MODINA vs.
COURT OF APPEALS (317 SCRA 696) either party to an illegal contract or agreement; it leaves the
FACTS:
The parcel of land under the name of Ramon Chiang is in
questioned since Mr. Chiang claims that the land has already been
sold by his wife to him. Mr. Chiang in turn sells this land to
Modina which are all evidenced by deed of sale. Modina then filed
Complaint for Recovery of Possession with Damages before the
Regional Trial Court of Iloilo City. On the other hand, Merlinda,
the wife of Ramon, presented also a complaint which is to make
the deed of sale between her husband and Modina null and void.
ISSUE:
The first issue raised was that whether the sale of the parcel of land
should be nullified or not. Second is that whether the petitioner,
Modina, was a purchaser in good faith or not. Third is whether the
decision of the trial court was in excess of jurisdiction or the
court's acting beyond the limits of its power; and lastly whether or
not only three-fourths of subject lots should be returned to the
private respondent.
RULING:
The court declares the sale of land between Chiang and Modina as
null and void. This is because under Art. 1490, husband and wife
are prohibited to sell properties to each other. Not being the owner
of the land, Ramon Chiang cannot sell the land to Modina. The
sale by Ramon Chiang in favor of Modina is, likewise, void and
inexistent. As for the second issue, the court concluded that
Modina is not a purchaser in good faith. It was found that there
were circumstances known to Modina which rendered their
transaction fraudulent under the circumstances. Circumstances
which indicated of bad faith on Modina, is that he asked his
nephew to investigate the origin of the property and the latter
learned that the land formed part of the properties of Merlindas
first husband; and also that the said sale was between the spouses.
RENZEL v. CATITO
G.R. No. 143958. July 11, 2003
Ponente: J. CALLEJO Sr.
DOCTRINE:
A contract that violates the Constitution and the law, is null
and void and vests no rights and creates no obligations. It
produces no legal effect at all. The petitioner, being a party
to an illegal contract, cannot come into a court of law and
ask to have his illegal objective carried out
FACTS:
Petitioner Alfred Fritz Frenzel is an Australian citizen of
German descent. He was so enamored with Ederlina that he
bought her numerous properties such as house and lot in
Quezon City and in Davao City. He also put up a beauty
parlor business in the name of Ederlina. Alfred was unaware
that Ederlina was married until her spouse Klaus Muller
wrote a letter to Alfred begging the latter to leave her wife
alone.
When Alfred and Ederlinas relationship started deteriorating.
Ederlina had not been able to secure a divorce from Klaus.
The latter could charge her for bigamy and could even
involve Alfred, who himself was still married. To avoid
complications, Alfred decided to live separately from Ederlina
and cut off all contacts with her.
On October 15, 1985, Alfred wrote to Ederlinas father,
complaining that Ederlina had taken all his life savings and
because of this, he was virtually penniless. He further
accused the Catito family of acquiring for themselves the
properties he had purchased with his own money. He
demanded the return of all the amounts that Ederlina and
her family had stolen and turn over all the properties
acquired by him and Ederlina during their coverture.
ISSUE:
Whether the petitioner could recover the money used in
purchasing the several properties
HELD:
No, even if, as claimed by the petitioner, the sales in
question were entered into by him as the real vendee, the
said transactions are in violation of the Constitution; hence,
are null and void ab initio. A contract that violates the
Constitution and the law, is null and void and vests no rights
and creates no obligations. It produces no legal effect at
all. The petitioner, being a party to an illegal contract, cannot
come into a court of law and ask to have his illegal objective
carried out. One who loses his money or property by
knowingly engaging in a contract or transaction which
involves his own moral turpitude may not maintain an action
for his losses. To him who moves in deliberation and
premeditation, the law is unyielding. The law will not aid
parties where it finds them
G.R. No. 118509 December 1, 1995 LIMKETKAI SONS
MILLING, INC. v. COURT OF APPEALS, BANK OF THE
PHILIPPINE ISLANDS and NATIONAL BOOK STORE
Facts: On June 23, 1988, Pedro Revilla, Jr., a licensed
real estate broker was given formal authority by BPI to sell
the lot for P1,000.00 per square meter. The owners of the
Philippine Remnants concurred this arrangement. Broker
Revilla contacted Alfonso Lim of petitioner company who
agreed to buy the land. On July 9, 1988, Revilla formally
informed BPI that he had procured a buyer, herein petitioner.
On July 11, 1988, petitioner's officials, Alfonso Lim and
Albino Limketkai, went to BPI to confirm the sale. Vice-
President Merlin Albano and Asst. Vice-President Aromin
entertained them. The parties agreed that the lot would be
sold at P1,000.00 per square meter to be paid in cash. The
authority to sell was on a first come, first served and non-
exclusive basis; there is no dispute over petitioner's being
the first comer and the buyer to be first served. Alfonso Lim
then asked if it was possible to pay on terms. The bank
officials stated that there was no harm in trying to ask for
payment on terms because in previous transactions, the
same had been allowed. It was the understanding, however,
that should the term payment be disapproved, then the price
shall be paid in cash. Two or three days later, petitioner
learned that its offer to pay on terms had been frozen.
Alfonso Lim went to BPI on July 18, 1988 and tendered the
full payment of P33,056,000.00 to Albano. The payment was
refused because Albano stated that the authority to sell that
particular piece of property in Pasig had been withdrawn
from his unit. The samecheck was tendered to BPI Vice-
President Nelson Bona who also refused to receive
payment. An action for specific performance with damages
was thereupon filed on August 25, 1988 by petitioner against
BPI. In the course of the trial, BPI informed the trial court that
it had sold the property under litigation to NBS on July 14,
1989.
Issue: Whether or not such contract is covered by the
statute of frauds.
Held: In the case at bench, the allegation that there was
noconcurrence of the offer and the acceptance upon the
cause of the contract is belied by the testimony of the very
BPI official with whom the contract was perfected. Aromin
and Albano concluded the sale for BPI. The fact that
the deed of sale still had to be signed and notarized does not
mean that no contract had already been perfected. A sale of
land is valid regardless of the form it may have been entered
into. The requisite form under Article 1458 of the Civil Code
is merely for greater efficacy or convenience and the failure
to comply does not affect the validity and binding effect of
the act between parties. Therefore, such contract that was
made constituted fraud and is covered by the statute of
frauds. BPI should be held liable and can be sued for
damages.
Velarde vs. Court of Appeals (361 SCRA 57)
14JAN
FACTS:
The private respondent executed a Deed of Sale with
Assumption of Mortgage, with a balance of P1.8 million, in
favor of the petitioners. Pursuant to said agreements,
plaintiffs paid the bank (BPI) for three (3) months until they
were advised that the Application for Assumption of
Mortgage was denied. This prompted the plaintiffs not to
make any further payment. Private respondent wrote the
petitioners informing the non-fulfillment of the obligations.
Petitioners, thru counsel responded that they are willing to
pay in cash the balance subject to several conditions.
Private respondents sent a notarial notice of
cancellation/rescission of the Deed of Sale. Petitioners filed
a complaint which was consequently dismissed by an
outgoing judge but was reversed by the assuming judge in
their Motion for Reconsideration. The Court of Appeals
reinstated the decision to dismiss.
ISSUE:
Whether or not there is a substantial breach of contract that
would entitle its rescission.
RULING:
YES. Article 1191 of the New Civil Code applies. The breach
committed did not merely consist of a slight delay in payment
or an irregularity; such breach would not normally defeat the
intention of the parties to the contract. Here, petitioners not
only failed to pay the P1.8 million balance, but they also
imposed upon private respondents new obligations as
preconditions to the performance of their own obligation. In
effect, the qualified offer to pay was a repudiation of an
existing obligation, which was legally due and demandable
under the contract of sale. Hence, private respondents were
 left with the legal option of seeking rescission to protect their
own interest
SIGUAN V. LIM
Facts:
1. On 25 and 26 August 1990, Rosa Lim (respondent,
LIM) issued two Metrobank checks to satisfy her debts to
Maria Antonia Siguan (petitioner, SIGUAN).
2. Upon presentment by SIGUAN with the drawee
bank, the checks were dishonoured for the reason account
closed.
3. Criminal case for violation of BP 22 was filed by
SIGUAN against LIM.
4. On December 29 1992, RTC convicted LIM as
charged. The case is pending before this Court for review.
5. On August 10, 1989, LIM executed a Deed of
Donation in favour of her children, and the same was
registered with the Office of the Register of Deeds on July 2,
1991.
6. June 23, 193, SIGUAN filed an accion pauliana
against LIM and her children, to rescind the questioned
Deed of Donation and to declare as null and void the new
transfer certificates of title.
Issue/s:
1. Whether or not the questioned Deed of Donation
was made in fraud of petitioner and, therefore, rescissible.
Ruling:
1. No. The rescission required the existence of
creditors at the time of alleged fraudulent alienation, and
this must be proved as one of the bases of the judicial
pronouncement setting aside the contract. Without prior
existing debt, there can neither be injury nor fraud. While it
is necessary that the credit of the plaintiff in the accion
pauliana must exist prior to the fraudulent alienation, the
date of the judgment enforcing it is immaterial.
Since LIMs indebtedness to SIGUAN was incurred in August
1990, or a year after the execution of the Deed of Donation,
the first requirement of accion pauliana was not met.
Even assuming arguendo that petitioner became a creditor of
LIM prior to the celebration of the contract of donation, still
her action for rescission would not fare well because the
third requisite was not met. It is essential that the party
asking for rescission prove that he has exhausted all other
legal means to obtain satisfaction of his claim. SIGUAN
neither alleged nor proved that she did so. On his score, her
action for rescission of the questioned deed is not
maintainable even if the fraud charged actually did exist.
The fourth requisite for an accion pauliana to prosper is not
present either. (4) the act being impugned is fraudulent. It
was not sufficiently established that the properties left
behind by LIM were not sufficient to cover her debts existing
before the donation was made.
Note / Doctrine:
Requisites of accion pauliana
1. Plaintiff asking for rescission has a credit prior to
the alienation, although demandable later.
2. Debtor has made a subsequent contract conveying
a patrimonial benefit to a third persons.
3. Creditor has no other legal remedy to satisfy his
claim, but would benefit by rescission of the conveyance to
the person.
4. Act being impugned is fraudulent.
5. The third parsons who received the property
conveyed, if by onerous title, has been an accomplice in the
fraud.
(New Civil Code) Article 1381. Contracts
entered into in fraud of creditors may be rescinded only
when the creditors cannot in any manner collect the claims
due to them.
(New Civil Code) Article 1383. The action for
rescission is but a subsidiary remedy which cannot be
instituted except when the party suffering damage has no
other legal means to obtain reparation for the same.
(New Civil Code) Article 1387(1). All contracts
by virtue of which the debtor alienates property by gratuitous
title are presumed to have been entered into in fraud of
creditors when donor did not reserve sufficient property to
pay all debts contracted before the donation.
(New Civil Code) Article 759. Donation is
always presumed to be in fraud of creditors when at the time
thereof the donor did not reserve sufficient property to pay
his debts prior to the donation.
(New Civil Code) Article 1384. Rescission
shall only be to the extent necessary to cover the damages
caused.
Only the creditor who brought the action
for rescission can benefit from the rescission; those who
are strangers to the action cannot benefit from its
effects.
Revocation is only to the extent of the
plaintiff creditors unsatisfied debts; as to the excess,
alienation is maintained.
RITA SARMING, et. al vs. CRESENCIO DY,
et al
G.R. No. 133643 June 6, 2002
Facts:
Valentina Unto Flores, who owned,
among others, Lot 5734, covered by OCT
4918-A; and Lot 4163. After the death of
Valentina, her three children, namely: Jose,
Venancio, and Silveria, took possession of Lot
5734 with each occupying a one-third
portion. Upon their death, their children and
grandchildren took possession of their
respective shares. The other parcel, Lot 4163
which is solely registered under the name of
Silveria, was sub-divided between Silveria
and Jose. Two rows of coconut trees planted
in the middle of this lot serves as boundary
line.
The grandchildren of Jose and now owners of
one-half of Lot 4163, entered into a contract
with plaintiff Alejandra Delfino, for the sale of
one-half share of Lot 4163 after offering the
same to their co-owner, Silveria, who declined
for lack of money. Silveria did not object to
the sale of said portion to Alejandra Delfino.
The late Atty. Pinili, Alejandra's lawyer, called
Silveria and the heirs of Venancio to a
conference where Silveria declared that she
owned half of the lot while the other half
belonged to the vendors; and that she was
selling her three coconut trees found in the
half portion offered to Alejandra Delfino for
P15. When Pinili asked for the title of the
land, Silveria Flores, through her daughter,
Cristita Corsame, delivered Original
Certificate of Title No. 4918-A, covering Lot
No. 5734, and not the correct title covering
Lot 4163. At that time, the parties knew the
location of Lot 4163 but not the OCT Number
corresponding to said lot.
Believing that OCT No. 4918-A was the
correct title corresponding to Lot 4163, Pinili
prepared a notarized Settlement of Estate and
Sale (hereinafter "deed") duly signed by the
parties. As a result, OCT No. 4918-A was
cancelled and in lieu thereof, TCT No. 5078
was issued in the names of Silveria Flores
and Alejandra Delfino, with one-half share
each. Silveria Flores was present during the
preparation and signing of the deed and she
stated that the title presented covered Lot No.
4163. Alejandra Delfino immediately took
possession and introduced improvements on
the purchased lot, which was actually one-
half of Lot 4163 instead of Lot 5734 as
designated in the deed.
Two years later, when Alejandra Delfino
purchased the adjoining portion of the lot she
had been occupying, she discovered that
what was designated in the deed, Lot 5734,
was the wrong lot. She sought the assistance
of Pinili who approached Silveria and together
they inquired from the Registry of Deeds
about the status of Lot 4163. They found out
that OCT No. 3129-A covering Lot 4163 was
still on file. Alejandra Delfino paid the
necessary fees so that the title to Lot 4163
could be released to Silveria Flores, who
promised to turn it over to Pinili for the
reformation of the deed of sale. However,
despite repeated demands, Silveria did not do
so, prompting Alejandra and the vendors to
file a complaint against Silveria for
reformation of the deed of sale.
Issue:
Whether or not a reformation of the
contract can take place

Ruling:
The Supreme Court Held that
reformation is that remedy in equity by
means of which a written instrument is made
or construed so as to express or conform to
the real intention of the parties. As provided
in Article 1359 of the Civil Code:
Art. 1359. When, there having been a
meeting of the minds of the parties to a
contract, their true intention is not expressed
in the instrument purporting to embody the
agreement by reason of mistake, fraud,
inequitable conduct or accident, one of the
parties may ask for the reformation of the
instrument to the end that such true
intention may be expressed.
If mistake, fraud, inequitable conduct, or
accident has prevented a meeting of the
minds of the parties, the proper remedy is
not reformation of the instrument but
annulment of the contract.
An action for reformation of instrument
under this provision of law may prosper only
upon the concurrence of the following
requisites: (1) there must have been a
meeting of the minds of the parties to the
contact; (2) the instrument does not express
the true intention of the parties; and (3) the
failure of the instrument to express the true
intention of the parties is due to mistake,
fraud, inequitable conduct or accident.
All of these requisites, in our view, are
present in this case. There was a meeting of
the minds between the parties to the contract
but the deed did not express the true
intention of the parties due to mistake in the
designation of the lot subject of the deed.
There is no dispute as to the intention of the
parties to sell the land to Alejandra Delfino
but there was a mistake as to the designation
of the lot intended to be sold as stated in the
Settlement of Estate and Sale.
G.R. No. L-19638 June 20, 1966
FILIPINAS COMPANIA DE SEGUROS, ET AL v.
HON. FRANCISCO Y.
MANDANAS (as Insurance Commissioner) and
AGRICULTURAL FIRE
INSURANCE & SURETY CO., INC., ET AL
Facts: The power of the Ph Rating Bureau to refuse
to do business with
insurance companies that are not its members is
valid because it is not contrary
to law or public policy as it reasonably restraints
competition merely by fixing
rates which it has, in the first place, the license to do.
> Letters (March 11, 1960, April 11, 1960, April 9,
1961) by Insurance
Commissioner Mandanas to the Ph Rating Bureau,
requesting the deletion of
Art. 22 of the Constitution of the Ph Rating Bureau
because it was allegedly
unlawful for allowing the Bureau to refuse
representation or reinsurance from
companies not members in good standing of the
Bureau ~ otherwise he would
suspend the license issued to the Bureau and its
members > SUIT (May 16,
1961) by non-life insurance companies against Hon.
Mandanas for Declaratory
Relief re: constitutionality of Art. 22 of the
Constitution of the Ph Rating
Bureau, the former alleging its constitutionality while
the former assailing its
validity for being an illegal or undue restraint of trade
> Test of Legality of an Agreement restraining trade:
(1) Reasonable Necessity
in protecting the parties interests; (2) Effect on
competition ~ to regulate and
promote competition is valid while to suppress and
destroy it is unlawful; BUT
considering the particular circumstances of the case
and the nature of the
particular contract, where public interest and welfare
are not involved >
PURPOSE OF ART. 22 (testimony of Salvador Estrada,
Chairman of the
Bureau): to promote ethical practices in order to earn
the respect of the public,
and to avoid the unethical practice of underrating of
the insurance companies
that resulted from intense competition BY
coordinating with the various
companies in fixing the rates and applying it as a
standard to all > NOT
ILLEGAL, IMMORAL, UNREASONABLE, or CONTRARY
TO PUBLIC
POLICY in both objectives and means
> FURTHERMORE, Circular No. 54 (February 26,
1954) requires the approval
of the Insurance Commissioner before non-life
insurance companies can
implement its rates > Annual grant of license (April
28, 1954) by the Insurance
Commissioner to the Bureau with knowledge of its
constitution and with grant
of authority to fix rates
PAKISTAN INTERNATIONAL AIRLINES (PIA)
CORPORATION vs HON. BLAS F. OPLE, in his capacity as
Minister of Labor; HON. VICENTE LEOGARDO, JR., in his
capacity as Deputy Minister; ETHELYNNE B. FARRALES
and MARIA MOONYEEN MAMASIG
G.R. No. 61594 September 28, 1990
FACTS: On 2 December 1978, petitioner Pakistan
International Airlines Corporation (PIA), a foreign
corporation licensed to do business in the Philippines,
executed in Manila 2 separate contracts of employment, one
with private respondent Farrales and the other with private
respondent Mamasig. 1 The contracts, which became
effective on 9 January 1979, provided in pertinent portion as
follows:
5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of 3 years, but can be
extended by the mutual consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided,
PIA reserves the right to terminate this agreement at any
time by giving the EMPLOYEE notice in writing in advance
one month before the intended termination or in lieu
thereof, by paying the EMPLOYEE wages equivalent to one
months salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and
by the laws of Pakistan, and only the Courts of Karachi,
Pakistan shall have the jurisdiction to consider any matter
arising out of or under this agreement.
Farrales & Mamasig (employees) were hired as flight
attendants after undergoing training. Base station was in
Manila and flying assignments to different parts of the
Middle East and Europe.
roughly 1 year and 4 months prior to the expiration of the
contracts of employment, PIA through Mr. Oscar Benares,
counsel for and official of the local branch of PIA, sent
separate letters, informing them that they will be terminated
effective September 1, 1980.
Farrales and Mamasig jointly instituted a complaint, for
illegal dismissal and non-payment of company benefits and
bonuses, against PIA with the then Ministry of Labor and
Employment (MOLE).
PIAs Contention: The PIA submitted its position paper, but
no evidence, and there claimed that both private respondents
were habitual absentees; that both were in the habit of
bringing in from abroad sizeable quantities of personal
effects; and that PIA personnel at the Manila International
Airport had been discreetly warned by customs officials to
advise private respondents to discontinue that practice. PIA
further claimed that the services of both private respondents
were terminated pursuant to the provisions of the
employment contract.
Favorable decision for the respondents. The Order stated
that private respondents had attained the status of regular
employees after they had rendered more than a year of
continued service; that the stipulation limiting the period of
the employment contract to 3 years was null and void as
violative of the provisions of the Labor Code and its
implementing rules and regulations on regular and casual
employment; and that the dismissal, having been carried out
without the requisite clearance from the MOLE, was illegal
and entitled private respondents to reinstatement with full
backwages.
Decision sustained on appeal. Hence, this petition for
certiorari
ISSUE: (Relative to the subject) Which law should govern
over the case? Which court has jurisdiction?
HELD: Philippine Law and Philippine courts
Petitioner PIA cannot take refuge in paragraph 10 of its
employment agreement which specifies, firstly, the law of
Pakistan as the applicable law of the agreement and,
secondly, lays the venue for settlement of any dispute arising
out of or in connection with the agreement only [in] courts
of Karachi Pakistan.
We have already pointed out that the relationship is much
affected with public interest and that the otherwise
applicable Philippine laws and regulations cannot be
rendered illusory by the parties agreeing upon some other
law to govern their relationship.
the contract was not only executed in the Philippines, it was
also performed here, at least partially; private respondents
are Philippine citizens and respondents, while petitioner,
although a foreign corporation, is licensed to do business
(and actually doing business) and hence resident in the
Philippines; lastly, private respondents were based in the
Philippines in between their assigned flights to the Middle
East and Europe. All the above contacts point to the
Philippine courts and administrative agencies as a proper
forum for the resolution of contractual disputes between the
parties.
Under these circumstances, paragraph 10 of the employment
agreement cannot be given effect so as to oust Philippine
agencies and courts of the jurisdiction vested upon them by
Philippine law. Finally, and in any event, the petitioner PIA
did not undertake to plead and prove the contents of
Pakistan law on the matter; it must therefore be presumed
that the applicable provisions of the law of Pakistan are the
same as the applicable provisions of Philippine law.
DKC Holdings v. CA
G.R. No. 118248. April 5, 2000
On March 16, 1998, petitioner DKC Holdings Corporation
(DKC) entered into a Contract of Lease with Option to Buy
with Encarnacion Bartolome, decedent herein, whereby
petitioner was given the option to lease or lease with
purchase the subject land.
Encarnacion died. Thereafter, petitioner coursed its payment
to private respondent Victor Bartolome, being the sole heir
of Encarnacion. Victor, however, refused to accept these
payments. On March 14, 1990, petitionerserved upon Victor,
via registered mail, notice that it was exercising its option to
lease the property, tendering the amount of P15,000.00 as
rent. Again, Victor refused to accept the tendered rental fee
and to surrender possession of the property to petitioner. On
April 23, 1990, petitioner filed a complaint for specific
performance and damages against Victor and the Register of
Deeds
ISSUE: Whether or not the rights under a Contact of Lease
with Option to Buy were transmissible.
YES. The general rule, therefore, is that heirs are bound by
contracts entered into by their predecessors-in-interest
except when the rights and obligations arising therefrom are
not transmissible by (1) their nature, (2) stipulation or (3)
provision of law. The Court held that there is
neither contractualstipulation nor legal provision making the
rights and obligations under the lease contract
intransmissible. More importantly, the nature of the rights
and obligations therein are, by their nature, transmissible.
In the case at bar, the subject matter of the contract is a
lease, which is aproperty right. The death of a party does not
excuse nonperformance of a contract which involves
a property right, and the rights and obligations thereunder
pass to the personal representatives of the deceased.
Similarly, nonperformance is not excused by the death of the
party when the other party has a property interest in the
subject matter of the contract.
Therefore, Victor is bound by the subject Contract of Lease
with Option to Buy
INTEGRATED PACKAGING CORP. V. CA
FACTS:
May 5, 1978: Integrated Packaging Corp
agreed to deliver to Fil-anchor paper co.,
inc. 3,450 reams of printing paper. Materials
were to be paid within 30-90 days
June 7, 1978: Integrated entered into a
contract with Philippine Appliance Corporation
(Philacor) to print three volumes of "Philacor
Cultural Books"
July 30, 1979: only 1,097 out of the 3,450
had been delivered so it wrote to Fil-anchor
that delay will prejudice them
July 23, 1981: Fil-anchor delivered
amounting to P766,101.70 of printing paper
August 27, 1981: Integrated
paid P97,200.00 which was applied to its back
accounts covered by delivery invoices dated
September 29-30, 1980 and October 1-2,
1980
Integrated entered into an additional
printing contract with Philacor but it failed to
comply so Philacor demanded
compensation for the delay and damage it
suffered on account of Integrated's failure
Fil-anchor filed a collection suit
of P766,101.70 against Integrated
representing unpaid purchase price of printing
paper bought on credit
By way of counterclaim, Fil-anchor alleged
the delivery was short of 2,875 reams so it
suffered actual damages and failed to realize
expected profits and that complaint was
prematurely filed
RTC: Integrated ordered to pay Fil-
anchor P27,222.60 as compensatory and
actual damages after deducting P763,101.70
for the value of materials received, P100K as
moral damages, P30K for attorney's fees and
cost of suit. However, the counterclaim is
also meritorious - Integrated could have sold
books to Philacor and realized profit of
P790,324.30 for which the award of moral
damages was justified
CA: reversed and set aside the judgment of
the trial court ordered to pay Fil-
anchor P763,101.70 for unpaid printing paper
and deleted the award of P790,324.30 as
compensatory damages as well as the award
of moral damages and attorney's fees, for
lack of factual and legal basis
ISSUE: W/N Integrated should be awarded
compensatory and moral damages.
HELD: YES. CA affirmed
suspension of its deliveries to Integrated
whenever the latter failed to pay on time, as
in this case, is legally justified under the
second paragraph of Article 1583 of the Civil
Code hence the Fil-anchor did not violate the
order agreement
Fil-anchor is not a party to the agreement
between Philacor neither is it a contract pour
autrui so no direct bearing
indemnification for damages comprehends
not only the loss suffered, that is to say actual
 damages (damnum emergens), but also
profits which the obligee failed to obtain,
referred to as compensatory damages (lucrum
cessans). However, to justify a grant of actual
or compensatory damages, it is necessary to
prove with a reasonable degree of certainty,
premised upon competent proof and on the
best evidence obtainable by the injured party,
the actual amount of loss.
trial court in arriving at the amount are
mere estimates or self-serving claim of
unrealized profitprepared by Integrated
deletion of the award of moral damages is
proper, since private respondent could not be
held liable for breach of contract. Moral
damages may be awarded when in a breach
of contract the defendant acted in bad faith,
or was guilty of gross negligence amounting
to bad faith, or in wanton disregard of his
contractual obligation. Finally, since the
award of moral damages is eliminated, so
must the award for attorney's fees be also
deleted.
Spouses Buenaventura vs. CA
Facts: Sought to be declared null and void ab initio are
certain deeds of sale of real property executed by defendant
parentsLeonardo Joaquin and Feliciana Landrito in favor of
their co-defendant children. The petitioners contend that
there was no actual valid consideration and that assuming
that there was consideration in the sums reflected the
properties are more than three-fold times more valuable than
the small sums appearing therein. The RTC ruled in favor of
the defendants and dismissed the case. RTCs ruling was
affirmed by CA. Hence the appeal.
Issue:Whether or not there was a valid consideration in the
deeds of sale
Held: If there is a meeting of the minds of the parties as to
the price, the contract of sale is valid, despite the manner of
payment, or even the breach of that manner of payment. If
the real price is not stated in the contract, then the contract
of sale is valid but subject to reformation.
Art. 1355. Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a contract, unless
there has been fraud, mistake or undue influence.
Article 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.
Petitioners failed to prove any of the instances mentioned in
Articles 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 the exact value of
the subject matter of sale. All the respondents believed that
they received the commutative value of what they gave.
TAEDO V. CA (January 22, 1996)
FACTS:
Lazaro Taedo executed a deed of absolute sale in favor of
Ricardo Taedo and Teresita Barrera in which he conveyed a
parcel of land which he will inherit. Upon the death of his
father he executed an affidavit of conformity to reaffirm the
said sale. He also executed another deed of sale in favor of
the spouses covering the parcel of land he already inherited.
Ricardo registered the last deed of sale in the registry of
deeds in their favor.
Ricardo later learned that Lazaro sold the same property to
his children through a deed of sale.
ISSUE:
WON the Taedo spouses have a better right over the
property against the children of Lazaro Taedo.
HELD:
Since a future inheritance generally cannot be a subject of a
contract, the deed of sale and the affidavit of conformity
made by Lazaro has no effect. The subject of dispute
therefore is the deed of sale made by him in favor of
spouses Taedo and another to his children after he already
legally acquired the property.
Thus, although the deed of sale in favor of private
respondents was later than the one in favor of petitioners,
ownership would vest in the former because of the
undisputed fact of registration. On the other hand, petitioners
have not registered the sale to them at all.
Petitioners contend that they were in possession of the
property and that private respondents never took possession
thereof. As between two purchasers, the one who registered
the sale in his favor has a preferred right over the other who
has not registered his title, even if the latter is in actual
possession of the immovable property.
RURAL BANK OF STA. MARIA, PANGASINAN vs.
THE HONORABLE COURT OF APPEALS, ROSARIO
R. RAYANDAYAN, CARMEN R. ARCEO
G.R. No. 110672 September 14, 1999
Facts:
A parcel of land is registered in the name of
Manuel Behis, married to Cristina Behis. Said land
originally was part of a bigger tract of land owned by
Behis, father of Manuel Behis. And upon the latter's
death, his children, namely: Saro Behis, Marcelo
Behis, Manuel Behis, Lucia Behis, Clara Behis and
Arana Behis, in an extrajudicial settlement with
Simultaneous Sale of Inheritance, agreed to sell the
land to Manuel Behis, married to Cristina Behis but
which subsequently was explained as only an
arrangement adopted by them to facilitate transactions
over the land in a Confirmation of Rights of Co-
Ownership over real Property, showing that the Behis
brothers and sisters, including Manuel Behis, are still
co-owners thereof.
Manuel Behis mortgaged said land in favor of
the Bank in a Real Estate Mortgage as security for
loans obtained, covered by six promissory notes and
trust receipts under the Supervised Credit Program
and annotated at the back of the title. The mortgage,
the promissory notes and trust receipts bear the
signatures of both Manuel Behis and Cristina Behis.
Unfortunately thereafter, Manuel Behis was delinquent
in paying his debts.
Manuel Behis sold the land to the plaintiffs
in a Deed of Absolute Sale with Assumption of
Mortgage which bears the signature of his wife Cristina
Behis. Manuel Behis took it upon himself to secure the
signature of his wife and came back with it. On the
same date, plaintiffs and Manuel Behis
simultaneously executed another Agreement whereby
plaintiffs are indebted to Manuel Behis for the sum of
P2,400,000.00 payable in installments with
P10,000.00 paid upon signing and in case of default in
the installments, Manuel Behis shall have legal
recourse to the portions of the land equivalent to the
unpaid balance of the amounts in installments.
Plaintiffs did not present to the Register of Deeds said
two contracts and ask that the title in the name of
Manuel Behis be cancelled and a new one issued in
their name which normally a buyer does. Neither did
plaintiffs annotate at the back of the title the aforesaid
two contracts. Nor did they immediately go to the Bank
and present said two contracts. Thus, the title to the
land remained in the name of Manuel Behis.
The plaintiffs were unable to complete their
full payment to Manuel Behis of the sale of the land as
it is nowhere near P2,400,000.00. Meantime, the loan
in the name of Manuel Behis with the Bank secured by
the Real Estate Mortgage on the land continued to
accumulate being delinquent.
Issue:
Whether or not the Memorandum is voidable on
the ground of fraud
Ruling:
The Supreme Court held that the kind of fraud
that will vitiate a contract refers to those insidious
words or machinations resorted to by one of the
contracting parties to induce the other to enter into a
contract which without them he would not have agreed
to. Simply stated, the fraud must be the determining
cause of the contract, or must have caused the
consent to be given. It is believed that the non-
disclosure to the bank of the purchase price of the sale
of the land between private respondents and Manuel
Behis cannot be the "fraud" contemplated by Article
1338 of the Civil Code. From the sole reason
submitted by the petitioner bank that it was kept in
the dark as to the financial capacity of private
respondents, we cannot see how the omission or
concealment of the real purchase price could have
induced the bank into giving its consent to the
agreement; or that the bank would not have otherwise
given its consent had it known of the real purchase
price.
Secondly, pursuant to Article 1339 of the
Civil Code, silence or concealment, by itself, does not
constitute fraud, unless there is a special duty to
disclose certain facts, or unless according to good faith
and the usages of commerce the communication
should be made. Verily, private respondents
Rayandayan and Arceo had no duty, and therefore
did not act in bad faith, in failing to disclose the real
consideration of the sale between them and Manuel
Behis.
KATIPUNAN VS. KATIPUNAN, JR.
G.R. No. 132415, January 30, 2002
Facts:
Respondent Braulio Katipunan Jr. is the
registered owner of a lot and a five-door apartment
constructed thereon, which were occupied by lessees.
Respondent assisted by his brother petitioner Miguel
entered into a Deed of Absolute Sale with brothers
Edardo Balguma and Leopoldo Balguma, Jr. ( co-
petitioners), represented by their lawyer-father involving
the subject property for a consideration of P187,000.00.
So, the title was registered in the names of the Balguma
brothers and they started collecting rentals thereon.
Later, Braulio filed a complaint for annulment of
the Deed of Absolute Sale, contending that his brother
Miguel, Atty. Balguma and Inocencio Valdez ( one of the
petitioners) convinced him to work abroad. Through
insidious words and machinations, they made him sign a
document purportedly a contract of employment, which
document turned out to be a Deed of Absolute Sale. He
further alleged that he did not receive the consideration
stated in the contract. He claimed that there was
evident bad faith and conspiracy in taking advantage of
his ignorance, he being only a third grader.
The RTC dismissed the complaint because Braulio
failed to prove his cause of action since he admitted that
he obtained loans from the Balgumas, he signed the Deed
of Absolute Sale, and he acknowledged selling the
property and stopped collecting the rentals. But when the
case was elevated, the decision of RTC was reversed and
it was held that Braulio was incompetent, has very low
I.Q., illiterate and has a slow comprehension. The CA
based its decision on Arts.1332 and 1390 of NCC and
Sec. 2, Rule 92 of the Rules of Court, concerning the
incompetence of a party in contract.
Issue:
Whether there was a valid contract of sale
between the parties.
Held:
The Supreme Court found the petition devoid
of merit. There was a vitiated consent on the part of the
respondent as he signed the Deed of Absolute Sale
without the remotest idea of what it was and received no
consideration thereof. The contract entered into by the
parties being voidable contract, was correctly annulled on
appeal.
A contract of sale is born from the moment there
is a meeting of minds upon the thing which is the object
of the contract and upon the price. This meeting of minds
speaks of the intent of the parties in entering the
contract respecting the subject matter and the
consideration thereof. Thus, the elements of a contract
of a sale are consent, object, and price in money or its
equivalent. Under Art. 1330 of NCC, consent may be
vitiated by any of the following: mistake, violence,
intimidation, undue influence, and fraud. The presence of
any of these vices renders the contract voidable.
A contract where one of the parties is
incapable of giving consent or where consent is vitiated
by mistake, fraud, or intimidation is not void ab initio but
only voidable and is binding upon the parties unless
annulled proper court action. The effect of annulment is
to restore the parties to the status quo ante insofar as
legally and equitably possible---this much is dictated by
Art. 1398 provides that when the defect of the contract
consists in the incapacity of one of the parties, the
incapacitated person is not obliged to make any
restitution, except when he has been benefited by the
things or price received by him. Thus, since the Deed
of Absolute Sale between respondent and Balguma
brothers is voidable and hereby annulled, then the
restitution of the property and its fruits to respondent
is just and proper.
G.R. No. 150179 April 30, 2003
HEIRS OF WILLIAM SEVILLA, NAMELY:
WILFREDO SEVILLA,
WILSON SEVILLA, WILMA SEVILLA, WILLINGTON
SEVILLA, AND
WILLIAM SEVILLA, JR., HEIRS OF MARIA
SEVILLA, NAMELY:
AMADOR SEVILLA, JENO CORTES, VICTOR
CORTES, MARICEL
CORTES, ALELEI* CORTES AND ANJEI** CORTES
v. LEOPOLDO
SEVILLA, PETER SEVILLA, AND LUZVILLA
SEVILLA
Facts: Felisa donated her share of her sisters estate
to her nephew, Leopoldo.
Despite her old age and alleged sickness at the time
of the execution of the Deed
of Donation, the donation remains valid because of
the lack of evidence to rebut
the presumption of valid consent. There was no proof
of specific acts that
Leopold had employed to vitiate the consent of his
aunt. Also, the condition of
Felisa was also not proven to show her susceptibility
to fraud.
> Three Instruments Executed by Felisa Almirol:
(1) Last Will and Testament (November 25, 1985)
where she left to her nephew,
Leopoldo, her undivided share to the parcel of
land, which she co-owned with
her sisters (Honorata already died on 1982 and
hence, only Felisa ad Filomena
share it);
(2) Donation Inter Vivos (August 8, 1986) where she
ceded to Leopoldo the
same undivided share that was accepted by
Leopoldo in the same document;
(3) Deed of Extrajudicial Partition (September 3,
1986) of Honoratas estate
where she adjudicated the formers 1/3 share in
favour of herself and the heirs of
Filomena who had already died as well (December
10, 1973) ~ New TCTs
issued in favour of Felisa and Filomenas heirs but
were without signatures of
the Register of Deeds pending submission by Peter
Sevilla, son of Filomena, of
a Special Power of Attorney authorizing him to
represent the other heirs of > SUIT (June 21, 1990)
for Annulment of the Deed of Donation and the Deed
of
Extrajudicial Partition by Filomenas heirs >
CONTENTION of Heirs: that the
Deed of Donation was void for being tainted with
fraud because Felisa was
already 81y and seriously ill and of unsound mind at
the time of its execution;
that the Deed of Extrajudicial Partition was void
because it was executed
without their knowledge and consent > CONTENTION
of Leopoldo: that the
Deed of Donation was valid because Felisa was of
sound mind at the time of its
execution and that she freely and voluntarily ceded
her undivided share in
favour of Leopoldo > RTC Held (December 16, 1994):
Donation Valid due to
absence of proof of fraud but Partition Void due to
lack of legal requisites of
SPA
> VALID DONATION (SC Upheld RTC)
> Consent of Filomena: presumption of valid consent
absent full, clear and
convincing evidence of fraud or undue influence >
Must be established by
specific acts that vitiated a party's consent ~
allegation only that she lived with
Leopoldo, that she was already 82, that she was
seriously ill and of unsound
mind BUT without specifying what acts of Leopoldo
constituted fraud and
undue influence and on how these acts vitiated the
consent of Felisa and why
Felisa should be held incapable of exercising
sufficient judgment
> Legal Capacity of Filemona: already the owner of
1/2 undivided portion of the
Lot when she and Filomena inherited the 1/3 share of
their sister Honorata after
the latter's death ~ unnecessary that partition of
Honoratas estate should first be
had because what was donated to Leopoldo was the
1/2 undivided share of
Felisa
> Deed of Extrajudicial Partition VOID AB INITIO >
Felisa had no legal
capacity to execute the deed dividing the share of
her deceased sister Honorata
between her and the heirs of Filomena ~ WHY: she
was no longer the owner of
the 1/2 undivided portion of the Lot, having
previously donated the same to
Leopoldo ~ she was neither the owner nor the
authorized representative of
Leopoldo.
JARDINE DAVIES INC., petitioner, vs. COURT OF
APPEALS and FAR EAST MILLS SUPPLY
CORPORATION, respondents. GRN 128066 June
19, 2000
PURE FOODS CORPORATION, petitioner, vs.
COURT OF APPEALS and FAR EAST MILLS SUPPLY
CORPORATION, respondents. GRN 128069 June
19, 2000
FACTS:
In 1992, petitioner PUREFOODS decided to install two
1500 KW generators in its food processing plant in
San Roque, Marikina City. A bidding for the supply
and installation of the generators was held. Out of
the 8 prospective bidders who attended the pre-
bidding conference, only 3 bidders, namely,
respondent FAR EAST MILLS SUPPLY CORPORATION
(FEMSCO), MONARK and ADVANCE POWER submitted
bid proposals and gave bid bonds.
In a letter dated 12 December 1992 addressed to
FEMSCO President Alfonso Po, PUREFOODS confirmed
the award of the contract to FEMSCO. FEMSCO
submitted the required performance bond in the
amount of P1,841,187.90 and contractors all-risk
insurance policy in the amount of P6,137,293.00
which PUREFOODS through its VP Benedicto G. Tope
acknowledged in a letter dated 18 December 1992.
However, in a letter dated 22 December 1992,
PUREFOODS through its Senior VP Teodoro L.
Dimayuga unilaterally canceled the award as
significant factors were uncovered and brought to
their attention which dictate the cancellation and
warrant a total review and re-bid of the project.
FEMSCO protested the cancellation of the award.
Before the matter could be resolved, PUREFOODS
awarded the project and entered into a contract with
JARDINE NELL, a division of Jardine Davies, Inc.
(JARDINE), which was not one of the bidders.
FEMSCO sued PUREFOODS and JARDINE: PUREFOODS
for reneging on its contract, and JARDINE for its
unwarranted interference and inducement.
RTC- Pasig, granted JARDINEs Demurrer to Evidence.
The RTC ordered PUREFOODS to indemnify FEMSCO.
FEMSCO and PUREFOODS appealed to CA. FEMSCO
appealed the Resolution of the trial court which
granted the Demurrer to Evidence filed by JARDINE
resulting in the dismissal of the complaint against it.
CA affirmed the Decision of the trial court. It also
reversed the Resolution of the lower court and
ordered JARDINE to pay FEMSCO moral damages for
inducing PUREFOODS to violate the latters contract
with FEMSCO. CA denied MR. Hence, these 2
petitions for review.
ISSUE: WON FEMSCO should be awarded with Moral
Damages.
RULING:
YES. Contracts are perfected by mere consent, upon
the acceptance by the offeree of the offer made by
the offeror. From that moment, the parties are bound
not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which,
according to their nature, may be in keeping with
good faith, usage and law. The acceptance must not
qualify the terms of the offer. However, the
acceptance may be express or implied. For a contract
to arise, the acceptance must be made known to the
offeror. Acceptance can be withdrawn or revoked
before it is made known to the offeror.
In the instant case, since PUREFOODS started the
process of entering into the contract by conducting a
bidding, Art. 1326 of the Civil Code, which provides
that advertisements for bidders are simply
invitations to make proposals, applies.
The 12 December 1992 letter of petitioner
PUREFOODS to FEMSCO constituted acceptance of
respondent FEMSCOs offer as contemplated by law.
The tenor of the letter, i.e., This will confirm that
Pure Foods has awarded to your firm (FEMSCO) the
project, could not be more categorical. While the
same letter enumerated certain basic terms and
conditions, these conditions were imposed on the
performance of the obligation rather than on the
perfection of the contract.
But even granting arguendo that the 12 December
1992 letter of petitioner PUREFOODS constituted a
conditional counter-offer, respondent FEMCOs
submission of the performance bond and contractors
all-risk insurance was an implied acceptance, if not a
clear indication of its acquiescence to, the
conditional counter-offer,
Petitioner PUREFOODS also argues that it was never
in bad faith. But by the unilateral cancellation of the
contract, the defendant (petitioner PURE FOODS) has
acted with bad faith and this was further aggravated
by the subsequent inking of a contract between
defendant Purefoods and erstwhile co-defendant
Jardine. It is very evident that Purefoods thought that
by the expedient means of merely writing a letter
would automatically cancel or nullify the existing
contract entered into by both parties after a process
of bidding. This, to the Courts mind, is a flagrant
violation of the express provisions of the law and is
contrary to fair and just dealings to which every man
is due.
This Court has awarded in the past moral damages to
a corporation whose reputation has been
besmirched. In the instant case, respondent FEMSCO
has sufficiently shown that its reputation was
tarnished after it immediately ordered equipment
from its suppliers on account of the urgency of the
project, only to be canceled later. We thus sustain
respondent appellate courts award of moral
damages. We however reduce the award from P2Mto
P1M, as moral damages are never intended to enrich
the recipient. Likewise, the award of exemplary
damages by way of example for the public good is
excessive and should be reduced to P100,000.00.
Petitioner JARDINE maintains on the other hand that
respondent appellate court erred in ordering it to pay
moral damages to respondent FEMSCO as it
supposedly induced PUREFOODS to violate the
contract with FEMSCO. We agree. While it may seem
that petitioners PUREFOODS and JARDINE connived
to deceive respondent FEMSCO, we find no specific
evidence on record to support such perception. There
is no showing whatsoever that petitioner JARDINE
induced petitioner PUREFOODS. The similarity in the
design submitted to petitioner PUREFOODS by both
petitioner JARDINE and respondent FEMSCO, and the
tender of a lower offer by petitioner JARDINE are
insufficient to show that petitioner JARDINE indeed
induced petitioner PUREFOODS to violate its contract
with respondent FEMSCO.
GSIS v. Court of Appeals [G.R. No. L-40824. February
23, 1989]
FACTS
Private respondents, Mr. and Mrs. Isabelo R. Racho,
together with the spouses Mr. and Mrs. Flaviano Lagasca,
executed a deed of mortgage, in favor of petitioner
Government Service Insurance System (GSIS) and
subsequently, another deed of mortgage, in connection with
two loans granted by the latter in the sums of P 11,500.00
and P 3,000.00, respectively. A parcel of land co-owned by
said mortgagor spouses, was given as security under the
aforesaid two deeds. They also executed a promissory
note which states in part:
for value received, we the undersigned JOINTLY,
SEVERALLY and SOLIDARILY, promise to pay the
GOVERNMENT SERVICE INSURANCE SYSTEM the sum
of . . . (P 11,500.00) Philippine Currency, with interest at
the rate of six (6%) per centum compounded monthly
payable in . . . (120)equal monthly installments of . . . (P
127.65) each.
Both parties relied on the provisions of Section 29 of Act No.
2031, otherwise known as the Negotiable Instruments Law,
which provide that an accommodation party is one who has
signed an instrument as maker, drawer, acceptor of indorser
without receiving value therefor, but is held liable on the
instrument to a holder for value although the latter knew him
to be only an accommodation party.
ISSUE
Whether or not the executed promissory note is a negotiable
instrument.
RULING
NO.The promissory note hereinbefore quoted, as well as the
mortgage deeds subject of this case, are clearly not
negotiable instruments. These documents do not comply
with the fourth requisite to be considered as such under
Section 1 of Act No. 2031 because they are neither payable
to order nor to bearer. The note is payable to a specified
party, the GSIS. Absent the aforesaid requisite, the
provisions of Act No. 2031 would not apply; governance shall
be afforded, instead, by the provisions of the Civil Code and
special laws on mortgages.