Sie sind auf Seite 1von 47

Coquia vs. Fieldmens Insurance Co.

G.R. No. L-23276, November 29, 1968

If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor upon a third person.

On Dec. 1, 1961, Fieldmens Insurance co. Issued in favor of the Manila Yellow Taxicab a common
carrier insurance policy with a stipulation that the company shall indemnify the insured of the sums
which the latter wmy be held liable for with respect to death or bodily injury to any faire-paying
passenger including the driver and conductor.
The policy also stated that in the event of the death of the driver, the Company shall indemnify his
personal representatives and at the Companys option may make indemnity payable directly to the
claimants or heirs of the claimants.
During the policys lifetime, a taxicab of the insured driven by Coquia met an accident and Coquia
When the company refused to pay the only heirs of Coquia, his parents, they institued this
complaint. The company contends that plaintiffs have no cause of action since the Coquias have no
contractual relationship with the company.

Whether or not plaintiffs have the right to collect on the policy.

Athough, in general, only parties to a contract may bring an action based thereon, this rule is subject
to exceptions, one of which is found in the second paragraph of Article 1311 of the Civil Code of the
Philippines, reading: "If a contract should contain some stipulation in favor of a third person, he
may demand its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties
must have clearly and deliberately conferred a favor upon a third person." This is but the
restatement of a well-known principle concerning contracts pour autrui, the enforcement of which
may be demanded by a third party for whose benefit it was made, although not a party to the
contract, before the stipulation in his favor has been revoked by the contracting parties
The policy under consideration is typical of contracts pour autrui, this character being made more
manifest by the fact that the deceased driver paid fifty percent (50%) of the corresponding
premiums, which were deducted from his weekly commissions. Under these conditions, it is clear
that the Coquias who, admittedly, are the sole heirs of the deceased have a direct cause of
action against the Company, and, since they could have maintained this action by themselves,
without the assistance of the Insured, it goes without saying that they could and did properly join
the latter in filing the complaint herein.

Kauffman vs. National Bank

G.R. No. 16454, September 29, 1921

"In applying this test to a stipulation pour autrui, it matters not whether the stipulation is in the
nature of a gift or whether there is an obligation owing from the promise to the third person.
That no such obligation exists may in some degree assist in determining whether the parties
intended to benefit a third person, whether they stipulated for him."
George A. Kauffman, was the president of a domestic corporation engaged chiefly in the exportation
of hemp from the Philippine Islands and known as the Philippine Fiber and Produce Company, of
which company the plaintiff apparently held in his own right nearly the entire issue of capital stock.
He was based in New York City and as the president of the said company, he was entitled to receive
a dividend; as per instruction, Wicks who worked as the treasurer of the company, went to the
exchange department of PNB and requested a telegraphic transfer of the money to Kauffman.

The PNB agreed with additional charges for the transaction. The treasurer issued a check to PNB
and it was accepted. The PNBs representative in New York sent a message suggesting the
advisability of withholding this money from Kauffman, in view of his reluctance to accept certain
bills of the company. PNB acquiesced in this and dispatched to its NY agency a message to withhold
the Kauffman payment as suggested. Meanwhile, Wicks then informed Kauffman that his dividends
had been wired to his credit in the NY agency of PNB. So Kauffman went to PNB office in NYC and
demanded the money, however, he was refused payment. So he filed this complaint.

Whether or not Kauffman has a right of action against PNB?

In Art. 1257, par. 2, should the contract contain any stipulation in favor of a third person, he may
demand its fulfillment, provided he has given notice of his acceptance to the person bound before
the stipulation has been revoked.
In the light of the conclusion thus stated, the right of the plaintiff to maintain the present action is
clear enough; for it is undeniable that the bank's promise to cause a definite sum of money to be
paid to the plaintiff in NYC is a stipulation in his favor within the meaning of the paragraph above
quoted; and the circumstances under which that promise was given disclose an evident intention on
the part of the contracting parties that the plaintiff should have the money upon demand in NYC.
The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion
the right in him to maintain an action to recover it.

It will be noted that under the paragraph cited a third person seeking to enforce compliance with a
stipulation in his favor must signify his acceptance before it has been revoked. In this case the
plaintiff clearly signified his acceptance to the bank by demanding payment; and although PNB had
already directed its NY agency to withhold payment when this demand was made, the rights of the
plaintiff cannot be considered to as there used, must be understood to imply revocation by the
mutual consent of the contracting parties, or at least by direction of the party purchasing he
exchange. Thus, it was said, "Cable transfers, therefore, mean a method of transmitting money by
cable wherein the seller engages that he has the balance at the point on which the payment is
ordered and that on receipt of the cable directing the transfer his correspondent at such point will
make payment to the beneficiary described in the cable. All these transaction are matters of
purchase and sale create no trust relationship."

Young vs. CA
G.R. No. 79518 January 13, 1989

The requisites of a stipulation pour autrui or a stipulation in favor of a third person are the
following: (1) there must be a stipulation in favor of a third person. (2) the stipulation must be a
part, not the whole of the contract. (3) the contracting parties must have clearly and
deliberately conferred a favor upon a third person, not a mere incidental benefit or interest. (4)
the third person must have communicated his acceptance to the obligor before its revocation.
(5) neither of the contracting parties bears the legal representation or authorization of the third

Defendant Philippine Holding, Inc. is the former owner of a piece of land located at Soler St., Sta.
Cruz, Manila, and a two storey building erected thereon, consisting of six units; Unit 1350 which is
vacant, Unit 1352 occupied by Antonio Young, Unit 1354 by Rebecca C. Young, Unit 1356 by Chui
Wan and Felisa Tan Yu, Unit 1358 by Fong Yook Lu and Ellen Yee Fong and Unit 1360 by the Guan
Heng Hardware (Rollo, pp. 14-15).

The owner Philippine Holding, Inc. secured an order from the City Engineer of Manila to demolish
the building. Antonio Young, then a tenant of said Unit 1352, filed an action to annul the City
Engineer's demolition Order (Civil Case No. 123883) entitled Antonio S. Young vs. Philippine
Holding, Inc. before the then Court of First Instance of Manila, Branch XXX. As an incident in said
case, the parties submitted a Compromise Agreement to the Court on September 24, 1981.
Paragraph 3 of said agreement provides that plaintiff (Antonio S. Young) and Rebecca Young and all
persons claiming rights under them bind themselves to voluntarily and peacefully vacate the
premises which they were occupying as lessees (Units 1352 and 1354, respectively) which are the
subject of the condemnation and demolition order and to surrender possession thereof to the
defendant Philippine Holding, Inc. within sixty (60) days from written notice, subject to the proviso
that should defendant decided to sell the subject property or portion thereof, "plaintiff and Rebecca
C. Young have the right of first refusal thereof." (Rollo, p. 49).

On September 17, 1981, Philippine Holding, Inc. had previously sold the above said property
described in the compromise agreement by way of dacion in payment to PH Credit Corporation
(Rollo, p. 49).

On November 9, 1982, the property was subdivided into two parcels, one 244.09 sq.m. in area
covering Units 1350, 1352 and 1354 (TCT No. 152439) and the other 241.71 sq.m. in area covering
Units 1356, 1358 and 1360 (TCT No. 152440) and both titles were placed in the name of PH Credit

On December 8, 1982, PH Credit Corporation sold the property covered by TCT 152439 to the
Blessed Land Development Corporation represented by its President Antonio T. S. Young; and on
September 16, 1983, PH Credit Corporation sold the property covered by TCT 152440 embracing
Units 1356, 1358 and 1360 to spouses Fong Yook Lu and Ellen Yee Fong (Rollo, p. 15).

Whether or not petitioner can enforce the compromise agreement

This issue has already been squarely settled by this Court in the negative in J.M. Tuason & Co., Inc.
v. Cadampog (7 SCRA 808 [1963])where it was ruled that appellant is not entitled to enforce a
compromise agreement to which he was not a party and that as to its effect and scope, it has been
determined in the sense that its effectivity if at all, is limited to the parties thereto and those
mentioned in the exhibits
The requisites of a stipulation pour autrui or a stipulation in favor of a third person are the
(1) there must be a stipulation in favor of a third person.
(2) the stipulation must be a part, not the whole of the contract.
(3) the contracting parties must have clearly and deliberately conferred a favor
upon a third person, not a mere incidental benefit or interest.
(4) the third person must have communicated his acceptance to the obligor before
its revocation.
(5) neither of the contracting parties bears the legal representation or authorization
of the third party. (Florentino v. Encarnacion, Sr., 79 SCRA 193 [1977]).
Assuming that petitioner is correct in claiming that this is a stipulation pour autrui it is unrebutted
that she did not communicate her acceptance whether expressly or impliedly. She insists however,
that the stipulation has not yet been revoked, so that her present claim or demand is still timely.

South Western Sugar vs. Atlantic Gulf

G.R. No. L-7382, June 29, 1955

It is true that under article 1324 of the new Civil Code, the general rule regarding offer and
acceptance is that, when the offerer gives to the offeree a certain period to accept, "the offer
may be withdrawn at any time before acceptance" except when the option is founded upon
consideration, but this general rule must be interpreted as modified by the provision of article
1479 above referred to, which applies to "a promise to buy and sell" specifically. As already
stated, this rule requires that a promise to sell to be valid must be supported by a consideration
distinct from the price.

On March 24, 1953, defendant-appellant Atlantic granted plaintiff-appellee Southwestern an option
period of ninety days to buy the formers barge No. 10 for the sum of P30,000. On May 11 of the
same year, Southwestern Company communicated its acceptance of the option to Atlantic through a
letter, to which the latter replied that their understanding was that the "offer of option" is to be a
cash transaction and to be effected "at the time the lighter is available." On June 25, Atlantic advised
the Southwestern Company that since there is still further work for it, the barge could not be turned
over to the latter company.

On June 27, 1953, the Southwestern Company filed this action to compel Atlantic to sell the barge in
line with the option, depositing with the court a check covering the sum of P30,000, but said check
was later withdrawn with the approval of the court. On June 29, the Atlantic withdrew its "offer of
option" with due notices to Southwestern Company stating that the option was granted merely as a
favor. The Atlantic contended that the option to sell it made to Southwestern Company is null and
void because said option to sell is not supported by any consideration.

The trial court granted herein plaintiff-appellee Southwestern Companys action for specific
performance and ordered herein defendant-appellant Atlantic to pay damages equivalent to 6 per
centum per annum on the sum of P30,000 from the date of the filing of the complaint.

Whether or not Atlantic is liable for specific performance and to pay damages in favor of
Southwestern Company.

The Court reiterated that "an accepted unilateral promise" can only have a binding effect if
supported by a consideration, which means that the option can still be withdrawn, even if accepted,
if said option is not supported by any consideration. The option that Atlantic had provided was
without consideration, hence, can be withdrawn notwithstanding Southwestern Companys
acceptance of said option.

American jurisprudence hold that an offer, once accepted, cannot be withdrawn, regardless of
whether it is supported or not by a consideration, but the specific provisions of Article 1479
commands otherwise. While under the "offer of option" in question appellant Atlantic has assumed
a clear obligation to sell its barge to appellee Southwestern Company and the option has been
exercised in accordance with its terms, and there appears to be no valid or justifiable reason for the
former to withdraw its offer, the Court cannot adopt a different attitude because the law on the
matter is clear.

Atkins Kroll and Co., Inc. vs. Cua Hian Tek

G.R. No. L-9871, January 31, 1958

Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree
should decide to exercise his option within the specified time. After accepting the promise
and before he exercises his option, the holder of the option is not bound to buy. He is free
either to buy or not to later. In this case, however, upon accepeting herein petitioner's offer a
bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the
obligations of a purchaser. He did not just get the right subsequently to buy or not to buy. It
was not a mere option then; it was bilalteral contract of sale.

On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to respondent B. Cu Hian
Tek (Hian Tek) offering (a) 400 cartons of Luneta brand Sardines in Tomato Sauce 48 / 15-oz. Ovals
at $8.25 per carton, (b) 300 cartons of Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per
carton, and (c) 300 cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per
carton, with all of the offers subject to reply by September 23, 1951. Hian Tek unconditionally
accepted the said offer through a letter delivered on September 21, 1951, but Atkins failed to deliver
the commodities due to the shortage of catch of sardines by the packers in California.

Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the same in his
favor. Upon Atkins appeal, the Court of Appeals affirmed said decision but reduced the damages to
P3,240.15 representing unrealized profits. Atkins herein contends that there was no such contract of
sale but only an option to buy, which was not enforceable for lack of consideration because it is
provided under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted
unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration distinct from the price. Atkins also insisted
that the offer was a mere offer of option, because the "firm offer" was a continuing offer to sell until
September 23.

Whether or not there is a contract of sale.

Petitioners argument assumed that only a unilateral promise arose when the respondent accepted
the offer, which is incorrect because a bilateral contract to sell and to buy was created upon
respondents acceptance.

Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardines and / or to pay for
their price, he could also be sued. But his letter-reply to Atkins indicated that he accepted "the firm
offer for the sale" and that "the undersigned buyer has immediately filed an application for import
license. After accepting the promise and before he exercises his option, the holder of the option is
not bound to buy. In this case at bar, however, upon respondents acceptance of herein petitioner's
offer, a bilateral promise to sell and to buy ensued, and the respondent had immediately assumed
the obligations of a purchaser.
Sanchez vs. Rigos
G.R. No. L-25494 June 14, 1972

This view has the advantage of avoiding a conflict between Articles 1324 on the general
principles on contracts and 1479 on sales of the Civil Code, in line with the cardinal
rule of statutory construction that, in construing different provisions of one and the same law or
code, such interpretation should be favored as will reconcile or harmonize said provisions and
avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting
the Code, its author has maintained a consistent philosophy or position.

In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant
Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez for
the sum of P1,510.00 within two (2) years from said date, a parcel of land situated in the barrios of
Abar and Sibot, San Jose, Nueva Ecija. It was agreed that said option shall be deemed "terminated
and elapsed," if Sanchez shall fail to exercise his right to buy the property" within the stipulated
period. On March 12, 1963, Sanchez deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and
filed an action for specific performance and damages against Rigos for the latters refusal to accept
several tenders of payment that Sanchez made to purchase the subject land.

Defendant Rigos contended that the contract between them was only a unilateral promise to sell,
and the same being unsupported by any valuable consideration, by force of the New Civil Code, is
null and void." Plaintiff Sanchez, on the other hand, alleged in his compliant that, by virtue of the
option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and
committed to buy" the land described in the option. The lower court rendered judgment in favor of
Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his
favor the requisite deed of conveyance. The Court of Appeals certified the case at bar to the Supreme
Court for it involves a question purely of law.
Whether or not there is a Contract to Buy and Sell
The instrument executed in 1961 is not a "contract to buy and sell," but merely granted plaintiff an
"option" to buy, as indicated by its own title "Option to Purchase." The option did not impose upon
plaintiff Sanchez the obligation to purchase defendant Rigos' property. Rigos "agreed, promised and
committed" herself to sell the land to Sanchez for P1,510.00, but there is nothing in the contract to
indicate that her aforementioned agreement, promise and undertaking is supported by a
consideration "distinct from the price" stipulated for the sale of the land. The lower court relied
upon Article 1354 of the Civil Code when it presumed the existence of said consideration, but the
said Article only applies to contracts in general.

However, it is not Article 1354 but the Article 1479 of the same Code which is controlling in the case
at bar because the latters 2nd paragraph refers to "sales" in particular, and, more specifically, to "an
accepted unilateral promise to buy or to sell." Since there may be no valid contract without a cause
or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer
to sell which, if accepted, results in a perfected contract of sale. Upon mature deliberation, the Court
reiterates the doctrine laid down in the Atkins case and deemed abandoned or modified the view
adhered to in the Southwestern Company case.
Rural Bank of Paranaque vs. Remolado
G.R. No. L-62051 March 18, 1985

Courts operate not because one person has been defeated or overcome by another, but
because he has been defeated or overcome illegally. Men may do foolish things, make
ridiculous contracts, use miserable judgment, and lose money by them-indeed, all they have in
the world; but not for that alone can the law intervene and restore. There must be, in addition,
a violation of law, the commission of what the law knows as an actionable wrong before the
courts are authorized to lay hold of the situation and remedy it.


Isidra Remolado, a resident of Rizal, owned a lot with a bungalow which was leased to Beatriz
Cabagnot. The said lot is located at Molave St., United Paranaque, Rizal. In 1966 she mortgaged the
lot to the Rural Bank of Paranaque as security for a loan of P15,000. She paid the loan. On April 17,
1971 she again mortgaged it to the bank. She failed to pay the loan amounting toP18,000. The bank
foreclosed the mortgage on July 21, 1972 and bought the lot at the foreclosure sale at P22,192.70.
The lot had a one year period of redemption which was to expire on August21, 1973.On August 8 ,
1973 the bank advised her that she has up to August 23 to redeem the property with the price
amounting to P 25,491.96. No redemption was made. The bank consolidated its ownership of the
property and was issued the title of the land on September 5. However, on September 24 the bank,
again, extended the deadline to October 31, without specifying there purchase price. On October 26,
Remolado and her daughter promised to pay the bank P33,000 on October 31. She failed to meet
the deadline and only paid the bank on November 5.The amount was returned to her the following
day for the assistant manager did not intend to receive the money for the bank was no longer willing
to allow the repurchase. On that day, November 6, she filed an action to compel the bank to return
the property to her for P25,491.96 plus interest and other charges and pay P35,000 as damages. The
repurchase price was not consigned. A notice of lis pendens was registered. On November 15, the
bank sold the property to Pilar Aysip for P50,000, along with the new title issued to Aysip with an
annotation of lis pendens. The trial court ordered the bank to return the property to Remolado upon
payment of P25,491.96 plus interest and other bank charges and P15,000 for damages.
Whether or not the property may be returned to Remolado
There was no binding agreement for its repurchase. Even on the assumption that the bank should
be bound by its commitment to allow repurchase on or before October 31, 1973, still Remolado had
no cause of action because she did not repurchase the property on that date.
As a rule, equity follows the law. There may be a moral obligation, often regarded as an equitable
consideration (meaning compassion), but if there is no enforceable legal duty, the action must fail
although the disadvantaged party deserves commiseration or sympathy.

Montilla vs. CA
G.R. No. L-47968. May 9, 1988
The action is also dismissible upon another legal ground. Assuming arguendo veritability of the
oral promise to sell by Montilla, the promise was nevertheless not binding upon her in view of
the absence of any consideration therefor distinct from the stipulated price. This is the principle
laid down by the second paragraph of Article 1479: "An accepted unilateral promise to .. sell a
determinate thing for a price certain is binding upon the promissor if the promise is supported
by a consideration distinct from the price."


An action was initiated in the Court of First Instance of Iloilo on April 27, 1972 by Emilio Aragon,
Jr., to compel Lina Montilla to comply with a verbal contract to sell to him a piece of land situated
at Poblacion, Iloilo City, known as Lot No. 4 of the Consolidated Subdivision plan (LRC) Psc-11605.
In his complaint, Aragon claimed that in the last week of June, 1969, Montilla had orally offered to
sell the lot to him at a price of P57,650.00 (at the rate of P50.00 per square meter), the price being
payable at any time within a three-year period from June, 1969 provided that Aragon constructed
on the lot a house of strong materials and paid a nominal monthly rental in the meantime; but
despite Aragon's acceptance of the offer, fulfillment by him of the specified conditions, and his
seasonable tender of the purchase price, Montilla had refused to comply with her obligation.

In her answer Montilla categorically denied ever having entered into such an agreement, and set up
the affirmative defenses of (1) unenforceability of the alleged agreement under the Statute of
Frauds; and (2) failure of the complaint to state a cause of action, no allegation having been made
therein of any consideration for the promise to sell distinct and separate from the price, as required
by Article 1479 of the Civil Code.

Whether or not there is an enforceable contract to sell.
It is difficult to see by what process of ratiocination the Trial Court arrived at the conclusion that
Montillas answer had admitted the offer to sell as any such admission is absolutely precluded by
the specific and unequivocal denial by Montilla of the claimed verbal contract to sell. She in fact
branded the allegations to that effect in the complaint as outrageously false, fantastically ridiculous
and despicable fabrications of plaintiff . Nor may any admission be inferred from the circumstance
that Montilla, apart from unqualifiedly denying the contract to sell, had also asserted in her
responsive pleading that the contract was unenforceable because violative of the Statute of Frauds
and because not supported by any consideration distinct from the price. For while those defenses
imply an acceptance by the pleader of the truth of the agreement at which the defenses are directed,
the acceptance is at best hypothetical, assumed only for purposes of determining the validity of the
defenses, but cannot in any sense be taken as an unconditional and irretrievably binding factual
admission. The import of the answer, couched in language that could not be made any plainer, is
that there was no verbal contract to sell ever agreed to by Montilla, but that, even assuming
hypothetically, or for the sake of argument that there was, the agreement was unenforceable
because in breach of the Statute of Frauds.

Natino vs. IAC

G.R. No. 73573 May 23, 1991
The second paragraph of Article 1479 of the Civil Code expressly provides: An accepted
unilateral. promise to buy or to sell a determinate thing for a price certain is binding upon the
promissory if the promise is supported by a consideration distinct from the price.

Petitioners Trinidad and Epifanio Natino executed a real-estate mortgage in favor of respondent-
bank Rural Bank of Aguilar, for security to a loan amounting to P2000. On the agreed date, the
spouses failed to pay the said loan and in the foreclosure of the property, the bank was the highest
bidder at its auction. Along with the certificate of sale, a notice for the redemption period was sent
to the spouses. Still, upon the expiration of the said period, no redemption was made. Upon
finalization of the deed of sale, the spouses deposited P4000 to the bank, and stated that they were
granted the extension of the redemption period and it was understood that it was a pay when
able arrangement. This said agreement was not approved by the banks Board of Directors, nor was
it ratified. The court ruled in favor of the bank, hence this petition

Whether or not the agreement is valid

Given the provisions of article 1180, the contentions of the petitioner would be meritorious.
However, because of the fact that such agreement was not approved by the Board of Directors, it
was held that a meeting of minds did not occur, therefore making the said arrangement not
binding. The case was dismissed

Yao Ka Sin Trading vs. CA

G.R. No. L-53820 June 15, 1992

In 1973, Constancio Maglana, president of Prime White Cement Corporation, sent an offer letter to
Yao Ka Sin Trading. The offer states that Prime White is willing to sell 45,000 bags of cement at
P24.30 per bag. The offer letter was received by Yao Ka Sins manager, Henry Yao. Yao accepted the
letter and pursuant to the letter, he sent a check in the amount of P243,000.00 equivalent to the
value of 10,000 bags of cement. However, the Board of Directors of Prime White rejected the offer
letter sent by Maglana but it considered Yaos acceptance letter as a new contract offer hence the
Board sent a letter to Yao telling him that Prime White is instead willing to sell only 10,000 bags to
Yao Ka Sin and that he has ten days to reply; that if no reply is made by Yao then they will consider
it as an acceptance and that thereafter Prime White shall deposit the P243k check in its account and
then deliver the cements to Yao Ka Sin. Henry Yao never replied.
Later, Yao Ka Sin sued Prime White to compel the latter to comply with what Yao Ka Sin considered
as the true contract, i.e., 45,000 bags at P24.30 per bag. Prime White in its defense averred that
although Maglana is empowered to sign contracts in behalf of Prime White, such contracts are still
subject to approval by Prime Whites Board, and then it still requires further approval by the
National Investment and Development Corporation (NIDC), a government owned and controlled
corporation because Prime White is a subsidiary of NIDC.
Henry Yao asserts that the letter from Maglana is a binding contract because it was made under the
apparent authority of Maglana.

Whether or not the President has authority to enter into binding contracts of third person
The Board may enter into contracts through the president. The president may only enter into
contracts upon authority of the Board. Hence, any agreement signed by the president is subject to
approval by the Board. Unlike a general manager (like the case of Francisco vs GSIS), the president
has no apparent authority to enter into binding contracts with third persons. Further, if indeed the
by-laws of Prime White did provide Maglana with apparent authority, this was not proven by Yao
Ka Sin.
As a rule, apparent authority may result from (1) the general manner, by which the corporation
holds out an officer or agent as having power to act or, in other words, the apparent authority with
which it clothes him to act in general or (2) acquiescence in his acts of a particular nature, with
actual or constructive knowledge thereof, whether within or without the scope of his ordinary
powers. These are not present in this case.
Also, the subsequent letter by Prime White to Yao Ka Sin is binding because Yao Ka Sins failure to
respond constitutes an acceptance, per stated in the letter itself which was not contested by Henry
Yao during trial.

Diamante vs. CA
G.R. No. L-51824 February 7, 1992


A fishery lot, encompassing an area of 9.4 hectares and designated as Lot No. 518-A of the Cadastral
Survey of Dumangas, Iloilo, was previously covered by Fishpond Permit No. F-2021 issued in the
name of Anecita Dionio. Upon Anecita's death, her heirs, petitioner Diamante and Primitivo Dafeliz,
inherited the property which they later divided between themselves; petitioner got 4.4. hectares
while Dafeliz got 5 hectares. It is the petitioner's share that is the subject of the present controversy.
Primitivo Dafeliz later sold his share to private respondent.

On 21 May 1959, petitioner sold to private respondent his leasehold rights over the property in
question for P8,000.00 with the right to repurchase the same within three (3) years from said date.

On 16 August 1960, private respondent filed an application with the Bureau of Fisheries, dated 12
July 1960, for a fishpond permit and a fishpond lease agreement over the entire lot, submitting
therewith the deeds of sale executed by Dafeliz and the petitioner.

Pressed by urgent financial needs, petitioner, on 17 October 1960, sold all his remaining rights over
the property in question to the private respondent for P4,000.00.
On 25 October 1960, private respondent, with his wife's consent, executed in favor of the petitioner
an Option to Repurchase the property in question within ten (10) years from said date, with a ten-
year grace period.

Private respondent submitted to the Bureau of Fisheries the definite deed of sale; he did not,
however, submit the Option to Repurchase.

Thereafter, on 2 August 1961, the Bureau of Fisheries issued to private respondent Fishpond Permit
No. 4953-Q; on 17 December 1962, it approved FLA No. 1372 in the latter's favor.

On 11 December 1963, petitioner, contending that he has a valid twenty-year option to repurchase
the subject property, requested the Bureau of Fisheries to nullify FLA No. 1372 insofar as the said
property is concerned. On 18 December 1964, his letter-complaint was dismissed. Petitioner then
sought a reconsideration of the dismissal; the same was denied on 29 April 1965. His appeal to the
Secretary of the DANR was likewise dismissed on 30 October 1968. Again, on 20 November 1968,
petitioner sought for a reconsideration; this time, however, he was successful. On 29 August 1969,
the DANR Secretary granted his motion in an Order cancelling FLA No. 1372.


Whether or not the Option to Repurchase was a promise to sell.


The Option to Repurchase executed by private respondent in the present case, was merely
a promise to sell, which must be governed by Article 1479 of the Civil Code which reads as follows:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price

certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.

A unilateral promise to buy or sell is a mere offer, which is not converted into a contract except at
the moment it is accepted. Acceptance is the act that gives life to a juridical obligation, because,
before the promise is accepted, the promissor may withdraw it at any time. Upon acceptance,
however, a bilateral contract to sell and to buy is created, and the offeree ipso facto assumes the
obligations of a purchaser; the offeror, on the other hand, would be liable for damages if he fails to
deliver the thing he had offered for sale.

Liguez vs. CA
G.R. No. L-11240 December 18, 1957

Plaintiff averred to be a legal owner, pursuant to a deed of donation of a land, executed in her favor
by the late owner, Salvador P. 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 P. Lopez, a married man; and that the property had been
adjudicated to the appellees as heirs of Lopez by the court of First Instance, since 1949.
The Court of Appeals rejected the appellant's claim on the basis of the well- known rule "in pari
delicto non oritur actio" as embodied in Article 1306 of 1889


Whether or not CAs rejection was correct


CA erred in applying to the present case the pari delicto rule. First, because it can not be said that
both parties here had equal guilt when we consider that as against the deceased Salvador P. Lopez,
who was a man advanced in years and mature experience, the appellant was a mere minor, 16 yrs of
age, when the donation was made; that there is no finding made by CA that she was fully aware of
the terms of the bargain entered into by and Lopez and her parents; that, her acceptance in the deed
of donation (Art. 741) did not necessarily imply knowledge of conditions and terms not set forth
therein; and that the substance of the testimony of the instrumental witnesses is that it was the
appellant's parents who insisted on the donation before allowing her to live with Lopez. These facts
are more suggestive of seduction than of immoral bargaining on the part of appellant. It must not be
forgotten that illegality is not presumed, but must be duly and adequately proved. Second, 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.

CA correctly held that Lopez could not donate the entirety of the property in litigation, to the
prejudice of his wife Maria Ngo, because said property was conjugal in character and the right of the
husband to donate community property is strictly limited by law

Ong vs. Ong

G.R. No. L-67888 October 8, 1985


On February 25, 1976, Imelda Ong, for and in consideration of P1.00 and other valuable
considerations, executed a quitclaim over a parcel of land in Makati in favor of Sandra Maruzzo,
then a minor. On November 19, 1980, Imelda revoked the quitclaim and donated the property to her
son Rex. On June 20, 1983, Sandra, through her guardial ad litem Alfredo Ong, filed an action to
recover the land and to declare the donation to Rex null and void. In their responsive pleading,
petitioners claimed that the quitclaim is equivalent to a donation which requires acceptance by the
donee, and since Sandra was a minor, there was no valid acceptance. The trial court ruled that the
quitclaim is equivalent to a sale. The Intermediate Appellate Court affirmed the decision.


Whether or not the quitclaim is equivalent to a deed of sale.


The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence
of the existence of a valuable consideration, the party alleging lack of consideration has the burden
of proving such allegation. Even granting that the Quitclaim deed in question is a donation, Article
741 of the Civil Code provides that the requirement of the acceptance of the donation in favor of
minor by parents of legal representatives applies only to onerous and conditional donations where
the donation may have to assume certain charges or burdens. Donation to an incapacitated donee
does not need the acceptance by the lawful representative if said donation does not contain any
condition. In simple and pure donation, the formal acceptance is not important for the donor
requires no right to be protected and the donee neither undertakes to do anything nor assumes any
obligation. The Quitclaim now in question does not impose any condition.

Cabanatuan vs. Lazaro

G.R. No. L-29256 June 30, 1971


Plaintiff-appellant sought the reformation of an agreement pursuant to Article 1359 of the New Civil
Code. The said lease was entered into on 28 December 1959 between plaintiff-appellant, through its
City Mayor, and defendants-appellees over a portion of Lot No. 1511 of Cabanatuan Cadastre (Cad.
Case No. 3, G.L.R.O. Rec. No. 94) situated in the City of Cabanatuan which plaintiff-appellant
owned, by specifically deleting paragraph 6 thereof. The said paragraph gives the defendants-
appellees an option to renew the lease for another 10 years after the expiration of the original
period, and reads:

6. That after the expiration of the ten (10) years from January 1, 1960, the party of
the second part may, at his option choose to extend this lease for another period of
ten years.

It is alleged, among others, that due to mistake or accident, the aforesaid provision was inserted in
the agreement and that the same does not reflect the true intention of the parties. It is contended
that while Resolution No. 1030 of the Municipal Board of the City of Cabanatuan, approved on, 17
December 1959, authorizes the City Mayor to enter into a contract of lease on its behalf "for a period
of 10 years", it does not provide for authority to extend the period.

Defendants-appellees moved for the dismissal of the complaint for the reasons that: (a) the action is
premature (b) there is no cause of action; and (c) the court has no jurisdiction over the subject and
nature of the action. The court a quo granted the motion to dismiss in order of 11 November 1967
finding the same to be meritorious.


Whether or not the agreement can be reformed.

Every party to a contract has a clear interest that the instrument bodying its terms should conform
to the actual and true agreement had by and between the contracting parties. Hence, if by accident
or mistake, as expressly pleaded in the complaint, the document does not conform to or reflect the
actual agreement, either party can ask for the reformation of the instrument as provided by Articles
1359, et seq. (Chapter 4, Title 2, Book 4) of the Civil Code of the Philippines, to forestall future
litigations on the true import of the agreement.

That the lessee's option to renew the Contract for another term of 10 years (which is alleged by
appellant not to have been intended by the parties) was not yet exercisable when the suit for
reformation was instituted by the petitioner City (plaintiff below because the original and
uncontested lease term of 10 years had not yet expired, does not render the action premature, for
precisely its purpose was to have such option embodied in the instrument declared ineffective as
one not agreed upon by the parties. No cogent reason exists with the plaintiff-appellant should wait
for the lapse of the first ten years before having the instrument reformed, when the inconsistency
between it and the true agreement existed right from the time the document was executed. The
contrary rule invoked by the appellee, and sustained by the court below, tends to make the
reformation more difficult, for the evidence on the time intent of the parties may disappear before
the first ten years are over.

Cosio vs. Palileo

G.R. No. L-18452 May 31, 1965


A two-story building, was formerly owned by Felicisima Vda. de Barza. It is located at 25 (formerly
6) Antipolo Street, Pasay City, on a lot belonging to the Hospicio de San Juan de Dios. On October 4,
1950, this house and the leasehold right to the lot were bought by respondent Cherie Palileo who
paid part of the purchase price and mortgaged the house to secure the payment of the balance.

It appears that respondent Palileo defaulted in her obligation, because of which the mortgage was
foreclosed and the house was advertised for sale. Fortunately for her, however, respondent Palileo
was able to raise money on December 18, 1951 before the house could be sold at public auction. On
this date, respondent Palileo received from petitioner Beatriz Cosio de Rama the sum of P12,000 in
consideration of which she signed a document entitled "Conditional Sale of Residential Building,"
purporting to convey to petitioner Cosio de Rama the house in question. Under this document, the
right to repurchase the house within one year was reserved to respondent Palileo. On the same day,
the parties entered into an agreement whereby respondent Palileo remained in possession of the
house as tenant, paying petitioner Cosio de Rama a monthly rental of P250.

Petitioner Cosio de Rama subsequently insured the house against fire with the Associated Insurance
& Surety Co., Inc. On October 25, 1952, fire broke out in the house and partly destroyed the same.
For the loss, petitioner Cosio de Rama was paid P13,107 by the insurance company.

At the instance of his sister, petitioner Cosio de Rama, the other petitioner Augusto Cosio entered
the premises and began the repair of the house. Soon after an action was filed by respondent Palileo
against Cosio de Rama for the reformation of the deed of pacto de retro sale into a loan with an
equitable mortgage. This case was filed in the Court of First Instance of Rizal on December 4, 1952.
One week after (December 11), respondent Palileo filed another action in the Municipal Court of
Pasay City, this time seeking the ejectment of petitioner Cosio who, it was alleged, had entered and
occupied the house without the knowledge and consent of respondent Palileo. Just the same,
however, repair work went on and although at times interrupted it was finally completed in 1953 at
a cost of P12,000.


Whether or not there is reformation of the deed of sale.


The petitioners and the Court of Appeals are in error in saying that the former had a right to the
possession of the house under the deed of pacto de retro sale. Petitioners did not have such a right
at any time and they knew this.

In reforming instruments, courts do not make another contract for the parties (See Civil Code, Arts.
1359-1369 and the Report of the Code Commission, p. 56). They merely inquire into the intention of
the parties and, having found it, reform the written instrument (not the contract) in order that it
may express the real intention of the parties (See Id., Arts. 1365 and 1602). This is what was done in
the earlier case between the parties. In holding that the document entitled "Conditional Sale of
Residential Building" was in fact a mortgage, this Court said: "This document did not express the
true intention of the parties which was merely to place said property (the house) as security for the
payment of the loan." (Palileo v. Cosio, 51 O.G. 6181 at 6184)

If that was the intention of the parties (to conform to which their written instrument was reformed)
then petitioner Cosio de Rama knew from the beginning that she was not entitled to the possession
of the house because she was a mere mortgagee. For the same reason, she could not have been
mistaken as to the true nature of their agreement. Hence, in bidding her brother, petitioner Cosio,
to enter the premises and make repairs and in later occupying the house herself, petitioner Cosio de
Rama did so with this knowledge.

As possessors in bad faith, petitioners are jointly liable for the payment of rental, the reasonable
value of which, as found by the appellate court is P300 a month. (Art. 549. See Lerma v. De la Cruz,
7 Phil. 581) This finding is supported by the evidence and we find no reason to disturb it.

G.R. No. L-52478 October 30, 1986


In 1961, herein private respondents spouses Nemencio R. Medina and Josefina G. Medina (Medinas
for short) applied with the herein petitioner Government Service Insurance System (GSIS for short)
for a loan of P600,000.00. The GSIS Board of Trustees, in its Resolution of December 20, 1961,
approved under Resolution No. 5041 only the amount of P350,000.00, subject to the following
conditions: that the rate of interest shall be 9% per annum compounded monthly; repayable in ten
(10) years at a monthly amortization of P4,433.65 including principal and interest, and that any
installment or amortization that remains due and unpaid shall bear interest at the rate of 9%/12%
per month. The Office of the Economic Coordinator, in a 2nd Indorsement dated March 26, 1962,
further reduced the approved amount to P295,000.00. On April 4, 1962, the Medinas accepting the
reduced amount, executed a promissory note and a real estate mortgage in favor of GSIS. On May
29, 1962, the GSIS, and on June 6, 1962, the Office of the Economic Coordinator, upon request of
the Medinas, both approved the restoration of the amount of P350,000.00 (P295,000.00 +
P55,000.00) originally approved by the GSIS. This P350,000.00 loan was denominated by the GSIS
as Account No. 31055.

On July 6, 1962, the Medinas executed in favor of the GSIS an Amendment of Real Estate Mortgage.

Upon application by the Medinas, the GSIS Board of Trustees adopted Resolution No. 121 on
January 18, 1963, as amended by Resolution No. 348 dated February 25, 1963, approving
an additional loan of P230,000.00 in favor of the Medinas on the security of the same mortgaged
properties and the additional properties covered by TCT Nos. 49234, 49235 and 49236, to bear
interest at 9% per annum compounded monthly and repayable in ten years. This additional loan of
P230,000.00 was denominated by the GSIS as Account No. 31442.

Beginning 1965, the Medinas having defaulted in the payment of the monthly amortization on their
loan, the GSIS imposed 9%/12% interest on an installments due and unpaid. In 1967, the Medinas
began defaulting in the payment of fire insurance premiums.


Whether or not the amended REM superseded the Mortgage contract.


By agreement of the parties the issues in this case are limited to the loan of P350,000.00
denominated as Account No. 31055 subject of the Amendment of Real Mortgage dated July 6, 1962,
the interpretation of which is the major issue in this case.

GSIS claims that the amendment of the real estate mortgage did not supersede the original
mortgage contract dated April 4, 1962 which was being amended only with respect to the amount
secured thereby, and the amount of monthly amortizations. All other provisions of aforesaid
mortgage contract including that on compounding of interest were deemed rewritten and thus
binding on and enforceable against the respondent spouses.

Accordingly, payments made by the Medinas in the total amount of P991,845.53 was applied as
follows: the amount of P600,495.51 to Account No. 31055, P466,965.31 of which to interest and
P133,530.20 to principal and P390,845.66 to Account No. 31442, P230,774.29 to interest and
P159,971.37 to principal.

On the other hand the Medinas maintain that there is no express stipulation on compounded
interest in the amendment of mortgage contract of July 6, 1962 so that the compounded interest
stipulation in the original mortgage contract of April 4, 1962 which has been superseded cannot be
enforced in the later mortgage.

UP vs. Gabriel
G.R. No. 70826 October 12, 1987

On December 27, 1966, the UP and Beta, Construction Co., Inc., entered into a contract for the latter
to construct the Biological Science Building of the U.P. College of Agriculture at Los Baos, Laguna
for a total lump sum price of Three Million Seven Hundred Ninety Two Thousand Two Hundred
Eighteen Pesos and Seven Centavos (P3,792,218.07).

On January 4, 1967, Beta, sub-contracted its plumbing works to private respondent Allied Plumbing
Company represented by its general manager Domingo P. Gabriel for the total amount of One
Hundred Fifty Five Thousand Eighteen Hundred Twenty Eight and 60/100 Pesos (P155,828.60).

The plumbing contract was duly approved by the U.P. Bidding Committee.

On the ground that after Allied Plumbing Company completed its works, Beta, refused to remit the
balance of P64,626.08. plus the payment of additional works asked by Beta, in the total amount of
P4,017.90, the former filed a complaint for "sum of money with damages" against U.P. and Beta,
with the Court of First Instance of Rizal.

The defendants denied the allegations of the plaintiff that the latter had completed its plumbing
works under the sub-contract. They contended that there was delay in payment due to the improper
and faulty plumbing connections made by the plaintiff; that the plaintiff was unable to complete the
work stipulated in the sub-contract and that the work completed including the additional works by
the plaintiff were later found to be grossly defective and had to be repaired and re-done by Beta;
that because of the incompetence of the plaintiff, Beta, was compelled to engage the services of
another plumbing contractor who repaired the work; and that Beta overpaid the amount of
P81,686.00 under the plumbing sub-contract which plaintiff is under obligation to return to Beta.

After trial on the merits, the lower court rendered a decision in favor of the plaintiff. The dispositive
portion of the


Whether or not University of the Philippines is solidarity liable with Beta, Construction Company,


Act 3959 was intended for private persons, companies, firms, or corporations using the services of
contractors who may employ their own carpenters, masons, and laborers or hire sub-contractors.
This is made even more evident by the fact that Presidential Decree No. 442. The Labor Code of the
Philippines, Articles 106 to 109 and its Rules and Regulations, Rule VIII, Sections 7-9, have
superseded Act 3959. The Labor Code does not cover government employment.

The applicable law is Act 3688 which is titled "AN ACT FOR THE PROTECTION OF PERSONS

Private respondent should have requested for a certified copy of the contract and bond from UP and
sued Beta Construction and the surety company for unpaid labor and materials instead of
proceeding against UP. Under the circumstances of this case, UP is not solidarity liable with Beta,
for the claims of the sub-contractor against Beta.
Bay View Hotel, Inc., vs. Ker and Co., LTD
G.R. No. L-28237 August 31, 1982


Sometime in January, 1958, plaintiff-appellant Bay View Hotel, Inc., then the lessee arid operator of
the Manila Hotel, secured a fidelity guarantee bond from defendant-appellee Ker & Co., Ltd., for its
accountable employees against acts of fraud and dishonesty. Said defendant-appellee Ker & Co.,
Ltd., is the Philippine general agent of Phoenix Assurance Co., Ltd. a foreign corporation duly
licensed to do insurance business in the Philippines.

When one of the bonded employees, Tomas E. Ablaza, while acting in his capacity as cashier, was
discovered by plaintiff-appellant to have had a cash shortage and unremitted collections in the total
amount of P42,490.95, it filed claims for payments on the said fidelity guarantee bond but
defendant-appellee Ker & Co. denied and refused indemnification and payment. To enforce its
claims, plaintiff-appellant instituted its complaint, dated August 30, 1965 docketed as Civil Case No.
63181 of the Court of First Instance of Manila.

In its answer, defendant-appellee Ker & Co. justified its denial of the claims of plaintiff-appellant on
various reasons, such as non-compliance with the conditions stipulated in the insurance policy;
non-presentation of evidence regarding the various charges of dishonesty and misrepresentation
against Tomas E. Ablaza and non-production of the documents to prove the alleged loss. Ker & Co.
likewise averred that it was merely an agent and- as such it was not liable under the policy.

Plaintiff-appellant maintains that Condition No. 8 of the policy provides for arbitration only if any
dispute should arise as to the amount of companys liability consequently, the reference to
arbitration is not a condition precedent to the filing of the suit contrary to the insurer companys
posture. Plaintiff-appellant points out that in the instant case, there is a total and complete negation
of liability. There is no dispute as to the amount of companys liability because this presupposes an
admission of responsibility although not to the extent of the cost thereof, while here the insurer
denies liability wholly and totally.


Whether or not Condition No. 8 of the policy should apply.


The provisions of Condition No. 8, more specifically the portion thereof which reads, if any dispute
shall arise as to the amount of companys liability under this policy , do not appear to require any
extended interpretation. Condition No. 8 requires arbitration only as to disputes regarding
the amount of the insurers liability but not as to any dispute as to the existence or non- existence of
liability. Thus, Condition No. 8 comes into play only if the insurer admits liability but cannot agree
with the insured as to the amount thereof and cannot be invoked in cases like that at bar where the
insurer completely denies any liability. Defendants-appellees contention that plaintiff-appellants
failure to request arbitration proceedings is a bar to its filing of the suit at bar against the insurer
company cannot be sustained, specially considering the established principle that contracts of
adhesion such as the insurance policy in question are to be strictly construed in case of doubt
against the insurer.
Angeles vs. Calasanz
G.R. No. L-42283 March 18, 1985


On December 19, 1957, defendants-appellants Ursula Torres Calasanz and plaintiffs-appellees

Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in
Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum. The plaintiffs-appellees
made a downpayment of P392.00 upon the execution of the contract. They promised to pay the
balance in monthly installments of P41.20 until fully paid, the installment being due and payable on
the 19th day of each month. The plaintiffs-appellees paid the monthly installments until July 1966,
when their aggregate payment already amounted to P4,533.38.

On December 7, 1966, the defendants-appellants wrote the plantiffs-appellees a letter requesting the
remittance of past due accounts. On January 28, 1967, the
defendants-appellants cancelled the said contract because the plaintiffs failed to meet subsequent
payments. The plaintiffs letter with their plea for reconsideration of the
said cancellation was denied by the defendants.

The plaintiffs-appellees filed a case before the Court of First Instance to compel the defendant to
execute in their favor the final deed of sale alleging inter alia that after computing all subsequent
payments for the land in question, they found out that they have already paid the total amount
including interests, realty taxes and
incidental expenses. The defendants alleged in their answer that the plaintiffs violated par. 6 of the
contract to sell when they failed and refused to pay and/or offer to pay
monthly installments corresponding to the month of August, 1966 for more than 5 months, thereby
constraining the defendants to cancel the said contract.


Whether or not the Contract to Sell was validly cancelled.


No. While it is true that par.2 of the contract obligated the plaintiffs-appellees to pay the defendants
the sum of P3,920 plus 7% interest per annum, it is likewise
true that under par 12 the seller is obligated to transfer the title to the buyer upon payment of the
said price.

The contract to sell, being a contract of adhesion, must be construed against the party causing it.
The Supreme Court agree with the observation of the plaintiffs appellees
to the ef fect that the terms of a contract must be interpreted against the party who drafted the
same, especially where such interpretation will help effect justice
to buyers who, after having invested a big amount of money, are now sought to be deprived of the
same thru the prayed application of a contract clever in its phraseology,
condemnable in its lopsidedness and injurious in its effect which, in essence, and its entirety is most
unfair to the buyers.
Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-
appellees have already paid an aggregate amount of P4,533.38, the courts should only order the
payment of the few remaining installments but not uphold the cancellation of the
contract. Upon payment of the balance of P671.67 without any interest thereon, the defendant must
immediately execute the final deed of sale in favor of the plaintiffs and
execute the necessary transfer of documents, as provided in par.12 of the contract.

Labasan vs. Lacuesta

G.R. No. L-25931 October 30, 1978


Spouses Lacuesta were the owners of an unregistered, irrigated riceland in Ilocos Norte. They
conveyed by means of a written document the land with the right to repurchase after 10 years. They
failed to exercise their right within the stipulated period.

They filed a petition seeking the reconveyance of the parcel of land, allegedly as security for a loan.
The trial court ruled that the document executed by the Lacuestas was a pacto de retro sale and that
they lost their right to redeem the land for not having taken any step within the agreed 10 years.

On appeal, the Court of Appeals set aside the judgement of the trial court and declared the contract
an equitable mortgage and ordered the Labasans to reconvey the land, and that the loan by the
Lacuestas be deemed paid from the fruits of the property which the Labasans had been receiving for
the past 32 years.


Whether or not the contract is a pacto de retro sale or an equitable mortgage.


It is an equitable mortgage. It is a basic fundamental rule in the interpretation of a contract that if

the terms thereof are clear and leave no doubt upon the intention of the contracting parties the
literal meaning of the stipulation shall control, but when the words appear to be contrary to the
evident intention of the parties, the latter shall prevail over the former (Article 1370, NCC).

In case of doubt concerning the surrounding circumstances in the execution of a contract, the least
transmission of rights and interest shall prevail if the contract is gratuitous, and if onerous, the
doubt is to be settled in favor of the greatest reciprocity of interest.
Sy vs. CA
G.R. No. L-39853 August 17, 1983


On March 20, 1969, petitioner, Buenasenso SY, and private respondent, Jaime LUZON 9 entered
into a Distributorship Agreement, whereby LUZON, as producer, would supply SY, as distributor,
sixty metric tons monthly of ipil-ipil leaves at the price stipulated therein. The agreement was to last
for two years, extendible for another two years upon mutual agreement of the parties.

From March to June, 1969, or a period of approximately three (3) months, LUZON effected
deliveries of approximately 133.2 metric tons of ipil-ipil leaves (Exhibits "B-D"), valued at
P29,645.14, short of the stipulated quantity of 60 metric tons a month.

In June, after the seventh and eighth shipments, the defendant (Buenasenso SY) presented to the
plaintiff (Jaime LUZON) the statement of account, Exhibit D, whereby defendant deducted from the
value of the shipments all the advances, including the sum of P3,700.00 still due on the revolving
capital leaving a net proceed in favor of the plaintiff in the sum of P1,963.19. This was received by
the plaintiff and he signed the statement of account, Exhibit D, on the promise of the defendant that
he would send the money to the plaintiff. When defendant failed to send the revolving capital to the
plaintiff, the latter sent a telegram on June 21, 1969, Exhibit E, reiterating his request that
defendant transmit to him immediately the agreed amount and to wire his reply. Defendant did not
answer this letter. About the end of July, plaintiff came to Manila and asked the defendant to deliver
to him the advance capital. Defendant did not give it, and plaintiff had to beg him even for his
expenses; and defendant gave him the measly amount of P50.00 for which he signed a receipt dated
July 29, 1969. When the advance capital was not forthcoming, the plaintiff wrote the letter, Exhibit
F, dated August 7, 1969, requesting that defendant correct the violation of the terms of the
agreement within sixty days from the receipt thereof, and that 'the same (letter) shall be the written
notice in accordance with paragraph 6 of the contract.' Defendant likewise did not answer this

Orduna vs. Fuentebella

G.R. No. 176841 June 29, 2010


Antonita Orduna purchased a residential lot from Gabriel Sr. payable in installments but no deed of
sale was executed. The installments were paid to Gabriel Sr. and later to Gabriel Jr. after the death
of the former. Improvements were thereafter introduced by petitioner and the latter even paid its
real property tax since 1970. Unknown to Orduna, the property has been subject to further
alienations until the same was ceded to respondent, Fuentebella, Jr. Orduna, after being demanded
by Fuentebella to vacate the disputed land, then filed a Complaint for Annulment of Sale, Title,
Reconveyance with Damages with a prayer to acquire ownership over the subject lot upon payment
of their remaining halance.


Whether or not the sale of the subject lot was unenforceable.


Statute of Frauds expressed in Article 1403, par. (2), of the Civil Code applies only to executory
contracts, i.e., those where no performance has yet been made. Stated a bit differently, the legal
consequence of non-compliance with the Statute does not come into play where the contract in
question is completed, executed, or partially consummated.

The Statute of Frauds, in context, provides that a contract for the sale of real property or of an
interest therein shall be unenforceable unless the sale or some note or memorandum thereof is in
writing and subscribed by the party or his agent. However, where the verbal contract of sale has
been partially executed through the partial payments made by one party duly received by the
vendor, as in the present case, the contract is taken out of the scope of the Statute.

Laurel vs. CSC

G.R. No. 71562 October 28, 1991


Petitioner, the duly elected Governor of the Province of Batangas, appointed his brother, Benjamin
Laurel, as Senior Executive Assistant in the Office of the Governor, a non-career service position
which belongs to the personal and confidential staff of an elective official. Upon the vacancy of the
position of Provincial Administrator of Batangas, petitioner designated his brother as Acting
Provincial Administrator. Then, he issued Benjamin Laurel a promotional appointment as Civil
Security Officer which is a position which the Civil Service Commission classifies as "primarily
confidential" pursuant to P.D. No. 868.


Whether or not nepotism apply to designation


The court ruled that petitioner could not legally and validly appoint his brother Benjamin Laurel to
said position because of the prohibition on nepotism under Section 49 of P.D. No. 807. They are
related within the third degree of consanguinity and the case does not fall within any of the
exemptions provided therein. The exemption in the said section covering confidential positions
cannot be considered since the said position is not primarily confidential for it belongs to the career
service. Petitioners contention that the designation of his brother is not covered by the prohibition
cannot be accepted for by legal contemplation, the prohibitive mantle on nepotism would include
designation, because what cannot be done directly cannot be done indirectly. His specious and
tenuous distinction between appointment and designation is nothing more than either a ploy
ingeniously conceived to circumvent the rigid rule on nepotism or a last-ditch maneuver to cushion
the impact of its violation. Section 49 of P.D. No. 807 does not suggest that designation should be
differentiated from appointment. Reading the section with Section 25 of said decree, career service
positions may be filled up only by appointment, either permanent or temporary; hence a
designation of a person to fill it up because it is vacant, is necessarily included in the term
appointment, for it precisely accomplishes the same purpose.
G.R. No. 66715 September 18, 1990


On March 20, 1968, Leticia de la Vina-Sepe executed a real estate mortgage in favor of PNB, San
Carlos Branch, over a lot registered in her name under TCT No. T-31913 to secure the payment of a
sugar crop loan of P3,400. Later, Leticia Sepe, acting as attorney-in-fact for her brother-in-law,
private respondent Romeo Alcedo, executed an amended real estate mortgage to include his
(Alcedo's) Lot No. 1626 (being a portion of Lot No. 1402, covered by TCT 52705 of the Isabela
Cadastre) as additional collateral for Sepe's increased loan of P16,500. Leticia Sepe and private
respondent Alcedo verbally agreed to split fifty-fifty (50-50) the proceeds of the loan (p. 94, Rollo)
but failing to receive his one-half share from her, Alcedo wrote a letter on May 12, 1970 to the PNB,
San Carlos Branch, revoking the Special Power of Attorney which he had given to Leticia Sepe to
mortgage his Lot No. 1626.

Replying on May 22, 1970, the PNB Branch Manager, Jose T. Gellegani advised Alcedo that his land
had already been included as collateral for Sepe's 1970-71 sugar crop loan, which the latter had
already availed of, nevertheless, he assured Alcedo that the bank would exclude his lot as collateral
for Sepe's forthcoming (1971-72) sugar crop loan.

On the same day, May 22, 1970, PNB advised Sepe in writing to replace Lot No. 1402 with another
collateral of equal or higher value.

Despite the above advice from PNB, Sepe was still able to obtain an additional loan from PNB
increasing her debt of P 16,500 to P56,638.69 on the security of Alcedo's property as collateral. On
January 15, 1974, Alcedo received two (2) letters from PNB: (1) informing him of Sepe's failure to
pay her loan in the total amount of P 56,638.69; and (2) giving him six (6) days to settle Sepe's
outstanding obligation, as otherwise, foreclosure proceedings would be commenced against his
property. Alcedo requested Sepe to pay her accounts to forestall foreclosure proceedings against his
property, but to no avail.


Whether or not estoppel applies in this case.


In the case at bar, since PNB had promised to exclude Alcedo's property as collateral for Sepe's 1971-
72 sugar crop loan, it should have released the property to Alcedo. The mortgage which Sepe gave to
the bank on Alcedo's lot as collateral for her 1971-72 sugar crop loan was null and void for having
been already disauthorized by Alcedo. Since Alcedo's property secured only P13,100.00 of Sepe's
1970-71 sugar crop loan of P16,500.00 (because P3,400 was secured by Sepe's own property),
Alcedo's property may be held to answer for only the unpaid balance, if any, of Sepe's 1970-71 loan,
but not the 1971-72 crop loan.
The PNB acted with bad faith in proceeding against Alcedo's property to satisfy Sepe's unpaid 1971-
72 sugar crop loan. The extrajudicial foreclosure being null and void ab initio, the certificate of sale
which the Sheriff delivered to PNB as the highest bidder at the sale is also null and void.

Kalalo vs. Luz

G.R. No. L-27782 July 31, 1970


Octavio Kalalo is an engineer whose services were contracted by Alfredo Luz, an architect in 1961.
Luz contracted Kalalo to work on ten projects across the country, one of which was an in the
International Rice Research Institute (IRRI) Research Center in Los Baos, Laguna. Luz was to be
paid $140,000.00 for the entire project. For Kalalos work, Luz agreed to pay him 20% of what IRRI
is going to pay or equivalent to $28,000.00.


Whether or not Kalalo should be paid in US currency.

No. The agreement was forged in 1961, years before the passage of Republic Act 529 in 1950. The
said law requires that payment in a particular kind of coin or currency other than the Philippine
currency shall be discharged in Philippine currency measured at the prevailing rate of exchange at
the time the obligation was incurred. Nothing in the law however provides which rate of exchange
shall be used hence it is but logical to use the rate of exchange at the time of payment.

Medija vs. Patcho

G.R. No. L-30310 October 23, 1984


Civil Case No. 1884 was an action for partition and damages filed by Ernesto Patcho, Lauriana
Patcho, Tarcila Batilona, Simeon Batilona, Teodoro Baroro, Donata Baluran and Marcelino Baluran
(defendants herein) against their uncle Agripino Morante, Cirila Morante, Ignacio Patcho and
Saturnino Medija (plaintiff-appellant herein). The subject matter of the action were five parcels of
land owned by the late Lorenzo Florante who died in 1943 leaving the plaintiffs (defendants herein)
as heirs. They claimed that the defendants have been unlawfully holding and using portions of the
lands since the death of Lorenzo Florante.

After trial, the lower court held that the plaintiffs had failed to establish the allegations of their
complaint and dismissed the same. The case was elevated on appeal to the then Court of Appeals.

On October 22, 1963, the Court of Appeals reversed the same in favor of the plaintiffs for the
partition of those portions not yet partitioned among the heirs of Lorenzo Morante being unlawfully
held by defendants since the death of aforesaid Lorenzo Morante in 1943 and for the payment of the
proportionate produce corresponding to the legitimate shares of the plaintiffs from the year 1943
(pp. 41-42, Record on Appeal, p. 5, rec.).
The case was remanded to the Court of First Instance anew with the specific order to partition
among the corresponding heirs of Lorenzo Morante the portion of the lands left unpartitioned and
to receive evidence on the damages to be paid by the defendants to the plaintiffs (defendants herein)
and thereafter to render judgment.

On April 17, 1967, the lower court issued its order embodying the partition of those undivided
portions of the land and the damages to be paid by the defendants

Thereafter, on March 16, 1968, Saturnino Medija filed a complaint in the same Court of First
Instance of Misamis Occidental. This is the present Civil Case No. 2665 for quieting of title and
damages with prayer for preliminary injunction.

The plaintiff-appellant alleged that he is the legal owner of two parcels of land situated at Dapacan
Alto, Calamba, Misamis Occidental

The complaint states that Parcel I had been acquired by plaintiff-appellant from the defendants by
virtue of documents of sale executed by the latter at various dates between the years 1948 and 1952
while Parcel II had been acquired by the plaintiff-appellant from one Agripino Morante.

The defendants filed their answer on April 17, 1968. They alleged that the procurement of the title of
the plaintiff-appellant is tainted with bad faith and fraud.


Whether or not there are latches in the case


An estoppel by laches arises from the negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it either has abandoned it or
declined to asset it (Tijam et al. vs. Sibonghanoy, 23 SCRA 29). Its essence is the doctrine of
estoppel, a concept derived from American law that aims to bring out justice between parties,
through the operation of the principle that an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person relying thereon
(Report of the Code Commission, p. 59). In other words, it precludes a person from denying or
asserting anything to the contrary of that which has, in contemplation of law, been established as
the truth, either by the acts of judicial or legislative officials or by his own deed or representation,
either expressed or implied.

In the instant case, the complaint of appellant states that Parcel I had been acquired by plaintiff-
appellant from the defendants by virtue of documents of sale executed by the latter at various dates
between the years 1948 and 1952, while Parcel II had been acquired by the plaintiff-appellant from
one Agripino Morante (p. 3, Record on Appeal, p. 5, rec.). If this were the case, he should have
presented the deeds of sale when Civil Case No. 1884 was filed on May 10, 1956. He did not. Neither
did he present any claim of ownership when Civil Case No. 1884 was appealed to the Court of
Appeals. Appellant did not contest the partition and the assessment of damages made by the lower
court in its order dated April 17, 1967 in Civil Case No. 1884. It was only when Civil Case No. 1884
was being executed that appellant moved to file a complaint for quieting of title in the same Court of
First Instance of Misamis Occidental. Such conduct cannot be allowed.
F.A.T. Kee Computer vs. Online Networks
G.R. No. 171238 February 2, 2011


Petitioner F.A.T. Kee Computer Systems, Inc. (FAT KEE) is a domestic corporation engaged in the
business of selling computer equipment and conducting maintenance services for the units it sold.
ONLINE is also a domestic corporation principally engaged in the business of selling computer
units, parts and software.ONLINE sold computer printers to FAT KEE. However, FAT KEE failed to
pay its obligations to ONLINE without any valid reason. ONLINE filed a Complaint for Sum of
Money against FAT KEE. During the trial FAT KEE insisted that the conversion rate they agreed
upon was P34:US$1 and not P40 as insisted by ONLINE.The RTC dismissed the complaint of
ONLINE for the latters failure to establish its claim. The appellate court reversed and set aside the
Decision of the RTC. The CA ruled that even granting that FAT KEE was of the impression that
P34:$1was the applicable rate for its obligation, ONLINE cannot be put in estoppel as this was
immediately rectified by ONLINE.


Whether or not ONLINE is estopped as to the conversion rate used.


One who claims the benefit of an estoppel on the ground that he has been misled by the
representations of another must not have been misled through his own want of reasonable care and
circumspection. A lack of diligence by a party claiming an estoppel is generally fatal. Thus, after
participating in the meeting on January 15, 1998, submitting its own proposals and further
negotiating for the lowering of the exchange rate, FAT KEE cannot anymore insist that it was
completely under the impression that the applicable exchange rate was P34:US$1.Respondent
Online filed a complaint against petitioner for sum of money. It alleged that petitioner failed to pay
the purchase price of the computer. Petitioner FATKEE answered the complaint and denied all the
allegations against him. Petitioner contended that the argument of Online that the instant petition is
fatally defective forfailure of the former to attach the Transcript of Stenographic Notes (TSN) of
RTC proceedings. He countered that there is no need to annex the said TSN given that Online does
not dispute the accuracy of the quoted portions of the transcripts and the petition does not request
for a re-evaluation of the evidence of the parties

Mapa III vs. Guanzon

G.R. No. L-25605 June 20, 1977


On September 21, 1925, an original certificate of title was issued to Isidoro Bayeta over a
certain property lot hereinafter referred to as Lot No. 2636. On September 7, 1928, Isidoro Bayeta
and his wife, Crispina Guanzon, sold the said land to Spouses John Roemer and Julia Roemer. On
March 11, 1935, the Roemers sold the land to Lucas Guirnela. On November 10, 1936, Guirnela, sold
said land to Fernando Mapa, Jr. On January 31, 1950, Fernando Mapa Jr. leased said land to
Omarementaria and Ballesteros for a period of eight (8) years. On January 26, 1953, said land was
sold at public auction for non-payment of taxes and was bought by the Province of Negros
Occidental there being no bidders.It was repurchased by Fernando Mapa, Jr. on January 26, 1954.
On December 28, 1956, said land was again sold at public auction for non-payment of taxes and the
Province of Negros Occidental again bought the same, there being also no bidders. The final
bill of sale in favor of the Province of Negros Occidental was issued on March 4, 1959, and registered
in the Register of Deeds on March 25, 1959.

Meanwhile, or on January 13, 1958, the original certificate of title in the name of Isidoro
Bayeta was reconstituted administratively. On the same date, the heirs of Isidoro Bayeta, filed an
action against Fernando Mapa for recovery of ownership of Lot No. 2636 (docketed as Civil Case
No. 4666). The complaint, however, was dismissed on October 5, 1959 for lack of interest.

On November 29, 1959, the same heirs of Isidoro Bayeta filed with the CFI another
complaint against Fernando Mapa, docketed as Civil Case No. 5557, also for recovery of ownership
and possession of the same parcel of land subject of Civil Case No. 4666. The Court of First Instance
dismissed the same on February 16, 1960 on the ground of res judicata. The plaintiffs appealed to
the CA, but the CA sustained the ruling of the lower court.

On January 27, 1961, the heirs of Isidoro Bayeta, the defendants-appellants herein,
executed an Extrajudicial Partition to the aforementioned lot.

Plaintiff Fernando Mapa III, successor-in-interest of Fernando Mapa, Jr., filed on May 18,
1962, the present case against the heirs of Isidoro Bayeta and the Provincial Treasurer of Negros
Occidental for cancellation of the transfer certificate in the name of Agustin Bayeta and the
Certificate of Repurchase issued by the Provincial Treasurer in favor of Agustin Bayeta and the
issuance of an order requiring the Provincial Treasurer to execute the deed of sale in favor of said
plaintiff, after payment of all taxes due on said property.

On November 4, 1965, the lower court rendered judgment in favor of the plaintiff-appellee
and against the defendants appellants.


Whether or not the question of ownership over Lot No. 2636 could still be relitigated, in
view of the final dismissal on the merits of Civil Cases Nos. 4666 and 5557, which were actions
instituted by herein defendants-appellants to recover the ownership and possession of the same
property from Mapa.


Ownership of the said lot cannot be litigated anew in this case. Indeed, not one of the defendants-
appellants as heirs of Isidoro Bayeta, could have validly exercised the right of redemption or
repurchase of the property. They were already barred by the prior judgment of the Court of First
Instance of Negros Occidental in Civil Case No. 4666 from asserting any right of ownership or title
over said property. They could not also exercise the right to repurchase as the "delinquent taxpayer"
since they were never the taxpayer of said property, but Fernando Mapa. Mapa is, therefore, the
party called upon by the law to exercise the right of redemption or repurchase within two (2) years
from the date of the registration of the sale, that is, up to March 25, 1961.

Insurance of the Philippine Islands Corp vs. Sps. Gregorio

G.R. No. 174104 February 14, 2011


Spouses Vidal Gregorio and Julita Gregorio obtained loans from the Insurance of the Philippine
Islands Corporation. By way of security for the said loan, respondents executed Real Estate
Mortgage. Respondents failed to pay their loans, as a result of which the mortgaged properties were
extrajudicially foreclosed.

Petitioner filed a Complaint for damages against respondents alleging that in 1995, when it was in
the process of gathering documents for the purpose of filing an application for the registration and
confirmation of its title over the foreclosed properties, it discovered that the said lots were already
registered in the names of third persons and transfer certificates of title (TCT) were issued to them.

The RTC of Morong, Rizal, ruled in favor of petitioner, while the CA rendered a Decision reversing
and setting aside the decision of the RTC and dismissing the complaint of petitioner. It ruled that
petitioner's action for damages is barred by prescription and laches.


Whether or not petitioner's right of action prescribed four years after the subject properties were
registered with the Register of Deeds of Morong, Rizal and TCTs were subsequently issued in the
names of third persons.


The Court finds no error in the ruling of the CA that petitioner's cause of action accrued at the time
it discovered the alleged fraud committed by respondents. It is at this point that the four-year
prescriptive period should be counted. However, the Court does not agree with the CA in its ruling
that the discovery of the fraud should be reckoned from the time of registration of the titles covering
the subject properties.

The essence of laches or stale demands is the failure or neglect for an unreasonable and unexplained
length of time to do that which, by exercising due diligence, could or should have been done earlier,
thus, giving rise to a presumption that the party entitled to assert it either has abandoned or
declined to assert it. It is not concerned with mere lapse of time; the fact of delay, standing alone,
being insufficient to constitute laches.

Caragay-Layno vs. CA
G.R. No. L-52064 December 26, 1984

Mariano De Vera died in 1951. His widow administered his property until her death in 1966. De
Veras nephew (Salvador Estrada) took over as administrator of De Veras estate. Prior to the
widows death, she made an inventory showing that De Veras property (located in Calasiao,
Pangasinan) measures 5417 sq. m (more or less). Estrada however noticed that the Torrens title
under De Vera indicated that his property measures 8752 sq. m. He learned that the discrepancy is
the 3732 sq. m. being occupied by Juliana. Estrada sued to evict Juliana.

Juliana averred that she and her father have been in open, continuous, exclusive and notorious
possession and in the concept of an owner of the land since 1921; that theyve been paying taxes;
that the title held by Estrada was registered in 1947 but it only took them to initiate an action in
1967 therefore laches has set in.


Whether or not the disputed portion should be adjudged in favor of De Veras estate.


The inclusion of Julianas land in De Veras title was erroneously done. It was shown that Juliana,
an unlettered woman, agreed to have Mariano de Vera borrow her title for the purposes of Mariano
obtaining a loan during de Veras lifetime; that when de Vera registered his portion of land adjoined
to that of Juliana, the latters land was erroneously included.

The error is highlighted by the fact that de Veras widow, in her inventory before she died, attested
that de Veras portion of land is only 5417 sq. m. more or less. The discrepancy approximates the
portion of land actually being occupied by Juliana. By that, the only portion that can be adjudged in
favor of de Veras estate is that which was being claimed by the widow (in her inventory). A
recalculation must however be made to specify the exact measure of land belonging to each: 3732 sq
m should be retained by Juliana (portion which she actually occupies) and 5020 sq. m. should go to
de Veras estate.

Jose Marques and Maxilite Technologies, Inc. vs. Far East Bank and Trust Company
G.R. No. 171379 January 10, 2011


Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the importation and
trading of equipment for energy-efficiency systems. Jose N. Marques (Marques) is the President and
controlling stockholder of Maxilite.

Far East Bank and Trust Co. (FEBTC) is a local bank which handled the financing and related
requirements of Marques and Maxilite. Marques and Maxilite maintained accounts with FEBTC.
Accordingly, FEBTC financed Maxilites capital and operational requirements through loans secured
with properties of Marques under the latters name.

On 17 June 1993, Maxilite and Marques entered into a trust receipt transaction with FEBTC, in the
sum of US$80,765.00, for the shipment of various high-technology equipment from the United
States, with the merchandise serving as collateral. The foregoing importation was covered by a trust
receipt document signed by Marques on behalf of Maxilite
Sometime in August 1993, FEBIBI, upon the advice of FEBTC, facilitated the procurement and
processing from Makati Insurance Company of four separate and independent fire insurance
policies over the trust receipted merchandise.

On 19 August 1994, Insurance Policy No. 1024439, covering the period 24 June 1994 to 24 June
1995, was released to cover the trust receipted merchandise.

Finding that Maxilite failed to pay the insurance premium in the sum of P8,265.60 for Insurance
Policy No. 1024439 covering the period 24 June 1994 to 24 June 1995, FEBIBI sent written
reminders to FEBTC, dated 19 October 1994, 24 January 1995, and 6 March 1995, to debit Maxilites

On 24 and 26 October 1994, Maxilite fully settled its trust receipt account.

On 9 March 1995, a fire gutted the Aboitiz Sea Transport Building along M.J. Cuenco Avenue, Cebu
City, where Maxilites office and warehouse were located. As a result, Maxilite suffered losses
amounting to at least P2.1 million, which Maxilite claimed against the fire insurance policy with
Makati Insurance Company. Makati Insurance Company denied the fire loss claim on the ground of
non-payment of premium. FEBTC and FEBIBI disclaimed any responsibility for the denial of the


Whether or not there is estoppel on the part of FEBTC


Article 1431 of the Civil Code defines estoppel as follows:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon.

Meanwhile, Section 2(a), Rule 131 of the Rules of Court provides:

SEC. 2. Conclusive presumptions. The following are instances of conclusive presumptions:

(a) Whenever a party has, by his own declaration, act, or omission, intentionally and
deliberately led another to believe a particular thing is true, and to act upon such belief, he
cannot, in any litigation arising out of such declaration, act or omission, be permitted to
falsify it.
In estoppel, a party creating an appearance of fact, which is false, is bound by that appearance as
against another person who acted in good faith on it. Estoppel is based on public policy, fair dealing,
good faith and justice. Its purpose is to forbid one to speak against his own act, representations, or
commitments to the injury of one who reasonably relied thereon. It springs from equity, and is
designed to aid the law in the administration of justice where without its aid injustice might result.

In Santiago Syjuco, Inc. v. Castro,the Court stated that estoppel may arise from silence as well as
from words. Estoppel by silence arises where a person, who by force of circumstances is obliged to
another to speak, refrains from doing so and thereby induces the other to believe in the existence of
a state of facts in reliance on which he acts to his prejudice. Silence may support an estoppel
whether the failure to speak is intentional or negligent.

Manila Lodge No. 716 vs. CA

G. R. No. L-41001 September 30, 1976


The Philippine Commission enacted Act No. 1306 which authorized the City of Manila to reclaim a
portion of Manila Bay. The reclaimed area was to form part of the Luneta extension. The act
provided that the reclaimed area shall be the property of the City of Manila, and the city is
authorized to set aside a tract of the reclaimed land for a hotel site and to lease or to sell the same.
Later, the City of Manila conveyed a portion of the reclaimed area to Petitioner. Then Petitioner sold
the land, together with all the improvements, to the Tarlac Development Corporation (TDC).


Whether or not the subject property was patrimonial property of the City of Manila.


The petitions were denied for lack of merit. The court found it necessary to analyze all the
provisions of Act No. 1360, as amended, in order to unravel the legislative intent. The grant made by
Act No. 1360 of the reclaimed land to the City of Manila is a grant of a public nature. Such grants
have always been strictly construed against the grantee because it is a gratuitous donation of public
money or resources, which resulted in an unfair advantage to the grantee. In the case at bar, the
area reclaimed would be filled at the expense of the Insular Government and without cost to the City
of Manila. Hence, the letter of the statute should be narrowed to exclude matters which, if included,
would defeat the policy of legislation.

Central Bank vs. CA

G.R. No. L-50031-32 : July 27, 1981

Isidro Fernandez and Jesus Jayme are the majority and controlling stockholders of Provident Bank.
When Provident Savings Bank experienced bankrun, which was triggered off by adverse publicity in
the newspapers, radio and television of investigations conducted by Congress that some banks were
unable to pay deposit withdrawals. The Bank was forced to borrow funds from other banks and the
Central Bank but despite the borrowing, the funds remained insufficient to satisfy the withdrawals.

Hence, the Isidro Fernandez and Jesus Jayme appealed to Central Bank for further assistance.
However, the Central Bank replied to them stating that they have to relinquish and turnover the
management and control of the bank to Iglesia ni Kristo (INK) affiliated entity Eagle Broadcasting
in order for it to assist the distressed provident. Under the agreement, EB agreed to purchase
52,000 capital stock with provident. The Eagle Broadcasting Corporation, however, did not comply
with its commitment to purchase 53,000 common shares of stock and to convert its deposits into
equity. Instead, the new management of PROVIDENT caused the conversion of the deposits of
Iglesia Ni Kristo into bills payable earning 12% interest, which were subsequently withdrawn. 4
PROVIDENT, under the new management, also failed to comply with the Monetary Board directives
relative to the rehabilitation of the bank so that it restored the interest rate of 12% on outstanding

These acts were made despite the presence of Central Bank examiners. Subsequently, Central Bank
Monetary Board issued a resolution declaring the closure of Provident Savings Bank and ordering
its liquidation. Hence, Fernandez and Jayme filed with the Court of First Instance a petition for
certiorari, prohibition, and mandamus against Central Bank to annul the resolution and restrain CB
from proceeding with the liquidation which the court granted.


Whether or not the closure of the bank may be subject to judicial inquiry and whether or not the
resolution was issued arbitrarily and in bad faith.


Having decided in 1968 that PROVIDENT was salvageable and could be permitted to continue in
business with its support, provided there is change in management and introduction of reforms, the
CB should have been vigilant in its overseeing of the faithful compliance by the parties of the terms
of the Memorandum Agreement, as well as in supervising and controlling the operations of the bank
under the management of EAGLE. The persuasive, nay, compulsory, powers of the CB to
accomplish these cannot be doubted. The CB exercises such control of private banks under its broad
powers that it can decree life or death of any bank by simply withholding from it the facilitates that
it normally accords banks.

While the closure and liquidation of a bank may be considered an exercise of police power, the
validity of such exercise of police power is subject to judicial inquiry and could be set aside if it is
either capricious, discriminatory, whimsical, arbitrary, unjust, or a denial of due process and equal
protection clauses of the Constitution. The arbitrariness and bad faith of Central Bank is evident
from the fact that it pressured Fernandez and Jayme into relinquishing the management and
control of Provident Savings Bank to Iglesia Ni Kristo which did not have any intention of restoring
the bank into its former sound financial condition but whose interest was merely to recover its
deposits from the bank and thereafter allowing INK to mismanage the bank until the banks
financial deterioration and subsequent closure. Central Bank acted whimsically and withdrew its
commitment to support the bank to the detriment of the latter.

If jurisdiction was already acquired ito delve into the validity of Resolutions 1263 and 1290 (and this
the Central Bank admits), there is no cogent reason why, after such jurisdiction had been acquired,
the Court should be deprived thereof by the subsequent adoption of Resolution 1333, particularly
because the latter, in relation to the antecedent facts, appears to be no more than a deliberate effort
to evade the jurisdiction of this Court, and have the case thrown back to the Court of First Instance.
The Central Bank, by promising to rehabilitate the bank, is estopped from closing it down. The
conduct of the Central Bank reveals a calculated attempt to evade rehabilitating OBM despite its
promises. Hence, respondent Central Bank of the Philippines is directed to comply with it
obligations under the voting trust agreement, and to desist from taking action in violation thereof.

The Central Bank made express representations to petitioners herein that it would support the
OBM, and avoid its liquidation if the petitioners would execute (a) the voting trust agreement
turning over the management of OBM to the Central Bank or its nominees, and (b) mortgage or
assign their properties to the Central Bank to cover the overdraft balance of OBM. The petitioners
having complied with these conditions and parted with value to the profit of the CB (which thus
acquired additional security for its own advances), the Central Bank may not now renege on its
representations and liquidate the OBM, to the detriment of its stockholders, depositors and other
creditors, under the rule of promissory estoppel.

Republic vs. Alagad

G.R. No. L-66807 January 26, 1989


On 11 October 1951, Melitona, Carmen (with spouse Espiridion Kolimlim), Justo, Carlos, Librada
(with spouse Emerson Abano), Demetrio, and Antonio Alagad filed an application for registration of
their title over a parcel of land situated at Linga, Pila, Laguna, with an area of 8.1263 hectares
(survey plan Psu-116971), which was amended after the land was divided into two parcels, namely,
Lot 1 with an area of 5.2476 hectares and Lot 2 with an area of 2.8421 hectares (survey plan Psu-
226971, amendment 2). The Republic opposed the application on the stereo-typed ground that
applicants and their predecessors have not been in possession of the land openly, continuously,
publicly and adversely under a bona fide claim of ownership since 26 July 1894 and the land has not
ceased to be a part of the public domain. It appears that barrio folk also opposed the application. On
16 January 1956, by virtue of a final judgment in said case, supplemented by orders issued on 21
March 1956 and 13 August 1956, the Alagads were declared owners of Lot 1 and the remaining
portion, or Lot 2, was declared public land. Decree N-51479 was entered and OCT 0-401, dated 18
October 1956, was issued in the names of the Alagads. In August 1966, the Alagads filed before the
Municipal Court of Pila, Laguna (Civil Case 52) an action to evict the barrio folk occupying portions
of Lot 1. On 8 August 1968, judgment was rendered in the eviction case ordering the barrio folk
therein to return possession of the premises to the Alagads. The barrio folk did not appeal. The
Republic filed a petition for annulment of title and reversion, insofar as the 1.42 hectare
northwestern portion on end of Lot 1 is concerned, contending that such is foreshore land, and that
the Alagads could not have had an imperfect title to it as it was the barrio folk who filled up the land
to elevate the land to its present condition. The Court, on 6 October 1970, issued a writ of
preliminary injunction enjoining the Provincial Sheriff of Laguna or his deputies from enforcing the
writ of execution issued in Civil Case 52, and the Alagads from selling, mortgaging, disposing or
otherwise entering into any transaction affecting the area. The case was set for pre-trial on 6 July
1971, to which the attorney representing the Republic did not appear. On 16 July 1971, the court
dismissed the complaint. The Republic filed a motion for reconsideration, was set for hearing, and
finally denied by the court. Appeal was made to the Court of Appeals, which sustained the trial.


Whether or not the state can be estoppeled.


The State cannot be bound by, or estopped from, the mistakes or negligent acts of its official or
agents, much more, non-suited as a result thereof. This is so because the state as a persona in law is
the judicial entity, which is the source of any asserted right to ownership in land under the basic
doctrine embodied in the 1935 Constitution as well as the present charter. It is charged moreover
with the conservation of such patrimony. There is need therefore of the most rigorous scrutiny
before private claims to portions thereof are judicially accorded recognition. Such primordial
consideration, not the apparent carelessness, much less the acquiescence of public officials, is the
controlling norm.

Nieva vs. Manila Banking Corporation

[G.R. No. L-30811. September 2, 1983.]


Civil Case No. 73863, entitled Manila Banking Corporation versus Antonio Nieva and Ignacio
Arroyo was an action to recover P10,897.78 with interest at 14 percent per annum until fully paid.
The promissory note evidencing the debt was originally for P8,000.00 only but because of accrued
interests, the alleged debt had increased to P10,897.78 when the action was commenced. Ignacio
Arroyo was included in his capacity as guarantor for the payment of the amount in the promissory

In addition to the defendants obligation on the note, the plaintiff bank asked for the payment of
attorneys fees allegedly incurred due to the refusal of the defendants to pay their obligation despite
repeated demands. Costs of suit and incidental expenses for collection were also included

Defendant Nieva filed a manifestation questioning the court's jurisdiction considering that the
principal demand of the plaintiff was only P8,000.00. Nieva prayed for the setting aside of the
decision and the dismissal of the case. After considering the manifestation and the opposition of the
respondent bank, the court denied Nieva's prayer. No appeal was taken from the decision.

After the decision had already become final and executory, the plaintiff bank filed a motion for
execution which was granted by the court.
Thereafter, Manila Banking Corporation filed an urgent ex-parte motion to clarify the decision
under execution. The respondent court issued the questioned order and granted the motion.


Whether or not the jurisdiction of the court can still be question


It was held in Tajonera v. Lamaroza (110 SCRA 447):

"The rule is that jurisdiction is conferred by law and the objection to the authority of the tribunal to
take cognizance of a case may be raised at any stage of the proceedings. However, considering the
attendant circumstances in the case at bar, petitioners are now barred from claiming lack of
jurisdiction at this stage with their active participation. They never questioned the authority of
respondents Leogardo, Jr. and Estrella throughout the duration of the proceedings when they have
the chance to do so. They never mentioned lack of jurisdiction in their memorandum of appeal, in
their motion for reconsideration or in their position paper. They are now estopped from raising
such objection. It has been held that a party cannot invoke the jurisdiction of a court to secure
affirmative relief against his opponent and after failing to obtain such relief, repudiate or
question that same jurisdiction. (Tijam v. Sibonghanoy, 23 SCRA 35) The Court frowns upon and
does not tolerate the undesirable practice of some litigants who submit voluntarily a cause and then
accepting the judgment when favorable to them and attacking it for lack of jurisdiction when
The petitioner's arguments appear to be meritorious. However, considering that the petitioner had
actively participated in all stages of the proceedings in the trial court, he cannot, at this stage,
question the court's jurisdiction. As a matter of fact, Nieva was the one who proposed what
amounted to a compromise agreement, which formed the basis of the decision after the respondent
bank agreed to the proposal. Only after the court had promulgated the decision did Nieva have
second thoughts which led to the manifestation raising the issue of jurisdiction. And when his
manifestation was denied, he did not pursue the denial and raise the matter to an appellate tribunal.
Nieva allowed the decision to become final and executory.

Manila Electric Company vs. CA

G.R. No. L-33794 May 31, 1982


Pedro Velasco bought 3 lot from Peoples Homesite and Housing Corporation, wherein an
agreement was made that the lots shall only be used for residential purposes only. Thereafter
Velasco sold the 2 of the lots to Meralco. However, Meralco used the lots to erect a substation.
Velasco now calls for the cancellation of the sale on the ground that there was a violation with the
condition that the lot can only be used for residential purposes.


Whether or not the sale can be cancelled.

The contract of sale between PHHC and VELASCO provided that only constructions exclusively for
"residential purposes" shall be built on the PROPERTY. That requirement, naturally, was binding
on VELASCO himself, as it is also binding on MERALCO as his assignee. Be that as it may, that
contract implies that it is PHHC itself which has the right of action against any assignee of

Even if the requirement for "residential purposes" were a condition imposed by VELASCO himself
in the contract of sale between VELASCO and MERALCO, the former can no longer cancel the
contract on the alleged violation of the condition. When MERALCO erected the sub-station in
September, 1953, VELASCO did not object to its construction as such.

Contracts should be given effect as the parties construe it. "Acts done by the parties to a contract in
the course of its performance are admissible in evidence upon the question of its meaning as being
their own contemporaneous interpretation of , its terms".

Bailon-Casilao vs. CA
G.R. No. 78178 April 15, 1988


There is a parcel of land in the names of the Bailons (Rosalia, Gaudencio, Sabina Bernabe, Nenita
and Delia) as co-owners, each with a 1/6 share. It appears that Rosalia and Gaudencio sold a portion
of the land to Donato Delgado. Rosalia alone, then sold the remainder of the land to Ponciana
Aresgado de Lanuza. On the same date, Lanuza acquired from Delgado land which the Delgado had
earlier acquired from Rosalia and Gaudencio. Husband John Lanuza, acting under a special power
of attorney given by his wife, Ponciana, sold the two parcels of landto Celestino Afable, Sr. In all
these transfers, it was stated in the deeds of sale that the land was not registered under the
provisions of Act No.496 when the fact is that it is. It appears that the land had been successively
declared for taxation first, in the name of Ciriaca Dellamas,mother of the co-owners, then in the
name of Rosalia Bailon, then in that of Donato Delgado, then in Poncianade Lanuza's name, and
finally in the name of Celestino Afable, Sr.


Whether or not latches apply in the case


Well-stated in this jurisdiction are the four basic elements of laches, namely: (1) conduct on the part
of the defendant or of one under whom he claims, giving rise to the situation of which complaint is
made and for which the complainant seeks a remedy; (2) delay in asserting the corporations
complainant's rights, the complainant having had knowledge or notice of the defendant's conduct
and having been afforded an opportunity to institute suit; (3) lack of knowledge or notice on the
part of the defendant that the complainant would assert the right on which he bases his suit; and,
(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit
is not held to be barred [Go China Gun, et al. v. Co Cho et al., 96 Phil. 622 (1955)].

While the first and last elements are present in this case, the second and third elements are missing.
Heirs of Batiog Lacumen vs. Heirs of Laruan
G.R. No. L-27088 July 31, 1975


Laruan executed a deed of sale in favor of Lacumen for a parcel of land in La Trinidad, Benguet.
Lacumen made use of the property even without securing a transfer certificate of title. The use and
improvement continued even after his death.

After World War II, Lacumens heirs tried to fix their papers, but it appeared that the Laruans was
able to procure a new title and named the land for themselves.

Thereafter, the Lacumens filed for claiming ownership over the land in dispute.


Whether or not the Lacumens should be considered the lawful owners.


"Laches" has been defined as "such neglect or ommission to assert a right, taken in conjunction with
lapse of time and other circumstances causing prejudice to an adverse party, as will operate as a bar
in equity." It is a delay in the assertion of a right "which works disadvantage to another" because of
the "inequity founded on some change in the condition or relations of the property or parties." It is
based on public policy which, for the peace of society, ordains that relief will be denied to a stale
demand which otherwise could be a valid claim. It is different from and applies independently of
prescription. While prescription is concerned with the fact of delay, laches is concerned with the
effect of delay. Prescription is concerned with the effect of delay. Prescription is a matter of time;
laches is principally a question of inequity of permitting a claim to be enforced, this inequity being
founded on some change in the condition of the property or the relation of the parties. Prescription
is statutory; laches is not. Laches applies in equity, whereas prescription applies at law. Prescription
is based on a fixed time, laches is not.

Laruan's sale of the subject lot to Lacamen could have been valid were it not for the sole fact that it
lacked the approval of the Director of the Bureau of Non-Christian Tribes. There was impressed
upon its face full faith and credit after it was notarized by the notary public. The non-approval was
the only "drawback" of which the trial court has found the respondents-appellants to "have taken
advantage as their lever to deprive [petitioners-appellants] of this land and that their motive is out
and out greed." As between Laruan and Lacamen, the sale was regular, not infected with any flaw.
Laruan's delivery of his certificate of title to Lacamen just after the sale symbolizes nothing more
than a bared recognition and acceptance on his part that Lacamen is the new owner of the property.
Thus, not any antagonistic show of ownership was ever exhibited by Laruan after that sale and until
his death in May 1938.

It results that as against Laruan and his heirs, respondents-appellants herein, the late Batiog
Lacamen and his heirs, petitioners-appellants herein, have superior right and, hence, have validly
acquired ownership of the litigated land. Vigilantibus non dormientibos sequitas subvenit.
Deluao vs. Casteel
G.R. No. L-21906 December 24, 1968


In 1940 Nicanor Casteel unsuccessfully registered a fishpond in a big tract of swampy land, 178.76
hectares, in the then sitio of Malalag, municipality of Padada, Davao for 3 consecutive times because
the Bureau of Fisheries did not act upon his previous applications.

Despite the said rejection, Casteel did not lose interest. Because of the threat poised upon his
position by the other applicants who entered upon and spread themselves within the area, Casteel
realized the urgent necessity of expanding his occupation thereof by constructing dikes and
cultivating marketable fishes. But lacking financial resources at that time, he sought financial aid
from his uncle Felipe Deluao.

Moreover, upon learning that portions of the area applied for by him were already occupied by rival
applicants, Casteel immediately filed a protest. Consequently, two administrative cases ensued
involving the area in question.

However, despite the finding made in the investigation of the above administrative cases, the
Director of Fisheries nevertheless rejected Casteel's application on October 25, 1949, required him
to remove all the improvements which he had introduced on the land, and ordered that the land be
leased through public auction

On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and
Nicanor Casteel as party of the second part, executed a contract denominated a "contract of
service". On the same date the above contract was entered into, Inocencia Deluao executed a special
power of attorney in favor of Jesus Donesa

On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on
November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the same area in the
two administrative cases and asked for reinvestigation of the application of Nicanor Casteel over the
subject fishpond.

The Secretary of Agriculture and Natural Resources rendered a decision ordering Casteel to be
reinstated in the area and that he shall pay for the improvement made thereupon.

Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering
the fishpond, and ejected the latter's representative (encargado), Jesus Donesa, from the premises.


Whether or not the reinstatement of Casteel over the subject land constitute a dissolution of the
partnership between him and Deluao.


The Supreme Court ruled that the arrangement under the so-called "contract of service" continued
until the decision both dated Sept. 15, 1950 were issued by the Secretary of Agriculture and Natural
Resources in DANR Cases 353 and 353-B.
This development, by itself, brought about the dissolution of the partnership. Since the partnership
had for its object the division into two equal parts of the fishpond between the appellees and the
appellant after it shall have been awarded to the latter, and therefore it envisaged the unauthorized
transfer of one half thereof to parties other than the applicant Casteel, it was dissolved by the
approval of his application and the award to him of the fishpond.

The approval was an event which made it unlawful for the members to carry it on in partnership.
Moreover, subsequent events likewise reveal the intent of both parties to terminate the partnership
because each refused to share the fishpond with the other.

Valdez vs. Olorga

G.R. No. L-22571 May 25, 1973


A lot was sold to Spouses Gutierrez to Spouses Valdez. A portion was leased to Mr. Quicho which
was eventually purchased for a consideration. The remaining portions remained registered to
Federico Valdez Jr.. The transfer of the lot in the name of Federico Sr., was never don because the
original title was lost.

It was later discovered by the plaintiffs that the lot was in the name of Federico Valdez Jr., as the
only vendee. This was done pursuant to the wishes of Mr. Quicho who advanced the money, in order
that he could facilitate the deed of sale between him and the Valdezes, with the understanding that
Federico Valdez Jr., will hold the same in trust for his other brothers and sisters.


Whether or not prescription applies.


When Federico Valdez, Jr. was still living, he never attempted to exclude the herein plaintiffs from
ownership of the land in question. Said plaintiffs have been in open continuous and uninterrupted
possession of the premises they are occupying inside the lot in question long before the execution of
the deed of sale. It was only after the death of Federico Valdez, Jr. that the widow Teofila Olorga
tried to eject the plaintiffs.

Given the antecedents of the property and the fact that its acquisition by Federico Valdez, Jr. was for
the benefit not of himself alone but also of his brother and sisters, although for purposes of
convenience he was made to appear as the sole vendee, the juridical relation that arose among them
was one of co-ownership, with the plaintiffs-appellees actually in possession of a portion of the
property. Under Article 494 of the Civil Code, "No prescription shall run in favor of a co-owner or
co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-
ownership." Insofar as the aspect of extinctive prescription referred to in this article is concerned, it
is but a restatement of Article 1965 of the Spanish Civil Code, which provides: "As between co-heirs,
co-owners, or proprietors of adjacent estates, the action to demand the partition of the inheritance
or of the thing held in common, or the survey of the adjacent properties, does not prescribe." And
from the standpoint of acquisitive prescription, or prescription of ownership, this Court has held in
numerous decisions involving fiduciary relations such as those occupied by a trustee with respect to
the cestui que trust that as a general-rule the former's possession is not adverse and therefore
cannot ripen into a title by prescription. Adverse possession in such a case requires, the concurrence
of the following-circumstances: (a) that the trustee has performed unequivocal acts of repudiation
amounting to an ouster of the cestui que trust; (b) that such, positive acts of repudiation have been
made known to the cestui que trust and (c) that the evidence thereon should be clear and

Fabian vs. Fabian

G.R. No. L-20449 January 29, 1968


Pablo Fabian bought from the Philippine Government lot 164 of the Friar Lands Estate in
Muntinlupa, Rizal. By virtue of this purchase, he was issued sale certificate 547. He died on August
2, 1928, survived by four children, namely, Esperanza, Benita I, Benita II, and Silbina.

On October 5, 1928 Silbina Fabian and Teodora Fabian, niece of the deceased, executed an affidavit.
On the strength of this affidavit, sale certificate 547 was assigned to them.

The acting Director of Lands, on behalf of the Government, sold lot 164 to Silbina Fabian Teodora
Fabian. The vendees spouses forthwith took physical possession thereof, cultivated it, and
appropriated the produce. In that same year, they declared the lot in their names for taxation
purposes. In 1937 the RD of Rizal issued a TCT over lot 164 in their names. They later subdivided
the lot into 2 equal parts.

The plaintiffs filed the present action for reconveyance against the defendants spouses, averring that
Silbina and Teodora, through fraud perpetrated in their affidavit aforesaid. That by virtue of this
affidavit, the said defendants succeeded in having the sale certificate assigned to them and
thereafter in having lot 164 covered by said certificate transferred in their names; and that by virtue
also of these assignment and transfer, the defendants succeeded fraudulently in having lot 164
registered in their names. They further allege that the land has not been transferred to an innocent
purchaser for value. A reconveyance thereof is prayed for.

In their answer, the defendants spouses claim that Pablo Fabian was not the owner of lot 164 at the
time of his death on August 2, 1928 because he had not paid in full the amortizations on the lot; that
they are the absolute owners thereof, having purchased it from the Government, and from that year
having exercised all the attributes of ownership thereof up to the present; and that the present
action for reconveyance has already prescribed. The dismissal of the complaint is prayed for.

The lower court rendered judgment declaring that the defendants spouses had acquired a valid and
complete title to the property by acquisitive prescription, and accordingly dismissed the complaint.
The latters motion for reconsideration was thereafter denied.


Whether or not acquisitive prescription has applied

It is already settled in this jurisdiction that an action for reconveyance of real property based upon a
constructive or implied trusts, resulting from fraud, may be barred by the statute of limitations. the
discovery in that case being deemed to have taken place when new certificates of title were issued
exclusively in the names of the respondents therein.

Although, as a general rule, an action for partition among co-heirs does not prescribe, this is true
only as long as the defendants do not hold the property in question under an adverse title. The
statute of limitations operates, as in other cases, from the moment such adverse title is asserted by
the possessor of the property

Inasmuch as petitioners seek to annul the aforementioned deed of extra-judicial settlement upon
the ground of fraud in the execution thereof, the action therefor may be filed within four (4) years
from the discovery of the fraud. Upon the undisputed facts in the case at bar, not only had laches set
in when the appellants instituted their action for, reconveyance in 1960, but as well their right to
enforce the constructive trust had already prescribed.

It logically follows from the above disquisition that acquisitive prescription has likewise operated to
vest absolute title in the appellees, pursuant to the provisions of section 41 of Act 190 that:

Ten years actual adverse possession by any person claiming to be the owner for that time of any land
or interest in land, uninterruptedly continued for ten years by occupancy, descent, grants, or
otherwise, in whatever way such occupancy may have commenced or continued, shall vest in every
actual occupant or possessor of such land a full and complete title

Upon the foregoing disquisition, we hold not only that the appellants action to enforce the
constructive trust created in their favor has prescribed, but as well that a valid, full and complete
title has vested in the appellees by acquisitive prescription.

Ferrer-Lopez vs. CA
G.R. No. L-50420 May 29, 1987


Petitioners are the children of the late Dominga Velasco who inherited Lot 12509 of the Cadastral
Survey of Malasiqui, Pangasinan. Petitioners contend that the area of said property was originally
54 hectares but 10 hectares were sold by their mother so that what they inherited by way of
testamentary succession are the remaining 44 hectares. Petitioners maintain that private
respondents are encroaching on the portion of the land which belongs to them, that what the father
of private respondents bought from Damasa Catalan in 1935 was the adjoining western portion of
the land with only a total of 25,704 sq.m. or 2.5704 hectares and not a total area of 52,908 sq. m. as
applied for by respondents in the registration of the land in 1957. Petitioners allege that at the time
of the Bureau of Lands Cadastral Survey in the year 1935 and 1936, Ramon Puzon was then
representing (2) two conflicting interests; namely, as overseer of Dominga Velasco over her 54-
hectare land and as overseer of his children in the land bought by them from Damasa Catalan.
Petitioners surmise that Ramon Puzon pointed to the surveyor the boundary between the lot bought
by his children, and that of Dominga Velasco as well as the places where the monuments would be
placed. They contend that the ocular inspection report and sketch of the Court's Commissioner
clearly and patently show the intentional deviation of the boundary line from the barrio road to the
lower portion going towards the North which is more than one kilometer in length and that the
deviation is definitely against the land of Dominga Velasco from whom the petitioners inherited.
Petitioners claim that private respondents were never in actual possession of the land in question
and it was only sometime in February 1967 or a total of more than 32 years that private respondents
first attempted to claim ownership over the alleged encroached portion of more than 2 1/2 hectares,
which portion is part and parcel of the 44 hectares owned by Dominga Velasco. Petitioners maintain
that they have been in successive, continuous, public, peaceful and uninterrupted possession of said
44 hectares including the questioned portion of more than 2 1/2 hectares, in the concept of absolute
owners, with just and valid title to the exclusion of all other person for more than 60 years and up to
the commencement of the litigation.


Whether or not acquisitive prescription has set in


The doctrine of implied trust asserted by petitioners finds no application in the case at bar, because
there are no proven facts to this effect. While an implied trust (of real or personal property) does not
require the formalities of an express trust over realty (which as mandated by the law cannot be
proved by oral evidence under Art. 1443 of the Civil Code, still there must be proof that the trustor
wanted to grant one party only the beneficial ownership of a parcel of land, although said
beneficiary may have legal title in himself. Implied trusts are exemplified in Arts, 1447-1456 of the
Civil Code. Private respondents have been in possession of Lot. No. 12510 as owners since its
purchase in 1935 thru their late father Ramon Puzon. Ramon Puzon was the overseer of petitioners'
mother over another lot (Lot No. 12509) and not over the lot in question (Lot No. 12510). It is
therefore obvious that there could not have been any possible conflict of interest in the role of
private respondents' father. And even if indeed he had been the overseer of both lots, there was also
no such conflict of interest. Both lots had their own marked and natural boundaries; both had their
own separate registered titles of ownership; dominion over each was exercised by two separate
groups of owners.

Petitioners' claim of acquisitive prescription is unavailing against the conclusive and indefeasible
character of OCT 13505 covering Lot No. 12510 in the name of private respondents even if the latter
are not in actual possession of the premises. It is an elemental rule that the decree of registration
bars all claims or rights, which arose or may have existed prior to the decree of registration.

In summary therefore, the evidence of the petitioners is grossly inadequate to overcome the
respondents' conclusive and indefeasible title and right of ownership and possession. We respect the
findings of the trial court that the controversial piece of land was well within the titled property of
the private respondents as We find no vital facts which have been overlooked or misappreciated.

Morales vs. CA
G.R. No. 117228 June 19, 1997


Ranulfo and Erlinda Ortiz claim that they are the absolute and exclusive owners of the premises in
question (318 sq.m. land located at corner Umbria St. and Rosales Blvd. Brgy. Central, Calbayog
City) through their purchase of the said property from Celso Avelino and stated the following: The
property was purchased by Celso Avelino (the Ortiz's predecessor in interest) when he was still a
bachelor and a city fiscal of Calbayog city from Alejandra Mendiola and Celita Bartolome through an
"Escritura de Venta." After the purchase, he caused the transfer of the title as well as the tax
declarations in his name. He faithfully paid the taxes and kept the receipts thereof. He also caused a
survey of the premises in question with the Bureau of Lands and built a residential house thereon.
He took his parents Rosendo Avelino and Juana Ricaforte and his sister Aurea to live in his property
until their death. Celso Avelino then became an Immigration Officer and later a Judge of the Court
of First Instance in Cebu so he left his property under the care of his sister, Aurea. Without his
knowledge, his nephew Rodolfo Morales (a son ofhis other sister, Priscilla) constructed a beauty
shop on the premises in question. Celso thereafter sold the property to Ranulfo and Erlinda Ortiz
(Celso's neighbors), they paid the purchase price and a deed of absolute sale was executed. Rodolfo
Morales, however, refused to vacate the premises unless he is reimbursed P35,000. He also
occupied the residential building on the property, took in paying boarders and even claimed
ownership of the premises in question. Rodolfo Morales contends that his grandparents Rosendo
Avelino and Juana Ricaforte originally owned the premises in question. The property was allegedly
bought by Celso Avelino who was entrusted by Rosendo with the money to buy it. They caused the
name of the property to be under Celso Avelino being the only son. When Rosendo Avelino and
Juana Ricaforte died, their children: Celso Avelino, Trinidad Cruz, Concepcion Peralta, Priscilla
Morales and Aurea Avelino succeeded as owners thereof.


Whether or not Celso Avelino acquired the property as a mere trustee.


Trusts are either express or implied. Express trusts are created by the intention of the trustor or of
the parties, while implied trusts come into being by operation of law, either through implication of
an intention to create a trust as a matter of law or through the imposition of the trust irrespective of,
and even contrary to, any such intention. In turn, implied trusts are either resulting or constructive
trusts. Resulting trusts are based on the equitable doctrine that valuable consideration and not legal
title determines the equitable title or interest and are presumed always to have been contemplated
by the parties. They arise from the nature or circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. On the other hand, constructive trusts are created by
the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment.
They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or
holds the legal right to property which he ought not, in equity and good conscience, to hold.

A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:

Art. 1448. There is an implied trust when property is sold, and the legal estate is
granted to one party but the price is paid by another for the purpose of having the
beneficial interest of the property. The former is the trustee, while the latter is the
beneficiary. However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, no trust is implied
by law, it being disputably presumed that there is a gift in favor of the child.

The trust created under the first sentence of Article 1448 is sometimes referred to as
a purchase money resulting trust. The trust is created in order to effectuate what the law
presumes to have been the intention of the parties in the circumstances that the person to
whom the land was conveyed holds it as trustee for the person who supplied the purchase

To give rise to a purchase money resulting trust, it is essential that there be:

1. an actual payment of money, property or services, or an equivalent, constituting

valuable consideration;

2. and such consideration must be furnished by the alleged beneficiary of a

resulting trust.

There are recognized exceptions to the establishment of an implied resulting trust. The first is stated
in the last part of Article 1448 itself. Thus, where A pays the purchase money and title is conveyed
by absolute deed to A's child or to a person to whom A stands in loco parentis and who makes no
express promise, a trust does not result, the presumption being that a gift was intended. Another
exception is, of course, that in which an actual contrary intention is proved. Also where the purchase
is made in violation of an existing statute and in evasion of its express provision, no trust can result
in favor of the party who is guilty of the fraud.

PNB vs. CA
G.R. No. 97995 January 21, 1993


Private Respondent B.P. Mata & Co. Inc. (Mata), a private corporation engaged in providing goods
and services to shipping companies. has acted as a manning or crewing agent for Star Kist Foods,
Inc., USA (Star Kist). Mata makes advances for the crew's expenses, fees, and basic personal needs.
Subsequently, Mata sends monthly billings to Star Kist, which in turn reimburses Mata by sending a
telegraphic transfer through banks for credit to the latter's account.

In 1975, Security Pacific National Bank (SEPAC) of Los Angeles transmitted a cable message to the
International Department of Philippine National Bank to pay the amount of US$14,000 to Mata by
crediting the latter's account with the Insular Bank of Asia and America (IBAA), per order of Star
Kist. PNB's International Department noticed an error and sent a service message to SEPAC Bank.
The latter replied with instructions that the amount of US$14,000 should only be for US$1,400. A
cashier's check in the amount of US$1,400 representing reimbursement from Star Kist, was issued
by the Star Kist for the account of Mata on February 25, 1975 through the Insular Bank of Asia and
America (IBAA).

However, a few days later, PNB effected another payment in the amount of US$14,000 purporting
to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal.
Six years later, (in 1981), PNB requested Mata for refund of US$14,00 after it discovered its error in
effecting the second payment.

On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against Mata
arguing that based on a constructive trust under Article 1456 of the Civil Code, it has a right to
recover the said amount it erroneously credited to respondent Mata.
After trial, the Regional Trial Court of Manila rendered judgment dismissing the complaint ruling
that the instant case falls squarely under Article 2154 on solutio indebiti and not under Article 1456
on constructive trust. The lower court ruled out constructive trust, applying strictly the technical
definition of a trust as "a right of property, real or personal, held by one party for the benefit of
another; that there is a fiduciary relation between a trustee and a cestui que trustas regards certain
property, real, personal, money or choses in action." The appellate court, in affirming the lower
court, concluded that petitioner's demand for the return of US$14,000 cannot prosper because its
cause of action had already prescribed under Article 1145, paragraph 2 of the Civil Code which states
that action upon quasi-contract must be commenced within 6 years. This is because petitioner's
complaint was filed only on February 4, 1982, almost seven years after March 11, 1975 when
petitioner mistakenly made payment to private respondent.

Petitioner naturally opts for an interpretation under constructive trust as its action filed on
February 4, 1982 can still prosper, as it is well within the prescriptive period of ten (10) years as
provided by Article 1144, paragraph 2 of the Civil Code.


Whether or not petitioner may still claim the US$14,000 it erroneously paid private respondent
under a constructive trust.


Although the Court is aware that only seven (7) years lapsed after petitioner erroneously credited
private respondent with the said amount and that under Article 1144, petitioner is well within the
prescriptive period for the enforcement of a constructive or implied trust, the Court rule that
petitioner's claim cannot prosper since it is already barred by laches. It is a well-settled rule now
that an action to enforce an implied trust, whether resulting or constructive, may be barred not only
by prescription but also by laches.

While prescription is concerned with the fact of delay, laches deals with the effect of unreasonable
delay. It is amazing that it took petitioner almost seven years before it discovered that it had
erroneously paid private respondent.

Tigno vs. CA
G.R. No. 110115. October 8, 1997


Sometime in January, 1980, Bienvenido Sison, Remedios Sison and the heirs of Isaac Sison,
namely: Manuel Sison, Gerardo Sison and Adelaida Sison appointed Dominador Cruz as agent to
sell three (3) parcels of land adjoining each other located at Padilla St., Lingayen, Pangasinan.

Sometime in April 1980, Rodolfo Tigno learned that the abovedescribed properties were for
sale. Accordingly, he approached Cruz and told the latter to offer these parcels of land to his brother,
Eduardo Tigno, herein appellant.

Having reached an agreement of sale, appellant then instructed Cruz to bring the owners of these
parcels of land to his ancestral house at Guilig Street, Lingayen, Pangasinan on May 2, 1980, as he
will be there to attend the town fiesta
On May 2, 1980, Cruz, together with Bienvenido Sison, Manuel Sison, Adelaida Sison and Remedios
Sison went to appellants house at Guilig Street, Lingayen, Pangasinan. At around 5:00 o clock in the
afternoon, the abovenamed persons and appellant went to Atty. Modesto Manuels house at
Defensores West Street, Lingayen, Pangasinan for the preparation of the appropriate deeds of sale.

However, despite the fact that no deed of sale was prepared by Atty. Manuel, Remedios Sison,
Bienvenido Sison and Manuel Sison asked appellant to pay a fifty percent (50%) downpayment for
the properties. The latter acceded to the request and gave Five Thousand Pesos (P5,000.00) each to
the 3 abovenamed persons for a total of Fifteen Thousand Pesos (P15,000.00) (TSN, Sept. 5, 1989,
pp. 19-20).This was witnessed by Cruz and Atty. Manuel. After giving the downpayment, appellant
instructed Cruz and Atty. Manuel to place the name of Rodolfo Tigno as vendee in the deeds of sale
to be subsequently prepared. This instruction was given to enable Rodolfo Tigno to mortgage these
properties at the Philippine National Bank (PNB), Lingayen Branch, for appropriate funds needed
for the development of these parcels of land as fishponds.

On April 29, 1989, Rodolfo Tigno, without the knowledge and consent of appellant, sold to Spouses
Edualino Casipit and Avelina Casipit 508.56 square meters of the land previously owned by
Bienvenido Sison. At the time of sale, the Casipits were aware that the portion of the land they
bought was owned by appellant, not Rodolfo Tigno.

On May 24, 1989, the plaintiff filed Civil Case No. 16673 for Reconveyance, Annulment of
Document, Recovery of Possession and Damages against Rodolfo M. Tigno and defendant spouses
Edualino Casipit and Avelina Estrada.


Whether or not there was implied trust


As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and
such proof must be clear and satisfactorily show the existence of the trust and its elements. While
implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by
the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.

From the foregoing, it is clear that the name of Rodolfo Tigno appeared in the deeds of sale not for
the purpose of transferring ownership to him but only to enable him to hold the property in trust for
his brother, herein private respondent.

Arlegui vs. CA
[G.R. No. 126437. March 6, 2002]


The object of a controversy is a residential apartment unit which was formerly owned by Serafia
Real Estate Inc. and leased to spouses Genguyon. Thereafter the spouses were informed that Serafia
and its assets had been assigned to A. B. Barreto enterprises, which was subsequently sold to Mateo
Tan Lu. Spouses Genguyon continued to make payments for the rental of the aforementioned
apartment. Before the sale to Mateo Tan Lu and to Arlegui, the Genguyon Spouses expressed their
desire to purchase the said apartment unit from A. B. Barreto Enterprises; offers for this was made
through Barreto Apartments Tenant Association, with Mateo Tan Lu and Arlegui made officer s in
this association. The sale of the property was done after Arlegui and Tan Lu were made officers in
the aforementioned association.


Whether or not Mateo Tan Lu and Josue Arlegui cannot be considered innocent purchasers for
value for violating the trust reposed upon them by the spouses Genguyon when they surreptitiously
purchased the object property.


It can be gainsaid that Arlegui violated the constructive trust that was created when Tan Lu and the
Petitioner appropriated for themselves the property for which they were negotiating for in behalf of
the Association. There is the presence of abuse of confidence. Petitioner avers that there was no
constructive trust created; however, constructive trusts do not only arise from fraud or duress, but
also by abuse of confidence, in order to satisfy the demands of justice. There is ample documentary
and testimonial evidence to establish the existence of a fiduciary relationship between them, and
those subsequent acts of the petitioner betrayed the trust and confidence reposed on him. Petitioner
cannot argue that the spouses Genguyon should and could have negotiated directly with the
Barretos after he had already accepted the responsibility and authority to negotiate in their behalf.
American jurisprudence provides precedent rulings that a constructive trust is an appropriate
remedy against unjust enrichment; it is raised by equity in respect of property, although acquired
originally without fraud, it is against equity that it should be retained by the person holding it.

An action for reconveyance of registered land on an implied trust prescribes in 10 years even
if the decree of registration is no longer open to review.