as to the purchase price, but the real price also stated in the Deeds of
Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father.

2. NO
- Art. 1355 of the Civil Code states:

Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud,
mistake, or undue influence. (Emphasis supplied)

- Art. 1470 of the Civil Code further provides:

Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the
parties really intended a donation or some other act or contract. (Emphasis supplied)

- Petitioners failed to prove any of the instances mentioned in art. 1355 and 1470 of the Civil Code which would invalidate, or even
affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to exact value of the subject matter of the sale. All
the respondents believed that they received the commutative value of what they gave. Men may do foolish things, make ridiculous
contracts, use miserable judgment, and lose money by themindeed, all they have in the world; but not for that alone can the law
intervene and restore.

There must be, in addition, a violation of the law, the commission of what the law knows as an actionable wrong, before the courts are
authorized to lay hold of the situation and remedy it (Vales V Villa).

- Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater weight when they coincide with the factual
findings of the trial court. In the instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant
children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the
seller is a factual finding that is now conclusive upon us.

HERNAEZ V DELOS ANGELES

REYES; April 30, 1969

Petition for a writ of certiorari to set aside certain orders of the Court of First Instance of Quezon City (Branch IV), in its Civil Case No. Q-
10288, dismissing a complaint for breach of contract and damages, denying reconsideration, refusing to admit an amended complaint, and
declaring the dismissal final and unappealable.

FACTS
- Petitioner Marlene Dauden Hernaez, a motion picture actress, filed a complaint against Hollywood Far East Productions, Inc., and its
President and General Manager, Ramon Valenzuela, to recover P14,700.00 representing a balance allegedly due for her services as leading
actress in two motion pictures produced by the company, and to recover damages.

- CFI QC (Judge Walfrido delos Angeles, presiding) ordered the complaint dismissed, mainly because the "claim of plaintiff was not evidenced
by any written document, either public or private" and the complaint "was defective on its face" for violating Articles 1356 and 1358 of the Civil
Code of the Philippines, and for containing defective allegations.

- Plaintiff sought reconsideration of the dismissal and for admission of an amended complaint. The court denied reconsideration and the leave
to amend. A second motion for reconsideration was filed, which the court also denied for being pro forma, as its allegations "are, more or less,
the same as the first motion," and for not being accompanied by an affidavit of merits, and further declared the dismissal final and
unappealable.

- respondent lower court argues that the proposed amended complaint did not vary in any material respect from the original complaint except
in minor details, and suffers from the same vital defect of the original complaint, which is the violation of Article 1356 of the Civil Code, in that
the contract sued upon was not alleged to be in writing; that by Article 1358 the writing was absolute and indispensable, because the amount
involved exceeds five hundred pesos; and that the second motion for reconsideration did not interrupt the period for appeal, because it was not
served on three days notice.

ISSUES
1. WON lower court erred in denying plaintiffs motions for reconsideration and leave to amend
2. WON lower court abused its discretion in ruling that a contract for personal services involving more than P500.00 was either invalid or
unenforceable under the last paragraph of Article 1358 of the Civil Code of the Philippines

HELD
1. YES

When a court sustains a demurrer or motion to dismiss it is error for the court to dismiss the complaint without giving the party plaintiff
an opportunity to amend his complaint if he so chooses. Insofar as the first order of dismissal did not provide that the same was
without prejudice to amendment of the complaint, or reserve to the plaintiff the right to amend his complaint, the said order was
erroneous; and this error was compounded when the motion to accept the amended complaint was denied in the subsequent order of
3 October 1966. Petitioner-plaintiff was within her rights in filing her so-called second motion for reconsideration, which was actually a
first motion against the refusal to admit the amended complaint.

- The second motion for reconsideration was addressed to the court's refusal to allow an amendment to the original complaint, and
this was a ground not invoked in the first motion for reconsideration. Thus, the second motion to reconsider was really not pro forma,
as it was based on a different ground, even if in its first part it set forth in greater detail the arguments against the correctness of the
first order to dismiss. As to the lack of 3 days notice, the record shows that respondent-appellees had filed their opposition to the
second motion to reconsider; so that even if it were true that respondents were not given the full 3 days' notice, they were not
deprived of any substantial right. Therefore, the claim that the first order of dismissal had become final and unappealable must be
overruled.

2. YES

The ruling contested betrays a basic and lamentable misunderstanding of the role of the written form in contracts, as ordained in the
Civil Code. In general, contracts are valid and binding from their perfection regardless of form, whether they be oral or written.

This is plain from Articles 1315 and 1356 of the Civil Code.

"ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what
has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith,
usage and law."

"ART. 1356. Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for
their validity are present.. . ."

- These essential requisites referred to in Art 1356 CC are normally:

(1) consent,
(2) proper subject matter, and
(3) consideration or causa for the obligation assumed (Article 1318).

Once the three elements exist, the contract is generally valid and obligatory, regardless of the form, whether oral or written, in which
they are couched.

- To this general rule, the Code admits exceptions, set forth in the second portion of Article 1356:
 "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

- There are thus two exceptions to the general rule:

(a) Contracts for which the law itself requires that they be in some particular form (writing) in order to make them valid and
enforceable (solemn contracts).
(b) Contracts that the law requires to be proved by some writing (memorandum) of its terms. Their existence not being
provable by mere oral testimony (unless wholly or partly executed), these contracts are exceptional in requiring a writing
embodying the terms thereof for their enforceability by action in court.

- The contract sued upon by petitioner, i.e. compensation for services, does not come under either exception. It is true that it appears
included in Article 1358, last clause, providing that "all other contracts where the amount involved exceeds five hundred pesos must
appear in writing, even a private one."

But Article 1358 nowhere provides that the absence of written form in this case will make the agreement invalid or unenforceable.

On the contrary, Article 1357 clearly indicates that contracts covered by Article 1358 are binding and enforceable by action or suit
despite the absence of writing.

"ART. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the
contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised
simultaneously with the action upon the contract.

- NOTE: It is not enough that the law should require that the contract be in writing, as it does in Article 1358. The law must further
prescribe that without the writing the contract is not valid or not enforceable by action.

Disposition The order dismissing the complaint is set aside, and the case is ordered remanded to the court of origin for further proceedings
not at variance with the decision. Costs to be solidarily paid by private respondents Hollywood Far East Productions, Inc., and Ramon
Valenzuela.

Resuena V CA
FACTS:

Petition for Review on certiorari under Rule 45.Juanito Borromeo, Sr. is the co-owner and overseer of certain parcels of land located in Pooc,
Talisay,Cebu, designated as Lots Nos. 2587 and 2592 of the Talisay-Manglanilla Estate. He owned six-eighths (6/8) of LotNo. 2587 while the
Sps. Bascon owned two-eights (2/8) thereof.

On the other hand, Lot No. 2592 is owned inc ommon by Borromeo and the heirs of one Nicolas Maneja. However, the proportion of their
undivided shares was not determined a quo.Tining Resuena, Alejandra Garay, Lorna Resuena, Eleuterio Resuena, and Unisima Resuena
resided in the upper portion of Lot No. 2587, allegedly under the acquiescence of the Spouses Bascon and their heir, Andres Bascon. On the
other hand, petitioner Eutiquia Rosario occupied a portion of Lot No. 2592, allegedly with the permission of the heirs of Nicolas Maneja, one of
the original co-owners of Lot No. 2587. Borromeo claimed that they have occupied portions of the subject property by virtue of his own
liberality.

Borromeo developed portions of Lots Nos. 2587 and 2592 occupied by him into a resort known as theBorromeo Beach Resort. In his desire to
expand and extend the facilities of the resort that he established on thesubject properties, respondent demanded that petitioners vacate the
property. Petitioners, however, refused tovacate their homes.On 16 February 1994, Borromeo filed a Complaint for ejectment with the MTC
against the petitioners.MTC decision (summary proceeding): dismissed the complaint.

Borromeo had no right to evict thepetitioners because the area was owned in common and there was no partition yet.RTC decision: reversed
the MTC decision. It held that Article 487 of the Civil Code, which allows any oneof the co-owners to bring an action in ejectment, may
successfully be invoked by the respondent because, in asense, a co-owner is the owner and possessor of the whole, and that the suit for
ejectment is deemed to beinstituted for the benefit of all co-owners.CA decision: affirmed the RTC decision.

ISSUE :
Whether or not Borromeo can lawfully evict the petitioners.

HELD:
Article 487 of the Civil Code, which provides simply that *any one of the co-owners may bring an actionin ejectment, is a categorical
and an unqualified authority in favor of respondent to evict petitioners from the portions of Lot. No. 2587.This provision is a departure
from Palarca v. Baguisi, which held that an action for ejectment must bebrought by all the co-owners.

Thus, a co-owner may bring an action to exercise and protect the rights of all. Whenthe action is brought by one co-owner for the
benefit of all, a favorable decision will benefit them; but an adversedecision cannot prejudice their rights.

Respondents action for ejectment against petitioners is deemed to be instituted for the benefit of all
co-owners of the property since petitioners were not able to prove that they are authorized to occupy the same.

Petitioners lack of authority to occupy the properties, coupled with respondents right under Article 487,clearly settles respondents
prerogative to eject petitioners from Lot No. 2587.

Time and again, this Court hasruled that persons who occupy the land of another at the latter's tolerance or permission, without any
contractbetween them, are necessarily bound by an implied promise that they will vacate the same upon demand,failing in which a
summary action for ejectment is the proper remedy against them

Petition is DENIED.
 BORROMEO V COURT OF APPEALS
FERNANDO; September 28, 1972

PETITION for review by certiorari of a decision of the Court of Appeals

FACTS
- Before 1933, defendant [Jose A. Villamor] was a distributor of lumber belonging to Mr. Miller who was the agent of the Insular Lumber
Company in Cebu City. Defendant being a friend and former classmate of plaintiff [Canuto O. Borromeo] used to borrow from the latter certain
amounts from time to time.

- On one occasion, defendant borrowed from plaintiff a large sum of money for which he mortgaged his land and house in Cebu City to pay
some pressing obligation with Mr. Miller.

- Mr. Miller filed a civil action against the defendant and attached his properties including those mortgaged to plaintiff, inasmuch as the deed of
mortgage in favor of plaintiff could not be registered because not properly drawn up.

- Plaintiff then pressed the defendant for settlement of his obligation, but defendant instead offered to execute a document promising to pay his
indebtedness even after the lapse of ten years. Liquidation was made and defendant was found to be indebted to plaintiff in the sum of
P7,220.00, for which defendant signed a promissory note therefor on November 29, 1933 with interest at the rate of 12% per annum, agreeing
to pay as soon as I have money'.

- The note further stipulates that defendant 'hereby relinguish, renounce, or otherwise waive my rights to the prescriptions established by our
Code of Civil Procedure for the collection or recovery of the above sum of P7,220.00. * * * at any time even after the lapse of ten years from
the date of this intrument'.

- After the execution of the document, plaintiff limited himself to verbally requesting defendant to settle his indebtedness from time to time.
Plaintiff did not file any complaint against the defendant within ten years from the execution of the document as there was no property
registered in defendant's name, who furthermore assured him that he could collect even after the lapse of ten years. After the last war, plaintiff
made various oral demands, but defendants failed to settle his account

- CFI: Villamor ordered to pay Borromeo (represented by his heirs) the sum of P7,220.00 within ninety days from the date of the receipt of such
decision with interest at the rate of 12% per annum from the expiration of such ninety-day period.
- CA: reversed CFI ruling

ISSUE
WON the CA erred in reversing the ruling of the CFI in finding the lack of validity of the stipulation amounting to a waiver in line with the
principle "that a person cannot renounce future prescription"

HELD
YES
Ratio Between two possible interpretations, that which saves rather than destroys is to be preferred. It is a fundamental principle in
the interpretation of contracts that while ordinarily the literal sense of the words employed is to be followed, such is not the case
where they "appear to be contrary to the evident intention of the contracting parties," which "intention shall prevail." The terms,
clauses and conditions contrary to law, morals and public order (in this case the contested stipulation) should be separated from the
valid and legal contract when such separation can be made because they are independent of the valid contract which expresses the
will of the contracting parties.

Reasoning There is nothing implausible in the view that such language renouncing the debtor's right to the prescription established
by the Code of Civil Procedure should be given the meaning, as noted in the preceding sentence of the decision of respondent Court,
that the debtor could be trusted to pay even after the termination of the ten-year prescriptive period. (so CA should have interpreted
the stipulation based on the context of the friendship between the two parties)

- 'Where an agreement founded on a legal consideration contains several promises, or a promise to do several things, and a part only
of the things to be done are illegal, the promises which, can be separated, or the promise, so far as it can be separated, from the
illegality, may be valid.

The rule is that a lawful promise made for a lawful consideration is not invalid merely because an unlawful promise was made at the
same time and for the same consideration, and this rule applies, although the invalidity is due to violation of a statutory provision,
unless the statute expressly or by necessary implication declares the entire contract void.

- The first ten years after November 29, 1933 should not be counted in determining when the action of creditor, now represented by
petitioners, could be filed. From the joint record on appeal, it is undoubted that the complaint was filed on January 7, 1953. If the first
ten-year period was to be excluded, the creditor had until November 29, 1953 to start judicial proceedings.

After deducting the first tenyear period which expired on November 29, 1943, there was the additional period of still another ten
years.29 Nor could there be any legal objection to the complaint by the creditor Borromeo of January 7, 1953 embodying not merely
the fixing of the period within which the debtor Villamor was to pay but likewise the collection of the amount that until then was not
paid.

Disposition Wherefore, the decision of respondent Court of Appeals of March 7, 1964 is reversed, thus giving full force and effect to
the decision of the lower court of November 15, 1956. With costs against private respondents.
 KASILAG V RODRIGUEZ
IMPERIAL; December 7, 1939

Appeal from the decision of the Court of Appeals

FACTS
- On May 16, 1932, Emiliana Ambrosio and Marcial Kasilag executed a public deed (Exhibit 1) saying that Kasilag bought Lot no. 285 (6.7540
hectares) under Homestead Certificate Title No. 325, with the assessed value of P940, from Ambrosio for the sum of P1000. Other stipulations
are as follows:

> that Ambrosio encumbers and hypothecates by way of mortgage the land improvements, consisting of 4 mango trees, 110 hills of
bamboo trees, 1 tamarind and 6 boga trees, of which Ambrosio is the absolute owner. The condition of said mortgage is such that if
the party of Ambrosio shall pay, Kasilag, his heirs, assigns, or executors, on or before the 16th day of November, 1936, or 412 years
after date of the execution of the instrument, the sum of P1,000 with interest at 12 per cent per annum, then the mortgage shall
become null and void; otherwise the same shall remain in full force and effect, and subject to foreclosure in the manner and form
provided by law for the amount due thereunder, with costs and also attorney's fees in the event of such foreclosure.

(Art VI) Ambrosio shall also pay all taxes and assessments which are or may become due on the land and improvements during the term of the
agreement(Art VII) Within 30 days after execution of agreement, Ambrosio shall file a motion before the Court of First Instance at Balanga,
Bataan, P. I., requesting cancellation of Homestead Certificate of Title No. 325, in lieu thereof, of a certificate of title under the provisions of
Land Registration Act No. 496, as amended by Act 3901.

(Art VIII) If upon the expiration of the period of time 4 years stipulated in this mortgage, the mortgagor should fail to redeem this mortgage, she
would execute a deed of absolute sale of the property herein described for the same amount as this mortgage, including all unpaid interests at
the rate of 12 per cent per annum, in favor of the mortgagee.

(Art IX) In the event the land transfer is not approved by the Court, the foregoing contract of sale shall automatically become null and void, and
the mortgage stipulated shall remain in full force and effect- In 1933, Ambrosio was unable to pay the stipulated interests as well as the tax on
the land and its improvements.

For this reason, she and the Kasilag entered into another verbal contract whereby she conveyed to the latter the possession of the land on
condition that the latter would not collect the interest on the loan, would attend to the payment of the land tax, would benefit by the fruits of the
land, and would introduce improvements thereon.

By virtue of this verbal contract, the petitioner entered upon the possession of the land, gathered the products thereof, did not collect the
interest on the loan, introduced improvements upon the land valued at P5,000, according to him and on May 22, 1934 the tax declaration was
transferred in his name and on March 6, 1936 the assessed value of the land was increased from P1,020 to P2,180.

- The children and heirs of the deceased Ambrosio, commenced this civil case to recover from Kasilag the possession of the land and its
improvements; that the petitioner pay to them the sum of P650 being the approximate value of the fruits which he received from the land;
that the petitioner sign all the necessary documents to transfer the land and its possession to the respondents;

that the petitioner be restrained, during the pendency of the case, from conveying or encumbering the land and its improvements;

that the registrar of deeds of Bataan cancel certificate of title No. 325 and issue in lieu thereof another in favor of the respondents,
and that the petitioner pay the costs of suit

- The CA held that the contract is entirely null and void and without effect; that the heirs of Ambrosio, are the owners of the disputed land, with
its improvements, in common ownership with their brother Gavino Rodriguez; that Kasilag acted in bad faith and should yield possession of the
land in their favor, with all the improvements; that the plaintiffs-respondents jointly and severally pay to the defendant-petitioner the sum of
P1,000 with interest at 6 percent per annum from the date of the decision.

It also ordered the registrar of deeds of Bataan to to issue another certificate of title in favor of the plaintiffs-respondents and their brother
Gavino Rodriguez, as undivided owners in equal parts, free of all liens and incumbrances except those expressly provided by law, without
special pronouncement as to the cost.

ISSUES
1. WON the contract entered into between the parties was one of absolute sale of the land and its improvements and that the agreement is null
and void
2. WON petitioner acted in bad faith in taking possession of the land

HELD
1. NO
Ratio In the interpretation of contracts, the intention of the contracting parties should always prevail because their will has the force of
law between them. Furthermore, terms, clauses and conditions contrary to law, morals and public order should be separated from the
valid and legal contract and when such separation can be made because they are independent of the valid contract which expresses
the will of the contracting parties.

Reasoning Art 1281 of the Civil Code: if the terms of a contract are clear and leave no doubt as to the intention of the contracting
parties, the literal sense of its stipulations shall be followed; and if the words appear to be contrary to the evident intention of the
contracting parties, the intention shall prevail.

Where an agreement founded on a legal consideration contains several promises, or a promise to do several things, and a part only
of the things to be done are illegal, the promises which can be separated, or the promise, so far as it can be separated, from the
illegality, may be valid.
The rule is that a lawful promise made for a lawful consideration is not invalid merely because an unlawful promise was made at the
same time and for the same consideration, and this rule applies, although the invalidity is due to violation of a statutory provision,
unless the statute expressly or by necessary implication declares the entire contract void. The contract set out in the agreement
 should be interpreted in accordance with these rules.

- As the terms thereof are clear and leave no room for doubt, it should be interpreted according to the literal meaning of its clauses.

The parties entered into a contract of mortgage of the improvements on the land acquired as homestead, to secure the payment of
the indebtedness for P1,000 and the stipulated interest thereon.

The principal contract is that of loan and the accessory that of mortgage of the improvements upon the land acquired as a
homestead. There is no question that the first of this contract is valid as it is not against the law. The second, or the mortgage of the
improvements, is expressly authorized by section 116 of Act No. 2874, as amended by section 23 of Act No. 3517.

- The subsequent verbal pacts made by the parties independently were calculated to alter the mortgage a contract clearly entered
into, converting the latter into a contract of antichresis. (Article 1881 of the Civil Code.) The contract of antichresis, being a real
encumbrance burdening the land, is illegal and void as expressly prohibited by section 116 of Act No. 2874.

2. NO
Ratio Gross and inexcusable ignorance of law may not be the basis of good faith, but possible, excusable ignorance may be such
basis.

Reasoning The Civil Code does not expressly define what is meant by bad faith, but section 433 provides that "Every person who is
unaware of any flaw in his title, or in the manner of its acquisition, by which it is invalidated, shall be deemed a possessor in good
faith"; and provides further, that "Possessors aware of such flaw are deemed possessors in bad faith".

It is a fact that the petitioner is not conversant with the laws because he is not a lawyer. In accepting the mortgage of the
improvements he proceeded on the well-grounded belief that he was not violating the prohibition regarding the alienation of the land.
In taking possession thereof and in consenting to receive its fruits, he did not know, as clearly as a jurist does, that the possession
and enjoyment of the fruits are attributes of the contract of antichresis and that the latter, as a lien, was prohibited by section 116.

These considerations again bring us to the conclusion that, as to the petitioner, his ignorance of the provisions of section 116 is
excusable and may, therefore, be the basis of his good faith.

Disposition The appealed decision is reversed, and we hereby adjudge:

(1) that the contract of mortgage of the improvements, set out in Exhibit 1, is valid and binding;
(2) that the contract of antichresis agreed upon verbally by the parties is a real incumbrance which burdens the land and, as such, is a
null and without effect;
(3) that the petitioner is a possessor in good faith;
(4) that the respondents may elect to have the improvements introduced by the petitioner by paying the latter the value thereof,
P3,000, or to compel the petitioner to buy and have the land where the improvements or plants are found, by paying them its market
value to be filed by the court of origin, upon hearing the parties;
(5) that the respondents have a right to the possession of the land and to enjoy the mortgaged improvements; and
(6) that the respondents may redeem the mortgage of the improvements by paying to the petitioner within three months the amount of
P1,000, without interest, as that stipulated is set off by the value of the fruits of the mortgaged improvements which petitioner
received, and in default thereof the petitioner may ask for the public sale of said improvements for the purpose of applying the
proceeds thereof to the payment of his said credit.

Santi vs. Court of Appeals

227 SCRA 541

FACTS:
Esperanza Jose, a registered owner of a parcel of land, leased a portion of her property in Cavite to spouses Eugenio Vitan and Beatriz
Francisco for a period of 20 years automatically extended for another 20 years. Spouses, in turn, sold all their rights and interest to Augusto
Reyes where a new lease contract was entered with Jose. In the interim, Jose sold all his rights to plaintiff Vicente Santi, with a rental of 20
years extendable for another 20 years.

After Reyes expiration of lease, plaintiff Santi wrote to Reyes heirs demanding recover of possession. Defendants refused on the contention
that there was automatic 20 years extension, and tendered to plaintiff the payment which the latter refused to accept.

Plaintiff filed a complaint against Reyes which the trial court ruled in his favor. CA reversed the lower courts decision.

ISSUE:
Whether the contract of lease contained automatic extension of lease

HELD:
NO.
The phrase, automatically extended did not appear and was not used in the lease contract subsequently entered by Jose and Reyes
since the lessor did not want to be bound by the stipulation of automatic extension as provided in the previous contract. It clearly
shows that Jose did not intend to automatically extend the lease contract but to ponder whether to do so.

If the intention provided for an automatic extension, they could have easily provided a 40 years contract instead to 20.
 Rapanut v. CA
Summary:
Rapanut (before balding) and Susan Flunker entered into a contract of sale with mortgage. Flunker (even if she fails all the time) decided to
sell her property in Pasay. It was to be paid on installments. Rapanut has been paying the 500 per month installments until a letter was
received was sent to him by Flunkers counsel informing him that for his failure to pay the monthly installments plus 10% per annum interest on
the balance and rescinding the contract.

RTC and CA ruled in favor of Flunker. The trial court and the appellate court agreed with private respondent's theory that the above payments
should be applied to the unpaid accrued interest (10% per annum on the balance) for the years 1986 to 1989 totalling P10,966.18, pursuant to
Article 1253 of the Civil Code of the Philippines.
W/N this is correct. Nope.

A liberal interpretation of the contracts in question is that at the end of each year, all payments made shall be deducted from the principal
obligation. The 10% interest on the balance is then added to whatever remains of the principal. Thereafter, petitioner shall pay the monthly
installments on the stipulated dates. In other words, the interest due are added to and paid like the remaining balance of the principal.

Thus, we must rule that the parties intended that petitioner pay the monthly installments at predetermined dates, until the full amount,
consisting of the purchase price and the interests on the balance, is paid.

Significant is the fact that private respondent accepted the payments petitioner religiously made for four years. Private respondent cannot rely
on the clause in the contract stating that no demand is necessary to explain her silence for four years as to the 10% interest, as such clause
refers to the P500.00 monthly installments.

After pondering on the meaning of Article 1253, we reach the conclusion that in a contract involving installment payments with interest
chargeable against the remaining balance of the obligation, it is the duty of the creditor to inform of the amount of interest that falls due and
that he is applying the installment payments to cover said interest. Otherwise, the creditor cannot apply the payments to the interest and then
hold the debtor in default for non-payment of installments on the principal.

FACTS:

On November 29, 1985, petitioner and private respondent executed a Deed of Conditional Sale with Mortgage. Under the contract, private
respondent agreed to sell to petitioner a parcel of land in San Rafael, Pasay City, payable in monthly installments of P500.00 to be paid not
later than the fifth day of every month and in semi-annual installments of P1,000.00 to be paid on June 30 and December 31 of every year,
"with an interest of 10% per annum on the remaining balance until the full amount is paid"

In April 1986, petitioner and private respondent entered into a Supplemental Agreement with the following stipulations:

WHEREAS, the VENDOR/MORTGAGEE is willing to sell said portion of her lots to the VENDEE/MORTGAGOR for a total price of P37,485.00
payable in monthly installments of P500.00 with an interest of 10% per annum on the remaining balance until the full amount is paid.

Payments of the monthly installments of P500.00 shall be made not later than the fifth day of every month without need of demand starting
January, 1986. Failure to pay any of the monthly installments when due for three months, shall be sufficient cause for rescission of this contract
and all payments made shall be applied as corresponding rentals.

Petitioner, thus, had been making the P500.00 monthly installment payments until he received a letter dated February 13, 1990 from private
respondent' s counsel informing him that for his failure to pay the monthly installments plus 10% per annum interest on the balance, the Deed
of Conditional Sale with Mortgage and the Supplemental Agreement were rescinded "as of receipt hereof," and that payments made were
considered rentals. The letter further demanded that petitioner vacate the premises within 15 days from receipt thereof.

Respondent filed a complaint against petitioner in the Regional Trial Court of Pasay City for rescission of the Deed of Conditional Sale with
Mortgage and Supplemental Agreement which the court granted.

The controversial provision in the Supplemental Agreement reads: ". . . the VENDOR/MORTGAGEE is willing to sell said portion of her lot to
the VENDEE/MORTGAGOR for a total price of P37,485.00 payable in monthly installments of P500.00 with an interest of 10% per annum on
the remaining balance until the full amount is paid"
Private respondent's view is that the 10% interest must be paid every year and posits that the P500.00 monthly installments include the 10%
interest.

Issue:
W/N the 10% interest must be paid every year and the P500.00 paid by petitioner monthly inludes the 10% interest.

Held:
After pondering on the meaning of Article 1253, we reach the conclusion that in a contract involving installment payments with interest
chargeable against the remaining balance of the obligation, it is the duty of the creditor to inform of the amount of interest that falls
due and that he is applying the installment payments to cover said interest.

Otherwise, the creditor cannot apply the payments to the interest and then hold the debtor in default for non-payment of installments
on the principal.

A liberal interpretation of the contracts in question is that at the end of each year, all payments made shall be deducted from the
principal obligation.

The 10% interest on the balance is then added to whatever remains of the principal. Thereafter, petitioner shall pay the monthly
installments on the stipulated dates. In other words, the interest due are added to and paid like the remaining balance of the
principal.
 Thus, we must rule that the parties intended that petitioner pay the monthly installments at predetermined dates, until the full amount,
consisting of the purchase price and the interests on the balance, is paid.

Significant is the fact that private respondent accepted the payments petitioner religiously made for four years. Private respondent
cannot rely on the clause in the contract stating that no demand is necessary to explain her silence for four years as to the 10%
interest, as such clause refers to the P500.00 monthly installments.

Even granting as acceptable private respondent's theory that the monthly amortizations shall first be applied to the payment of the
interests, we must still rule for petitioner.

The contracts provided for private respondent's right of rescission which may be exercised upon petitioner's failure to pay installments
for three months. Private respondent's failure to exercise her right of rescission after petitioner's alleged default constitutes a waiver of
such right. Her continued acceptance of the installment payments places her in estoppel.

OIL & NATURAL GAS COMMISSION vs. CA, & PACIFIC CEMENT CO., INC.
July 23, 1998 | Martinez, J. |

When it contains stipulations which admit of several meanings | by: M.G. Albao

PETITIONER: Oil and Natural Gas Commission (ONGC), a foreign corp. owned and controlled by Govt of IndiaRESPONDENT: CA, Pacific
Cement Company, Inc. (PACIFIC), a private domestic corporation

SUMMARY: ONGC and PACIFIC entered into a supply contract, but PACIFIC failed to do deliver the cargo to India.

They agreed that PACIFIC will deliver Class G cement instead, but upon seeing that it did not comply with their specs, ONGC resorted to
arbitration pursuant to Clause 16. The arbitrator ruled in ONGCs favor, which decision was adopted by the Indian Civil Court, enabling ONGC
to collect form PACIFIC. ONGC sought to enforce this ruling in the Philippines, but PACIFIC moved to dismiss. SC ruled that although ONGC
erroneously invoked and interpreted Clause 16 as basis of their remedy, the foreign judgment still holds and PACIFIC was, in the end, still
liable to ONGC. DOCTRINE: Noscitur a sociis: where a particular word/phrase is ambiguous in itself or is equally susceptible of various
meanings, its correct construction may be made clear and specific by considering the company of the words in which it is found or with which it
is associated

FACTS:
1. Feb 1983 - Indian company ONGC entered into a contract with domestic company PACIFIC, where the latter was to supply ONGC with
4,300 metric tons of oil well cement, in consideration of ONGCs payment of $477k through a letter of credit in favor of PACIFIC.

2. The cement was loaded on MV SURUTANA NAVA at Surigao for delivery to Bombay & Calcutta, India. However, because of dispute b/W
shipowner & PACIFIC, the cargo was held up in Bangkok and didnt reach India. - PACIFIC already received payments, but despite
several demands of ONGC, the former was not able to deliver.

3. Negotiations ensued betweent them, and they resolved that PACIFIC would deliver replacement of Class G cement cost free, but upon
ONGCs inspection, the Class G cement did NOT conform to ONGCs specifications.
1
4. ONGC informed PACIFIC that pursuant to Clause 16 of their contract, it was referring its claim to an arbitrator.

5. July 1988 - ONGCs chosen arbitrator, Mr. Malhotra, resolved dispute and set arbitral award in favor of ONGC, directing PACIFIC to pay

1) the amount received by PACIFIC thru the letter of credit,

2) reimbursement of expenditure incurred due to ONGC inspection teams visit to the Phils.,
3.) establishment charges, &
4.) losses suffered = $899k (+ interest + 1/2 of arbitration expenses)

6. To execute award, ONGC filed Petition before the Court of the Civil Judge in Dehra Dun, India (hereinafter, foreign court), praying that
the arbitrators decision by made the Rule of Court in India.

7. Foreign court issued notices to PACIFIC for objections

- PACIFIC complied and sent objections, but when the court directed it to pay filing fees, it instead sent a letter asking how much was to be
paid

8. Without responding, foreign court did not admit PACIFICs objections, so it issued its ruling, making the arbitrators award (Paper No. 3/B-
1) the Rule of the Court, entitling ONGC to get from PACIFIC $899k

9. ONGC sent notices of demand for PACIFICs compliance, but refused to pay
10. ONGC filed complaint for enforcement of judgment of Clause 16:

Except where otherwise provided in the supply order/contract all questions and disputes, relating to the meaning of the specification
designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered or as to any other
question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing,
specification, instruction or these conditions or otherwise concerning the materials or the execution or failure to execute the same
during stipulated/extended period or after the completion/abandonment thereof shall be referred to the sole arbitration of the persons
appointed by Member of the Commission at the time of dispute.
the foreign court in RTC Surigao

11. PACIFIC filed a Motion to Dismiss based on the ff.: a. ONGCs lack of legal capacity to sueb. Lack of cause of actionc. ONGCs
claim/demand has been waived/abandoned/extinguished

- ONGC filed Opposition, & PACIFIC filed Rejoinder 12. RTC: ruled for ONGC, but said it erred in using Cl. 16
a. ONGC allowed to sue as a foreign corp. suing on an isolated transaction in this case (exception to gen. rule that foreign corp.
 transacting business in Philippines w/o license cannot sue)

b. ONGCs referral of the dispute b/w the parties to the arbitrator under Clause 16 was ERRONEOUS, as Clause 16s subject matter
was limited to specifications, designs, drawings, and instrcutions; that the breach of non-delivery should have been properly
litigated before a court of law pursuant to Clause 15 => hence, the proceedings before the arbitrator were null and void, so award
cant be source of ONGCs right

13. CA: affirmed RTC, and added that:

a. foreign courts judgment cant be enforced b/c it contained only the dispositive portion of the decision, in violation of
constitutional reqt that no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and
the law on which it is based
b. dismissal of PACIFICs objections for non- payment of filing fees, without the foreign court first replying to PACIFICs query,
constituted want of notice or violation of due process
c. arbitration was defective as arbitrator was appointed solely by ONGC, and the fact that appointed arbitrator was former employee
of ONGC gave rise to bias in favor of ONGC

HELD:
petition GRANTED;
CA decision reversed; ordered PACIFIC to pay ONGC the amounts adjudged in the foreign judgment of said case.

It will be no objection to any such appointment that the arbitrator so appointed is a Commission employer (sic) that he had to deal with
the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed
views on all or any of the matter in dispute or difference.

Clause 15: All questions, disputes and differences, arising under out of or in connection with this supply order, shall be subject to the
EXCLUSIVE JURISDICTION OF THE COURT, within the local limits of whose jurisdiction and the place from which this supply order
is situated."

ISSUE
RATIO:

1. WON non-delivery of the cargo cement is a proper subject for arbitration under Clause 16? NO

- In their argument, ONGC misquoted the phrase by shrewdly inserting a comma between the words supply order/contract and
design where none actually exists (see bolded part of Footnote #1)

- Given the true wording of that part of Clause 16, it is clear that to be able to invoke said caluse, the claim must arise out of or relate
to the design, drawing, specification, or instruction of the supply order/contract

(ONGC: non-delivery of the cargo is still covered by the clause failure to execute the same under Clause 16)

- SC: No! The doctrine of noscitur a sociis (equally applicable in construction of statutes as well as in ascertainment of meaning and
scope of vague and contractual stipulations), which means that where a particular word/phrase is ambiguous in itself or is equally
susceptible of various meanings, its correct construction may be made clear and specific by considering the company of the words in
which it is found or with which it is associated (its obscurity or doubt may be reviewed by reference to associated words)

=> hence, even the clause failure to execute the same must be construed in light of the preceding words with which it is
associated, meaning, it, too, is limited only to the design, drawing, instructions, specifications, or quality of the materials of
the supply order/contract

- that Clause 16 should pertain only to matters involving the technical aspects of the contract is but a logical inference considering
that the underlying purpose of a referral to arbitration is for such technical matters to be deliberated upon by a person possessed with
the required skill and expertise which may be otherwise absent in the regular courts.

=> SC agrees with CA that the non-delivery of the oil well cement was a matter cognizable by the regular courts, as
stipulated by the parties in Clause 15

- SC enumerated the ff. fundamental principles in the interpretation of contracts and other instruments:
i. CC 1373: If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import
which is most adequate to render it effectual.
ii. CC 1374: The various stipulations of a contract shall be interpreted together, attributing the doubtful ones that sense which may
result from all of them taken jointly.
iii. Sec. 11, RoC 130: Instrument construed so as to give effect to all provisions. In the construction of an instrument, where there
are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.

=> The whole & every part of a contract must be considered in fixing the meaning of any of its harmounious whole. The rule is
that a construction that would render a provision inoperative should be avoided; instead, apparently inconsistent provisions
should be reconciled whenever possible as parts of a coordinated and harmonious whole.

2. WON the failure of the replacement cement (Class G) to conform to the specifications of the contract is a matter within the ambit of Clause
16 YES

- The subsequent agreement forged between ONGC and PACIFIC for the latter to deliver Class G cement as replacement was valid.
However, when, upon inspection, it turned out that the replacement cement did not conform to the specifications of the contract, its
being brought up before the arbitrator was clearly within the coverage of Clause 16 (PACIFIC: claims that it was under no legal
obligation to make replacement, but it did so only out of liberality, and hence, the undertaking to deliver the replacement cement and
its failure to conform to specifications are not anymore subject of the contracts provisions)

- SC: No! The replacement was undertaken precisely because of PACIFICs recognition of its duty to do so under the supply
 order/contract, Clause 16 of which remains in force and effect. => WON PACIFIC was able to recover the original cargo is immaterial!

=> That PACIFIC hasnt recovered yet is also hard to believe since Bangkok Court already ruled in their favor, so the logical
assumption is that they have or will eventually recover

3. WON foreign court is enforceable despite PACIFICs allegation that it is bereft of statement of facts & law upon which the award of ONGC
was based YES

- The foreign courts categorical declaration that Award Paper No. 3/B-1 shall be part of the decree means that it adopted the
findings of facts and law of the arbitrator, which contained exhaustive discussions of the parties claims & defenses and the arbitrators
subsequent evaluation.

=> CA erred in saying that this was a simplistic decision, containing only the dispositive portion- In this jurisdiction,
incorporation by reference is allowed if only to avoid the cumbersome reproduction of the decision of the lower courts, or
portions thereof, in the decision of the higher court. (the Award Paper here was 18 single-spaced pages long!)

4. WON foreign judgment is affected by the fact that the procedure in which their judgment was rendered differs from our courts NO

- SC already held before that matters of remedy and procedure are governed by the lex fori or the internal law of the forum. =>
Hence, if under the procedural rules of the Indian court here, a valid judgment may be rendered by adopting the arbitrator's findings,
then the same must be accorded respect.

- In the same vein, if the procedure in the foreign court mandates that an Order of the Court becomes final and executory upon failure
to pay the necessary docket fees, then the courts in this jurisdiction cannot invalidate the order of the foreign court simply because
our rules provide otherwise. (PACIFIC: due process rights violated!)

=> SC: Essence of due process is to be found in the reasonable opportunity to be heard. Thus, there is no violation of due
process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy and he
waived his right to do so.

(PACIFIC: the arbitrator is presumed to be biased!)

=> SC: This was stipulated, hence, PACIFIC agreed to it.5. Also, foreign judgment is presumed to be valid & binding until
contrary is shown by party attacking such judgment.

He has burden of overcoming such presumption.

[G.R. No. 136423. August 20, 2002]

SPOUSES EFREN N. RIGOR and ZOSIMA D. RIGOR, for themselves and as owners of CHIARA
CONSTRUCTION, petitioners, vs. CONSOLIDATED ORIX LEASING and FINANCE CORPORATION,
respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review of the decisionof the Court of Appeals in CA-G.R. SP No. 48415 affirming the orders [if dated June 3, 1998
and July 15, 1998 of the Regional Trial Court of Dagupan City, Branch 41. These orders denied for lack of merit the motion to dismiss filed by
petitioner Chiara Construction, owned by the spouses Efren and Zosima Rigor (Petitioners for brevity), in Civil Case No. 98-02067 of the same
Regional Trial Court.

The Facts
Petitioners obtained a loan from private respondent Consolidated Orix Leasing and Finance Corporation (Private Respondent for
brevity) in the amount of P1,630,320.00. Petitioners executed a promissory note on July 31, 1996 promising to pay the loan in 24 equal
monthly installments of P67,930.00 every fifth day of the month commencing on September 5, 1996. The promissory note also provides that
default in paying any installment renders the entire unpaid amount due and payable. To secure payment of the loan, petitioners executed in
favor of private respondent a deed of chattel mortgage over two dump trucks.

Petitioners failed to pay several installments despite demand from private respondent. On January 5, 1998, private respondent sought
to foreclose the chattel mortgage by filing a complaint for Replevin with Damages against petitioners before the Regional Trial Court of
Dagupan City (Dagupan trial court for brevity). After service of summons, petitioners moved to dismiss the complaint on the ground of improper
venue based on a provision in the promissory note which states that, x x x all legal actions arising out of this note or in connection with the
chattels subject hereof shall only be brought in or submitted to the proper court in Makati City, Philippines.

Private respondent opposed the motion to dismiss and argued that venue was properly laid in Dagupan City where it has a branch
office based on a provision in the deed of chattel mortgage which states that, x x x in case of litigation arising out of the transaction that gave
rise to this contract, complete jurisdiction is given the proper court of the city of Makati or any proper court within the province of Rizal, or any
court in the city, or province where the holder/mortgagee has a branch office, waiving for this purpose any proper venue.

After a further exchange of pleadings, the Dagupan trial court denied petitioners motion to dismiss in an Order dated June 3, 1998. On
July 15, 1998, the Dagupan trial court denied their motion to reconsider the Order of June 3, 1998.

Not satisfied with the orders, petitioners filed a petition for certiorari before the Court of Appeals imputing grave abuse of discretion by
the Dagupan trial court in denying the motion to dismiss. On October 19, 1998, the Court of Appeals rendered the decision denying due course
and dismissing the petition. On November 27, 1998, the Court of Appeals issued a resolution denying the motion for reconsideration.
Hence, the instant petition.
 The Ruling of the Court of Appeals
In dismissing the petition, the Court of Appeals ruled as follows:

Records reveal that Chiara executed the Promissory Note in favor of Consolidated secured by a Chattel Mortgage over two (2) motor vehicles.
Conformably, failure to comply with the obligations under the Promissory Note entitles Consolidated to the possession of the mortgaged
chattels or motor vehicles for purposes of foreclosure to satisfy the loan obligation. It is for this reason that the action commenced by
Consolidated is for Replevin and damages with an alternative prayer for the defendants to pay the outstanding amount in the event manual
delivery of the motor vehicles involved cannot be effected. In plain language, the action commenced before the respondent court is principally
based both on the Promissory Note and the Chattel Mortgage, so much so, that it becomes essentially imperative to interpret and give effect to
all the provisions of the two actionable documents.

In this wise, both the Promissory Note and the Chattel Mortgage should be treated as a singular contract with one complementing the other.
Appropriately, Article 1374 provides:

Art. 1374. 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.

And in giving meaning to the contract, an interpretation of all its provisions must be adopted as will give effect to all. The stipulations of the
contract shall be interpreted together attributing to the doubtful ones that sense which may result from all of them taken jointly [ Layug vs.
Intermediate Appellate Court, 167 SCRA 627 (1988)]. Tolentino, in his Civil Code of the Philippines, Vol. 4, 1995 Reprint, pp. 563-564 said:
xxx The whole contract must be interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot be segregated
and then made to control; neither do particular words or phrases necessarily determine the character of a contract. The legal effect of the
contract is not to be determined alone by any particular provision disconnected from all others, but in the ruling intention of the parties as
gathered from all the language they have used; and from their contemporaneous and subsequent acts.

Provisions of a contract are to be given a reasonable and practical interpretation so as to be efficacious. Titles given to sections of a contract
may be resorted to in interpreting its scope. An interpretation that gives effect to the contract as a whole should be adopted.
By and large, it was therefore not an error or grave abuse of discretion when the controversial Motion to Dismiss was denied by the respondent
court. Indeed, venue is properly laid in the case at bar under the provisions of the Chattel Mortgage in issue.

The Issue
In petitioners memorandum, the sole issue posed is:
WHETHER VENUE WAS PROPERLY LAID UNDER THE PROVISIONS OF THE CHATTEL MORTGAGE CONTRACT IN THE LIGHT OF
ARTICLE 1374 OF THE CIVIL CODE.

The controversy stems from the conflicting provisions on venue in the promissory note and the deed of chattel mortgage. Consequently,
the decisive issue is the correct interpretation of the venue provisions in the two contracts. The venue provision in the promissory note reads
as follows:
It expressly (sic) agreed that all legal actions arising out of this note or in connection with the chattels subject hereof shall only be brought in
or submitted to the proper court in Makati City, Philippines.

On the other hand, the venue provision in the deed of chattel mortgage reads:
VENUE. The payment herein mentioned whether covered by notes or not, are payable at the office address of the MORTGAGEE or its
assignee and in case of litigation arising out of the transaction that gave rise to this contract, complete jurisdiction is given the
proper court of the city of Makati or any proper court within the province of Rizal, or any court in the city, or province where the
holder/mortgagee has a branch office, waiving for this purpose any proper venue.

Petitioners argue that the promissory note should prevail over the deed of chattel mortgage because this is the principal contract being
sued upon while the deed of chattel mortgage merely accompanies the promissory note. According to petitioners, the words shall only in the
promissory note makes exclusive and restricts venue to the proper court in Makati City. Petitioners contend that the venue provision in the
promissory note does not contain qualifying words that the parties intended the venue provision in the deed of chattel mortgage to be a
modification of the venue in the promissory note. Petitioners maintain that the Court of Appeals erroneously applied Article 1374 of the Civil
Code in construing the promissory note and the deed of chattel mortgage. According to petitioners, this article applies only to conflicting
provisions in one and the same contract and not to those found in two distinct and entirely separate contracts such as in the instant case.
Petitioners further assert that any ambiguity should be decided against private respondent under the contract of adhesion doctrine.

Private respondent counters that the alternative venues provided under the deed of chattel mortgage may not be disregarded as
meaningless verbiage. While the promissory note confines venue to the proper court in Makati City, the deed of chattel mortgage has modified
this. Private respondent points out that petitioners loan under the promissory note as secured by the deed of chattel mortgage was negotiated
and concluded by the parties in Dagupan City, and booked at private respondents Dagupan branch office. Further, the seizure of the
mortgaged vehicles in Dagupan City, as allowed by the deed of chattel mortgage, constitutes private respondents cause of action in the
Dagupan trial court. Private respondent maintains that the convenience of the parties is the overriding consideration in determining venue. This
is best achieved by laying the same in Dagupan City where private respondent has a branch office, while petitioners reside in nearby Tarlac.
Private respondent bewails that petitioners filed the motion to dismiss as a dilatory tactic.

The Courts Ruling

The petition is bereft of merit. The Court finds no reversible error in the Court of Appeals conclusion that venue was properly laid in the
Dagupan trial court.

The issue presented in this case is not novel.

As a general rule, all personal actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where
the defendant or any of the principal defendants resides, at the election of the plaintiff. However, by written agreement of the parties, the venue
of an action may be changed or transferred from one place to another.

Under the promissory note, petitioners are obliged to pay private respondent the loan in accordance with the agreed schedule. To
secure the promissory note, petitioners constituted a chattel mortgage in favor of private respondent over two dump trucks. Both contracts
contain venue provisions.
 There is no dispute that the words shall only preceding the designation of venue in the promissory note, standing alone, is mandatory
and restrictive. However, the deed of chattel mortgage executed to secure the loan obligation provides alternative venues. Should we
disregard the venue provision in the deed of chattel mortgage as mere surplusage as contended by petitioners?

The answer is in the negative.

The chattel mortgage constituted over the two dump trucks is an accessory contract to the loan obligation as embodied in the
promissory note. The chattel mortgage cannot exist as an independent contract since its consideration is the same as that of the principal
contract. A principal obligation is an indispensable condition for the existence of an accessory contract. Indeed, contracts may be classified
according to the degree of dependence. Loans, sales or leases are classified as principal contracts while pledges, mortgages and suretyships
are classified as accessory contracts because their existence is dependent upon the principal obligations they guarantee or secure.

The Court held in National Power Corporation vs. Court of Appeals that the provisions of an accessory contract such as a surety
bond must be read in its entirety and together with the principal contract between the parties. We quote the pertinent portion of the decision
thus:

The surety bond must be read in its entirety and together with the contract between NPC and the contractors. The provisions must be
construed together to arrive at their true meaning. Certain stipulations cannot be segregated and then made to control.

This rule was reiterated in Velasquez vs. Court of Appeals as the complementary contracts construed together doctrine. The Court
explained that the doctrine
x x x finds support in the principle that the surety contract is merely an accessory contract and must be interpreted with its principal contract,
which x x x was the loan agreement. This doctrine closely adheres to the spirit of Art. 1374 of the Civil Code which states that
Art. 1374. 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.
xxx.

Applying the doctrine to the instant case, we cannot sustain petitioners contentions. The promissory note and the deed of chattel
mortgage must be construed together. Private respondent explained that its older standard promissory notes confined venue in Makati City
where it had its main office. After it opened a branch office in Dagupan City, private respondent made corrections in the deed of chattel
mortgage, but due to oversight, failed to make the corresponding corrections in the promissory notes. Petitioners affixed their signatures in
both contracts.

We apply the presumption that a person takes ordinary care of his concerns. It is presumed that petitioners did not sign the deed of
chattel mortgage without informing themselves of its contents. As aptly stated in a case, they being of age and businessmen of experience, it
must be presumed that they acted with due care and have signed the documents in question with full knowledge of their import and the
obligation they were assuming thereby.

In any event, petitioners did not contest the deed of chattel mortgage under Section 8, Rule 8 of the Revised Rules of Civil Procedure.
As held in Velasquez, this omission effectively eliminated any defense relating to the authenticity and due execution of the deed, e.g. that the
document was spurious, counterfeit, or of different import on its face as the one executed by the parties; or that the signatures appearing
thereon were forgeries; or that the signatures were unauthorized.

Clearly, the Court of Appeals did not err in ruling that venue was properly laid in Dagupan City as provided in the deed of chattel
mortgage. We hold that private respondent is not barred from filing its case against petitioners in Dagupan City where private respondent has a
branch office as provided for in the deed of chattel mortgage.

The rules on venue are intended to assure convenience for the plaintiff and his witnesses and to promote the ends of justice. As
correctly pointed out by private respondent, Dagupan City is the more convenient venue for both parties considering that private respondent
has a branch office in the city while petitioners reside in nearby Tarlac. From this standpoint, petitioners futile insistence on an exclusive venue
in Makati City smacks of a dilatory tactic to evade or at the very least, prolong the payment of a just obligation. The case has been pending for
four years on account of the question of venue to the detriment of private respondent which is simply collecting on an outstanding loan
obligation.

Finally, private respondent claims that petitioners are guilty of forum shopping. Petitioner filed another petition before the Court of
Appeals assailing the denial of their motion to dismiss on the ground of improper venue involving different promissory notes and deeds of
chattel mortgages with the same venue provisions. We are not in a position to determine the presence of the elements of forum shopping and
to resolve this issue on the basis of private respondents bare allegations. This matter should be brought to the attention of the Court of Appeals
where the petition which allegedly raises the same issues is pending.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated October 19, 1998, as well as its Resolution dated
November 27, 1998 denying reconsideration, is AFFIRMED.
SO ORDERED.
 Chua v. Court of Appeals
G.R. 119255 9 April 2003
Facts:
Private Respondent Encarnacion Valdez-Choy advertised for sale her house in Makati City.
Petitioner Tomas Chua respondent to the advertisement and the two agreed on the purchase price of P 10,800,000.00 payable in
cash.
Valdez-Choy received from Chua a check for P 100,000 as earnest money as evidenced in a receipt dated 30 June 1989, which
indicates that failure to pay balance on or before 15 July 1989 forfeits the earnest money. This is provided that all papers are in
order.
Chua then paid the private respondent P 485,000 through a managers check as payment for capital gains tax. Valdez-Choy prepared
another receipt confirming payment and indicating that petitioner had a remaining balance of P 10,215,000 after the two advance
payments.
Chua then showed to the respondent a managers check for the remaining balance but mentioned that he will not deposit it because
the property was not under his name. Valdez-Choy did not consent to this arguing that it was not part of the original agreement.
Chua filed a complaint for specific performance with damages against Valdez-Choy with the RTC. The RTC ruled in favor of Chua, but
the said ruling was overturned by the CA. Hence this petition.
Chua argues, contrary to what is stated in his legal arguments with the lower courts, that there is a perfected contract of sale rather
than contract to sell. Consequently, his payment of earnest money and its acceptance by Valdez-Choy precludes the latter from
rejecting the binding effect of the contract of sale.
Chua also argues that he was ready to pay before the deadline, but the private respondent did not fulfill her obligation to put all
papers in proper order.
Issues:
Whether the contract between Chua and Valdez Choy is a contract of sale?
Whether there is a valid ground for Chua to withhold payment?

Held: No. Petition denied

Reason:
The contract in question is a contract to sell, not contract of sale. The ownership of the property was retained by Valdez-Choy and
was subject to a suspensive condition of payment of purchase price. This is proven by the existence of a receipt stating Chuas initial
payment and remaining balance and the absence of a deed of sale.
Chua also insists that he was ready to pay the balance of the purchase price provided that all papers are in proper order. In
particular, Chua claims that Valdez-Choy fialed to show that capital gains tax had been paid after he had advanced the money for its
payment.
Chua argues that proper order should be interpreted to mean the transfer of the title to his name. He also argued that Valdez-Choy
failed to present proof of payment of the capital gains tax.
The Court found this interpretation to be contrary to customs. Customarily, in the absence of a contrary agreement, the submission by
an individual seller to the buyer of the following papers would complete the sale of real estate: (1) owners duplicate of Torrens title,
(2) signed deed of absolute sale, (3) tax declaration, (4) tax realty receipt. Payment of capital gains tax is not a pre requisite to the
transfer of ownership of the buyer.
Article 1376: The usage of the custom of the place shall be borne in mind in the interpretation of the ambiguities of the contract, and
shall fill the omissions of the stipulations which are ordinarily established.

G.R. Nos. 85962-63 August 3, 1992

ROSARIO GACOS, ARNULFO PRIETO, and RENITA PRIETO v. COURT OF APPEALS, SOLOMON BRIONES, LEONOR
BRIONES and TEODULFO MENDONES

Facts:
Petrona sold a portion of her inherited property to Marcial but the Contract of Sale indicated a larger measurement. Marcial subsequently
measure the correct size and declared the same in his Tax Declaration. However, when he sold the same property to Rosario, the Contract
indicated a bigger but different size. Hence, when the heirs of Petrona sold her remaining property to Mendones and partitioned the estate of
Petrona which adjudicated to them the property inherited by their mother, minus the portion sold to Marcial. The Contract of Sale with Marcial
was construed to transfer the least rights because the property sold was indicated by boundaries and the size stipulated turned out erroneous.

> Two Faiths of the Property of Petrona Gacos

ORIGIN:

> From Father Eladio Gacos

> Adjudicated his 6,854 sq.m. property to his 3 daughters
~ Immediate possession by Petrona Gacos of her 1/3 share (2242 sqm)
> Agreement of Partition of Real Property (May 14, 1950) among Lucia and heirs of 2 sisters, formally confirming what was apportioned to
them by their father as their respective shares in the 6,854 sqm. Land ~ Petrona, 2,242 square meters; Lucia, 2,148 square meters; and
Fortunata, 2,194 square meters

BUT PRIOR TO CONFIRMATION OF SIZE...

1) Contract of Sale (March 13, 1948) by Patrona in favour of son-in-law
Marcial Olaybal, of a portion of her inherited property (866 sqm. from 2,242 sqm) but alleged to be an entire 2720 sqm in the contract
BUT measured and declared by Marcial as 866 sqm in his tax declaration.

a) Deed of Absolute Sale (December 30, 1950) by Marcial in favour of Encarnacion Gacos, covering the parcel of land he
bought from Petrona but indicated 2, 025 sqm instead of 866 sqm that he declared in the tax declaration

~ Possession by Rosario Gacos, sister of Encarnacion who was named as the vendee and owner in Tax Declaration
Ratification of Ownership of Realty (April 4, 1967) by Rosario, consolidating her 4 properties (including purchased from from
Marcial) into 1 parcel of land.

b) Sale (October 24, 1973) by Rosario of her land to nephew Arnulfo Prieto
 ~ Possession and Ownership in Tax Declaration
> Lease (March 14, 1975) by Arnulfo to sister Vivencia Prieto for 15 yrs

(2) Sale (February 22, 1949) between Lucia and Teodolfo Mendiones of 84 sq.m. of Petronas share
~ PURSUANT TO Introduction by Petrona to sister Lucia, administrator of her remaining property, to sell the 84 sq.m. of her property
(in the east) for her funeral expenses and novena

(a) Deed of Extrajudicial Settlement (August 1, 1975) by heirs of Petrona, adjudicating onto themselves the 2, 242 sqm
share of their mothers inheritance AFTER aunt Lucia informed them that a portion of the land had been sold to Gacos and
that a ricemill had been constructed on the land

> SUIT (September 1, 1975) by heirs of Petrona against Gacos for recovery of 1352 sqm alleged to be the remnant of the 2,242 sq.m.
because only 866 sq.m. was sold to Marcial Olaybal

> CONTENTION of Gacos: Sale was entire share of 2,780 sq.m. and hence, no remnant of 1,352 to speak of
> SUIT (June 1, 1976) by sps. Arnulfo Prieto and Renita Chua Prieto against Teodolfo Mendones and Visitacion Borrega and sps.
Jesus and Merced Gabitos for recovery of the 84 sq.m. property of Petrona which was fraudulently sold to Mendones by Petronas
sister Lucia
RULING:
> PROPERTY SOLD TO MARCIAL ONLY 866 sq.m. NOT ENTIRE 2,242 sq.m. SHARE OF PETRONA

(1) Contract of Sale (March 18, 1948) between Petrona and Marcial indicated as that the subject property is bounded on the North
and West by the land of the late Eladio Gacos and other heirs abovementioned, together with the widow of the late Severo Gacos,
Mrs. Angela Vda. de Gacos, on the East by National Road Irosin-Juban-Bulan, and on the South, irrigation canal, and beyond the
heirs abovementioned.

~ Cannot be construed as a lump sale because the given boundaries do not coincide with the boundaries declared in:
(i) the Tax Declaration of Marcial (866 sq.m.) and in the sketch plan and filed sheet attached thereto, as testified by Marcial
himself and as pointed out by him when he encircled the property in the sketch plan made by the Geodetic Engineer;
(ii) the Partition of Eladios property as Petronas share (2,242 sq.m.);
(iii) the Deed of Absolute Sale by Marcial to Rosario (2,025 sq.m.) where the property indicated was bounded on the west by
the Heirs of Petrona Gacos
(2) Construction of a Fence by Marcial to separate the property he bought from that of Petronas;
(3) Possession by Petrona, her 4 minor children and sister Lucia on the remaining property;
(4) Instruction by Petrona to Lucia to sell her remaining property

(5) 27y possession by Prietos did not give a prescriptive right because the possession must be under a claim of title or must have
been adverse > Rosario Gacos knew and recognized the sale on February 22, 1949 by Lucia to Teodolfo Mendones of the eastern
portion of the hereditary estate of Petrona ~ Mendones is mentioned as the boundary owner on the south;

(6) Non-objection of the construction by sps. Gabito of a residential house on the 84 sq.m. purchased property

>> Possession as prescriptive right must be possession under claim of title (en concepto de dueno) or it must be adverse
> mere tolerance of the owner are clearly not "en concepto de dueno," and such possessory acts, no matter how long so continued,
do not start the running of the period of prescription

GARCIA V BISAYA
REYES; 1955

FACTS

- On May 20, 1952, plaintiff filed a complaint against the defendants in the Court of First Instance of Oriental Mindoro, alleging that: On
November 12, 1938, defendants executed in favor of plaintiff a deed of sale covering a parcel of land therein described.

- That the said land "was erroneously designated by the parties in the deed of sale as an unregistered land (not registered under Act 496, nor
under the Spanish Mortgage Law) when in truth and in fact said land is a portion of a big mass of land registered under Original Certificate of
Title No. 6579 in the Office of the Register of Deeds of Oriental Mindoro"

- That despite persistent demand from plaintiff to have the error corrected, defendants have refused to do so. Plaintiff, therefore, prayed for
judgment ordering defendants to make the aforesaid correction in the deed of sale.

- Defendants denied having executed the alleged deed of sale and pleaded prescription as a defense- Without trial on the merits and merely
upon motion, the lower court dismissed the case on the ground that plaintiff's action had already prescribed. From this order plaintiff has
appealed directly to the SC

ISSUES
1. WON the action for reformation of instruments has already prescribed 2. WON the action for reformation of instruments may prosper

HELD
1. NO
- Both appellant and appellees apparently regard the present action as one for the reformation of an instrument under Chapter 4, Title
II, Book IV of the new Civil Code. Specifically, the object sought is the correction of an alleged mistake in a deed of sale covering a
piece of land.

The action. being upon a written contract, it should prescribe in ten years counted from the day it could have been instituted.
Obviously, appellant could not have instituted his action to correct an error in a deed until that error was discovered. There being
 nothing in the pleadings to show that the error was discovered more than ten years before the present action was filed on May 20,
1952, while, on the other hand, there is allegation that the error was discovered "only recently", we think the action should not have
been dismissed as having already prescribed before the factual basis for prescription had been established and clarified by evidence.

2. NO
- Appellant's complaint states no cause of action, for it fails to allege that the instrument to the reformed does not express the real
agreement or intention of the parties.

Such allegation is essential since the object sought in an action for reformation is to make an instrument conform to the real
agreement or intention of the parties. But the complaint does not even allege what the real agreement or intention was. Moreover,
courts do not reform instruments merely for the sake of reforming them, but only to enable some party to asserts right under them as
reformed.

Disposition Order of dismissal is affirmed not because of prescription but because of failure to state the cause of action

BENTIR AND PORMIDA V LEANDA AND LEYTE GULF TRADERS , INC.

KAPUNAN; April 12, 2000

NATURE
Certiorari with prayer for a writ of preliminary injunction

FACTS

- May 15, 1992- Leyte Gulf Traders, Inc. filed a complaint for reformation of instrument, specific performance, annulment of conditional sale
and damages with prayer for writ of injunction against Yolanda Rosello-Bentir and the spouses Samuel and Charito Pormida.

- LGT Inc alleged that it entered into a contract of lease of a parcel of land with Bentir for a period of 20 years starting May 5, 1968.

- LGT Inc said the lease was extended for another 4years or until May 31, 1992.

- May 5, 1989- Bentir sold the leased premises to spouses Samuel and Charito Pormada.

- LGT Inc questioned the sale alleging that it had a right of first refusal. It sought the reformation of the expired contract of lease on the ground
that its lawyer inadvertently omitted to incorporate in the contract of lease executed in 1968, the verbal agreement or understanding between
the parties that in the event Bentir leases or sells the lot after the expiration of the lease, LGT Inc has the right to equal the highest offer.

- In due time, petitioners filed their answer alleging that the inadvertence of the lawyer who prepared the lease contract is not a ground for
reformation.

- They further contended that respondent corporation is guilty of laches for not bringing the case for reformation of the lease contract within the
prescriptive period of 10 years from its execution.

- LGT Inc then filed its reply and on November 18, 1992, filed a motion to admit amended complaint. Said motion was granted by the lower
court.

- Thereafter, Petitioners filed a motion to dismiss reiterating that the complaint should be dismissed on the ground of prescription.

- Dec. 15, 1995- TC through Judge Pedro S. Espina issued an order dismissing the complaint premised on its finding that the action for
reformation had already prescribed.- Dec. 29, 1995- LGT Inc filed a MR of the order dismissing the complaint.

- Jan 11, 1996, LGT Inc filed an urgent ex-parte motion for issuance of an order directing the petitioners, or their representatives or agents to
refrain from taking possession of the land in question.

- March 28, 1996 - the case was re-raffled and assigned to RTC, Tacloban City, presided by herein respondent judge Mateo M. Leanda.

- May 10, 1996 Leanda reversed the order of dismissal on the grounds that the action for reformation had not yet prescribed and the
dismissal was "premature and precipitate", denying LGT Inc of its right to procedural due process.- June 10, 1996- Leanda issued an order for
status quo ante, enjoining petitioners to desist from occupying the property.- Jan. 17, 1997- CA affirmed the assailed decision of Leanda;
denied MR

ISSUE
WON the complaint for reformation has prescribed and has not, WON LGT Inc is entitled to the remedy of reformation sought

HELD
YES, it has prescribed. LGT Inc is no longer entitled to the reformation sought.

Reasoning The remedy of reformation of an instrument is grounded on the principle of equity where, in order to express the true
intention of the contracting parties, an instrument already executed is allowed by law to be reformed.

- The right of reformation is necessarily an invasion or limitation of the parol evidence rule since, when a writing is reformed, the result
is that an oral agreement is by court decree made legally effective.

- Consequently, the courts, as the agencies authorized by law to exercise the power to reform an instrument, must necessarily
exercise that power sparingly and with great caution and zealous care. Moreover, the remedy, being an extraordinary one, must be
subject to limitations as may be provided by law. Our law and jurisprudence set such limitations, among which is laches. A suit for
reformation of an instrument may be barred by lapse of time.

- The prescriptive period for actions based upon a written contract and for reformation of an instrument is ten (10) years under Article
 1144 of the Civil Code.

- Prescription is intended to suppress stale and fraudulent claims arising from transactions like the one at bar which facts had become
so obscure from the lapse of time or defective memory.- In the case at bar, respondent corporation had 10 years from 1968, the time
when the contract of lease was executed, to file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24)
years after the cause of action accrued, hence, its cause of action has become stale, hence, time-barred.

- If, according to LGT Inc., there was an agreement between the parties to extend the lease contract for 4 years after the original
contract expired in 1988, then Art. 1670 would not apply as this provision speaks of an implied new lease ( tacita reconduccion) where
at the end of the contract, the lessee continues to enjoy the thing leased "with the acquiescence of the lessor", so that the duration of
the lease is "not for the period of the original contract, but for the time established in Article 1682 and 1687." In other words, if the
extended period of lease was expressly agreed upon by the parties, then the term should be exactly what the parties stipulated, not
more, not less.

- Even if the supposed 4-year extended lease be considered as an implied new lease under Art. 1670, "the other terms of the original
contract" contemplated in said provision are only those terms which are germane to the lessee's right of continued enjoyment of the
property leased. The prescriptive period of 10 years provided for in Art. 1144 applies by operation of law, not by the will of the parties.
Therefore, the right of action for reformation accrued from the date of execution of the contract of lease in 1968.

- Even if we were to assume for the sake of argument that the instant action for reformation is not time-barred, LGT Inc's action will
still not prosper because under Sec 1, Rule 64 of the New Rules of Court, an action for the reformation of an instrument is instituted
as a special civil action for declaratory relief.

- Purpose of an action for declaratory relief- to secure an authoritative statement of the rights and obligations of the parties for their
guidance in the enforcement or compliance and not to settle issues arising from an alleged breach thereof.

- Here, LGT Inc. brought the present action for reformation after an alleged breach or violation of the contract was already committed
by Bentir. Consequently, the remedy of reformation no longer lies.

Disposition Petition is GRANTED. J. Leandas decision is reversed and set aside. J. Espinas decision dismissing the reformation is
reinstated.

Quiros and Villegas vs. Arjona et. al.

PROCESO QUIROS and LEONARDA VILLEGAS vs. MARCELO ARJONA, TERESITA BALARBAR, JOSEPHINE ARJONA, and
CONCHITA ARJONA
G.R. No. 158901. 9 March 2004.
Petition for review of the decision of the CA
Ynares-Santiago, J.:

Facts:

In Dec 1996, petitioners Proceso Quiros and Leonarda Villegas filed with the office of the barangay captain of Labney, San Jacinto,
Pangasinan, a complaint for recovery of ownership and possession of a parcel of land located at Labney, San Jacinto, Pangasinan. Petitioners
sought to recover from their uncle Marcelo Arjona, one of the respondents herein, their lawful share of the inheritance from their late
grandmother Rosa Arjona Quiros alias Doza. In 1997, an amicable settlement was reached between the parties. By reason thereof,
respondent Arjona executed a document denominated as "PAKNAAN" ("Agreement", in Pangasinan dialect).

Petitioners filed a complaint with the MCTC with prayer for the issuance of a writ of execution of the compromise agreement which was denied
because the subject property cannot be determined with certainty. The RTC reversed the decision of the municipal court on appeal and
ordered the issuance of the writ of execution. Respondents appealed to the CA, which reversed the decision of the RTC and reinstated the
decision of the MCTC.

Issue:
WON CA erred in reversing the decision of the RTC and reinstating that of the MCTC.

Ruling: Petition denied.

Generally, the rule is that where no repudiation was made during the 10-day period, the amicable settlement attains the status of finality and it
becomes the ministerial duty of the court to implement and enforce it. However, such rule is not inflexible for it admits of certain exceptions. In
the case at bar, the ends of justice would be frustrated if a writ of execution is issued considering the uncertainty of the object of the
agreement. To do so would open the possibility of error and future litigations.

Both parties acknowledge that petitioners are entitled to their inheritance, hence, the remedy of nullification, which invalidates the Paknaan,
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.
 ATILANO V ATILANO
MAKALINTAL; May 21, 1969

Appeal from the decision of the Court of First Instance

FACTS
- In 1916, Eulogio Atilano I acquired, by purchase from one Gerardo Villanueva, lot No. 535 of the then municipality of Zamboanga. The
vendee thereafter obtained transfer certificate of title No. 1134 in his name. In 1920 he had the land subdivided into five parts. On May 18 of
the same year, after the subdivision had been effected, Eulogio Atilano I, for the sum of P150.00, executed a deed of sale covering lot No. 535-
E in favor of his brother Eulogio Atilano II, who thereupon obtained transfer certificate of title No. 3129 in his name. Three other portions,
namely lots Nos. 535-B, 535-C and 535-D, were likewise sold to other persons, the original owner, Eulogio Atilano I, retaining for himself only
the remaining portion of the land, presumably covered by the title to lot No. 535-A. Upon his death the title to this lot passed to Ladislao
Atilano, defendant in this case, in whose name the corresponding certificate (No. T-5056) was issued.

- On December 6, 1952, Eulogio Atilano II and his children obtained transfer certificate of title No. 4889 over lot No. 535-E in their names as
co-owners. Then, on July 16, 1959, desiring to put an end to the co-ownership, they had the land resurveyed so that it could properly be
subdivided; and it was then discovered that the land they were actually occupying on the strength of the deed of sale executed in 1920 was lot
No. 535-A and not lot 535-E, as referred to in the deed, while the land which remained in the possession of the vendor, Eulogio Atilano I, and
which passed to his successor, defendant Ladislao Atilano, was lot No. 535-E and not lot No. 535-A.
- On January 25, 1960, the heirs of Eulogio Atilano II, who was by then also deceased, filed the present action in the CFI of Zamboanga,
alleging, that they had offered to surrender to the defendants the possession of lot No. 535-A and demanded in return the possession of lot No.
535-E, but that the defendants had refused to accept the exchange. The plaintiffs' insistence is quite understandable, since lot No. 535-E has
an area of 2,612 sq m, as compared to the 1,808 square- meter area of lot No. 535-A.

- In their answer to the complaint the defendants alleged that the reference to lot No. 535-E in the deed of sale of May 18, 1920 was an
involuntary error; that the intention of the parties to that sale was to convey the lot correctly identified as lot No. 535-A; that since 1916, when
he acquired the entirety of lot No. 535, and up to the time of his death, Eulogio Atilano I had been possessing and had his house on the portion
designated as lot No. 535-E, after which he was succeeded in such possession by the defendants herein; and that as a matter of fact Eulogio
Atilano I even increased the area under his possession when on June 11, 1920 he bought a portion of an adjoining lot, No. 536, from its owner
Fruto del Carpio. On the basis of the foregoing allegations the defendants interposed a counterclaim, praying that the plaintiffs be ordered to
execute in their favor the corresponding deed of transfer with respect to lot No. 535-E.

- The trial court rendered judgment for the plaintiffs since the property was registered under the Land Registration Act the defendants could not
acquire it through prescription. There can be no dispute as to the correctness of this legal proposition; but the defendants, aside from alleging
adverse possession in their answer and counterclaim, also alleged error in the deed of sale of May 18, 1920

ISSUE
WON the trial court rendered proper judgment for the plaintiffs since the property was registered under the Land Registration Act the
defendants could not acquire it through prescription

HELD
NO.
The court erred in granting the plaintiffs the lot.

Reasoning When one sells or buys real property, one sells or buys the property as he sees it, in its actual setting and by its physical
metes and bounds, and not by the mere lot number assigned to it in the certificate of title.

The portion correctly referred to as lot No. 535-A was already in the possession of the vendee, Eulogio Atilano II, who had constructed
his residence therein, even before the sale in his favor even before the subdivision of the entire lot No. 535 at the instance of its
owner, Eulogio Atillano I.

In like manner the latter had his house on the portion correctly identified, after the subdivision, as lot No. 535-E, even adding to the
area thereof by purchasing a portion of an adjoining property belonging to a different owner. The two brothers continued in possession
of the respective portions the rest of their lives, obviously ignorant of the initial mistake in the designation of the lot subject of the 1920
until 1959, when the mistake was discovered for the first time.

- The real issue here is not adverse possession, but the real intention of the parties to that sale. From all the facts and circumstances
we are convinced that the object thereof, as intended and understood by the parties, was that specific portion where the vendee was
then already residing, where he reconstructed his house at the end of the war, and where his heirs, the plaintiffs herein, continued to
reside thereafter:

- The new Civil Code provides a remedy for such a situation by means of reformation of the instrument. This remedy is
available when, there having been a meeting of the funds of the parties to a contract, their true intention is not
expressed in the instrument purporting to embody the agreement by reason of mistake, fraud, inequitable conduct on
accident (Art. 1359, et seq.)

- In this case, the deed of sale executed in 1920 need no longer reformed. The parties have retained possession of their
respective properties conformably to the real intention of the parties to that sale, and all they should do is to execute
mutual deeds of conveyance.

Disposition WHEREFORE, the judgment appealed from is reversed. The plaintiffs are ordered to execute a deed of conveyance of lot No.
535-E in favor of the defendants, and the latter in turn, are ordered to execute a similar document, covering lot No. 595-A, in favor of the
plaintiffs. Costs against the latter.
 SARMING V DY
QUISUMBING; June 6, 2002

Petition for review on certiorari of decision of CA

FACTS
- Respondents are the successors in interest of the original plaintiff Alejandra Delfino while the petitioners are successors in interest of the
original defendant Silveria Flores.- Silveria Flores and her brother Jose jointly owned a piece of land denominated as Lot 4163 covered by
OCT 3129-A. Said property was inherited from their parents. The other inherited property designated as Lot 5734 covered by OCT 4918 were
jointly owned by Silveria, Jose, and Venancio with each occupying a third of the said lot.

- In January 1956, the grandchildren of Jose and then owners of the half interest in Lot 4163 sold said half interest to Alejandra Delfino when
Silveria declined to purchase same.

- Prior to the preparation of the documents, the lawyer, Atty. Pinili, called a conference of all the parties concerned to a conference. In this
conference, Silveria declared that she owned half of the property and that the grandchildren of Jose were owners of the other half. Silveria
confirmed that she was selling also to Alejandra three tree of coconut at the property of the heirs of Jose for P15.00. It was further noted that
the natural division of the property two rows of coconut trees planted in the middle of the property.

- The lawyer requested for the title of the land to draw up the Settlement of Estate and Sale contract between the parties. Instead of delivering
OCT 3129-A, the daughter of Silveria instead gave OCT 4918. The lawyer drafted the document based on this title. Same was signed in the
presence of Silveria.

- The buyer of the property took possession of the lot where she introduced improvements. Silveria, on the other hand, continued to reside on
the other half.

- Two years later, when Alejandra purchased the adjoining property, it was discovered the error in her title on the original property. The error
was confirmed through subsequent checking at the Registry of Deeds. With money from Alejandra, the title to Lot 4163 was released to
Silveria who promised to give said title to Atty Pinili so that a reformation of the deed of sale could be prepared. Silveria never complied with
the promise. Alejandra then filed with the RTC a suit for reformation of contract with damages before the RTC of Negros Oriental.

- The RTC ruled in favor of Alejandra in 1992. On appeal to the CA, the decision of the lower court was affirmed. Hence the appeal to the SC.

ISSUES
1. WON there is cause of action for reformation of instrument against Silveria as she was not a party to the sale
2. WON reformation of subject deed is proper by reason of mistake in designating the correct lot number
3. WON the heirs of Alejandra Delfino are entitled to actual and moral damages including attorneys fees

HELD
1. YES

Ratio Participation is not an element to determine the existence of a cause of action. The rule is that only the allegations in the
complaint may properly be considered in ascertaining the existence of a cause of action. The test of the sufficiency of the facts found
in the complaint as constituting a cause of action is whether or not, admitting the facts alleged, the court can render a valid judgment
upon the same in accordance with the prayer in the complain.

Reasoning While it is not required that a party participate to determine the existence of a cause of action, in the case at bar, it was
shown that Silveria in fact participated therein as part of the deed is the sale of her three coconut trees to Alejandra. Silverias name
did not appear as seller as she did not in fact sell her half of the property to the buyer. The buyer bought the half of the lot belonging
to the heirs of Silverias brother. It was likewise shown during the hearing that it was Silveria and her children who turned over the
property to Allejadra .It was established that the wrong title was given to the lawyer when the deed was being prepared. So the
document was done by reason of mistake, and the document did not express the tru intention of the parties.

2. YES
Ratio Reformation is that remedy in equity by means of which a written instrument is made or construed so as to express or conform
to the real intention of the parties as provided in Article 1359 of the Civil Code. Due to the mistake in the designation of the lot subject
of the deed, reformation of the deed is the proper remedy to reflect the true intent of the parties.

Reasoning The claim of Silveria that she owned Lot 4163 cannot be given credence in view of the fact that one of the stipulations in
the hearing is the fact that Silveria is occupying half of the said property. The Court questioned this as they did not find it usual that
Silveria would not have objected to Alejandra occupying half of what she claims as hers alone from the very beginning.3. NORatio
There is no evidentiary support to grant the award of actual damages. In the absence of showing that the petitioners acted in bad faith
or with malice, the ward of moral damages is improper.

UNIVERSAL FOOD CORP V COURT OF APPEALS

CASTRO; May 13, 1970

Petition for certiorari by the Universal Food Corporation against the decision of the Court of Appeals

Facts:
- Magdalo V Francisco discovered or invented a formula for the manufacture of a food seasoning (sauce) derived from banana fruits popularly
known as MAFRAN sauce- The manufacture of this product was used in commercial scale in 1942, and in the same year registered his
trademark in his name as owner and inventor with the Bureau of Patents

- Due to lack or sufficient capital to finance the expansion of the business, he secured the financial assistance of Tirso T. Reyes who, after a
series of negotiations, formed with other defendant Universal Food Corporation eventually leading to the execution of Bill of Assignment
- Magdalo V Francisco was appointed Chief Chemist with a salary of P300.00 a month, and Victoriano V Francisco was appointed auditor and
superintendent with a salary of P250.00 a month.

- Magdalo V Francisco when preparing the secret materials inside the laboratory, never allowed anyone, not even his own son, or the
President and General Manager Reyes or defendant, to enter the laboratory in order to keep the formula secret to himself.

- He expressed a willingness to give the formula to defendant provided that the same should be placed or kept inside a safe to be opened only
when he is already incapacitated to perform his duties as Chief Chemist, but defendant never acquired a safe for that purpose.

- Reyes wrote him to permit one or two members of his family to observe the preparation of the 'Mafran Sauce', but said request was denied-
Due to the alleged scarcity and with prices or raw materials, Secretary-Treasurer Ciriaco L. de Guzman that only Supervisor Ricardo Francisco
should be retained in the factory and that the salary of Magdalo V Francisco, should be stopped for the time being until the corporation should
resume its operation.

- Reyes issued a memorandum to Victoriano Francisco ordering him to report to the factory and produce a 'Mafran Sauce' at the rate of not
less than 100 cases a day so as to pope with the orders of the corporation's various distributors and dealers, and with Instructions to take only
the necessary daily employees without employing permanent employees

- Another memorandum was issued by Reyes instructing the Assistant Chief Chemist Ricardo Francisco to recall all daily employees
connected in the production of Mafran Sauce and also some additional daily employees for the production of Porky Pops

- Another memorandum instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as Acting Superintendent, to produce Mafran
Sauce and Porky Pops with further instructions to hire daily laborers in order to cope with the full blast production

- Magdalo V Francisco received his salary as Chief Chemist in the amount of P300.00 a month only until his services were terminated.

- Reyes authorized Zarraga and de Bacula to look for a buyer of the corporation Including its trademarks, formula and assets at a price of not
less than P300.000.00 - Due to these successive memoranda, without Magdalo, V Francisco being recalled back to work, the letter riled the
present action

ISSUES
1. WON by virtue of the term of the Bill of Assignment, Magdalo V Francisco ceded and transferred to the petitioner corporation the formula for
Mafran sauce
2. WON Magdalo V Francisco was dismissed from his position as chief chemist of the corporation without justifiable cause, and in violation of
paragraph 5-(a) of the Bill of Assignment which in part provides that his appointment is "permanent in character"
3. WON rescission of the Bill of Assignment is proper4. WON the corporation is liable to pay the patentee his agreed monthly salary, as long as
the use, as well as the right to use, the formula for Mafran sauce remained with the corporation5. WON it can bbe inferred from the appellate
courts decision that what was meant to be returned to the patentee is not the formula itself, but only its use and the right to such use

HELD
1. What was actually ceded and transferred by the patentee Magdalo V Francisco in favor of the petitioner corporation was only the use of
the formula.

The Bill of Assignment vested in the petitioner corporation no title to the formula.- One of the principal considerations of the Bill of
Assignment is the payment of "royalty of 2% of the net annual profit" which the petitioner corporation may realize by and/or out of its
production of Mafran sauce and other food products, etc. The word "royalty," when employed in connection with a license under a
patent, means the compensation paid for the use of a patented invention.

- The intention of the patentee at the time of its execution was to part, not with the formula for Mafran sauce, but only its use, to
preserve the monopoly and to effectively prohibit anyone from availing of the invention.- Should dissolution or the petitioner
corporation eventually take place, "the property rights and interests over said trademark and formula shall automatically revert" to the
patentee.

- Facts of the case compellingly demonstrate continued possession of the Mafran sauce formula by the patentee.- A conveyance
should be interpreted to effect "the least transmission of rights."

2. YES
The petitioner, acting through its corporate officers, schemed and maneuvered to ease out, separate and dismiss the said from the
service as permanent chief chemist, in flagrant violation of the Bill of Assignment. The fact that a month after the institution of the
action for rescission, the petitioner corporation, thru Reyes requested the patentee to report for duty, is of no consequence.

3. YES
Appellees had no alternative but to rile the present action for rescission and damages.

- The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him. The injured party may choose between fulfillment and rescission of the obligation, with payment of damages in either case.

- There is no controversy that the provisions of the Bill of Assignment are reciprocal in nature.The general rule is that rescission of a
contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the
very object of the parties in making the agreement.

- The dismissal of Magdalo V Francisco as the permanent chief chemist of the corporation is a fundamental and substantial breach of
the Bill of Assignment. He was dismissed without any fault or negligence on his part.

4. YES
The corporation could not escape liability to pay the patentee his agreed monthly salary, as long as the use, as well as the right to
use, the formula for Mafran sauce remained with the corporation.

- The contract placed the use of the formula for Mafran sauce with the petitioner, subject to defined limitations. One of the
 considerations for the transfer of the use thereof was the undertaking on the part of the petitioner corporation to employ the patentee
as the Second Vice President and Chief Chemist on a permanent status, at a monthly salary of P300, unless "death or other
disabilities" supervened.

5. YES
It is a logical inference from the appellate court's decision that what was meant to be returned to the patentee is not the formula itself,
but only its use and the right to such use.Article 1385 of the New Civil Code provides that rescission creates the obligation to return
the things which were the object of the contract.

CANNU vs. GALANG

G.R. No. 139523 May 26, 2005

Facts:

Respondent spouses Gil and Fernandina Galang agreed to sell their house and lot subject to mortgage with the National Home Mortgage
Finance Corp (NHMFC).

Petitioner Leticia Cannu agreed to buy the property for 120K & to assume the mortgage obligations with the NHMFC. A deed of sale &
assumption of mortgage was executed & petitioners immediately took possession & occupied the house & lot.

Despite requests from Adelina R. Timbang (attorney-in-fact) and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to
vacate the property in question, petitioners refused to do so.

Because the Cannus failed to fully comply with their obligations, respondent Fernandina Galang, on 21 May 1993, paid P233K as full payment
of her remaining mortgage loan with NHMFC.

8 yrs had already elapsed and petitioners have not yet complied with the obligation.

The RTC ordered the deed of sale with Assumption of Mortgage as rescinded as well as ordered mutual restitution.

Issue:
1. WON the breach of obligation is substantial? YES
2. WON respondent waived their right of rescission? NO
3. WON rescission is subsidiary? NO

Held:

1.

We consider this breach to be substantial. Cannu failed to comply with her obligation to pay the monthly amortizations due on the mortgage.
Also, the tender made by Cannu only after the filing of this case cannot be considered as an effective mode of payment.

Resolution of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity
between them. In the case at bar, Cannus failure to pay the remaining balance of 45K to be substantial. To give petitioners additional time to
comply with their obligation will be putting premium on their blatant non-compliance of their obligation. They had all the time to do what was
required of them (i.e., pay the P45,000.00 balance and to properly assume the mortgage loan with the NHMFC), but still they failed to comply.
Despite demands for them to pay the balance, no payments were made.

Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had only for such breaches that are substantial
and fundamental as to defeat the object of the parties in making the agreement.

2.

The fact that Galang accepted payments in installments does not constitute waiver on their part to exercise their right to rescind the Deed of
Sale with Assumption of Mortgage. Galang accepted the installment payments as an accommodation to petitioners since they kept on
promising they would pay. However, after the lapse of considerable time (18 months from last payment) and the purchase price was not yet
fully paid, Galang exercised their right of rescission when they paid the outstanding balance of the mortgage loan with NHMFC. It was only
after petitioners stopped paying that respondents-spouses moved to exercise their right of rescission.

3.

The provision that applies in the case at bar is Article 1191. The subsidiary character of the action for rescission applies to contracts
enumerated in Articles 138148 of the Civil Code.

The rescission in this case is not predicated on injury to economic interests of the party plaintiff but on the breach of faith by the defendant, that
violates the reciprocity between the parties. It is not a subsidiary action. The rescission in 1191 is a principal action retaliatory in character, it
being unjust that a party be held bound to fulfill his promises when the other violates his.
>>>>>
PS. FELIPE AND LETICIA CANNU vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME
MORTGAGE FINANCE CORPORATION,
G.R. No. 139523. May 26, 2005

Facts:

Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173, 800.00 to purchase a house and lot located at
Pulang Lupa, Las Pias, To secure payment, a real estate mortgage was constituted on the said house and lot in favor of Fortune Savings &
Loan Association.

In early 1990, NHMFC purchased the mortgage loan of respondents-spouses from Fortune Savings & Loan Association for P173, 800.00.
Petitioner Leticia Cannu agreed to buy the property for P120, 000.00 and to assume the balance of the mortgage obligations with the NHMFC
and with CERF Realty. Of the P120, 000. 00, several payments were made leaving a balance of P45, 000.00. A Deed of Sale with Assumption
of Mortgage Obligation was made and entered into by and between spouses Fernandina and Gil Galang and spouses Leticia and Felipe
Cannu over the house and lot.

Petitioners immediately took possession and occupied the house and lot. Despite requests from Adelina R. Timbang and Fernandina Galang to
pay the balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused to do so.

Issues:
1) Whether or not the breach of the obligation is substantial.
2) Whether or not there was substantial compliance with the obligation to pay the monthly amortization with NHMFC.
3) Whether or not respondents-spouses Galang demanded from petitioners a strict and/or faithful compliance of the Deed of Sale with
Assumption of Mortgage. 4. Whether or not the action for rescission is subsidiary.

Held:
1) Rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the
agreement.
The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the
percentage of the amount not paid. In the case at bar, we find petitioners failure to pay the remaining balance of P45,000.00 to be
substantial.

Taken together with the fact that the last payment made was on 28 November 1991, eighteen months before the respondent
Fernandina Galang paid the outstanding balance of the mortgage loan with NHMFC, the intention of petitioners to renege on their
obligation is utterly clear.

2) The petitioners were not religious in paying the amortization with the NHMFC.

As admitted by them, in the span of three years from 1990 to 1993, their payments covered only thirty months. This, indeed,
constitutes another breach or violation of the Deed of Sale with Assumption of Mortgage. On top of this, there was no formal
assumption of the mortgage obligation with NHMFC because of the lack of approval by the NHMFC on account of petitioners non-
submission of requirements in order to be considered as assignees/successors-in-interest over the property covered by the mortgage
obligation.

3) There is sufficient evidence showing that demands were made from petitioners to comply with their obligation.
Adelina R. Timbang, attorney-in-fact of respondents-spouses, per instruction of respondent Fernandina Galang, made constant
follow-ups after the last payment made on 28 November 1991, but petitioners did not pay.

Sometime in March 1993, due to the fact that full payment has not been paid and that the monthly amortizations with the NHMFC
have not been fully updated, she made her intentions clear with petitioner Leticia Cannu that she will rescind or annul the Deed of
Sale with Assumption of Mortgage.

4. The subsidiary character of the action for rescission applies to contracts enumerated in Articles 1381 of the Civil Code.

The contract involved in the case before us is not one of those mentioned therein. The provision that applies in the case at bar is
Article 1191.As a consequence of the rescission or, more accurately, resolution of the Deed of Sale with Assumption of Mortgage, it is
the duty of the court to require the parties to surrender whatever they may have received from the other. The parties should be
restored to their original situation.

Iringan v. CA (2001)
Petitioners: ALFONSO L. IRINGAN
Respondents: CA, ANTONIO PALAO, REPRESENTED BY HIS ATTORNEY-IN-FACT, FELISA P.DELOS SANTOS
Ponente: QUISUMBING
Topic: Remedies for Breach
SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling)

FACTS:
March 22, 1985: Antonio Palao sold to Alfonso Iringan an undivided portion of a lot in Tuguegarao. The parties executed a Deed of Sale with
the purchase price of P295, 000, payable as follows:
a. P10, 000 upon the execution of this instrument, and for this purpose, the vendor acknowledges having received the said amount
from the vendee;
b. P140, 000 on or before Apr. 30, 1985;
c. P145, 000 on or before Dec. 31, 1985
When the second payment was due, Iringan only paid P40,000. Thus, on July, 18, 1985, Palao sent a letter to Iringan stating that he
considered the contract as rescinded for Iringans failure to comply with his obligation, and that Palao would no longer accept any future
payments.

Iringan agreed to the rescission but asked for the reimbursement of the P50,000 he paid as well as geodetic engineers fee, attorneys fee, and
current interest. Palao refused.

Iringan then proposed that the P50,000 he paid be reimbursed or Palao could sell to him an equivalent portion of the land. Still, Palao refused.
Needless to say, they failed to reach an agreement.

On July 1, 1991, Palao filed a Complaint for Judicial Confirmation of Rescission of Contract and Damages against Iringan and his wife.
Iringans argued that the contract of sale was a consummated contract, hence, the remedy of Palao was for collection of the balance of the
purchase price and not rescission. Moreover, they had always been ready and willing to comply w/ their obligations in accordance w/ said
contract.

RTC and CA ruled in favor of Palao.

Iringan contended that no rescission was effected simply by virtue of the letter sent by Palao stating that he considered the contract of sale
rescinded. He also asserted that a judicial or notarial act is necessary before one party can unilaterally effect a rescission.
Palao contended that the right to rescind is vested by law on the obligee and since Iringan did not oppose the intent to rescind the contract, he
in effect agreed to it and had the legal effect of a mutually agreed rescission.

ISSUES:
WON the contract of sale was validly rescinded
o YES. A1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price
at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration
of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial
act. After the demand, the court may not grant him a new term.
o A1592 requires the rescinding party to serve judicial or notarial notice of his intent to resolve the contract.
o Both RTC and CA affirmed the validity of the alleged mutual agreement to rescind based on A1191, par. 1 and 2.
o Even if Article 1191 were applicable, Palao would still not be entitled to automatic rescission. In Escueta v. Pando,
SC ruled that under A1124, OCC (now A1191), the right to resolve reciprocal obligations, is deemed implied in case
one of the obligors shall fail to comply with what is incumbent upon him. But that right must be invoked judicially.
The same article also provides: "the court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period."
o However, when Palao filed an action for Judicial Confirmation of Rescission and Damages before the RTC, he
complied with the requirement of the law for judicial decree of rescission. The complaint categorically stated that the
purpose was 1) to compel appellants to formalize in a public document, their mutual agreement of revocation and rescission;
and/or 2) to have a judicial confirmation of the said revocation/rescission under terms and conditions fair, proper and just for
both parties.
o Iringan contends that even if the filing of the case were considered the judicial act required, the action should be deemed
prescribed based on the provisions of A1389.
o A1389 applies to rescissible contracts, as enumerated and defined in A1380 and 1381. However, that the "rescission" in
A1381 is not akin to the term "rescission" in A1191 and 1592.
o In A1191 and 1592, the rescission is a principal action which seeks the resolution or cancellation of the contract
while in A1381, the action is a subsidiary one limited to cases of rescission for lesion as enumerated in said article.
o The prescriptive period applicable to rescission under A1191 and 1592, is found in A1144, which provides that the
action upon a written contract should be brought within ten years from the time the right of action accrues.
o The suit was brought on July 1, 1991, or six years after the default. It was filed within the period for rescission. Thus, the
contract of sale between the parties as far as the prescriptive period applies, can still be validly rescinded.
NOTES:

ADELFA S. RIVERA V. FIDELA DEL ROSARIO

G.R. No. 144934. January 15, 2004

FACTS:
Respondents Fidela, et al. were the registered owners of a parcel of land. Fidela borrowed P250k from Mariano Rivera and to secure the loan,
she and Mariano Rivera agreed to execute a deed of REM and an agreement to sell the land. Mariano went to his lawyer to have 3 documents
drafted: the Deed of REM, a Kasunduan (Agreement to Sell), and a Deed of Absolute Sale.

The Kasunduan provided that the children of Mariano Rivera, herein petitioners, would purchase the land for a consideration of P2M, to be
nd
paid in 3 installments. It also provided that the Deed of Absolute Sale would be executed only after the 2 installment is paid and a postdated
check for the last installment is deposited with Fidela.

Mariano Rivera then went to his lawyer bringing with him the signed documents. He also brought Fidela and her son Oscar, so that the latter
two may sign the mortgage and the Kasunduan there. Although Fidela intended to sign only the Kasunduan and the REM, she inadvertently
st
affixed her signature on all 3 documents. Mariano then gave Fidela the amount for the 1 installment. Later, he also gave Fidela a check for
nd
the 2 installment. Mariano also gave Oscar several amounts upon the latters demand for the payment of the balance despite his lack of
authority to receive payments under the Kasunduan. Fidela entrusted the owners copy of TCT to Mariano to guarantee compliance with the
Kasunduan.

When Mariano unreasonably refused to return the TCT, respondents caused the annotation on TCT of an Affidavit of Loss of the owners
duplicate copy of the title. However, Mariano then registered the Deed of Absolute Sale and got a new TCT.

Respondents then filed a complaint asking that the Kasunduan be rescinded for failure of the Riveras to comply with its conditions, with
damages. They also sought the annulment of the Deed of Absolute Sale on the ground of fraud. Respondents claimed that Fidela never
intended to enter into a deed of sale at the time of its execution and that she signed the said deed on the mistaken belief that she was merely
signing copies of the Kasunduan.

ISSUE:
WON the Deed of Absolute Sale is valid and binding?

HELD: NO. The deed is void in its entirety.

Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be distinguished from rescission of contracts
under Article 1383 of the same Code. Both presuppose contracts validly entered into as well as subsisting, and both require mutual
restitution when proper, nevertheless they are not entirely identical.

While Article 1191 uses the term rescission, the original term used in Article 1124 of the old Civil Code, from which Article 1191 was
based, was resolution. Resolution is a principal action that is based on breach of a party, while rescission under Article 1383 is a
subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code.

Obviously, the Kasunduan does not fall under any of those situations mentioned in Article 1381. Consequently, Article 1383 is
inapplicable. Hence, we rule in favor of the respondents.

May the contract entered into between the parties, however, be rescinded based on Article 1191?
A careful reading of the Kasunduan reveals that it is in the nature of a contract to sell, as distinguished from a contract of
sale. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; while in a
contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which
is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an
obligatory force.

Respondents in this case bound themselves to deliver a deed of absolute sale and clean title covering Lot No. 1083-C after
petitioners have made the second installment. This promise to sell was subject to the fulfillment of the suspensive condition that
petitioners pay P750,000 on August 31, 1987, and deposit a postdated check for the third installment of P1M. Petitioners, however,
failed to complete payment of the second installment.

The non-fulfillment of the condition rendered the contract to sell ineffective and without force and effect. It must be stressed
that the breach contemplated in Article 1191 of the New Civil Code is the obligors failure to comply with an obligation already
extant, not a failure of a condition to render binding that obligation. Failure to pay, in this instance, is not even a breach but
an event that prevents the vendors obligation to convey title from acquiring binding force. Hence, the agreement of the
parties in the instant case may be set aside, but not because of a breach on the part of petitioners for failure to complete
payment of the second installment. Rather, their failure to do so prevented the obligation of respondents to convey title from
acquiring an obligatory force.

Coming now to the matter of prescription. Contrary to petitioners assertion, we find that prescription has not yet set in. Article 1391
states that the action for annulment of void contracts shall be brought within four years. This period shall begin from the time the fraud
or mistake is discovered. Here, the fraud was discovered in 1992 and the complaint filed in 1993. Thus, the case is well within the
prescriptive period.

EQUATORIAL V. MAYFAIR
Sale of Land
While execution of a public instrument of sale is recognized by law as equivalent to the delivery of the thing sold, such constructive or symbolic
delivery is merely presumptive. It is nullified by the failure of the vendee to take actual possession of the land sold.

FACTS:
Carmelo & Bauermann, Inc. owned a land, together with two 2-storey buildings at Claro M. Recto Avenue, Manila, and covered by TCT No.
18529.

On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc. fpr 20 years. The lease covered a portion of the second
floor and mezzanine of a two-storey building with about 1,610 square meters of floor area, which respondent used as Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Lease with Carmelo for another portion of the latters property this time, a
part of the second floor of the two-storey building, and two store spaces on the ground floor. In that space, Mayfair put up another movie house
known as Miramar Theater. The Contract of Lease was likewise for a period of 20 years.

Both leases contained a clause giving Mayfair a right of first refusal to purchase the subject properties. Sadly, on July 30, 1978 - within the 20-
year-lease term -- the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. for eleven million smackers, without
their first being offered to Mayfair.

As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the Regional Trial Court of Manila for the
recission of the Deed of Absolute Sale between Carmelo and Equatorial, specific performance, and damages. RTC decided for Carmelo and
Equatorial. Tsk tsk.
CA reversed and ruled for Mayfair. The SC denied a petition questioning the CA decision. What happened is that the contract did get
rescinded, Equatorial got its money back and asserted that Mayfair have the right to purchase the lots for 11 million bucks.

Decision became final and executory, so Mayfair deposited with the clerk the 11M (less 847grand withholding) payment for the properties
(Carmelo somehow disappeared).
Meanwhile, on Sept 18, 1997, barely five months after Mayfair submitted its Motion for Execution, Equatorial demanded from Mayfair
backrentals and reasonable compensation for the Mayfairs continued use of the subject premises after its lease contracts expired. Remember
that Mayfair was still occupying the premises during all this hullabaloo.
ISSUE:
Whether or not Equatorial was the owner of the subject property and could thus enjoy the fruits and rentals.

HELD:
NO.
Nor right of ownership was transferred from Carmelo to Equatorial since there was failure to deliver the property to the buyer.
Compound this with the fact that the sale was even rescinded.

The court went on to assert that rent is a civil fruit that belonged to the owner of the property producing it by right of accession.
Hence, the rentals that fell due from the time of the perfection of the sale to petitioner until its rescission by final judgment should
belong to the owner of the property during that period.

We remember from SALES that in a contract of sale, one of the contracting parties obligates himself to transfer ownership of and to
deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent.

Ownership of the thing sold is a real right, which the buyer acquires only upon delivery of the thing to him in any of the ways specified
in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the
vendee. This right is transferred, not by contract alone, but by tradition or delivery. There is delivery if and when the thing sold is
placed in the control and possession of the vendee.

While execution of a public instrument of sale is recognized by law as equivalent to the delivery of the thing sold, such constructive or
symbolic delivery is merely presumptive. It is nullified by the failure of the vendee to take actual possession of the land sold.

For property to be delivered, we need two things. Delivery of property or title, and transfer of control or custody to the buyer.

Possession was never acquired by the petitioner. It therefore had no rights to rent.

[G.R. No. 182435. August 13, 2012.]

LILIA B. ADA, et al., vs. FLORANTE BAYLON

FACTS:
This case involves the estate of spouses Florentino Baylon and Maximina Elnas Baylon (Spouses Baylon) who died on November 7, 1961 and
May 5, 1974, respectively. 3 At the time of their death, Spouses Baylon were survived by their legitimate children, namely, Rita Baylon (Rita),
Victoria Baylon (Victoria), Dolores Baylon (Dolores), Panfila Gomez (Panfila), Ramon Baylon (Ramon) and herein petitioner Lilia B. Ada (Lilia).
Dolores died intestate and without issue on August 4, 1976.

Victoria died on November 11, 1981 and was survived by her daughter, herein petitioner Luz B. Adanza. Ramon died intestate on July 8, 1989
and was survived by herein respondent Florante Baylon (Florante), his child from his first marriage, as well as by petitioner Flora Baylon, his
second wife, and their legitimate children, namely, Ramon, Jr. and herein petitioners Remo, Jose, Eric, Florentino and Ma. Ruby, all surnamed
Baylon.

Florentino +
Maxima

Rita Victoria Dolores Panfila Ramon Lilia

Florante
Luz

+ Flora

Ramon Jr

Remo, Jose,
Eric,
Florentino,
Ma. Ruby

Petitioners filed with the RTC complaint for partition, accounting, and damages against respondent Florante, Rita, and Panfila. They alleged
that Spouses Baylon owned 43 parcels of land. They claimed that Rita took possession of the land and appropriated the income derived
therefrom. Florante, Rita and Panfila asserted, in their answer, that the co-owned the properties in question. On July 1997, Rita donated a
parcel of land to Florante. In July 2000, Rita died. Petitioners learned of the donation made by Rita in favor of Florante. They filed for a
Supplemental Pleading, asking the court to rescind the Deed of Donation.

The RTC rendered a decision, finding the existence of co-ownership but ordered the partition of the estate of the Spouses Baylon. RTC also
rescinded the donation made.
The case was appealed to the CA. The appellate court set aside the decision and remanded the case to determine ownership of Lot Nos. 4706
and 4709.
The complaint filed by the petitioners with the RTC involves two separate, distinct and independent actions partition and
rescission. First, the petitioners raised the refusal of their co-heirs, Florante, Rita and Panfila, to partition the properties which they inherited
from Spouses Baylon. Second, in their supplemental pleading, the petitioners assailed the donation inter vivos of Lot No. 4709 and half of Lot
No. 4706 made by Rita in favor of Florante pendente lite.

ISSUE/S: W/N

RULING:
By a joinder of actions, or more properly, a joinder of causes of action is meant the uniting of two or more demands or rights of action
in one action, the statement of more than one cause of action in a declaration. It is the union of two or more civil causes of action,
each of which could be made the basis of a separate suit, in the same complaint, declaration or petition. A plaintiff may under certain
circumstances join several distinct demands, controversies or rights of action in one declaration, complaint or petition. 29

While parties to an action may assert in one pleading, in the alternative or otherwise, as many causes of action as they may have
against an opposing party, such joinder of causes of action is subject to the condition, inter alia, that the joinder shall not include
special civil actions governed by special rules. 31

Here, there was a misjoinder of causes of action. The action for partition filed by the petitioners could not be joined with the action for
the rescission of the said donation inter vivos in favor of Florante. Lest it be overlooked, an action for partition is a special civil action
governed by Rule 69 of the Rules of Court while an action for rescission is an ordinary civil action governed by the ordinary rules of
civil procedure. The variance in the procedure in the special civil action of partition and in the ordinary civil action of rescission
precludes their joinder in one complaint or their being tried in a single proceeding to avoid confusion in determining what rules shall
govern the conduct of the proceedings as well as in the determination of the presence of requisite elements of each particular cause
of action. 32

Nevertheless, misjoinder of causes of action is not a ground for dismissal. Indeed, the courts have the power, acting upon the motion
of a party to the case or sua sponte, to order the severance of the misjoined cause of action to be proceeded with
separately. 33 However, if there is no objection to the improper joinder or the court did not motu proprio direct a severance, then there
exists no bar in the simultaneous adjudication of all the erroneously joined causes of action.

It should be emphasized that the foregoing rule only applies if the court trying the case has jurisdiction over all of the causes of action
therein notwithstanding the misjoinder of the same. If the court trying the case has no jurisdiction over a misjoined cause of action,
then such misjoined cause of action has to be severed from the other causes of action, and if not so severed, any adjudication
rendered by the court with respect to the same would be a nullity.

Here, Florante posed no objection, and neither did the RTC direct the severance of the petitioners' action for rescission from their
action for partition. While this may be a patent omission on the part of the RTC, this does not constitute a ground to assail the validity
and correctness of its decision. The RTC validly adjudicated the issues raised in the actions for partition and rescission filed by the
petitioners.
Asserting a New Cause of Action in a Supplemental Pleading

Section 6, Rule 10 of the Rules of Court reads:

Sec. 6.Supplemental Pleadings. Upon motion of a party the court may, upon reasonable notice and upon such terms as
are just, permit him to serve a supplemental pleading setting forth transactions, occurrences or events which have
happened since the date of the pleading sought to be supplemented. The adverse party may plead thereto within ten (10)
days from notice of the order admitting the supplemental pleading.

In Young v. Spouses Sy, 36 this Court had the opportunity to elucidate on the purpose of a supplemental pleading.
Thus:

As its very name denotes, a supplemental pleading only serves to bolster or add something to the primary pleading. A
supplement exists side by side with the original. It does not replace that which it supplements. Moreover, a supplemental
pleading assumes that the original pleading is to stand and that the issues joined with the original pleading remained an
issue to be tried in the action. It is but a continuation of the complaint. Its usual office is to set up new facts which justify,
enlarge or change the kind of relief with respect to the same subject matter as the controversy referred to in the
original complaint.

The purpose of the supplemental pleading is to bring into the records new facts which will enlarge or change the
kind of relief to which the plaintiff is entitled; hence, any supplemental facts which further develop the original right
of action, or extend to vary the relief, are available by way of supplemental complaint even though they themselves
constitute a right of action. 37 (Citations omitted and emphasis ours)

Thus, a supplemental pleading may properly allege transactions, occurrences or events which had transpired after the filing
of the pleading sought to be supplemented, even if the said supplemental facts constitute another cause of action.

Here, the issue as to the validity of the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 made by Rita in favor of
Florante is a new cause of action that occurred after the filing of the original complaint. However, the petitioners' prayer for
the rescission of the said donation inter vivos in their supplemental pleading is germane to, and is in fact, intertwined with the
cause of action in the partition case. Lot No. 4709 and half of Lot No. 4706 are included among the properties that were
sought to be partitioned.

The petitioners' supplemental pleading merely amplified the original cause of action, on account of the gratuitous
conveyance of Lot No. 4709 and half of Lot No. 4706 after the filing of the original complaint and prayed for additional
reliefs, i.e., rescission. Indeed, the petitioners claim that the said lots form part of the estate of Spouses Baylon, but cannot
 be partitioned unless the gratuitous conveyance of the same is rescinded. Thus, the principal issue raised by the petitioners
in their original complaint remained the same.
Petition is partly granted. The case is remanded to the RTC.